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LIABILITY INSURANCE THAT HELPS YOU TAKE OFF
Why “Public vs Product vs Combined” Matters in Semiconductor Manufacturing
Semiconductor and electronics businesses are exposed to two different worlds of liability risk: (1) what happens on your premises or while you are carrying out work (public liability), and (2) what happens after your products, components or assemblies leave your control (product liability).
Many manufacturers assume one policy automatically covers everything. In reality, liability insurance is all about how the incident happens, where it happens, who is affected, and whether the harm is caused by your operations or by your product. Semiconductor supply chains make this more complex because components can be integrated into high-value systems, shipped worldwide, and used in high-reliability applications where a defect can trigger substantial downstream losses.
This guide explains the difference, common gaps, and when a combined policy makes sense — so you can satisfy customer requirements, protect cash flow and avoid nasty surprises at claim time.
Public Liability vs Product Liability: The Simple Definition
Public Liability (PL) covers your legal liability to third parties for injury or property damage arising from your business activities (typically on your premises or arising from your operations). Product Liability covers your legal liability for injury or property damage caused by products you manufacture, supply or sell after they have left your control.
In manufacturing, both are important. A visitor can slip in your warehouse (PL). A component you supplied can fail and cause property damage in a customer’s equipment (Product Liability). A combined policy typically includes both sections, with one limit and aligned wording.
Public Liability Covers
- Injury to visitors, customers or members of the public at your premises.
- Damage to third-party property caused by your on-site activities.
- Liability arising from installation, commissioning or site work (wording dependent).
- Defence costs for covered claims (subject to policy terms).
- Often includes “products” automatically for low-risk trades — but not always suitable for manufacturers.
Product Liability Covers
- Injury or property damage caused by a defective product after it leaves your control.
- Claims from customers or third parties where your product is alleged to be the cause.
- Worldwide territories and export exposures where arranged (important for semicon supply chains).
- Defence costs, investigations and legal representation (subject to wording).
- Options for recall/withdrawal may be available separately (not automatic).
Real-World Examples for Semiconductor & Electronics Manufacturers
Liability insurance becomes clearer when you map it to real incidents. Semiconductor and electronics environments tend to have: high-value third-party property exposure (tools, customer goods), highly sensitive products, international distribution, and quality-driven disputes that can blur the line between “liability” and “contract”.
Below are examples of claims that typically sit under Public Liability versus Product Liability, and where combined cover helps remove ambiguity.
Public Liability Claim Examples
- A courier is injured at your loading bay due to a trip hazard.
- A visitor slips in a reception area and makes a claim.
- A contractor damages a customer’s equipment while working at your site.
- A fork-lift collision damages a third-party vehicle in your yard.
- You attend a customer site to troubleshoot a process issue and accidentally damage their property.
- A chemical spill from your operations damages a neighbour’s property (pollution wording matters).
Product Liability Claim Examples
- A semiconductor device fails and damages a customer’s control system.
- A PCB assembly has a defect that causes overheating and property damage.
- A power component fails in a product and causes a fire in third-party property.
- A latent defect leads to downstream property damage in an OEM installation.
- A batch escapes QA and causes damage once integrated into higher assemblies.
- Exported products cause a claim overseas where local legal costs are significant.
When a Combined Policy Makes Sense
A Combined Public & Products Liability policy is often the simplest and most cost-effective way for manufacturers to arrange liability cover. It provides a single policy with aligned definitions, consistent territorial terms, and one renewal date. It also makes procurement checks easier because customers usually ask for evidence of both Public and Products Liability.
Combined cover is especially relevant for semiconductor and electronics manufacturers because risks can overlap: for example, you may supply products and also perform on-site installation, repair, calibration, field service or troubleshooting. A combined policy reduces the chance of disputes about whether the claim is “operations” or “products”.
However, “combined” does not mean “everything”. Contractual liabilities, pure financial loss, performance guarantees and product efficacy claims are often excluded or restricted. For those exposures you may need tailored cover, careful contract reviews, or specialist extensions.
Benefits of Combined Cover
- One policy, one insurer, one set of definitions and one renewal.
- Easier compliance with customer and landlord requirements.
- Reduced coverage ambiguity for mixed activities (manufacture + site work).
- Consistent territorial and jurisdiction terms for export businesses.
- Streamlined claims handling and a single legal defence strategy.
Common Limitations to Watch
- Contractual penalties and liquidated damages are often excluded.
- Pure financial loss (no injury/property damage) may be excluded.
- Product recall is usually not included unless specifically arranged.
- Pollution liability is often restricted unless sudden/accidental extensions apply.
- Work away conditions, heat work or installation exclusions can apply.
Key Liability Gaps for Semiconductor Supply Chains
Semiconductor losses are often “quality-driven”. Customers may claim for rework costs, production delays, field replacements and warranty programmes. But many of these losses are contractual or financial in nature and may not be covered by standard liability policies unless there is third-party injury or third-party property damage.
This is where manufacturers get caught: they buy a policy assuming it covers “customer losses”, but then discover the claim is framed as breach of contract, performance failure or pure financial loss. That doesn’t mean you can’t protect against these scenarios — it means you need the right structure, and sometimes additional covers.
Common Gaps
- Rework and replacement costs where there is no third-party property damage.
- Chargebacks and warranty costs framed as contract disputes.
- Customer’s lost profit or downtime costs (pure financial loss).
- Recall costs unless recall/withdrawal cover is arranged.
- Contractual indemnities beyond common-law liability.
- US/Canada exports without proper territorial extensions.
- Pollution or contamination liabilities beyond sudden/accidental events.
How to Reduce the Gap
- Align contracts with insurable liabilities and avoid uninsurable clauses.
- Consider product recall/withdrawal if you supply critical markets.
- Review financial loss exposure and whether specialist solutions exist.
- Strengthen traceability and containment to reduce severity.
- Use clear QC documentation to support defence strategy.
- Ensure the policy reflects your territories, markets and end-use.
The biggest risk isn’t just “having liability insurance” — it’s having liability cover that matches how your products move through the supply chain and how claims are actually made.
Commercial Account Executive, Insure24PROTECT YOUR BUSINESS
- Combined Public & Products Liability options for manufacturers
- Export and worldwide territory arrangements where needed
- Defence costs support and insurer claims expertise
- Advice on structuring cover around contracts and supply chain exposure
- Optional add-ons such as recall/withdrawal (where available)
Compliance & Customer Requirements
Many semiconductor and electronics manufacturers must evidence liability insurance as part of vendor onboarding and customer contracts. Typical requirements include minimum liability limits, territorial extensions for exports, and confirmation that products liability is included. We help ensure your documents match procurement checks and reflect what you actually do.
- Public and Products Liability certificates for customer onboarding
- Limits of indemnity aligned to contracts and markets served
- Territory/jurisdiction terms for export supply chains
- Clear description of activities (manufacturing, assembly, testing, field service)
- Contract reviews to avoid uninsurable liability assumptions
FREQUENTLY ASKED QUESTIONS
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What is the difference between public liability and product liability?
Public liability relates to injury or property damage to third parties arising from your operations (often on your premises). Product liability relates to injury or property damage caused by products you manufacture or supply after they have left your control, subject to policy terms.
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Do semiconductor manufacturers usually need both?
In most cases, yes. You typically have public-facing risks (visitors, deliveries, contractors) and product-related risks (components or assemblies that could cause damage once integrated elsewhere). Many manufacturers choose combined public and products liability to keep cover consistent.
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Does product liability cover warranty, rework or customer chargebacks?
Often not, unless the claim involves third-party injury or third-party property damage and the policy responds. Warranty and chargebacks are commonly contractual or financial losses and may be excluded. The right structure depends on your contracts, markets and the type of loss scenarios you face.
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Does a combined policy mean one limit for both public and products?
Many combined policies provide one limit of indemnity that applies to both sections, but structure and aggregates vary by insurer. We’ll explain how the limit applies, whether it’s “any one occurrence”, and if there are annual aggregates for products/exports.
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Do I need worldwide cover for exports?
If you export or supply customers who export, you may need worldwide territory and jurisdiction terms. This is especially relevant for semiconductor supply chains where components can end up globally. Cover must be arranged correctly for the territories you trade in.
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Is product recall included in product liability?
Usually not. Recall/withdrawal is typically a separate cover (where available) designed to help with the cost of removing products from the supply chain and managing the incident. If recall exposure matters to you, we can explore options.
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What information do you need to quote the right liability cover?
We typically ask about your activities (manufacture, assembly, testing, field service), products and end-use, turnover, export territories, customer contract requirements, claims history, quality controls/traceability and whether you have recall exposure. This helps us structure a combined policy that matches your risks.