Product Liability Insurance UK: Manufacturer Guide

Protect customer promises, regulatory approvals and market access when products fail or injure users

Product liability insurance for UK manufacturers covers legal defence costs, compensation payments, and recall expenses when products cause injury, property damage, or fail to perform as warranted. The policy responds to claims from injured users, customers suffering losses, and regulatory investigations into product safety failures.

Common coverage triggers:

Personal injury from defective products including medical devices, consumer electronics, or manufactured goods
Property damage caused by product failures, fires, or malfunctions
Pure economic loss when products fail to perform causing customer financial harm
Product recall costs including notification, logistics, replacement, and disposal
Breach of regulatory approvals or safety standards requiring market withdrawal
Contamination or manufacturing defects affecting entire production batches

Why product liability becomes essential:

Customer contract requirements — According to research by TechUK on hardware procurement, 91% of enterprise purchase agreements and 87% of healthcare sector contracts mandate product liability coverage. Typical limits: £2m–£5m for B2B hardware; £5m–£10m for medical devices; £10m–£20m+ for implantable devices and life-sustaining equipment.

Regulatory framework exposure — MHRA, UKCA marking requirements, and Consumer Protection Act 1987 create strict liability regimes where manufacturers are liable for injuries regardless of negligence. Legal defence costs for product injury claims typically range £75k–£300k before settlement, with median settlements around £180k for moderate injuries and £2m+ for severe permanent injuries.

Recall cost concentration — According to research on UK product recall costs across manufacturing sectors, average recall costs range from £450k for limited consumer electronics recalls to £5m+ for medical device recalls affecting multiple markets. Costs include notification (£15–£75 per unit), reverse logistics, replacement product expediting, and regulatory compliance documentation.

Market access requirements — Distributors, retailers, and platform marketplaces (Amazon, medical device wholesalers) require proof of product liability insurance before listing products. CE/UKCA marking obligations include demonstrating adequate financial provisions for potential liabilities.

Determining adequate limits:

Consumer electronics and hardware startups: £2m–£5m
B2B industrial equipment: £5m–£10m
Medical devices (non-implantable): £10m–£20m
Implantable devices and life-sustaining equipment: £20m–£50m+
Selection factors: injury severity potential, user vulnerability, regulatory classification, cross-border sales, product lifetime

Product recall insurance structure: Recall coverage typically sits as an extension within product liability policies or as standalone recall insurance, covering:

Notification costs (letters, advertisements, customer contact)
Logistics and handling (collection, transport, storage, destruction)
Replacement product costs (manufacturing, expedited delivery)
Lost profit from recalled stock
Crisis management and PR consultancy
Regulatory compliance costs (MHRA notifications, safety reports)

Critical policy features:

Territorial scope covering all sales jurisdictions (UK, EU, USA, global)
Products completed operations coverage for products after sale and installation
Retroactive date protecting all previously manufactured products still in use
Defence costs in addition to policy limits (not eroding coverage available for settlements)
Pre-delivery product coverage during testing, demonstrations, and evaluation periods
Contractual liability endorsements addressing customer-specific indemnity requirements

Claims process reality — what manufacturers don’t expect: Product liability claims operate on multiple parallel tracks simultaneously. When a medical device causes injury, you face the injured party’s personal injury claim (civil litigation), the customer’s breach of contract claim (commercial dispute), the MHRA’s regulatory investigation (compliance process), and potentially the police investigation if criminal negligence is suspected. Your insurer controls the personal injury defence through appointed solicitors, but other tracks require separate legal representation you fund personally unless specific policy extensions apply. Most insurers settle personal injury claims within 18–36 months, but regulatory investigations continue for 2–4 years, and customer contractual disputes can take 3–5 years to resolve. The insurance funds one track well whilst leaving other tracks partially funded or unfunded, creating unexpected legal costs of £150k–£500k beyond policy coverage.

UKCA and regulatory compliance: UKCA marking requires manufacturers to demonstrate financial capacity to meet potential liability obligations. Insurance certificates provide evidence of financial provisions during conformity assessments. Post-Brexit regulatory divergence creates coverage gaps when UK policies don’t extend to EU sales or vice versa.

Medical device specific considerations: Medical devices face enhanced liability exposure reflecting user vulnerability and injury severity potential. Class IIa and above devices require specialist medical device liability insurers who understand MHRA regulatory frameworks, clinical evaluation requirements, and post-market surveillance obligations. Standard manufacturing insurers typically exclude medical devices or cap limits at inadequate levels.

Bottom line: Product liability insurance enables manufacturers to access customer contracts and distribution channels, maintain regulatory compliance with CE/UKCA obligations, and transfer the costs of defending injury claims and funding product recalls to insurers with claims handling expertise and financial capacity to cover multi-million pound settlements.

What’s in this Guide

A 28-year-old healthy volunteer in your Phase I oncology trial develops acute liver failure 72 hours after receiving the first dose of a novel kinase inhibitor. He requires emergency liver transplant, 6 weeks ICU care, and faces lifetime immunosuppression with associated complications. His solicitors estimate lifetime costs at £3.2 million including medical expenses, loss of earnings, care costs, and compensation for pain and suffering.

Simultaneously, the MHRA suspends your Clinical Trial Authorisation pending investigation into whether dosing protocols were appropriate and monitoring was adequate. Your Series B investors discover the trial suspension during due diligence, requesting detailed explanation of liability exposure and insurance coverage before proceeding with the funding round. Your CRO contract places primary liability on you as sponsor, but requires the CRO to cooperate in the investigation and maintain their own professional indemnity coverage.

This scenario demonstrates why clinical trials insurance is mandatory before commencing trials, not an optional risk management consideration. The MHRA won’t authorise trials without evidence of adequate insurance. Ethics committees won’t approve studies without participant compensation provisions. Investors won’t fund companies conducting trials without appropriate liability coverage. And no reputable CRO will conduct trials for sponsors lacking proper insurance.

Short answer: Clinical trials insurance covers compensation to participants injured during trials, legal defence costs when claims arise, and trial continuation expenses when adverse events create liability exposure. The insurance operates under no-fault principles where participants receive compensation for trial-related injury without proving negligence, consistent with ABPI industry guidelines and MHRA regulatory expectations.

What Clinical Trials Insurance Actually Covers

Clinical trials insurance operates under no-fault compensation principles unique to pharmaceutical research. Unlike standard product liability where claimants must prove defect and negligence, trial insurance compensates participants for injuries “on balance of probabilities” related to trial participation, regardless of whether the sponsor was negligent.

Participant injury compensation under no-fault principles:

The policy covers medical expenses, care costs, loss of earnings, and pain/suffering compensation when participants suffer injury during or after trials, provided causation analysis establishes the injury was more likely than not trial-related.

Covered injuries include:

Adverse reactions to investigational medicinal products including allergic responses, organ toxicity, or unexpected pharmacological effects
Injury from trial procedures including invasive monitoring, biopsies, imaging with contrast agents, or protocol-required interventions
Exacerbation of underlying conditions when trial participation worsens pre-existing disease
Delayed diagnosis or treatment when trial protocols prevent participants receiving standard care that would have identified or treated developing conditions

The causation complexity: determining whether injury is trial-related requires independent medical expert assessment distinguishing between natural disease progression, coincidental illness, and actual trial-caused harm. This assessment process takes 6–18 months typically, during which the participant may require ongoing care funded by the sponsor pending causation determination.

According to ABPI guidelines on compensation for medicine-induced injury in clinical trials, compensation covers:

Reasonable medical expenses not covered by NHS
Care costs for assistance with daily living resulting from injury
Loss of earnings during recovery and permanently if unable to return to work
Pain, suffering, and loss of amenity compensating for reduced quality of life

Sponsor legal liability for negligence:

Beyond no-fault compensation, the policy covers traditional negligence claims when sponsors, CROs, or investigators breach duty of care causing participant harm. These claims arise from:

Protocol design failures creating unreasonable risks to participants, including inadequate safety monitoring, inappropriate dosing, or failure to exclude vulnerable populations

Informed consent deficiencies where participants weren’t adequately informed of risks, leading to claims they wouldn’t have participated had full information been provided

Monitoring failures where investigators failed to detect deteriorating participant condition or respond appropriately to adverse events

The distinction between no-fault and negligence matters because compensation amounts differ. No-fault settlements typically reach £100k–£500k for moderate permanent injuries. Negligence claims where sponsors demonstrated gross departures from standards can reach £2m–£5m+ reflecting punitive elements beyond pure compensation.

Investigator and site staff indemnity:

Trials involve multiple parties: sponsors provide IMPs and protocols, CROs manage trial operations, investigators at clinical sites enrol and monitor participants. When participants are injured, determining which party bears liability requires analysing what caused harm.

The policy typically provides:

Sponsor indemnity protecting investigators following approved protocols from liability when participants are injured from IMP effects or protocol-required procedures
CRO indemnity covering trial management functions performed by contract research organisations on sponsor’s behalf
Clarification that investigators remain liable for their own negligence in trial conduct, which should be covered by investigators’ own clinical negligence insurance

The indemnity allocation principle: sponsors accept liability for injuries inherent in testing novel compounds and following protocol-required procedures. Investigators retain liability for their clinical negligence in patient care independent of protocol requirements. The boundary becomes disputed when adverse events result from both protocol design (sponsor liability) and investigator monitoring failures (investigator liability).

Trial continuation and abandonment costs:

When serious adverse events occur, trials may continue with enhanced monitoring, or be suspended/terminated. The policy covers:

Costs of continuing to monitor injured participants through trial completion and follow-up periods
Enhanced monitoring costs implementing additional safety assessments across all participants after adverse events detected
Trial abandonment costs when trials must terminate early due to safety concerns, including participant notification, close-out procedures, and regulatory reporting

The financial exposure: a Phase III trial with 500 participants costs £50k–£150k per participant. If serious adverse events force early termination after enrolling 300 participants, continuation costs for monitoring those 300 through safety follow-up can reach £5m–£10m. Standard clinical trial insurance includes sublimits of £2m–£5m for continuation costs, potentially inadequate for large trials.

When Clinical Trials Insurance Becomes Mandatory

Unlike most commercial insurance where timing is discretionary, clinical trials insurance is legally required before commencing trials under UK regulations.

MHRA Clinical Trial Authorisation requirements:

The Medicines for Human Use (Clinical Trials) Regulations 2004 require sponsors to have “arrangements” for compensation before MHRA grants Clinical Trial Authorisation. Regulation 15 specifically requires sponsors to provide statements confirming insurance or indemnity provisions are in place.

MHRA assesses insurance adequacy during CTA review, requiring:

Evidence of insurance or indemnity covering participant injury
Confirmation coverage limits are adequate for trial risk profile
Demonstration that coverage applies throughout trial duration including follow-up periods

Without adequate insurance documentation, MHRA will not issue CTA approval. The trial cannot legally commence until insurance is demonstrated. This makes clinical trials insurance a regulatory prerequisite, not a commercial decision.

Ethics committee and HRA approval requirements:

NHS Research Ethics Committees reviewing trials require sponsors to complete insurance sections in IRAS (Integrated Research Application System) applications. The application requires:

Insurance company name and policy number
Coverage limits per participant and in aggregate
Confirmation coverage meets ABPI guidelines for no-fault compensation

Ethics committees will not issue favourable opinion without adequate insurance documentation. Health Research Authority site approval similarly requires insurance confirmation before NHS sites can participate in trials.

Institutional and site participation requirements:

NHS Trusts, universities, and clinical research facilities require sponsors to demonstrate insurance before signing site agreements. Typical institutional requirements specify:

Minimum limits of £5m per participant for Phase I, £10m+ for Phase II/III
Sponsor indemnity protecting investigators following protocols
Coverage extending through trial completion and follow-up periods
A-rated insurers with financial stability to pay claims years after policies expire

Academic institutions conducting investigator-initiated trials often struggle meeting these requirements because university-arranged insurance may provide lower limits than NHS Trusts require, creating barriers to site participation.

Investor due diligence expectations:

Investors funding biotech companies conducting trials expect proper insurance before committing capital. Due diligence reviews examine:

Whether insurance limits match trial risk profiles
Retroactive dates covering all previously enrolled participants
Whether coverage continues through potential long-latency effects
Claims history and whether previous adverse events created uninsured exposures

Investors treat inadequate trial insurance as red flag indicating poor risk management and potential future liabilities that could consume investment capital responding to uninsured claims.

Clinical trials involve multiple parties with overlapping responsibilities. Understanding who maintains which insurance prevents gaps and disputes when claims arise.

Sponsor responsibilities:

The sponsor (company or institution initiating the trial) must maintain clinical trials insurance covering:

Participant injury compensation under no-fault principles
Sponsor negligence in protocol design, IMP supply, or trial oversight
Investigator indemnity for injuries arising from following protocol as written

Sponsors cannot delegate this insurance obligation to CROs even when CROs conduct most trial operations. Regulatory responsibility remains with sponsors, so insurance responsibility remains with sponsors.

CRO responsibilities:

Contract Research Organisations conducting trials on sponsors’ behalf must maintain professional indemnity insurance covering:

Errors in trial management, monitoring, or data management
Negligence in CRO staff training or site oversight
Protocol violations resulting from CRO operational failures

CRO insurance typically excludes participant injury compensation (that’s sponsor responsibility) but covers CRO’s own professional errors. Typical CRO professional indemnity limits range £10m–£20m.

If participant injury arises from:

→ Adverse reaction to the IMP itself Primary coverage: Sponsor’s clinical trials insurance Why: Testing novel compounds is sponsor responsibility. Inherent IMP risks are sponsor liability regardless of CRO involvement.

→ Protocol violation by CRO monitor Primary coverage: CRO professional indemnity Why: CRO negligence in performing contracted services sits in CRO liability territory. Sponsor’s trial insurance is secondary if CRO coverage is inadequate.

→ Investigator error in patient monitoring unrelated to protocol Primary coverage: Investigator’s clinical negligence insurance Why: Investigators’ own medical negligence remains their responsibility. Sponsor doesn’t indemnify investigators for clinical errors outside protocol requirements.

→ Combined protocol design flaw and monitoring failure Primary coverage: Both sponsor trial insurance and investigator clinical negligence Why: When both protocol design and clinical monitoring contributed to injury, liability is shared between parties based on causation analysis.

Critical Policy Features That Determine Real World Value

Clinical trials insurance varies significantly in coverage quality based on specific policy features underwriters don’t always explain clearly during placement.

No-fault compensation vs negligence-only coverage:

Some policies cover only injuries where sponsor negligence is proven (standard liability insurance). Better policies cover trial-related injury on balance of probabilities without requiring negligence proof (true no-fault coverage consistent with ABPI guidelines).

The distinction matters because no-fault coverage settles claims faster and more generously than negligence-only coverage where legal liability must be established. MHRA and ethics committees expect no-fault provisions, making negligence-only policies inadequate for regulatory compliance.

Retroactive dates and historical participant coverage:

Policies include retroactive dates specifying the earliest trial enrolment date covered. If your policy has a 1 January 2024 retroactive date, participants enrolled before this date have no coverage for injuries manifesting after policy inception.

The critical issue: some trial injuries have long latency. Healthy volunteers in Phase I trials who develop liver damage or neurological issues years later need coverage under policies that were active when they enrolled. If you’ve switched insurers and new policies exclude historical participants, uninsured gaps emerge.

Correct approach: maintain continuous retroactive dates covering all trial participants ever enrolled. When switching insurers, require new insurers to match existing retroactive dates or earlier, never allowing dates to move forward.

Claims-made vs occurrence basis:

Most clinical trials policies operate on claims-made basis, covering claims made during the policy period for injuries occurring after the retroactive date. This differs from occurrence basis (covering injuries occurring during policy period regardless of when claims are made).

Claims-made structure requires:

Continuous coverage without gaps from trial commencement through claims tail (typically 10–15 years post-trial)
Extended reporting periods (“run-off coverage”) purchased when policies terminate
Careful management of policy renewals ensuring retroactive dates don’t shift forward

The practical consequence: you can’t simply let clinical trials insurance expire after trials complete. Participants can bring claims up to limitation periods (typically 3 years from injury discovery in England, but longer for latent injuries). You need coverage continuing through this claims tail period.

Exclusions for specific trial types:

Standard policies often exclude or require endorsements for:

First-in-human trials testing novel mechanisms
Trials in particularly vulnerable populations (pregnant women, children, cognitively impaired)
Gene therapy or cell therapy trials with long-term genetic modification potential
Trials in high-risk jurisdictions with unpredictable legal systems

Sponsors conducting trials in these categories must obtain specific endorsements or specialist policies, often premium loadings can be significant.

Structuring Adequate Coverage for Your Trial Risk Profile

Clinical trials insurance limits must match trial phase, compound toxicity, participant vulnerability, and trial duration.

Phase I healthy volunteer trials:

Limits: £5m–£10m per participant, £10m–£20m aggregate

Phase I creates highest severity exposure because healthy volunteers receive no therapeutic benefit, only risks. Serious adverse events in young healthy volunteers generate extreme compensation amounts (£2m–£5m+ for permanent disability in 25-year-olds with 40+ year life expectancy).

Phase II/III patient trials:

Limits: £10m–£20m per participant, £20m–£50m aggregate

Patient trials in severe diseases (oncology, neurodegenerative diseases) create lower relative exposure because participants have limited life expectancy and existing disability from underlying conditions. But absolute compensation amounts remain high and participant numbers increase, raising aggregate exposure.

Paediatric trials:

Limits: £20m+ per participant

Injured children face lifetime care costs and earning loss calculated over 50+ year horizons. Compensation amounts can exceed adult equivalents by 200%–400%.

First-in-human novel mechanisms:

Limits: £10m–£20m+ per participant with specialist underwriters

First-in-human trials testing compounds with novel mechanisms and limited safety data create maximum underwriting uncertainty. Underwriters apply premium loadings versus established compound classes.

What underwriters actually think: they’re assessing probability that something unexpected will go catastrophically wrong. Established compound classes have decades of safety data informing risk assessment. Novel mechanisms testing first-generation compounds in new therapeutic areas provide minimal historical data for underwriters to price risk accurately. Underwriters respond to uncertainty with high premiums and sometimes coverage declinations entirely.

Preparing for the Claims Process

Clinical trial injury claims begin with clinical causation assessment, not legal proceedings. Understanding this pre-legal phase prevents mistakes that undermine coverage or slow compensation.

Hours 1 to 72: Adverse event identification and reporting:

When participants report adverse events potentially related to trials:

Implement immediate safety measures (withdraw participant, provide medical care)
Document event details precisely (timing relative to dosing, severity, clinical presentation)
Report to investigators, ethics committees, MHRA, and sponsor medical monitors per regulatory timelines
Notify insurer within 24–48 hours even if causation is unclear
Do NOT conduct detailed causation investigation before obtaining legal advice on maintaining privilege

The notification tension: you must report adverse events to regulators immediately (MHRA requires serious adverse events reported within 15 days) but you want legal privilege over causation investigation for insurance purposes. The solution: factual reporting to regulators without legal conclusions about liability, whilst conducting parallel privileged investigation with solicitors instructing medical experts.

Months 1 to 12: Clinical causation assessment:

Before legal claims commence, independent medical experts assess whether injury was trial-related. This clinical causation process involves:

Detailed review of participant’s medical history and underlying conditions
Analysis of event timing relative to IMP administration
Consideration of alternative explanations (disease progression, concurrent illness)
Assessment using Bradford Hill criteria and pharmacological plausibility

This process takes 6–18 months typically. Only after causation is provisionally established do compensation negotiations begin. The insurer funds this causation assessment phase, but many sponsors underestimate its duration and cost.

Years 1 to 3: Compensation negotiation and settlement:

Once causation is established, compensation follows ABPI guidelines calculating:

Medical expenses for treatment beyond NHS provision
Care costs calculated using NHS-approved care rate schedules
Loss of earnings with actuarial calculations for permanent disability
Pain and suffering using Judicial College Guidelines for compensation

Assume trial injury claims settle within 18–36 months for £100k–£500k. Catastrophic injuries causing permanent disability settle for £1m–£5m+. Settlement negotiations involve participant solicitors, sponsor legal teams, insurers, and medical experts agreeing compensation quantum.

The settlement reality: insurers settle claims commercially, not emotionally. They calculate probable compensation if claim proceeds to judgment, compare to settlement costs, and offer amounts reflecting litigation risk. Sponsors wanting to compensate generously for reputational reasons often find insurers resist settlements exceeding actuarial valuations, creating tensions between sponsor commercial interests and insurer claims philosophy.

Reference Reading

Health Research Authority (HRA) – Insurance and Indemnity Guidance. UK regulatory authority guidance on insurance requirements for clinical trials.
Link 2: MHRA Clinical Trials Regulations. Primary regulatory source for UK clinical trial requirements including insurance obligations.

Simplify Stream provides educational content about business insurance for UK companies, especially those with high growth business models that require specialist insurance market knowledge. We don't sell policies or provide regulated advice, just clear explanations from people who've worked on the underwriting and broking side.