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Engineering and manufacturing
Precision engineers need professional indemnity insurance when they design, specify or advise, not only when they make. If you design components, tooling or fixtures, set tolerances, choose materials, reverse-engineer parts or change a customer’s drawing, a mistake can cost your customer money without injuring anyone, and product liability insurance will not pay for that. A subcontract shop machining strictly to customers’ drawings has a smaller design exposure, but still needs to know where its product cover stops.
Part of: Engineers’ professional indemnity insurance
In short
Product liability insurance responds when a part you made injures someone or damages other property. Professional indemnity is designed to respond to financial loss caused by negligent design, specification or advice: a tolerance stack-up that stops an assembly working, a material recommendation that fails in service, or a press tool that turns out scrap. Neither policy usually pays to replace or recall your own faulty parts; that needs product recall or product guarantee insurance. No law requires precision engineers to hold PI, but aerospace, automotive, medical and industrial customers often require it in supply agreements, especially where you carry design responsibility.
Last reviewed 5 October 2026 by the Apex professional indemnity team.
Most precision engineering firms already hold product liability insurance, usually alongside public liability. It pays when a component you supplied causes injury, or damages someone else’s property. Under Part 1 of the Consumer Protection Act 1987 that liability is strict: an injured person does not have to prove you were careless, and the Act treats a component part as a product in its own right.
The Act’s idea of a defect is about safety. A lifting bracket that cracks and drops a load is defective in that sense. A shaft that is entirely safe but sits outside a bearing fit may not be, yet it can halt a customer’s production line, scrap a batch of assemblies and push back a product launch. Those are financial losses, and product liability policies are generally not written to pay them.
Professional indemnity (PI) insurance usually fills that gap where the loss comes from your professional work: design, tolerancing, material and process selection, design-for-manufacture advice, reverse engineering, and the design of jigs, fixtures and tools. If you only machine to customers’ drawings, your PI exposure is narrower. The moment you propose a change, approve a substitution or own the drawing, it grows.
These scenarios are illustrative. They show the kind of allegation a precision engineering firm can face; they are not real claims or outcomes.
The first four are classic PI allegations about design and advice. The fifth is closer to workmanship and quality control, which many PI wordings treat differently, so ask how your policy would respond to that kind of error before you need it to.
A dispute with a customer is usually argued in contract first, using terms implied by statute alongside whatever you signed. Claims by injured third parties run under the Consumer Protection Act or in negligence.
| Law or standard | What it says | What it means for your cover |
|---|---|---|
| Sale of Goods Act 1979, s.14 | Goods sold in the course of a business must be of satisfactory quality, and reasonably fit for any particular purpose the buyer makes known, unless the buyer does not rely, or it is unreasonable to rely, on the seller’s skill or judgment. | Fitness for purpose is a strict obligation. PI responds to negligence, so a claim based purely on fitness for purpose may fall outside it. |
| Supply of Goods and Services Act 1982, s.13 | In business contracts for services there is an implied term that the supplier will use reasonable care and skill. It applies in England, Wales and Northern Ireland. | This is the standard PI is built around: design, advice and inspection services. |
| Consumer Protection Act 1987, ss.1 to 3 | Producers are strictly liable for damage caused by a defective product. A component part counts as a product, and a product is defective if its safety is not what persons generally are entitled to expect. | Injury and property damage claims belong with product liability insurance. |
| Consumer Protection Act 1987, s.4(1)(f) | A component producer has a defence where the defect was in the finished product and wholly attributable to its design, or to following the instructions of the finished product’s producer. | Working strictly to a customer’s design gives you a defence that design-and-make work may not. |
| Consumer Protection Act 1987, s.5(2) | No liability under the Act for loss of or damage to the defective product itself, or to the product it was supplied as part of. | Replacing the parts, or the assemblies they went into, is a contract question rather than a CPA one. |
| BS 8888 | The British Standard for technical product documentation and specification, covering engineering drawings and dimensional tolerancing. The current edition is BS 8888:2025. | Arguments about what a drawing actually required are often settled by reference to it. |
Customers also judge you against your quality system. Aerospace, automotive and medical device supply chains each have a sector standard for quality management: the 9100 series for aviation, space and defence organisations, IATF 16949 for automotive, and ISO 13485 for medical devices. A lapse in the controls your certification requires is often the first thing a claimant’s expert looks for.
| Usually covered by PI | Often excluded or limited | Needs a different policy |
|---|---|---|
| Negligent design of components, assemblies, jigs, fixtures and tools | Claims based on fitness for purpose or warranty terms rather than negligence | Injury or property damage caused by parts you supplied (product liability) |
| Tolerancing, stack-up and drawing errors in work you design | Re-making or replacing your own defective parts | Recalling, removing and replacing parts in the field (product recall or product guarantee insurance) |
| Material, finish and heat-treatment recommendations | Pure machining and workmanship errors, depending on the wording | Customers’ free-issue material damaged in your care (goods in custody cover) |
| Reverse engineering and design-for-manufacture advice | Liquidated damages and penalties you agreed to by contract | Injury to your own staff (employers’ liability) |
| Defence costs, including metallurgical and dimensional expert evidence | Parts exported to the USA or Canada, unless agreed with the insurer | Breakdown of your own machine tools (engineering breakdown cover) |
Every wording is different, and cover depends on the insurer’s acceptance and the policy terms. For a manufacturer, the first clause to read in a PI policy is the products exclusion. Some wordings exclude any claim arising from goods you sell or supply, which can remove the very cover you bought unless design and advice claims are written back in.
Precision engineers sit on a spectrum. At one end is pure build-to-print: the customer owns the design, issues a fully toleranced drawing, specifies material and finish, and your job is to make parts that conform. At the other is design-and-make, where the customer gives you a function and an envelope and you produce the design. Most firms do some of each, and liability follows the design.
The law reflects this. Under the Consumer Protection Act a component maker has a defence where the defect is wholly attributable to the design of the finished product, or to following its maker’s instructions. In contract, the Sale of Goods Act implies that goods are fit for a purpose the buyer made known, unless the buyer did not rely on your skill or judgment. Both questions turn on whose design was relied on.
Ways to keep the line clear:
Supply agreements and purchase order terms usually set the limit. OEMs, defence primes and large industrial customers often specify PI and product liability limits side by side, and the PI figure tends to climb when you take on design responsibility or supply safety-critical parts. Before accepting a supply agreement, check:
The two policies also run on different clocks. Product liability is usually written on a losses-occurring basis, so the policy in force when the injury or damage happens responds. PI is claims-made: it answers claims first made during the policy period, so a design flaw that surfaces years after delivery falls on whichever PI policy is live at the time. If you sell the business or stop design work, ask about run-off cover, and see claims-made versus occurrence cover for how the two bases differ.
A complete proposal gets better terms than a bare one, and a broker can only present what you tell us. Have these ready:
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Start the online proposal and save it as you go, or leave your number and a named broker will call you back, usually the same working day.
Apex Insurance Brokers is an independent insurance broker based in Bristol, established in 2009 and authorised and regulated by the Financial Conduct Authority. We are not tied to one insurer: we work with over 30 markets, including Lloyd’s syndicates through wholesale brokers, and every client has a named broker who handles the placement, mid-term changes, certificates for clients and the renewal.
Yes, if you design parts, assemblies or tooling, set tolerances, recommend materials or processes, or reverse-engineer components. Those activities can cause financial loss without injury or damage, which product liability insurance is not designed to cover. Firms that only machine to customers’ drawings have less design exposure, but should still check where their product cover ends.
No law requires precision engineers to hold professional indemnity insurance. Customers ask for it instead: OEMs, defence primes and medical device manufacturers often set PI and product liability limits in supply agreements, particularly where you hold design responsibility or make safety-critical parts.
Product liability responds when a part you supplied causes injury or damage to other property. PI responds when your design, specification or advice causes a customer financial loss, such as a stopped production line or scrapped assemblies, with no injury or damage involved. Many precision engineers need both, arranged so there is no gap between them.
Usually not. Replacing your own defective parts and recalling products from the field are normally excluded from PI and product liability alike. Product recall or guarantee insurance is designed for those costs. PI may still respond to a customer’s other financial losses where they flow from negligent design or advice, subject to the policy terms.
Your main exposure is making parts that conform to the drawing. The Consumer Protection Act gives component makers a defence where a defect is wholly attributable to the finished product’s design, or to following its maker’s instructions. If you proposed changes or approved substitutions, you may have taken on part of the design.
It can, if your policy describes tooling design as part of your business and you declared it. Tooling claims can be large because a faulty tool affects every part it produces, so make sure your limit reflects the value of the production runs your tools support.
Apex arranges professional indemnity insurance for precision engineers across the UK. Tell us about your work and we’ll find cover that fits. Or call 0117 325 0027.
Start your PI proposal Call 0117 325 0027Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not advice on your individual circumstances. Cover is always subject to the insurer’s acceptance and the policy terms, and this page does not guarantee that cover will be available or on what terms.
