Commodity producer

If the customer is a manufacturer, importer, distributor, supplier, repairer or installer and is generally involved in any part of the life cycle of a product or service, there is a risk of liability for the quality of that product or service. Even if, ultimately, the fault for the quality of the product or service will be assigned to another person, the company may incur significant costs of providing legal protection for a claim or demand brought against it.

Why is it necessary to insure the liability of a manufacturer, supplier of works/services?
Consumer protection legislation in many countries around the world establishes absolute liability (no fault) for the quality of manufactured products, with little scope for protection. For example, according to Article 1111 of the Civil Code of the Republic of Tajikistan, harm caused to life, health or property of a citizen or property of a legal entity due to constructive, prescription or other shortcomings of a product, work or service, as well as due to inaccurate or insufficient information about a product (work, service) is subject to compensation by the seller or manufacturer of the goods, the person who performed the work or provided the service (performer), regardless of their guilt and whether the victim was in a contractual relationship with them or not. In addition, damage caused due to defects in the goods is subject to compensation at the choice of the injured person by the seller or manufacturer of the goods (i.e. any owner of the product in the chain of its implementation).

Even companies that maintain good quality control, comply with health and safety regulations, and use proper product testing methods for product quality, can be held liable for harm to consumer life, health, and property.

Besides:
• The requirement for insurance may be provided for by an agreement with a counterparty (for example, in the case of export of products);
• Claims about the quality of exported products involve proceedings under a different legal regime (laws) and unclear legal consequences, when payments can be significantly higher than in Tajikistan. For example, it is common knowledge that product quality claims in North America or Canada can result not only in liability for damages, but also in large compensations many times the amount of damages caused;
• Manufactured products have varying lifetimes/expiry dates and can be re-exported or shipped anywhere in the world, which implies the possibility of legal action anywhere in the world many years after the production and distribution of the products;
• Losses happen even in companies with good corporate governance.