Product Liability Insurance for Medical Supply Distributors

Short answer: Product liability insurance pays for claims that a product you sold was defective and caused injury or damage. A medical supply distributor can be held liable even when the manufacturer designed and made the defect, and the manufacturer’s policy may not protect the distributor. This page is general information, not legal, insurance or medical advice.

What product liability insurance is, and what it covers at a distributor

Cornell Law School’s Legal Information Institute describes product liability as a doctrine that gives plaintiffs a cause of action if they encounter a defective consumer item. Claims can rest on negligence, strict liability or breach of express or implied warranty, and the recognised defect categories are manufacturing defects (the product was made incorrectly), design defects (the design was unsafe and safer alternatives existed) and marketing defects (inadequate warning of the product’s risks). A product liability insurance policy is the contract an organisation buys to respond to claims of that kind. Policy wording, limits and exclusions vary by insurer, so the policy itself, read by the buyer or a licensed adviser, is the only authority on what is covered.

Why a distributor is exposed

Medmarc, a liability insurer for life sciences companies, states in its published guidance (page last updated 17 April 2024) that the majority of states hold distributors strictly liable for defects in the product, even where the distributor had no part in design or production. It explains the reasoning as each member of the distribution chain benefiting from the sale. The same article says a distributor’s own negligence can remove the ability to seek indemnification from the manufacturer, even if the distributor is named as an additional insured on the manufacturer’s policy. Treat this as one insurer’s view, not a statement of law in your state.

Where a distributor sits against the three defect types

Defect type (Cornell LII)	What it means	Why a distributor can still appear in the claim (Medmarc, insurer’s view)
Manufacturing	Product made incorrectly	Strict liability can reach every seller in the chain
Design	Unsafe design when safer alternatives existed	A distributor may be named although it took no part in design
Marketing	Inadequate warning of risks	A distributor’s own negligence can create direct liability, separate from strict liability

The manufacturer’s policy versus your own

Medmarc’s published guidance lists several reasons a distributor may not be protected by the manufacturer’s coverage:

• A vendor endorsement is typically a blanket endorsement covering parties the manufacturer is contractually involved with, and it does not give the distributor any right to be informed about a change or lapse in the policy.
• The manufacturer may have let coverage lapse or be cancelled without telling the distributor.
• If the distributor repackages or installs a product, or trains users, the exposure is not typically covered under the manufacturer’s policy, and independent acts of negligence by the distributor typically would not be covered.
• For imported products, the foreign manufacturer’s policy may not provide coverage, or defence of claims, in the United States.

Medmarc’s FAQ does not say a distributor must carry its own policy. It says: “We recommend that distributors purchase their own products liability insurance policies.” That is a recommendation from an insurer that sells such policies.

What Medicare DMEPOS rules require

For distributors that bill Medicare as DMEPOS suppliers, 42 CFR 424.57(c)(10) (checked 1 November 2026) requires a comprehensive liability insurance policy of at least $300,000 that covers both the supplier’s place of business and all customers and employees of the supplier. The product liability clause is narrower: “In the case of a supplier that manufactures its own items, this insurance must also cover product liability and completed operations.” In other words, the regulation names product liability and completed operations for suppliers that make their own items, not for every supplier. See our guide to DMEPOS supplier standards for the wider list of standards, and our medical supply business plan guide for how insurance fits into start-up planning.

Checklist: documents to ask for and confirm

This checklist combines the points above. Each item traces to the sources named on this page.

1. Your own policy: read the declarations and exclusions and confirm that the product lines you distribute are included (Medmarc: the manufacturer’s policy may not cover you).
2. A certificate of insurance from each manufacturer, every year: Medmarc advises contractually requiring certificates of insurance from your manufacturer on an annual basis. Our guide on requesting a certificate of insurance from a vendor explains certificate holder versus additional insured.
3. The vendor endorsement itself: confirm whether you are named, and recognise that it does not by itself give you notice of a lapse.
4. Your own activities: list any repackaging, installation or training you do, since these are the exposures Medmarc says the manufacturer’s policy does not typically cover.
5. Imported products: ask whether the foreign manufacturer’s coverage applies in the United States.
6. Medicare DMEPOS billing: if applicable, check the 42 CFR 424.57(c)(10) amount and scope, and whether you manufacture any of your own items.
7. Contract terms: review how indemnification clauses and limitation of liability clauses in your supply agreements sit alongside the insurance above.

Common misunderstandings

• “The manufacturer’s insurance covers me.” Medmarc calls this an assumption distributors sometimes make wrongly.
• “Being an additional insured ends the risk.” Per Medmarc, it does not protect against the manufacturer’s lapse or against the distributor’s own negligence.
• “Medicare requires every supplier to carry product liability cover.” The regulation’s product liability and completed operations language applies to suppliers that manufacture their own items.

FAQ

What is product liability insurance?

It is liability coverage for claims that a product sold by the insured was defective and caused injury or damage. The categories of defect recognised in product liability law are manufacturing, design and marketing defects (Cornell LII).

Is product liability insurance required for medical supply distributors?

None of the sources cited on this page makes it a universal requirement. Medicare’s DMEPOS standard requires comprehensive liability insurance of at least $300,000 and names product liability and completed operations for suppliers that manufacture their own items. An insurer recommends that distributors buy their own cover. Contracts with manufacturers, hospitals or lenders may add their own requirements.

Does the manufacturer’s policy cover a medical supply distributor?

Sometimes a manufacturer’s policy extends to distributors through a vendor endorsement, but that endorsement does not give the distributor notice of a lapse, and independent distributor negligence typically is not covered (Medmarc).

Sources

• Cornell LII, 42 CFR 424.57(c)(10), checked 1 November 2026: https://www.law.cornell.edu/cfr/text/42/424.57
• Cornell LII Wex, Product liability (last reviewed August 2020), checked 1 November 2026: https://www.law.cornell.edu/wex/product_liability
• Medmarc, Why Distributors May Be More Vulnerable to Products Liability Than They Realize (updated 17 April 2024), checked 1 November 2026: https://medmarc.com/life-sciences-news-and-resources/publications/why-distributors-may-be-more-vulnerable-to-products-liability-than-they-realize
• Medmarc FAQ, As a distributor, do I need products liability coverage?, checked 1 November 2026: https://medmarc.com/faqs/as-a-distributor-do-i-need-products-liability-coverage