A Product Liability Insurance Case Study: The Hidden Cost of Copper
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Here we present an International Commercial Goods Liability Insurance claim that crossed borders and was not without its own challenges.
Introduction to the Case
Doing any form of international business in the modern world carries with it a degree of risk. From missed payments, to defective products, to even the prospect of end customers getting hurt, when you are dealing with physical goods and a global economy, there is a lot that can go wrong.
One Hong Kong-based trading company, Company A, found itself dealing with this reality when a shipment of Printed Circuit Boards (PCBs) turned from a potentially lucrative deal into a defective catastrophe. Creating a situation that was only salvaged thanks to a robust Commercial Goods Liability Insurance policy.
Understanding your options, and taking preventative measures before a risk develops can be the difference between survival and bankruptcy. In this instance problems arose in the supply chain of manufactured products leading to a significant loss.
Product Liability Claim Background: Who is Involved?
Company A is a lean and agile trading firm specializing in the international distribution of Printed circuit board components, operated with the kind of streamlined efficiency that typifies many of Hong Kong’s small-to-medium-sized enterprises (SMEs).
Their core business is sourcing high quality electronic components (PCBs) from suppliers in mainland China and exporting them to clients within the European Union.
The longest standing, and most lucrative customer for Company A is Company B, a major Italian electronics retailer.
The Situation: Printed Circuit Boards with a Critical Flaw
Company B requested a large order of Printed Circuit Boards for reassembly in their own factories. The PCBs were slated for integration into control units used across various consumer products.
Company A sources the circuit boards, approves the supplied products with their internal quality assurance process, files the manufacturing certificates, and sends the boards out for shipment to Italy.
Company B receives the shipment and begins to immediately integrate the delivered PCBs into their intended final products. However, at this point a serious issue is noticed – the copper thickness of the PCBS is below the required specifications. This is to say, that the copper on the PCBs supplied by Company A is too thin.
The boards, while externally perfect, were electronically compromised. This silent defect had gone undetected during quality control but became painfully apparent during product integration.
The Fallout: Assembling a Product Liability Disaster
By the time the defect was discovered, the damage was extensive.
Company B, trusting Company A to supply quality products up to the desired standard, had already used the PCBs in a series of assembled units — all of which were now unusable.
The entire production run had to be scrapped.
What was the cost to Company B for this mistake? A staggering €83,000 in wasted labor, component costs, and halted timelines.
Company B turned to the Company A for compensation.
After all, the defect originated in the product they supplied — regardless of the upstream manufacturer. Under Italian and international commercial law, the responsibility fell squarely on the shoulders of the Hong Kong trading firm.
Commercial Goods Liability Insurance: A Safety Net
This is where the story could have taken a fatal turn for Company A.
Without Product Liability Insurance, this Hong Kong trading company — a modest SME without deep capital reserves — would have been forced to absorb the full €83,000 cost.
That’s enough to obliterate a quarter’s worth of revenue. It could have endangered their reputation, strained cash flow, threatened their ability to compensate employees, and even pushed them toward insolvency. None of which is the expected result when signing a potentially lucrative trading contract.
Fortunately, Company A had worked with CCW Global to arrange a Commercial Goods Liability Insurance (CGLI) policy — also commonly referred to as Product Liability Insurance (PLI) — which specifically protected against exactly this type of scenario.
Despite being a trading intermediary, and not a direct manufacturer, the company had been advised that product liability exposure still applied to them as the entity responsible for placing the goods on the market.
The claim was filed promptly, evidence was reviewed, and the insurance company processed the €83,000 payment (minus the applicable deductible) to cover the full cost of the Italian customer’s loss. Company A retained their client in Company B, avoided financial trauma, and continued trading without a hiccup, or an extensive drain on their bank account.
Invisible Risks in Global Trade; Product Liability Insurance Support
This case underscores a harsh truth in international commerce — if your name is on the invoice, then the liability is yours.
Far too many Hong Kong trading companies assume that product liability stops at the factory gate. This couldn’t be further from the truth. While manufacturers might be at fault for defects, they rarely carry insurance that can compensate downstream buyers, and legal recourse across borders is complex, expensive, and ultimately unreliable.
If a trading company doesn’t have its own Product Liability cover, they’re effectively gambling the entire future of their business on the assumption that nothing will ever go wrong.
In this case, €83,000 was just the tip of the iceberg. Imagine if the defective PCBs had reached end-consumers and caused fire or electrical damage, or even injury and death. Lawsuits, regulatory scrutiny, and reputational damage would have quickly followed — potentially turning a minor flaw into a multimillion-dollar catastrophe.
Free Product Liability Insurance Advice
At CCW Global, we understand the nuanced risks faced by trading businesses and e-commerce companies in Hong Kong.
Whether you're sourcing electronics, textiles, toys, or specialty chemicals, Commercial Goods Liability Insurance provides an essential shield between your company and the financial fallout of defective products.
Our team works with international insurers to craft bespoke policies that address not only product defects but also design flaws, labeling errors, and even unforeseen third-party injuries. We regularly consult with online retailers, drop shippers, and B2B distributors to ensure their risk profiles are protected — especially as cross-border e-commerce introduces new forms of liability.
For more information about your company’s Commercial Goods Liability Insurance options, or to speak with an expert business insurance broker, Contact Us Today.
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