What is Part Product? In the last few weeks I have seen trade advertising from different major insurers announcing that their Construction policy now has an optional extension for what is known as Part Product. Well, this is not something new as I have been including this important extension since the early 1990’s.
Liability Insurance? – well for a contractor, everything physical he supplies or installs or works on is considered to be the Product. Products Liability insurance – usually insured in tandem with Public Liability – is intended to cover liability to third parties for physical injury or for damage to their property caused by defect in your Product. This excludes damage to any product which is defective – and this is perfectly reasonable. After all if you supply a defective product why should any insurer pay for your cock-up? You have to put it right at your own cost.
What is the problem then? – Well, everything in a single contract is considered to be one Product. Let’s say that you are a housebuilder and have, surprise, surprise, contracted to build a house. You do that, hand it over to the developer and two days a leak from a faulty plumbing connection causes damage to the nice new electrics, nice new plastering and nice new floors. Not a huge claim at £12,000 but serious enough and naturally you turn to your insurer – but – nope, not covered. All the damage is to the Product and excluded.
What can you do? Well there are non-insurance ways around this but not terribly practical. You could contract separately for every part of your work which would make each part a separate product but that’s messy and admin. heavy. If some parts are carried out by sub-contractors you could make each of them contract separately with your employer, but that’s messy too and you lose any margin on their work. Of course, if the damage is caused by a sub-contractor’s Product provided to you then you may have a claim against them but they may not be insured, or not insured properly, or not for enough.
The solution is Part Product. Simple and elegant, all that is involved is a form of words that has the effect of changing the exclusion so that it doesn’t apply to any part of the Product which is free of defect. In the example above the only part of the claim which wouldn’t be paid is the cost of the connection and the policy excess.
Anyone can do it so why haven’t you – or your broker?