Product Liability Insurance for Cross-Border Importers: The Coverage That Protects You When a Defective Product Causes Harm

The Lawsuit That Named the Importer First

A small importer sold LED string lights online. A customer's unit shorted and started a small fire that damaged a home. The customer sued the marketplace, the brand, and the importer. The factory in Guangdong was never named, because a lawyer knows you can't easily collect a judgment there.

The importer had no product liability policy. The defense alone cost more than a year's profit, and the settlement was worse. The importer is still in business only because the claim was small by the standards of these things. The next one might not be.

You Are the Manufacturer, Whether You Like It or Not

This is the part most first-time importers miss. Under product liability law, the importer of record is treated as the manufacturer. It does not matter that the factory made the product, that you never touched it, or that your name is not on the box. If a defective unit injures someone, you can be sued, and the jurisdiction will be wherever the injury happened, not wherever your office is.

The factory overseas is nearly impossible to sue and collect from across borders. So plaintiff lawyers name the importer first. That's not unfair, it's just how the incentives line up. Your insurance is what steps in front of that lawsuit.

What the Policy Actually Pays For

Product liability insurance pays the defense and the damages from a claim that your product caused bodily injury or property damage. Legal fees, settlements, and judgments, up to your limit. That's the core. But there are gaps people only discover after the fact.

Recall is the one that catches people. Liability covers the injured customer. Recall covers the cost of getting a dangerous product out of the market, the notices, the shipping, the disposal, and the lost stock. They are two different policies. If your product could hurt someone, you want both.

How Much Coverage to Buy

One million dollars per occurrence and two million aggregate is the floor. Most retailers and marketplaces require it before they'll let you list. That number is about getting in the door, not about covering your actual exposure.

If your product can injure someone, electrical items, children's products, anything that plugs in or heats up, carry two to five million. If you sell to large retailers, they will often write five million or more into the contract and require you to name them as an additional insured. Size the limit to the worst injury a single unit could plausibly cause, not to your annual revenue, because a burn, a fire, or a child's injury does not scale with how small your company is.

The Exclusions That Will Surprise You

Read the exclusions page. That's where the real coverage lives.

• Known defects: if you knew a product was dangerous and sold it anyway, the insurer may deny coverage.
• Contractual liability: standard policies may not cover liability you take on in a contract, so the indemnity clause you sign with a retailer matters.
• Certain markets: some policies exclude specific product categories or countries. Selling a product outside the covered territory can void the claim.
• Pollution or recall: generally excluded and need their own endorsements.

None of this is fine print trivia. An exclusion is the difference between the insurer writing a check and you writing one.

Certificates, Additional Insured, and the Factory's Policy

A certificate of insurance from your Chinese supplier proves the factory has coverage. It does not cover you, and it may not respond to a claim filed in your market. So never treat the factory's policy as your shield.

What you want is your own policy, written for the country you sell into, and where possible, your company named as an additional insured on the factory's policy too. That gives you two layers. Your own policy is the one you control, the one whose limits and exclusions you've read, and the one that answers the phone when the letter arrives.

Common Questions from Buyers