What does product liability insurance cover?

It covers damages and legal defence costs when a product you made, imported, distributed or sold causes bodily injury or damage to someone else's property after it has left your possession. That includes claims over defects, design and inadequate warnings or instructions. It does not pay to replace your own defective product or to recall it.

Is product liability part of my CGL policy?

Usually, yes. A standard Canadian commercial general liability policy includes products and completed operations coverage, typically with its own annual aggregate limit. Some insurers write it as a standalone policy for online brands with no premises. Check that your products are described accurately and that the aggregate is high enough for your contracts.

I only resell products. Can I still be sued?

Yes. Negligence can be alleged against anyone in the distribution chain, and provincial sale of goods laws imply conditions of merchantable quality and fitness into sales by businesses that deal in those goods, whether or not they made them. Retailers and distributors should carry their own products cover and ask suppliers for vendors endorsements.

I import products made overseas. Am I treated like the manufacturer?

In practice, often yes. When an injured Canadian cannot realistically sue a foreign factory, the importer is the nearest defendant with assets in Canada. Importers also carry federal reporting duties for consumer products. Insure imported goods by name, collect supplier certificates, and treat a foreign supplier's indemnity as a backstop rather than your protection.

Does my policy cover products I sell into the United States?

Only if the coverage territory includes suits brought in the United States and your US sales were disclosed and rated. Some Canadian wordings limit the territory to Canada. US products liability is generally strict liability under state law, so insurers price it separately and sometimes decline it. Confirm the territory in writing.

What is a vendors endorsement?

It is an endorsement that adds a retailer or distributor to the manufacturer's or importer's policy as an additional insured for claims arising from the products it resells. Large retailers and marketplaces often require one before listing your goods. It usually excludes the vendor's own conduct, such as repackaging, relabelling or making its own warranties.

Does product liability insurance pay for a recall?

No. A standard CGL excludes the cost of withdrawing, recalling, inspecting, repairing, replacing or disposing of your product, your work or property that contains it. Those costs are covered by product recall insurance. Product liability pays the injury and damage claims, so businesses with recall risk usually need both.

How long after a sale can someone sue over a product?

In Ontario, the basic limitation period is two years from the day the claim was discovered, with an ultimate limit of 15 years from the act or omission. Because CGL responds to injury that happens during the policy period, a claim can reach a policy that expired years earlier. Keep your old policies and product records.

Do small makers and home-based brands need product liability?

Yes. The exposure depends on what the product can do, not on the size of the business. Many markets, shops and online marketplaces require proof of liability insurance before you can sell. Small-batch makers of candles, cosmetics, food and children's goods are rated on their sales and product type, so cover is usually scaled to the business.

How is product liability insurance priced?

It is usually rated on annual sales, by product class, with separate rates for Canadian, US and other export sales. Insurers then weigh your role in the supply chain, distribution channels, quality and labelling controls, supplier certificates, limits and loss history. A complete submission with product lists and sample labels gets the most accurate terms.

Product Liability Insurance

Everyone in the supply chain can be sued over a defective product. Your policy should know exactly where you sit in it.

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In short

Product liability insurance pays damages and defence costs when a product you made, imported, distributed or sold causes bodily injury or damage to someone else's property. In Canada it is usually the products and completed operations section of a commercial general liability policy, with its own annual aggregate limit. It does not pay to replace your defective product or to recall it, which needs separate product recall coverage.

Last reviewed October 26, 2026

Canadian insurers we compare for product liability: 17; Canadian insurers we compare for product liability
To give Health Canada incident information on a consumer product (CCPSA, s. 14): 2 days; To give Health Canada incident information on a consumer product (CCPSA, s. 14)
Records of consumer product sales and suppliers must be kept (CCPSA, s. 13): 6 years; Records of consumer product sales and suppliers must be kept (CCPSA, s. 13)
Ontario's ultimate limitation period from the act or omission (Limitations Act, s. 15): 15 years; Ontario's ultimate limitation period from the act or omission (Limitations Act, s. 15)

Product liability insurance pays damages and defence costs when something you made, imported, distributed or sold injures someone or damages their property. In Canada it usually sits inside your commercial general liability policy as the products and completed operations coverage, with its own annual aggregate. Manufacturers, importers, wholesalers, retailers and online sellers all carry the exposure, because claimants sue every link in the chain that can pay.

Products claims go wrong on detail: a territory that excludes US suits, a products aggregate set too low, an importer with no enforceable supplier indemnity, or a retailer's vendors endorsement that was never added. The cost of pulling product back is a separate exposure covered by product recall insurance. We place both, rated on what you actually sell and where it goes.

What's covered

Bodily injury and property damage caused by your products
Defence costs, paid outside the limit under standard wording
Failure-to-warn and labelling allegations
Imported goods where you are the importer of record
Products sold online, through marketplaces, wholesale and in store
Vendors endorsements for retailers and distributors that resell your goods
US or worldwide territory for exported products, where rated

What product liability insurance covers

Product liability covers your legal liability to other people for injury or property damage caused by your product after it has left your hands. A space heater that starts a fire, a stroller that collapses, a component that fails inside a customer's machine and damages it, a cosmetic that causes a reaction. The policy defends the lawsuit and pays the damages up to the limit.

In a standard Canadian CGL, this exposure is the products and completed operations hazard: injury or damage occurring away from premises you own or rent, arising out of your product, once the product is out of your physical possession. The definition of your product is wide. It covers goods manufactured, sold, handled, distributed or disposed of by you or by others trading under your name. It also covers containers and parts supplied with them, and warranties or representations about fitness, quality or performance.

Bodily injury, sickness or death caused by the product.
Damage to other people's property, including loss of use, caused by the product.
Defence costs, which standard wording pays outside the limit.
Claims over warnings, labels and instructions, which are often the real allegation.

If you have no premises exposure at all, such as an online brand shipping from a third-party warehouse, some insurers write products liability as a standalone policy. Most businesses buy it inside their commercial general liability policy, which also handles premises and operations claims.

Who gets sued: makers, importers, distributors and retailers

Injured claimants sue everyone in the chain who could be liable and who can pay. Canadian law supports that approach: negligence may be alleged against any party in the distribution chain, although manufacturers are typically held to a higher duty of care than retailers. In contract, provincial sale of goods laws imply conditions into every sale by a business that deals in those goods, whether or not it made them.

Where product liability lands in the supply chain
Role	Why it gets named	What protects it
Manufacturer or brand owner	Design, manufacturing and warning defects all trace back to it; private-label sellers are treated as the maker	Products liability with adequate aggregate limits, quality records, warnings reviewed by counsel
Importer	When the foreign maker cannot practically be sued in Canada, the importer is the nearest defendant with assets here	Product liability that names imported goods, supplier certificates and enforceable indemnities
Distributor or wholesaler	It sold the goods by description, and may have stored, repackaged or relabelled them	Its own products cover, plus a vendors endorsement on the manufacturer's policy
Retailer, including online sellers	It is the seller in the contract with the injured buyer and the easiest defendant to find	Its own CGL, a vendors endorsement from suppliers, and written indemnities
Component or ingredient supplier	Its part may be the defect inside someone else's product	Products cover with a worldwide territory if the finished goods are exported

Makers selling online and at markets face the same exposure at a smaller scale. Our post on product liability for makers and brands covers the kitchen-table to store-shelf path, and our pages for Etsy sellers, Amazon sellers and ecommerce businesses cover each channel.

How Canadian product liability law works

Outside Quebec, product claims in tort are assessed on a negligence standard, not the strict liability standard used in much of the United States. The claimant must prove a duty of care, a breach, damage and causation. In practice the alleged breach takes one of three forms: a manufacturing defect in the unit that failed, a design defect across the whole line, or a failure to warn.

The duty to warn is the one that catches businesses out. The Supreme Court of Canada held in Lambert v. Lastoplex Chemicals (1972) that a general warning that a product is flammable was not enough where a specific fire risk was foreseeable. In Hollis v. Dow Corning (1995), it held that the duty continues after the sale and extends to risks the manufacturer learns about later. Warnings have to match the severity of the risk and keep pace with what you know from complaints, field reports and testing.

Contract claims run alongside. Under section 15 of Ontario's Sale of Goods Act, goods bought by description from a seller who deals in them carry an implied condition of merchantable quality, and goods bought for a purpose the buyer made known carry an implied condition of fitness for that purpose. Both apply whether or not the seller is the manufacturer. Other common-law provinces have similar statutes.

Damages in Canada are moderated by a cap on non-pecuniary damages set by the Supreme Court's 1978 trilogy and indexed to inflation, and punitive damages are rare and typically far smaller than US awards. Class actions are well established in product cases.

How the policy works: trigger, aggregate and territory

Three mechanics decide whether a products claim is paid in full.

Trigger: CGL responds to injury or damage that occurs during the policy period. The policy in force when the heater caught fire responds, not the one in force when you sold it. Product claims can surface years after the sale, so keep every old policy.
Aggregate: products and completed operations claims share an annual aggregate, separate from the general aggregate in many current forms. One serious injury, or a run of claims from one defect, can use most of it. Contracts with retailers and customers often set a minimum products aggregate.
Territory: the coverage territory decides where a suit can be brought. Some Canadian wordings define it as Canada and exclude suits brought in the United States. Exported goods, US online sales and products that travel with their owners need a territory that matches.

Timing also runs on the claimant's side. In Ontario, the Limitations Act, 2002 gives two years from discovery to sue, with an ultimate limit of 15 years from the act or omission. A product sold today can produce a valid claim long after the policy that covers it has expired.

Selling into the United States

The United States is a different liability environment. There is no federal products liability law, so each state's law applies, and products liability there is generally treated as strict liability: the claimant need only show the product was defective, not that anyone was careless. Liability can reach every link in the distribution chain, from the component maker to the retail store.

Insurers rate US sales separately, typically at higher rates, and some decline them. That makes accurate disclosure essential. Report US revenue by channel, including sales through US distributors, marketplace fulfilment centres and direct online orders. An understated US share can lead to a premium audit adjustment, and a territory that excludes US suits can leave a claim uninsured.

Confirm the coverage territory includes suits brought in the United States for products you sell there.
Ask how defence costs are handled for US suits, and whether any US-specific conditions or deductibles apply.
Consider higher limits through an umbrella, since US distributors and retailers often require them.
Ask US distributors for their own products cover, and review the indemnities in their contracts.

Our cross-border insurance services cover placement for Canadian businesses selling south, including cargo for the goods in transit.

Vendors endorsements, indemnities and certificates

Retailers, distributors and marketplaces want your insurer, not theirs, to defend claims over your product. They get there with three tools.

Vendors endorsement: adds a reseller to your policy as an additional insured for claims arising from your products sold in the ordinary course of its business. Vendors wordings typically exclude the vendor's own conduct, such as repackaging, relabelling, failing to follow your instructions or making its own warranties.
Indemnity clause: a contract promise that you will pay for claims arising from your product. CGL covers tort liability you assume under a contract made before the injury, but not every indemnity clause fits that definition, so have it reviewed before you sign.
Certificate of insurance: proof of the coverage, the limits and the additional insured status. A certificate does not create coverage; the endorsement on the policy does.

Importers should reverse the process. Ask each foreign supplier for evidence of its own product liability, with your business added as a vendor, and check whether it would answer a claim brought in Canada. An indemnity from a supplier with no assets here may be impossible to collect. Our manufacturing and wholesaling guide covers supply contracts in more detail.

Common exclusions, and how to close the gaps

Products cover answers injury and damage to others. Most of what it excludes is the cost of your own product failing.

Typical products liability exclusions and where the cover comes from
Excluded or limited	How to cover it
Damage to your own product	Warranty reserves, pricing and supplier indemnities; not insured under CGL
Withdrawal or recall of your product, work or impaired property	Product recall insurance, which pays retrieval, destruction and related costs
Impaired property: other property that is less useful because it contains your defective product, but is not physically damaged	Recall or contamination cover with third-party recall extensions; contract terms with your customer
Professional or design advice sold separately from the product	Professional liability for engineering or design services
Suits outside the coverage territory	A territory endorsement covering the US or worldwide, rated for those sales
Pollution caused by the product	Pollution liability where products can release chemicals or fuel
Specific high-risk products, such as aircraft parts or some health products	Specialty products markets; disclose these at submission

Insurers also add class-specific exclusions or conditions to some programs for higher-hazard product types. Read the endorsements, not just the declarations page.

Product liability vs. product recall vs. E&O

These three policies are often confused, and a single defect can trigger all of them.

How a defective product claim splits across three policies
	Product liability	Product recall	Professional liability (E&O)
Who is paid	Third parties injured or whose property is damaged	You, for your own recall costs, and in some wordings your customers	Clients who suffer financial loss
Typical trigger	Injury or damage occurring during the policy period	A recall decision or order because of a defect or contamination	A claim alleging an error in advice, design or service
What it pays	Damages and defence	Notification, retrieval, disposal, replacement and related expenses	Financial loss and defence
Where it sits	Products section of the CGL	Standalone recall or contamination policy	Standalone claims-made policy

Recall reporting duties under the Canada Consumer Product Safety Act and the Safe Food for Canadians Regulations are covered on our product recall page, and our recall playbook explains preparation.

A worked example: an imported heater

This scenario is hypothetical. An Ontario company imports portable heaters from an overseas factory and sells them through its own website, a Canadian hardware chain and a US marketplace. A heater overheats in a customer's basement in Ontario, causing a fire that injures the homeowner and damages the house.

The homeowner's property insurer pays her claim, then sues the importer and the hardware chain in subrogation, and the homeowner adds her own injury claim. The importer's CGL products coverage defends both. The hardware chain tenders its defence under the vendors endorsement it required as a condition of listing, and the importer's insurer accepts it because the chain sold the heater unopened. The overseas factory has no Canadian assets, so the indemnity in the purchase agreement is of little practical help.

The importer also has a reporting duty to Health Canada, and if more units are at risk, a recall. Its CGL will not pay those costs. A second fire in a US home would only be covered if the policy territory includes US suits and the US sales were disclosed.

What product liability insurance costs

Products liability is usually rated on annual sales, by product class, with separate rates for Canadian, US and other export sales. The class rate reflects how likely the product is to hurt someone and how badly.

What it is: a greeting card, a candle, a ladder, a child's car seat and a dietary supplement sit in very different classes.
Where it goes: Canadian-only sales rate differently from US and worldwide sales.
How it reaches the buyer: direct, through distributors, through marketplaces, or as a component in someone else's product.
Your role: maker, private-label brand owner, importer of record or pure reseller.
Controls: quality testing, lot tracing, complaint handling, warning and label review, and the supplier certificates you hold.
Limits, aggregate and loss history.

Market conditions are currently favourable to buyers. Marsh's Global Insurance Market Index put overall Canadian commercial rates down 6% in the third quarter of 2026. The best results still come from a complete submission: product list with sales by territory, sample labels and instructions, supplier details and five years of claims. We prepare it with you and market it to insurers with an appetite for your products. See also candle maker and soap maker insurance.

How we place product liability insurance

Insurabiz is an independent brokerage that works only in business insurance. With products, the underwriting is in the detail of what you sell and where it goes.

1Product inventory: we list every product line, your role for each one, and the sales by channel and territory.
2Contract review: we read retailer, distributor and marketplace agreements for limits, vendors wording and indemnities.
3Supply chain check: we review supplier certificates and indemnities for imported goods.
4Marketing: we take a full submission to the insurers on our panel of 17 whose appetite fits your products and export profile.
5Comparison: we compare territory, aggregates, defence terms, class exclusions and vendors endorsements, not just premium.
6Coordination: we line up product recall, cargo and umbrella cover so a single defect does not fall between policies.

If you have a product claim

1Report the incident to your broker as soon as you learn of it, even before any lawsuit.
2Preserve the product, its packaging, lot or serial numbers and any photographs. Do not test or repair it without the adjuster.
3Pull your records: sales, supplier and production records for that lot, complaints and any earlier similar incidents.
4Check your reporting duties. Consumer product incidents must be reported to Health Canada within two days of becoming aware of them.
5Send every demand, notice and statement of claim to your broker the day it arrives, and notify your suppliers under any indemnity.

Our claims team coordinates with the adjuster and defence counsel from first notice.

Good to know

Frequently asked questions

What does product liability insurance cover?: It covers damages and legal defence costs when a product you made, imported, distributed or sold causes bodily injury or damage to someone else's property after it has left your possession. That includes claims over defects, design and inadequate warnings or instructions. It does not pay to replace your own defective product or to recall it.
Is product liability part of my CGL policy?: Usually, yes. A standard Canadian commercial general liability policy includes products and completed operations coverage, typically with its own annual aggregate limit. Some insurers write it as a standalone policy for online brands with no premises. Check that your products are described accurately and that the aggregate is high enough for your contracts.
I only resell products. Can I still be sued?: Yes. Negligence can be alleged against anyone in the distribution chain, and provincial sale of goods laws imply conditions of merchantable quality and fitness into sales by businesses that deal in those goods, whether or not they made them. Retailers and distributors should carry their own products cover and ask suppliers for vendors endorsements.
I import products made overseas. Am I treated like the manufacturer?: In practice, often yes. When an injured Canadian cannot realistically sue a foreign factory, the importer is the nearest defendant with assets in Canada. Importers also carry federal reporting duties for consumer products. Insure imported goods by name, collect supplier certificates, and treat a foreign supplier's indemnity as a backstop rather than your protection.
Does my policy cover products I sell into the United States?: Only if the coverage territory includes suits brought in the United States and your US sales were disclosed and rated. Some Canadian wordings limit the territory to Canada. US products liability is generally strict liability under state law, so insurers price it separately and sometimes decline it. Confirm the territory in writing.
What is a vendors endorsement?: It is an endorsement that adds a retailer or distributor to the manufacturer's or importer's policy as an additional insured for claims arising from the products it resells. Large retailers and marketplaces often require one before listing your goods. It usually excludes the vendor's own conduct, such as repackaging, relabelling or making its own warranties.
Does product liability insurance pay for a recall?: No. A standard CGL excludes the cost of withdrawing, recalling, inspecting, repairing, replacing or disposing of your product, your work or property that contains it. Those costs are covered by product recall insurance. Product liability pays the injury and damage claims, so businesses with recall risk usually need both.
How long after a sale can someone sue over a product?: In Ontario, the basic limitation period is two years from the day the claim was discovered, with an ultimate limit of 15 years from the act or omission. Because CGL responds to injury that happens during the policy period, a claim can reach a policy that expired years earlier. Keep your old policies and product records.
Do small makers and home-based brands need product liability?: Yes. The exposure depends on what the product can do, not on the size of the business. Many markets, shops and online marketplaces require proof of liability insurance before you can sell. Small-batch makers of candles, cosmetics, food and children's goods are rated on their sales and product type, so cover is usually scaled to the business.
How is product liability insurance priced?: It is usually rated on annual sales, by product class, with separate rates for Canadian, US and other export sales. Insurers then weigh your role in the supply chain, distribution channels, quality and labelling controls, supplier certificates, limits and loss history. A complete submission with product lists and sample labels gets the most accurate terms.

Sources

Product liability in Canada (negligence standard, supply-chain duties, damages cap, punitive damages). Torys LLP, April 10, 2019.
Duty to warn: what manufacturers owe injured Canadians (Lambert v. Lastoplex; Hollis v. Dow Corning). Canadian Lawyer, August 26, 2026.
Sale of Goods Act, R.S.O. 1990, c. S.1, s. 15. Government of Ontario, e-Laws, Current consolidation.
Canada Consumer Product Safety Act, S.C. 2010, c. 21 (ss. 13, 14). Justice Laws Website, Government of Canada, Current consolidation.
Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (ss. 4, 15). Government of Ontario, e-Laws, Consolidated December 4, 2024.
Products liability. Legal Information Institute, Cornell Law School, Reviewed February 2026.
Commercial General Liability Policy, specimen form PM-GL-2100 (your product, products-completed operations hazard, territory). Premier Group, Revised August 25, 2005.

This page is general information, not insurance or legal advice. Coverage depends on your policy wording and the insurer. Speak with a licensed broker about your situation.

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