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PROTECT YOUR BUSINESS AGAINST DEFECTIVE PARTS & DESIGN-RELATED CLAIMS
Why Defective Parts & Design Error Risk Is So Costly
In engineering and manufacturing, defects don’t just create inconvenience — they can create downstream failure, production shutdowns, warranty disputes, reputational damage, and serious financial loss. A single machining tolerance issue, incorrect material grade, faulty assembly step, or design miscalculation can trigger a chain of events affecting multiple parties in the supply chain.
Whether you manufacture components, assemblies, finished products, or provide design input, you can face claims that relate to: defective parts, manufacturing faults, testing failures, specification disputes, or design errors. Understanding which policies respond — and where gaps can exist — is critical.
Insure24 helps UK engineering and manufacturing businesses structure cover to address these exposures in a practical and contract-aware way.
What Counts as a Defective Part, Design Error or Manufacturing Fault?
Insurers and customers may use different language, but the issues often fall into a few categories. Identifying which category applies helps determine which type of insurance is most relevant (product liability, professional indemnity, recall/rectification extensions, etc.).
Defective Parts (Component Failure)
A defective part is typically a component that fails to perform as intended due to a fault in manufacture, materials, or workmanship. Examples include:
- Incorrect dimensions / tolerance drift on machined components
- Wrong material grade, heat treatment, coating or hardness
- Weld defects, porosity, cracking or poor penetration
- Assembly errors: missing fasteners, incorrect torque, misalignment
- Electrical faults: wrong wiring, failed solder, incorrect specification components
- Testing/QA failures: incorrect calibration or missed inspection stages
Design Errors (Specification / Engineering Mistakes)
Design errors generally relate to professional services: design, specification, advice, tolerance setting, prototyping, sign-off, or engineering decisions. Examples include:
- Incorrect calculations or design assumptions
- Tolerance stack-up issues and interface misalignment
- Material selection errors
- Failure to meet regulatory/standard requirements (where responsibility is yours)
- Incorrect drawings, CAD revisions or version control mistakes
- Inadequate testing specification or validation approach
Which Insurance Policies Respond to Defects & Fault Claims?
Many manufacturing disputes involve a mix of allegations: negligence, faulty workmanship, breach of contract, and damage to third-party property. This is why choosing the correct mix of policies — and understanding their limitations — matters.
The key policies typically involved include:
Product Liability
Product liability is designed to respond when your product causes bodily injury or property damage to a third party. For example, a faulty component causes a machine to fail and damages other property, or causes injury.
- Best for: third-party injury/damage caused by defective products
- Often not for: pure financial loss, contractual penalties, or “your work” rectification costs
- Important factors: territory, end-use, safety-critical applications, limits and exclusions
Professional Indemnity (Design/Advice)
Professional indemnity protects against claims arising from professional negligence, such as design errors, specification mistakes or engineering advice issues. This is often relevant when you do design-and-build or provide input beyond build-to-print.
- Best for: design/specification mistakes, negligent advice, drawings/CAD errors
- Often not for: injury/damage caused purely by a product defect (that’s usually PL)
- Important factors: retroactive date, contractual liability clauses, scope of services
Product Recall / Rectification (Where Available)
Some insurers offer specialist extensions for recall and rectification costs. These can be valuable for businesses whose products are distributed widely or integrated into customer systems, where “pulling back” stock or replacing batches is a major exposure.
- Can help with: recall logistics, notifications, retrieval, disposal, and some rectification activities
- Typically requires: robust QA systems, traceability, and clear triggers for cover
- Not standard: often needs specialist underwriting and policy wording review
Property / Business Interruption
Property and business interruption insurance are not “defect policies”, but defects can still create secondary exposures such as production interruption due to an insured event (fire, flood) or machinery breakdown. Where a defect leads to damage in your own premises, coverage depends on the cause and policy terms.
- Best for: insured physical damage and resulting downtime (subject to terms)
- Important: machinery breakdown and BI structure, indemnity period, and dependencies
Why Manufacturing Fault Claims Often Become Disputes
Manufacturing fault incidents can quickly become complex because multiple parties may be involved: your customer, their customer, and an end user. The question isn’t just “was the part defective?” but also:
- Who specified the design and tolerances?
- Was it build-to-print or design-and-build?
- Were there later drawing revisions or version control issues?
- Was the failure caused by installation, misuse or operating conditions?
- Did the customer’s system contribute to the failure?
- Are losses physical damage/injury, or purely financial and contractual?
This is why getting the correct insurance structure upfront — and ensuring the business description matches reality — is so important.
Typical Financial Impacts of Defect Incidents
- Cost of replacing/remaking parts and expedited production
- Customer downtime claims and consequential losses
- Scrap and wasted materials
- Sorting and inspection (containment actions)
- Logistics costs, courier, collection and re-delivery
- Reputational damage and loss of key contracts
- Legal costs, expert reports, and dispute resolution
Risk Management That Helps Underwriting
Insurers often provide better terms to businesses that can evidence strong quality management and traceability:
- Version control for drawings/CAD and documented change approval
- Incoming materials certification checks (CoC / CoA)
- Calibration schedules and inspection records
- Lot/batch traceability and retention of key QA evidence
- Final inspection and documented release processes
- Supplier management and subcontractor controls
We can help you present these controls clearly to insurers (without overcomplicating the submission).
Why Choose Insure24 for Defect & Design Error Exposures?
Defect claims sit at the intersection of product liability, contract terms, and professional responsibility. Many “standard” policies don’t neatly match the realities of modern supply chains. Insure24 helps manufacturers structure cover that aligns to how you actually operate — and how your contracts define responsibility.
- Manufacturing-focused insurance broking and insurer access
- Support distinguishing build-to-print vs design responsibility exposures
- Guidance on cover for products, PI, and recall/rectification options
- Assistance aligning cover to OEM and contract requirements
- Clear, practical advice and fast documentation
How to Get a Quote
Getting the right cover starts with clarity: what you make, how it’s used, and what responsibility you carry under contract. We’ll keep the process straightforward while capturing the details insurers actually need.
- 1. Tell us your products, industries served, and whether you do design work
- 2. Share typical contract requirements and territories (UK/EU/Worldwide)
- 3. Confirm QA controls, traceability and claims history
- 4. We approach specialist insurers and compare terms
- 5. Choose the right cover and we put it on risk quickly
We had a specification dispute with a customer and needed clarity on what was covered. Insure24 structured our product liability and PI properly and explained the key gaps in plain English.
Director, UK Engineering ManufacturerFREQUENTLY ASKED QUESTIONS
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Does product liability cover defective parts?
Product liability generally covers third-party bodily injury or property damage caused by your products. It may not cover purely financial losses, contractual penalties, or the cost of repairing/replacing your own defective work unless a specialist extension applies.
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What insurance covers design errors?
Professional indemnity insurance is designed to cover claims arising from professional negligence, such as design mistakes, specification errors, or negligent engineering advice (subject to the policy terms, scope of services and retroactive date).
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Can I insure recall and rectification costs?
Sometimes. Product recall or rectification cover may be available for certain manufacturers, but it is not always standard and usually requires specialist underwriting. Eligibility can depend on your product type, volumes, QA controls and traceability.
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What about contractual penalties and chargebacks?
Many policies do not cover purely contractual penalties or “chargeback” costs unless they arise from covered liability or are insured under a specialist extension. We can review your typical contract wording and advise on the best available solutions.
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How do insurers assess defective parts risk?
Insurers typically look at what you manufacture, end-use, contract values, territories, claims history, and the strength of your quality controls—such as traceability, inspection stages, calibration records, materials certification checks, and version control for drawings/CAD.
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How quickly can Insure24 arrange cover?
Many manufacturers can be quoted quickly once we have key details such as products, industries served, territories, contract values, and whether you provide design services. More complex risks may require additional underwriting review, but we aim to progress matters promptly.