Manufacturing Insurance

A typical manufacturer insurance policy includes coverages such as:

• Manufacturers’ Errors and Omissions (E&O) Insurance: Manufacturers’ E&O insurance is a form of professional liability coverage. It usually includes coverage for legal defence costs and damages related to your company’s professional services, products, and media and advertising. Since your manufacturing business develops and creates products, consider including E&O insurance to your overall policy to protect your business from lawsuits alleging neglect, misconduct, or failure to deliver a product or service as promised. For example, your business failed to meet the production output contracted with your distributor due to a material shortage at your factory. E&O insurance may cover the financial loss sustained by your client, along with legal fees should a lawsuit be launched against your business.

• Commercial General Liability (CGL) Insurance: Also referred to as slip-and-fall insurance, commercial general liability insurance protects you from day-to-day risks that can happen when interacting with third parties, such as claims of bodily injury or property damage. So, if a customer or supplier visits your facility to pick up an order or deliver materials should trip, fall, and get injured, they could sue you for bodily harm. The cost of the lawsuit could be exorbitant. CGL will typically cover your legal expenses and the customer’s medical fees, regardless of the lawsuit’s outcome.

A CGL policy includes product liability coverage: which protects against claims alleging third-party property damage or bodily injury caused by a product you manufacture, distribute, or sell to a consumer. Damages covered by product liability may include a defect in the design, manufacturing, or marketing of a product, such as an incorrect label or a lack of safety warnings. Product liability coverage cannot be purchased separately.

• Commercial Property Insurance: If you store the products you manufacture in a warehouse that you own, whether on your property or offsite, you need commercial property insurance. Commercial property insurance protects your physical location, as well as its contents (including your inventory) from insured risks that occur beyond your control, like a fire, theft, or flood.

Commercial property insurance often includes business interruption coverage, which reimburses the net income lost following an insured event. It may also cover overhead costs, employee wages, and other costs associated with temporarily closing your business. However, business interruption coverage does not cover income lost due to a pandemic, infectious disease, or government-mandated closure.

• Equipment Breakdown Insurance: Think of the machinery and tools your manufacturing operation uses daily. What would be the cost to your business if the equipment your company relies on to manufacture the goods it does should suddenly malfunction? Equipment breakdown coverage is designed to protect a wide range of machinery from unexpected malfunctions. It covers your boiler and pressure vessel, electrical, mechanical, and production systems, and air conditioning and refrigeration in the event of breakdowns due to things like explosion damage from boilers and piping steam or pressurized water, or a spontaneous mechanical and electrical breakdown or one caused by an operator’s error. If your equipment is covered by a warranty, check its terms and conditions. There may be instances that a warranty will not cover, such as operator error.

• Legal Expense Insurance: Legal expense coverage provides you with access to legal advice from an experienced lawyer on a range of topics, including tax protection, statutory licence protection, employment or contract disputes, debt recovery, property protection, and bodily injury. It also covers the cost of retaining a lawyer to deal with such issues.

• Commercial Crime Insurance: Commercial crime insurance protects against theft by employees. It includes money and securities coverage for losses from burglary, robbery, or theft and employee dishonesty coverage for losses or liabilities resulting from fraudulent acts. It can be purchased as a standalone policy or added to your existing commercial general liability policy.

• Cyber Liability Insurance: For any online business, cyber liability insurance is one of the most critical coverages to have, especially if you’re storing your customers’ data. Cyber liability insurance covers costs associated with electronic incidents, such as cyber-attacks.

For example, suppose an employee inadvertently clicks on a malicious link in an email that exposes your database to a hacker, which compromises your customers’ and supply partners’ financial data. In that case, cyber liability insurance could cover the cost to notify your customers and repair your data systems, as well as any legal expenses that result from a data breach.