Chubb liability insurance for worldwide exports
Exporting does not change your liability, but it does change where you are sued and the amounts that are usual there. Your policy has to deal with those two things separately.
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In brief
With export, two concepts are often confused. The area of cover says where the loss may arise; the jurisdiction says before which court the claim may be brought. A policy with worldwide cover but without US jurisdiction does not pay when your customer sues you before a court in the United States. Claims under US or Canadian law are excluded as standard and can only be covered after an express extension and for a separate premium.
For the product itself, a harmonised regime applies within the European Union. Under Article 6:185 of the Dutch Civil Code the producer is liable for loss caused by a defective product, even without fault. That liability also affects the importer who brings the product in from outside the European Economic Area and anyone who puts their brand name on it. If you supply a distributor who sells your product on under their own name, that position shifts; set out in the contract who carries what. See also the product liability insurance.
What the liability policy does not include: the cost of taking a batch back off the market, and damage to the goods in transit. The first calls for recall cover, the second for goods in transit insurance. The basic cover and the usual exclusions are described under the public and employers' liability insurance.
This page deals with one situation. The full overview is on Compare personal liability insurance (AVP).
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What to look out for
Four points that determine the outcome of a claim when supplying across borders.
Where you are sued determines the cover
Your own terms of supply may point to Dutch law and a Dutch court, but a consumer or an end user abroad is not always bound by that. So work from the countries your product ends up in and not only from the countries you invoice. Ask for a breakdown of turnover by destination on your application.
Punitive damages and legal costs
In a number of legal systems an award can contain a punitive element. Punitive and exemplary damages are excluded on virtually every Dutch policy, even where US jurisdiction is included. Defence costs there can also exceed the loss itself; check whether those costs fall within or on top of the sum insured.
Onward supply and private label
If your customer sells your product under their own brand, they are treated as the producer towards the end user and will then come to you. That recourse claim is contractual liability and can fall outside the cover in so far as it goes beyond what the law imposes on you. Have the indemnity clauses in export contracts set against the policy in advance.
What falls outside the cover
Excluded are the the value of the product supplied and supplying it again, recall costs without separate cover, pure financial loss such as a customer's loss of production where nothing was broken, fines from regulators and damage caused by intent (Article 7:952 of the Dutch Civil Code). Supply to countries subject to sanctions or a trade embargo also falls outside every policy.
What does your premium depend on?
- Export countries and split of turnover: the destination weighs more heavily than the total volume
- Turnover in the US and Canada: the main individual loading factor
- Type of product and application: a component in a medical or industrial application weighs heavily
- Position in the chain: producer, importer, supplier or private label
- Sum insured and aggregate: per claim and per insurance year
- Quality assurance and certification: inspections, standards and documentation for each sales market
Insurers weigh these details differently. That is where your saving is.
What is covered
| Situation | Cover in Europe | Worldwide cover |
|---|---|---|
| Your machine injures an employee of a customer in Belgium | Yes | Yes |
| The same machine injures someone at a customer in Vietnam | No | Yes |
| A distributor in Japan is held liable and then recovers the loss from you | No | Provided that |
| A consumer in Australia is injured by a unit that reached the country through a web shop | No | Provided that |
| Your consignment is damaged during the sea voyage to Chile | No | No |
| A defective raw material from you makes a German customer's entire batch of finished product unusable | Provided that | Provided that |
The territorial scope says where the loss may arise; whether that claim is also taken up in that legal system is a second question.
Frequently asked questions
This is what people ask us most.
My policy says worldwide. Am I covered everywhere then?
Not necessarily. Alongside the territorial scope, look at the jurisdiction provision. Virtually every Dutch policy excludes claims brought before a court in the United States or Canada, even where the cover otherwise reads worldwide. If you supply there, directly or through a distributor, have that expressly included before the first consignment leaves.
I only supply a distributor in the Netherlands. Do I run an export risk?
You may well. If that distributor sells your product on abroad, the end user can hold you liable as the producer under Article 6:185 of the Dutch Civil Code, whoever you invoiced. Ask your customers where the goods go and report it to the insurer. A territorial scope limited to the Netherlands does not stop such a claim. It only excludes it.
What if my component is built into someone else's product?
The discussion is then about the damage to the assembled end product. Damage to your own component is not covered; damage to the rest of the product and the cost of dismantling and reassembly only fall under the cover if the extension for processed or assembled goods is included. In supplying industry, that is an essential extension.
How long does my liability continue after supply?
Longer than the guarantee period. A defect can come to light years after supply, and the law has its own limitation and expiry periods for product liability that are separate from your contractual guarantee. So watch the notification system in your policy and the run-off cover on termination. If you stop exporting, claims about earlier supplies will keep coming in.
Every situation is different. For these situations we have a separate page.