If you’re a manufacturing company, you are what you produce. Your product quality should be priority number one. Your products are what define your company. Thus, your company’s reputation depends on the quality of your products.
As with any business, there are no guarantees. One day, you may not be able to deliver exactly what you’ve promised.
If a product your company has produced has a defect or malfunctions it could cause injury or damages. If it does lead to third-party bodily injury or property damage, you can expect to be held liable.
Insurance for Manufacturing Businesses
There are risks associated with running a manufacturing business. These risks can be passed off to a third party via insurance. The most common insurance policies for manufacturing facilities are commercial property and general liability insurance.
Commercial property insurance provides coverage for property and equipment damage. It also provides coverage for business contents, such as inventory. If your property was damaged by severe weather or vandalism, your commercial property insurance would cover that. It would also cover any damaged or stolen property.
General liability covers injuries and property damage to third-parties. This covers injuries that occur at your facilities. Example, a client visits your manufacturing plant and has a slip-and-fall accident. General liability Insurance would cover defense costs and settlement if the client decides to file a claim.
Smaller businesses can buy a BOP which combines those two insurance policies. A Business Owner’s Policy (BOP) is less expensive. It can also bundle in business interruption insurance. This protect against monetary losses due to periods of suspended operations. Example, a fire occurs and causes physical property damage and you have to close for a period of time. These policies may cover rent payments, relocation costs, wages, taxes, and loan payments .
Manufacturers should also have workers’ compensation insurance. This is mandated coverage in about every U.S. state. This covers costs related to any employee injury that occurs on the job.
Are Product-Related Damages covered on a General Liability Policy?
Many assume that product-related claims are covered, but it's almost never the case with a basic general liability policy.
You'll need a separate policy If your business centers around the production, sale, or distribution of products.
Combining a general liability policy and a product liability policy is the best way to completely cover your manufacturing facility. This should make sure there are no gaps in your coverage and prevent your company from any financial losses.
What Does Product Liability Insurance Cover?
To recap, general liability covers claims that are related to your premises and operations. Product liability covers claims that are related to people using the product that you have manufactured.
These are the most common types of claims that a product liability policy will cover:
Defective Design: There is a flaw in the original design of the product which made it dangerous for consumer use.
Flaws in Production: An error occurred during manufacturing and caused the product to change from its intended design.
Bad Instructions or Unsatisfactory Warnings: Failing to provide proper instructions or failing to warn of potential risks of using the product.
There is typically significant legal costs that businesses will incur as a result of these types of claims. This is why product liability insurance should be considered essential coverage for your manufacturing business.
Disclaimer: The analysis of coverage is in general terms and is superseded in all respects by the Insuring Agreements, Endorsements, Exclusions, Terms and Conditions of the Policy. Some of the coverage mentioned in this material may not be applicable in all states or may have to be modified to conform to applicable state law. Some coverages may have been eliminated or modified since the publishing of this material. Please check with your local Independent Insurance Agent for details.
Other Industries we specialize in at The Huttenlocher Group:
Advanced Manufacturing Insurance
Automotive Manufacturing Insurance
Tool & Die Shop Insurance
Staffing Agency Insurance
Food and Agriculture Insurance
Freshwater Technology and Services Insurance
Cannabis Facility Insurance
Investment Properties – Commercial landlord Insurance
Medical Malpractice Insurance
Elementary and Secondary (K-12) School Insurance