For high-growth businesses, licensing is a great way to scale. You can license your technology, brand or product design to others and expand quickly without worrying about manufacturing or distribution.
But many businesses make a common assumption that a licensing agreement keeps them protected, and often it doesn't. Relying on contracts alone, without the right insurance, can leave you seriously exposed. Here are the most common misconceptions - and why they're wrong.
While licensing agreements often include clauses that attempt to shift liability, they don’t override legal responsibility. If your product, design or intellectual property contributes to a defect or causes harm, you can still be held liable regardless of what the contract says. Courts will look at the full chain of responsibility rather than deferring to contracts.
Even if you’re not physically producing a product, your involvement in its design, branding or specification can expose you to claims. If something goes wrong, claimants will often pursue every party involved - especially the one with the strongest brand or deepest pockets. Licensors are frequently named in product liability claims, especially when their brand, IP or reputation is associated with the product.
Each party in a licensing chain has its own exposure, and one insurance policy won’t cover everyone. Even if your licensee has comprehensive insurance, their policy is designed to protect them - not you. Without your own cover in place, you could find yourself funding legal defence costs and claims out of pocket.
A licensing agreement sets out responsibilities between parties, whereas insurance provides financial protection when things go wrong. One cannot replace the other, and even the most robust contract won’t pay legal fees, settlements, or damages.
If your technology, product design or IP sits behind a product, even if it’s sold under another brand you can still be implicated in a claim. In many cases, your involvement may not even be visible to the end customer, but it will quickly come to light during legal proceedings.
While they are important, they are only as strong as the party backing them. If your licensee doesn’t have the financial resources, or their insurer declines the claim, your indemnity may offer little real-world protection. Insurance ensures that there is actual capital behind those obligations.
Your partner’s insurance is structured to protect their interests, within their policy terms and limits. It may not respond to claims against you, and you have no control over how their policy is structured, maintained or renewed. Relying solely on another party’s insurance is effectively giving up control of your own risk management.
Licensing models don’t eliminate risk - they distribute it to other areas, and in many cases they make the risk landscape more complex. For high-growth businesses, particularly those scaling across markets and partners, it’s essential to take a proactive approach. That means:
→ Ensuring you have your own product liability and relevant cover in place.If your business is scaling through licensing, it’s important to make sure your risk strategy keeps pace with your growth.
We work with high-growth businesses to identify where contractual protections fall short and ensure the right insurance is in place to back them up. From product liability to complex, multi-party risk structures, we help you build cover that reflects how your business operates. Get in touch if you’d like a second opinion or want clarity on your current exposure.