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R&D and prototype engineering insurance is a programme combining professional indemnity and product liability with cover for testing, tooling, work in progress and overseas trials. It matters because design and manufacture overlap, and gaps open between policies.
Part of: Manufacturing insurance
In short
R&D, prototype and specialist engineering firms usually need both PI and product liability, because they sell design and advice as well as physical parts. PI responds to a failure of reasonable care causing financial loss; product liability responds to injury or third party damage from a product supplied. Client owned tooling, prototypes and work in progress need to be declared on property cover. Testing on client sites, IP infringement and overseas trials each raise specific exclusions and territorial limits. A broker can align the policies with what the firm actually does.
An R&D, prototype or specialist engineering firm usually needs both professional indemnity and product liability, because it sells advice and design as well as physical parts. Around those two sit cover for client property in its care, tooling and work in progress, testing on client sites, overseas work, and the firm's own premises, machinery and income.
The mistake is to buy one or the other. A design consultancy that also machines prototypes, or a contract manufacturer that also redesigns parts for production, has both exposures in the same project. Our manufacturing insurance guide covers the wider programme.
When you supply a service in the course of business, section 13 of the Supply of Goods and Services Act 1982 implies a term that you will carry out the service with reasonable care and skill. A design or calculation error that breaches that duty, causing the client financial loss, is classic PI territory. When a physical product you made injures someone or damages third party property, liability may arise under the Consumer Protection Act 1987 and in negligence, and product liability is the natural home.
| Situation | More likely to fall under | Why |
|---|---|---|
| A design drawing specifies the wrong material grade | PI | Error in professional advice or design; often pure financial loss |
| A prototype bracket you machined fails and injures a test technician | Product or public liability | Physical injury caused by a product you supplied |
| Your redesign makes a client product unmanufacturable at volume | PI | No physical damage; client's losses flow from your design |
| A rig you built damages the client's test equipment | Public liability, subject to care, custody and control exclusions | Damage to third party property in the course of your work |
| A design flaw causes a batch of production parts to fail in service | Potentially both, plus recall | Design error combined with physical failure |
Our pages on PI versus product liability and PI for manufacturers and suppliers go further. Firms working to tight tolerances may also find our page on PI for precision engineers useful.
Commissioning, trials and test runs at a client's premises create public liability exposure, and sometimes damage to the client's own plant or process. Many liability policies restrict cover for property in your care, custody or control, or for the part of property being worked on. Check these exclusions against what your engineers actually do on site.
Tooling and moulds are often owned by the client but kept at your premises. They need to be declared on property cover, either as your property or as goods held in trust, with an accurate replacement value and an understanding of lead times.
Long build projects such as a special purpose machine or a test rig represent significant value before delivery. Property cover should include work in progress. Where you install at the client site, a contractors all risks policy or a contract works extension may be needed until handover. Plant on hire may need hired in plant cover.
R&D firms create and use intellectual property constantly. A claim that your design infringes a third party patent or design right is usually excluded from product liability and may be excluded or limited on PI. Some PI wordings include IP infringement cover, sometimes with a sub-limit or excluding patents. Ownership disputes with clients are a contract question rather than an insurance one, so the agreement should be clear.
Overseas testing, trade shows and field trials raise territorial limits, local compulsory cover and employee travel. Liability and PI territories should match where work is done and where the client could bring a claim. For established overseas work, see our pages on UK firms with overseas offices and global insurance programmes. Moving prototypes and test equipment abroad may need marine cargo or engineering cover.
These examples are illustrative and do not describe any real business or claim.
Example 1: a gearbox prototype. A firm designs and builds a prototype gearbox for a client's vehicle programme. During a dynamometer test at the client's facility, the gearbox fails and damages the test cell. The physical damage is likely to be a public liability question. The client's delay to its programme, if caused by a design error, points to PI.
Example 2: client tooling. A fire damages a workshop holding client owned injection moulds. If the moulds were not declared, property cover may not respond, and the client's production stops while new tools are cut.
Example 3: a production handover. An electronics design house hands over a board design for volume manufacture. A layout error causes intermittent faults in the field. The client claims rework and recall costs. This may involve PI for the design, and the manufacturer's own position is covered on our electronics manufacturers page.
Before renewal, list every activity by revenue, check client contracts for liability caps and indemnities, declare client owned tooling and work in progress, and confirm testing, overseas and IP positions. Review employers' liability for staff working away from base.
Apex arranges insurance for R&D, prototype and specialist engineering firms; a broker reads every enquiry.
Usually both. PI responds to claims that design, calculation or advice fell below reasonable care and caused a client financial loss. Product liability responds to injury or third party property damage caused by a physical product you supplied. Firms that design and build often face both risks on the same project, so cover should be arranged to dovetail.
Not automatically. Tooling, moulds and prototypes owned by a client but kept at your premises usually need to be declared, either as goods in trust or as a separate item, with a realistic replacement value. Without that, a fire or theft may leave you liable to the client with no cover, subject to the policy terms.
Commonly not in full. Most PI policies cover liability arising from a failure to use reasonable care and skill. A contractual promise that a design will be fit for its purpose goes further and is often excluded or limited. Where a client insists on such a clause, discuss it with your broker before signing.
Public liability usually covers injury and third party property damage during testing on client sites, but exclusions for property in your care, custody or control, or the part being worked on, can limit cover. Damage to the client's product or process from a design error may be a PI matter. Check both policies against your testing activities.
Send us your current schedules or renewal pack and we will review the whole programme and tell you plainly what to keep and what to change. No fee and no obligation. Or call 0117 325 0027.
Book a programme review Get a quoteApex 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, and it does not guarantee that cover will be available or on what terms.
