Over the past decade, Insurance Canopy has been providing insurance solutions to manufacturers, distributors, wholesalers, and importers across the nation. In servicing their general and product liability insurance, we have responded to several common questions. Within this article are some of those questions and we hope you will find the information of value for you and your company.
We will be answering the following common questions about product liability insurance:
- Who is insured under my policy?
- Why am I classified as a manufacturer when I don’t manufacture products?
- What’s the difference between Product Liability and General Liability?
We have a lot of ground to cover, so let’s dive in!
Who Is Insured Under My Policy?
“When I purchase a product liability policy, who is getting coverage under my policy? Is my spouse covered? Are my employees covered? Who does the policy cover?“
This section should help you understand “Who Is An Insured” within your general and product liability policy.
It all starts with your entity type. How your entity is designated on the insurance policy will determine whom the policy will cover. If you are a sole proprietor (individual) the people covered under your policy are different than if you are a corporation, limited liability company, partnership, or joint venture. So, let’s dive in!
The chart below will provide a list of who is insured under your general and product liability policy based upon your entity type:
| Individual | Partnership/Joint Venture | Limited Liability Co. | Corporation |
|---|---|---|---|
|
You (The Owner) |
You (The Owner) |
You (The Owner) |
You (The Owner) |
|
Your Spouse |
Your Members |
Your Members |
Your Executive Officers |
|
Your Employees |
Your Partners |
Your Managers |
Your Directors |
|
|
Your Spouse |
Your Employees |
Your Stockholders |
|
|
Your Employees |
|
Your Employees |
*Your spouses, employees, members, partners, executive officers, directors, and stockholders are insureds only with respect to their duties as such to the conduct of your business.
The general and product liability policy covers bodily injury and property damage that you become legally obligated to pay to others (3rd parties). The policy does not pay for damages to the people that are considered “insureds” in the chart above.
For example, if an employee is hurt on the job the general and product liability would not pay for their damages, this would be covered under a worker’s compensation policy. But if your employee caused damage to someone else, while working in the conduct of your business, the policy would respond because they are insured under your general and product liability policy.
If you change entities—Sole Proprietor to Limited Liability Company—it is important to notify your insurance carrier so they can reflect this change on the policy. This will ensure that the individuals within the entity/company will be properly covered under the policy.
Why Am I Classified As A Manufacturer?
“Why does an insurance company classify me as a manufacturer when I don’t manufacture any products?” It’s a common question and can be confusing at times. To cut to the chase and simplify the “Who is the manufacturer?” question, ask yourself:
- Do I Import Products from Overseas?
- Do I Private Label or Re-Label Product?
- Do I Re-Package the Product?
We talk to business owners who state they are distributors, suppliers, dropshipping companies, e-commerce businesses, or wholesalers. But it all comes back to the three questions above. If you answer “yes” to any of the above questions, whether you physically manufactured the product or not, you will be classified as the manufacturer.
Let’s take a little deeper dive:
When you import a product, you are at the end of the legal food chain if a claim arises from that product. It is very difficult for an injured party to bring a lawsuit against an overseas company and win a judgment for their injuries. So, the individual or company that imported the product will be the one responsible for the injuries. Because you take on the exposure of a manufacturer when you import a product the insurance company will rate you as a manufacturer.
It is similar when you private label, re-label, or repackage a product. Because your name is all over the packaging (or product), the product liability exposure increases. You will be sued for any injuries arising from the product and the exposure to your company increases—this is why the insurance carrier will classify and rate you as a manufacturer.
What Is The Difference Between Product Liability And General Liability?
Below we will explore the difference between the two policies:
Product Liability:
Product liability, or product-specific, policies are designed to respond to bodily injury and property damage claims arising from the use of your products.
Many policies may not have restrictions on the products you sell but it is very common for a product liability policy to only provide coverage for specific products you sell. If this is the case, you are required to provide a list of products you want to be covered by the insurance company and have them listed on the policy. If it’s not listed, it’s not covered.
For example: If you have a product liability policy listing baseball gloves, bats, and baseballs, the policy would only respond to claims arising from these specifically listed products. So, if you had a claim arise from a batting helmet (which is not listed on the policy), there would be no coverage.
This type of product liability policy can be problematic as you add products during the year and forget to report them to the insurance company. If you have a product liability policy with this restriction, it is important to review your “insured product” list and make sure it’s up to date.
General Liability:
A general liability policy will respond to bodily injury and property damage claims from other areas of your business operations; premises liability, completed operations, personal and advertising injury, damage to rented premises, and in most cases, product liability coverage.
If your general liability policy includes product liability it can also have the same product restrictions as mentioned above. It is important to review any product liability restrictions, if any, with an insurance professional and review the products covered periodically.
When available, we strongly suggest purchasing a comprehensive general liability policy—including product liability—over a product liability policy only. This will provide your business with a policy offering broader coverages to protect your business.
In Summary...
We hope that the information provided has provided a better understanding of:
- Who is insured under my policy?
- Why am I classified as a manufacturer when I don’t manufacture products?
- What’s the difference between Product Liability and General Liability?
If you have additional questions please reach out to us at 844.520.6993 and one of our representatives will be happy to assist you.
All insurance policies have specific terms, conditions, limitations, and exclusions. It is important to review your policy for exact coverages. It is also recommended that you review you coverage’s periodically with an insurance professional.
