Product Liability: Protecting the Assets of Your Company
Having Coverage Isn't Enough. You Must Ensure That Coverage Is Adequate.
››› Product liability insurance is like life insurance for a manufacturing company—you need to know the right questions to ask before purchasing coverage.
For any company or corporate executive team, responding to an unexpected liability-insurance claim is not the time to find out that the business' coverage is inadequate.
"We've had situations where someone was looking and they wish they found us three months ago," said Bob Corwin, senior vice president of Alliant Insurance Services, an insurance consulting and brokerage service based in Irvine, California.
Added Corwin's partner, Franco Ganino, also a senior vice president at Alliant, "The ultimate goal is to provide defense should someone allege that their property has been damaged or they've been injured in some way through the use of your product."
They made these statements during a recent webinar (the video can be viewed at https://learning.sema.org/on-demand-
video) hosted by SEMA's Motorsports Parts Manufacturers Council (MPMC).
Corwin and Ganino explained that Alliant Insurance Services does not sell insurance, but acts as a consultant for SEMA members.
"We're here to make sure SEMA members are protected properly," said Corwin.
Starting with the basics, he and Ganino described product liability insurance as life insurance for a manufacturing company. It will protect a company from financial loss arising out of claims because it transfers the burden from the corporation to the insurance company.
"Product liability is a critical element of transferring risk away from a manufacturer's balance sheet," said Ganino. It will pay for defense costs should there be a need to hire an attorney and will indemnify a third party for damages if needed.
Technically speaking, product liability coverage is a subset of a general liability policy. It can be purchased individually, but most often, it's part of a package. Part of the decision to purchase coverage can include determining that your company doesn't need it. There are three paths a company can take. "You can transfer the risk by buying insurance," said Ganino. "You can avoid the risk by not making the product, and the last one is to assume the risk."
A typical liability policy generally covers a company's aggregate, products/completed, operations aggregate, personal and advertising injury, per occurrence, fire legal liability and medical payment.
››› Bob Corwin (left), Alliant Insurance Services senior vice president, and Franco Ganino, Alliant Insurance Services senior vice president.
General policy limits start at $1 million with policy limits of $2 million for general aggregate; $2 million for products/completed, operations aggregate; $1 million for personal and advertising injury; $1 million per occurrence; $1 million for fire legal liability; and $5,000 for medical payments.
When it comes to assessing the risks and how much insurance is needed, the overall value of the company's assets and the level of risk based on the products are key considerations. For example, if a company uses a wholesale distributor for its products, the manufacturer will want to be protected if someone buys through the distributor and files a claim.
When shopping for liability insurance, a company should be aware of endorsements that exclude specific parts or uses of products. For example, an insurance policy could be considered to be "full coverage," but it has an endorsement in the fine print for safety equipment or tires. If the company makes either of these two items and there's a claim, there would be no coverage because of the endorsements.
Worldwide coverage is required for companies that do business outside their home country. "If you're going to carry a distribution center in Germany, at that point you need to work with an agent that allows you to have defense in that country's legal system," said Ganino.
Obviously, the goal is to never have to use product liability insurance, but that doesn't mean it shouldn't be taken seriously. A liability policy that isn't tailored to your company and its products won't help when a claim is filed, so do your homework and make sure the broker and the coverage are what your company needs.
"Make sure your agent has oil in his or her DNA," advised Ganino.
As of August 15, 2023
Acima Leasing 12016
Acumatica Cloud ERP 11861
American First Finance 11877
Ascentium Capital 12060
Autoshop Solutions 12064
Autotrader Classics 12022
Bright ENGenuity 11649
The Carbon Offset Co. 12073
The Decal Factory 12017
Desperate Enterprises 11920
eBay Motors 11827
E-Motive Online 12019
Epicor Software 11951
Extreme Canopy 12055
EZ360 Photos Studio, Turntables, and Software 11717
Fifth Third Bank Motorsports Group 11722
Flagpoles By Uncommon USA 11939
Gemstone Cars 12020
Heat Seal LLC 11653
Heglory Auto Parts 12162
The High Ground of Texas 12023
Hoops & Gears 11979
Impact Canopy 11923
KD KANOPY Inc. 11631
Knobbe Martens 12116
Koble Systems 11744
Mecka Inc. 12031
Mira Commerce 11965
MMY Automotive Business Systems 12144
My Car App 12150
Neonetics Inc. 11639
Northwood University 12164
PartsTech Inc. 11655
PDM Automotive 11847
Performance Plus Global Logistics 11748
PPM Industries 48199
ProThings Apparel 12168
ROLLBO Engineering 49204
R.O. Writer Shop Management Software 11969
RRM Insurance Services 12160
Rutan & Tucker LLP 12072
Shop Boss 12061
Shop Fix Academy 11967
Sign of the Times 11879
Sisson & Banyas, Attorneys at Law LLC 12042
Snap Finance 11919
Solera | Identifix 11867
Southern Illinois Airport/TechPark 12166
Spark Shipping 12049
Steer by Mechanic Advisor 11949
SureDone Inc. 12120
Surf & Turf Instant Shelters Inc. 11943
Synchrony Car Care by Synchrony Financial 12051
Target Freight Management 11823
360 Payments 12066
Torqata Data and Analytics 11973
United Agencies Insurance 11978
United States Postal Service 11839
Uown Leasing 11651
US Professional Funding 11972
Vietnam Homologation Service-TKR Asia LLC 12078
Web Shop Manager 12027
West Virginia Department of Tourism 11725
Whiterail Recruits 12048