🛡️ Don’t Let This Hidden Clause Void Your Product Liability Cover
For any business involved in manufacturing, importing, distributing, or selling goods, Product Liability Insurance is essential. But many businesses overlook a critical detail that could invalidate their insurance altogether the Right of Recourse clause. This clause, often buried in supplier contracts, can be the difference between a paid claim and a costly financial loss.
🔍 What Is the Right of Recourse Clause?
Most Product Liability policies arranged by Premier Insurance include a clause like this:
“It is a condition precedent to Our liability to indemnify You under this Certificate that You maintain full rights of recourse against any manufacturer or supplier with whom You enter into a legal contract for the provision of products and or components”
In plain English:
If someone else in your supply chain causes the defect, your insurer needs the legal right to recover the cost of the claim from them after paying you
If your contract waives that right, your insurer may legally decline to pay your claim altogether
🧾 Why Does This Matter?
Let’s say you import phone chargers from overseas. One explodes and injures a customer. Your Product Liability insurer pays out £30,000 then tries to recover that amount from the manufacturer.
But if you signed a supplier contract waiving your legal rights, the insurer has no legal route to recover the money
➡️ No recourse = breach of policy conditions = claim could be declined
🛠️ Case Study 1: The Smartwatch Injury
AlphaTech UK Ltd, a UK based tech distributor, rebranded smartwatches from a Chinese supplier. Their supplier contract included this clause:
“AlphaTech agrees not to pursue the manufacturer for any damages arising post delivery”
When a smartwatch overheated and burned a customer’s wrist, the insurer refused to pay a £45,000 claim because AlphaTech had breached the Right of Recourse condition.
They had to settle the claim out of pocket
🧃 Case Study 2: Chilled Drinks and Untraceable Ingredients
A UK wholesaler distributed organic juices under its own brand. A contaminated batch led to food poisoning
The insurer paid the claim but discovered the ingredients came from an uncontracted third party supplier abroad.
➡️ Because there was no recourse clause, the insurer had to absorb the cost, imposed a £5,000 excess at renewal, and excluded imported stock from future cover
✅ What Should You Do to Stay Covered?
Whether you’re an importer, white label seller, retailer, or manufacturer:
1. Review Your Supplier Agreements
Look for red flags like:
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“Hold harmless”
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“No liability for defects after delivery”
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“Waives all rights to recourse”
Flag any of these to your broker before inception or renewal
2. Maintain Legal Rights in Contracts
Ensure contracts preserve your right to recover damages from suppliers. Get legal advice before signing if unsure
3. Tell Your Broker About Any Waivers
If a supplier insists on a waiver, inform your Premier Insurance broker. We can:
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Speak with underwriters
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Add policy endorsements
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Offer alternative cover or risk mitigation advice
📃 No Written Contracts? Legal Help Is Available
If you’re trading with suppliers without formal written contracts, or you’re unsure whether your agreements comply with your insurance obligations, it is essential to seek legal advice
At Premier Insurance, we work closely with Carter Bond Solicitors, a leading commercial law firm with expertise in business law. Their team can draft, review, or negotiate contracts that ensure your insurance protection remains intact
🔗 Visit: https://carterbond.co.uk
💡 Real World Examples of When the Clause Applies
| Scenario | Does the Clause Matter? |
|---|---|
| You buy air fryers from Turkey and rebrand under your own name | ✅ Yes |
| You manufacture parts but subcontract one key component | ✅ Yes |
| You sell third party branded goods without altering them | ❌ Less likely |
| You buy from a UK wholesaler who imports from China | ✅ Yes |
🧩 Final Thought
The Right of Recourse clause is not just legal jargon — it’s a critical safeguard. Insurers use it to maintain accountability and manage claims costs
For your business, it could be the difference between a paid claim and a six figure bill
📞 Need Help Reviewing Your Contracts?
At Premier Insurance, we don’t just arrange cover — we help you protect it
📧 Email: quoteme@premier-insurance.net
📞 Call: 0208 908 2426
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📞 Need Help? Let’s Talk.
Book a free policy review with one of our expert brokers today.