Premiums, Policy Types and 2026 Rules
Product liability insurance in India under the Consumer Protection Act, 2019
How Chapter VI of the Consumer Protection Act 2019 makes manufacturers, service providers and sellers liable, and how to buy product liability insurance that fits.
Since the Consumer Protection Act, 2019 came into force in July 2020, Indian law has a dedicated product liability regime in Chapter VI (sections 82 to 87). A consumer harmed by a defective product can bring a product liability action against the product manufacturer, the product service provider or the product seller, and for manufacturers the Act makes clear that liability can arise even without proof of negligence or fraud in making an express warranty. Product liability insurance, either as a standalone policy or as the products part of a CGL policy, pays compensation and defence costs for such claims, within the limit and subject to the exclusions. It does not pay to recall or replace the defective product itself.
This guide belongs to the business liability insurance overview. Section numbers refer to the Act as enacted; read the current text on India Code. Products cover is often bought within a CGL policy; see CGL vs public liability and what decides a liability premium.
Who can be liable
| Party | Section | When they can be liable (summary) |
|---|---|---|
| Product manufacturer | 84 | Manufacturing defect, design defect, deviation from manufacturing specifications, product not conforming to an express warranty, or failure to contain adequate instructions or warnings |
| Product service provider | 85 | Faulty, imperfect or deficient service; act of omission or negligence causing harm; failure to give adequate instructions or warnings; service not conforming to an express warranty or contract |
| Product seller | 86 | Substantial control over design, testing, manufacture, packaging or labelling; altering the product; making an express warranty independent of the manufacturer; selling a product whose manufacturer cannot be identified or served; failing to exercise reasonable care; failing to pass on warnings |
"Harm" under the Act includes damage to property other than the product itself, personal injury, illness or death, and mental agony or emotional distress attendant on those. A "product seller" can include a person who places a product for commercial purpose, which is why marketplace sellers and distributors also need to think about cover. The Consumer Protection (E-Commerce) Rules, 2020 add duties for e-commerce entities and sellers.
Defences under section 87
Section 87 sets out exceptions. In summary, a product liability action may fail where the product was misused, altered or modified; for a manufacturer, where adequate warnings were given to the employer of the user, or the product was sold as a component and the end product's maker ignored warnings, or the product was meant for use by or under the supervision of an expert; and where the danger was obvious or commonly known to the user. Insurers expect your warnings, instructions and labelling to support these defences, so keep them documented.
What product liability insurance covers
- Compensation you are legally liable to pay for bodily injury, illness, death or damage to third-party property caused by your product
- Defence costs incurred with the insurer's consent
- Often, costs of attending court or tribunal hearings where the wording includes them
Typical exclusions:
- Product recall and withdrawal costs (needs separate recall cover)
- Repair, replacement or refund of the defective product itself, and loss of its use
- Efficacy claims: the product simply did not work as promised, without injury or damage
- Known defects at inception and deliberate breaches of standards
- Contractual liability beyond what the law would impose
- Fines and penalties, including any imposed by the Central Consumer Protection Authority
Territory and jurisdiction for exporters
The price of product cover depends heavily on where your products go and which courts can make awards against you.
| Option | Typical use | Watch out for |
|---|---|---|
| India only | Domestic manufacturers and sellers | Online orders shipped abroad are outside cover |
| Worldwide excluding USA and Canada | Exporters to Asia, Europe, Middle East, Africa | Products re-exported by your buyer to North America |
| Worldwide including USA and Canada | Direct or indirect sales into North America | Much higher premium and deductible; defence costs often within the limit |
Declare export turnover by territory. If your buyer asks to be named as a vendor (an additional insured who sells your products), ask for a vendor's endorsement.
Worked example: sizing and pricing cover
A small kitchen-appliance brand (illustrative) has India turnover of ₹8 crore and exports of ₹2 crore to the Middle East.
- It asks for product cover with ₹1 crore AOA and ₹2 crore AOY, territory worldwide excluding USA and Canada, jurisdiction the same.
- Quote received: base premium ₹54,000; GST ₹54,000 × 18% = ₹9,720; total ₹63,720.
- Implied rate: ₹54,000 ÷ 1,000 lakh of turnover = ₹54 per ₹1 lakh.
A second quote at ₹45,000 base looks cheaper, but its jurisdiction is India only. The Middle East exports (₹2 crore, 20% of turnover) would be uncovered. Before comparing, ask the second insurer to quote on the same territory. You can run implied rates through the premium range estimator and test claim scenarios in the quote comparison tool.
Steps that reduce both claims and premium
- Keep design, testing and batch records so you can show the product met its specifications.
- Use clear instructions and warnings in the languages of your markets, and keep dated copies of every label version.
- Make sure your warranty card does not promise more than you intend: an express warranty is a ground of liability under section 84.
- Keep supplier contracts with indemnity and insurance clauses for components.
- Have a recall plan, even if you do not buy recall cover.
- Report potential claims or incidents promptly; late notice is a leading cause of disputes (see why liability claims are rejected).
Where product liability claims are heard
A consumer can file a complaint, including a product liability action, before the District, State or National Consumer Disputes Redressal Commission. Online filing is available through the e-Jagriti portal, which replaced the earlier e-Daakhil portal from 1 January 2025. Separately, the Central Consumer Protection Authority can act against unfair trade practices and order recalls. For disputes with your own insurer, see consumer commission disputes.
When to consult a professional
Consult a lawyer for any claim notice that alleges injury or death, and use an IRDAI-licensed broker when you sell into the USA or Canada, sell medical devices, food supplements or children's products, or supply components to large manufacturers who require specific product liability limits.
Frequently asked questions
Can a retailer be sued for a defective product it did not make?
Yes, in the situations listed in section 86, for example if it altered the product, gave its own warranty, failed to exercise reasonable care, or the manufacturer cannot be identified. Retailers should check whether their public liability or CGL policy includes products.
Does product liability insurance pay for a recall?
Generally no. Recall and withdrawal costs need a separate product recall policy or a specific extension.
Is product liability cover compulsory?
There is no general statutory requirement to insure, but many distribution agreements, marketplace programmes and export buyers require it.
Does the policy cover the cost of replacing the faulty product?
No. It covers harm the product causes to people and other property, not the product itself.
Sources
- India Code — Consumer Protection Act, 2019, Chapter VI, and the E-Commerce Rules
- Department of Consumer Affairs — consumer protection framework and the Central Consumer Protection Authority
- e-Jagriti — online filing of consumer complaints
- IRDAI — registered insurers and brokers
