Introduction
Sometimes, product liability insurance is confused
with other types of insurance producers and farm
owners have for their operation. Below, we discuss the
purpose and importance of product liability insurance
along with frequently asked questions. In addition,
we note the differences between product liability
insurance and other common types of farm insurance
coverage.
a
Note: The following document is based on research
but should not be taken as legal advice. We recom-
mend reviewing all insurance documents and inqui-
ries with your insurance agent. We are here to guide
producers in the world of insurance, but we are not
the end-all, be-all.
What is product liability insurance?
Product liability insurance protects producers in the
event a food borne illness occurs from a product they
sold. This type of insurance is often required by most
retail stores, groceries, distributors, restaurants, etc.
Product liability insurance covers the claims of in-
jured parties, such as medical treatment for consum-
ers hurt by consuming the product. It does not cover
the costs of a product recall.
Why is product liability insurance
important?
Product liability insurance is a tool used to manage
risk when selling goods to the public. Restaurants,
groceries, and other establishments
selling to the public need to know they
are protected when selling your prod-
uct. They need to know if a consumer
becomes sick after eating your product,
you will be able to account for any resulting lawsuit
or injured party claim.
Do I need product liability insurance?
The short answer is yes. If you are selling to restau-
rants, schools, groceries, etc. or selling directly to
consumers, additional product liability insurance is
needed to cover yourself if a food borne illness were
to occur. There may be a small amount of product li-
ability insurance already in your general farm policy,
but we suggest reviewing this policy with your insur-
ance agent because it might not meet the minimum
requirements of a restaurant, school, grocery, etc.
What is the difference between general
farm liability and product liability – aren’t
they both liability?
Yes, they are both liability insurance coverages.
However, general farm liability insurance typically
covers damage or injury resulting on the farm or
because of farming activities. Farming activities can
include the sale of produce in its raw, unprocessed
state but a general farm liability policy does not cover
the harm which could come to consumers if the raw,
unprocessed produce causes a food borne illness
outbreak. Farming activities do not include processed
items of any sort of foods with additional ingredients.
The key difference is product liability insurance
covers the producer in any food borne illness cases
resulting from their product, while general farm
liability insurance does not.
Does product liability insurance
cover the cost of recalling my
product?
No, product liability insurance does not
Center for Crop Diversicaon Crop Prole
Product Liability Insurance Importance & FAQ
Savannah L. Columbia
1
1
Savannah Columbia is an Agricultural Extension Associate in the Department of Agricultural Economics at the University of
Kentucky
www.uky.edu/CCD
CCD-MR-1
cover the cost of recalling your product. Product re-
call insurance is an insurance coverage option which
does cover a recall; however, it usually only covers
the direct costs of recalling a product. It would not
cover the indirect costs of recalling; such as prot
loss. Direct costs of recall usually include getting the
product off the shelf, destroying it, and replacing it
with new product.
What products require product liability
insurance?
Any product you have modied or added value to will
need product liability insurance. Additionally, any
product sold to restaurants, groceries, wholesalers,
schools, etc. will need product liability insurance.
Remember, there may be product liability coverage in
your general farm policy but it is your responsibility
to ensure you have the minimum amount required by
your buyers and product outlets.
How much product liability insurance do I
need?
This is a great question to bring up with your insurance
agent. They can give you a personalized policy based
on what you are selling and who you are selling to.
It is also a good idea to bring this question up with
your buyer(s) because they can give you an idea of
what they require, which can give you an idea of how
much coverage you will need to work with them.
However, a common rule of thumb is to have at least a
$1 million policy. Do not let this number scare you – a
$1 million policy refers to your amount of coverage,
not the cost you pay for having the policy. Check with
your insurance agent for updated information about
how much this insurance premium might cost.
How does product liability insurance t in
with other insurance policies?
Table 1 shows how product liability insurance falls in
line with other insurance coverage options discussed
in this document. This table does not include all of
the available insurance coverage options, but does
include some of the most common types.
References and Continued Reading
Kime, Lynn & McGee, Winifred W. “Product Li-
ability Insurance.” PennState Extension. Revised
September 2015. https://extension.psu.edu/product-
liability-insurance
Rejesus, Roderick & Dunlap, Annette. “Insurance
Coverage Options for Fresh Produce Growers.” NC
State Extension Publications, AG-710. January 2009.
https://content.ces.ncsu.edu/insurance-coverage-
options-for-fresh-produce-growers
Massey, Ray & Langford, Barry. “Farm Liability
Insurance.” University of Missouri Extension. March
2019. https://extension.missouri.edu/publications/
g455
General Farm Liability
Insurance
Product Liability
Insurance
Product Recall
Insurance
What does this
insurance type cover?
Damage or injury
resulting on the farm
or because of farming
activities.
The producer, if their
product causes a food
borne illness outbreak.
The direct cost(s) of
recalling a
contaminated product.
What does this
insurance type not
cover?
Does not cover your
raw, unprocessed
product if it causes a
food borne illness
outbreak.
Only covers up to the
policy limit. Be sure to
have adequate
coverage for your sales
outlets.
Does not cover indirect
costs of recall; such as
profit loss or business
interruption losses.
Table 1: Types of Insurance
August 2021
For additional information, contact your local County Extension agent
Reviewed by Tim Woods, UK Extension Professor and Emily Spencer, UK Extension Associate
Educational programs of Kentucky Cooperative Extension serve all people regardless of economic or social status and will not discriminate on the basis of race, color, ethnic origin, national origin, creed, religion, political
belief, sex, sexual orientation, gender identity, gender expression, pregnancy, marital status, genetic information, age, veteran status, or physical or mental disability.
Suggested Citation:
Columbia, Savannah L. (2021). Product Liability Insurance
Importance and FAQs. CCD-MR-1. Lexington, KY: Center
for Crop Diversication, University of Kentucky College of
Agriculture, Food and Environment. Available: http://www.uky.
edu/ccd/marketready/ProductLiabilityInsurance
