Products liability

In Reilly v National Insurance & Guarantee Corporation Ltd [2008] EWHC 722 (Comm) Mr Justice Burton was asked to resolve preliminary issues on the meaning of an exclusion in a product liability policy issued to an assured whose business was installing fire detection and protection systems. The case was decided on assumed facts. The effect of the judgment is that: (a) an overall system can be machinery even though its constituent parts are not;and (b) a product liability policy is designed to protect the assured against liability for damage caused by defective products and not against liability in respect of mere equipment failure.

Reilly: the facts

The claimant operated the business of installing fire detection and protection systems at clients’ premises. He was insured under a liability policy that covered both public liability and product liability. The public liability section had an indemnity limit of £2m in respect of occurrences, defined as accidental damage to property. The product liability section similarly covered the assured against accidental damage to property caused by any products supplied by the claimant, but excluding loss as the result of ‘the failure of any fire or intruder alarm switch gear control panel or machinery to perform its intended function.’