Product Liability Insurance in Malaysia: Who Needs It and What It Covers

The short answer

Product liability insurance protects a business if a product it makes, imports, brands or sells injures someone or damages their property, and the injured person claims against it. It pays the valid claim and the legal costs, within the policy limits. It does not repair the faulty product itself, and it usually does not pay for a product recall. In Malaysia it is commonly arranged together with public liability or comprehensive general liability (CGL) insurance.

What is product liability?

Public liability deals with harm caused by your premises or your activities. Product liability deals with harm caused by what you put into the market. The risk starts after the product leaves your hands: a heater that overheats, a food item that makes customers ill, a power bank that catches fire in a customer's home.

What does Malaysian law say?

Part X of the Consumer Protection Act 1999 deals with product liability. In plain terms, the producer can be liable for damage caused wholly or partly by a defect in a product. The Act treats the following as the producer:

• The manufacturer of the product
• Anyone who puts their own name, trademark or distinguishing mark on it, such as a private-label or white-label brand
• The person who imports it into Malaysia

A product is generally treated as defective if its safety is not what a person is entitled to expect, taking into account things like its marketing, packaging and warnings. The damage covered includes death, personal injury and loss of or damage to property. The Act also gives producers certain defences, and a claimant still has to show that the defect caused the damage.

This is a general summary, not legal advice. If you are worried about a specific product, speak to a lawyer.

Who needs product liability insurance?

• Manufacturers and food producers: you make the product, so you carry the most exposure.
• Importers and distributors: as an importer you can be treated as the producer under the Act.
• Brand owners using contract manufacturers: your name is on the pack, so claims can come to you.
• Retailers and traders: you may be less exposed, but a customer injured by something you sold can still pursue you.
• E-commerce sellers: goods shipped to many homes means many chances for a claim.

What does it usually cover?

• Your legal liability for bodily injury caused by a product you supplied
• Your legal liability for damage to other people's property caused by the product
• Legal costs and expenses of defending the claim, with the insurer's consent

What does it usually exclude?

• The cost of repairing, replacing or refunding the faulty product itself
• Product recall costs, which normally need a separate recall policy
• Pure financial loss that does not involve injury or property damage
• Fines and penalties
• Defects you already knew about before the policy started
• Liability you took on only by contract, beyond what the law would impose
• Some export territories, such as sales into North America, which may be excluded or priced separately

Always confirm the territory and the exclusions in your own policy.

How is it different from other liability cover?

• Public liability covers third-party injury or property damage from your premises or activities.
• Product liability covers harm from products after they have left your control.
• Professional indemnity covers losses from advice or services, rather than physical goods.

CGL can combine public and product liability under one policy. Our guide to all-risk and CGL insurance explains how that fits with property cover.

What will an insurer ask?

• What you make, import or sell, and who uses it
• Annual sales, and how much is exported
• Whether you manufacture, import or put your own brand on goods made by others
• Quality control, testing, labelling and warnings
• Your suppliers and the contracts you have with them
• Past claims and incidents

Common questions

I only resell products. Do I need it?
Possibly. If you import the goods or sell them under your own brand, the law may treat you as the producer. Even a plain reseller can be sued, so it is worth checking.

Does it cover a product recall?
Usually not. Recall costs normally need a separate product recall policy.

Does my supplier's insurance protect me?
Not unless you are named on the policy. Ask suppliers for proof of their cover and check your contract for indemnities.

Is it a separate policy?
It can be a stand-alone policy, but it is often an extension of public liability or CGL. Ask your broker how it is structured for your business.

Related reading

New to liability cover? Start with what public liability insurance is. If goods move by road or sea before they reach customers, see the difference between carrier liability and goods in transit insurance.

Work with Cover Buddies Today!

If your business makes, imports or sells products, Cover Buddies can review your exposure and arrange the right liability cover. Explore CGL insurance, get a quote or WhatsApp us.