Can Your Product Shut Down a Business?
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Can your product shut down a business? This is a question that all manufacturers should ask themselves. If the answer is yes, or even maybe, you need to think about purchasing manufacturing error and omission coverage for your company. Most, if not all manufacturers carry general liability insurance. Most everyone understands the problems that can arise if a product you make causes injury to a person or destruction of property. All industries are concerned about this, hence the reason we all have general liability insurance. It protects a business in the event that a product or service causes bodily injury or property damage.
General liability doesn’t cover the financial loss that a product or service may cause. Imagine for a minute the following examples:
- You make a component part that goes into a larger machine. Your component part malfunctions and the machine is shut down for an extended period of time. You’re sued by the machine owner for the loss of profits and/or customers for the time the machine is down. They claim you didn’t have the proper quality controls on your products.
- You make a product that assists in the quality control area of a client. Your product doesn’t work as expected and it’s put into the stream of commerce that doesn’t match specifications. Your clients need to perform a product recall for the products at major expense to them. Then, you’re sued for the financial loss to your customer because your product failed to perform as intended.
Each of these scenarios is real. In both cases the general liability policy didn’t respond to the lawsuit because there wasn’t bodily injury or property damage, only uncovered financial loss. For this type of loss, manufacturers’ errors and omissions insurance is required. Manufacturers’ E&O insurance is designed to respond to claims of financial loss by a third party in the event your product fails but didn’t cause bodily injury and/or property damage. If you’re a manufacturer, this is a product that you should seriously consider purchasing to minimize the risk of your business. Contact us today and ensure you’re covered!
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