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 1990s.

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, been contracted to build a house. You do that, hand it over to the developer and two days later, 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 be 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 that 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?

Ian Lawley - Technical Director

Ascend Broking 01245 449060 - ian.lawley@ascendbroking.co.uk