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Liability & law

Risks in the value chain

It is quite common for the product manufacturing process to be spread across different manufacturers. This makes the value chain increasingly more complex and places heavy demands on the companies in the network. How can you safeguard yourself against process interruptions caused by an outage at one of the companies participating? And how do you cover yourself against claims due to defective products?

10 February 2019, author: Natascha Fabian, photo: Helvetia

A man is standing next to a robot in a factory and is taking notes.
Is your SME covered in the event of a process interruption? We strongly recommend a systematic risk assessment for the best possible protection.

A missing production step can quickly prove expensive. If the supplier is unable to deliver products, this will result in a partial or even complete production standstill as well as a loss in earnings. The important thing is to analyse all critical processes – including those within your own company. This is the only way you can safeguard yourself optimally in the event of an outage.

Claims arising from defective products

Production downtime is not the only potential risk. Defective products frequently lead to claims. Professional liability insurance provides you with protection here, regardless of whether the article being manufactured is a component product or an end product. You can also safeguard yourself by including extended product liability cover in your policy, e.g.for related claims or recall costs.

Specifically, this means: If you deliver a defective product to your customer and this results in a claim, you are protected. The same also applies if your supplier delivers you a defective product, you don't notice this and so process it further, subsequently causing damage to a third party.

We recommend that you take the following tips on board:

  • Always make a record of the materials used, serial numbers, certificates, trial samples etc. and keep these documents as evidence.
  • Write down customers' exact specifications and have product samples approved by them.
  • Request confirmation of cover from suppliers and customers at yearly intervals. It also makes sense to reach an identical liability agreement with suppliers and customers. (Example: If an agreement is reached with the customer to extend the warranty period to 5 years, this same 5-year period should also be agreed with the raw materials supplier).
  • Any assumption of liability which goes beyond statutory requirements must always be discussed with the insurer. Unless otherwise specifically agreed, liability will be within the statutory limit.
  • Discuss matters such as quality control and product recall protocols with suppliers and customers. This helps to reduce claims and also ensures that recalls happen quickly.

A systematic risk assessment and end-to-end consultation can bring clarity

When it comes to insuring business clients, Helvetia sets great store by systematic risk analysis and end-to-end consultation. This gives businesses clarity about the potential risks and how you and your company can be safeguarded according to your individual requirements.

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