There is no question that everyone needs insurance. The hard part is finding the best insurance quotes for your specific needs. In this comprehensive guide, we will walk you through the process of getting the best insurance quotes for your unique situation. We will discuss how to find the right insurance company, how to compare rates, and how to get the most value for your money. Let’s get started!
The first step in getting the best insurance quotes is to find the right insurance company. There are many different companies out there that offer insurance, so it’s important to do your research and find one that is reputable and has a good track record. Once you have found a few potential companies, the next step is to get quotes from each one.
When you are comparing insurance quotes, it’s important to compare apples to apples. Make sure you are looking at the same coverage levels and deductibles. Also, be sure to read the fine print carefully so that you understand what is and is not covered. Once you have compared all of the different options, you can then make an informed decision about which company is right for you.
The last step in getting the best insurance quotes is to negotiate. Don’t be afraid to ask for a lower rate or better coverage. The worst that can happen is that the company will say no, but it never hurts to ask. Remember, the goal is to get the most value for your money, so don’t be afraid to haggle a bit.
How to get the most value for your money?
Decide what kind of insurance you need
There are many types of insurance, so it’s important to figure out which one is right for you. Do you need health insurance? Auto insurance? Homeowners insurance? Make a list of the types of coverage you need and then research different companies that offer those policies.
Get quotes from different companies
Once you know what kind of insurance service you need, the next step is to get quotes from different companies. There are a few different ways to do this:
You can go online and get quotes from different companies. This is usually the quickest and easiest way to get quotes.
You can call different companies and ask for quotes. This can be a bit more time-consuming, but it’s a good way to get a feel for how each company operates.
You can visit different companies in person. This is the best way to get a feel for the company and the customer service they provide.
Once you have quotes from different companies, the next step is to compare them.
Compare the coverage levels and deductibles. Make sure you are comparing apples to apples here.
Read the fine print carefully. You want to make sure you understand what is and is not covered under each policy.
Compare the prices. This is probably the most important factor in deciding which company to choose.
Negotiate. Don’t be afraid to ask for a lower rate or better coverage. The worst that can happen is that the company will say no, but it never hurts to ask.
By following these simple steps, you can be sure that you are getting the best insurance quotes for your needs. Don’t waste any more time searching for insurance; follow our guide and get the coverage you need at a price you can afford.
After assessing your company’s risks, you’ve made the decision to purchase Directors and Officers insurance. Now what?
It’s essential to know the ins and outs of your Directors & Officers (D&O) policy, including policy limits, what’s covered and, most importantly, what’s not. Why? Because you may assume you’re covered for a claim when policy exclusions could apply. As time-consuming as it may be, it’s critical to read the fine print in your policy, as the language in the exclusions may affect the coverage of potential claims.
TYPES OF EXCLUSIONS IN D&O POLICIES
Some exclusions that insurers and insureds dispute concern incidents that happened or allegedly happened before the D&O policy went into effect. In some cases, the insurer simply won’t cover the claim; in other cases, the insurer may render the policy void.
The Known Circumstances Exclusion. With this exclusion, the insurer will not pay for claims that arise from a negligent act, error, omission or personal injury that occurred prior to the start date of the D&O policy. The insurance carrier attests that the insured knew or could have foreseen that any of the above happened and could have been the basis for a claim. This exclusion is found more frequently in private and non-profit policies than in public company policies. What is especially important to note is that the premium is usually not returned to the insured if it is determined that they withheld their knowledge of circumstances that occurred prior to the start of the policy.
In the case of a rescission scenario, the premium is returned to the insured. Rescission means that the policy is rendered void after the insurer discovers that the insured answered untruthfully to any of the warranty questions on the insurance application. Warranty questions ask the applicant if they know of any fact, circumstance or situation that might reasonably be expected to give rise to a claim. Rescission also could occur if the applicant provided false or misleading information in the company’s financial data. These scenarios usually happen only in public company D&O policies.
Prior Acts Exclusion. Similar to the known circumstance exclusion, this exclusion is also concerned with pre-policy circumstances. The insurer is not responsible for wrongful acts committed or attempted before the coverage was enacted. A wrongful act is that which damages the rights of another. These acts are not only limited to criminal offences but can also include acts that result in civil lawsuits.
Other exclusions found in D&O policies revolve around the duty to defend and defense expenses in the event of a claim. If the insurer has the right to the duty to defend, then they are able to select the insured’s defense and have greater control over the rates and billing practices of the defense counsel.
Reasonableness of Defense Fees. This is more prevalent in private company and non-profit D&O policies, as most of those policies give the insurer the right and duty to defend the insured’s claims, whereas public companies retain the right to choose their own defense counsel. If this is written into your D&O policy, it means that the insurer will only pay for “reasonable and necessary” defense fees. Some insurers also provide detailed information on litigation guidelines.
Consent to Settle and the Hammer Clause. If the insurance carrier has no duty to defend, such as in cases against public companies, then they have no right to settle the case when they want to settle it. As a result, the insured may elect to continue with litigation, even if that would exhaust the policy limit, because the defendants don’t want to settle the case to be perceived as an admission of their wrongdoing or incompetence. This creates a lot of tension between insurers and the insured, especially if the insured does not include the insurer in the settlement discussion. Therefore, some insurance policies have a consent to settle exclusion in the policy, prohibiting the insured from settling the claim without the insurer’s prior written consent.
The hammer clause is similar to the consent to settle exclusion, although less common. Basically, the hammer clause informs the insured that if they go against the insurer’s recommendation to settle, the insured will be responsible for any judgment won by the plaintiff and legal fees that go beyond the settlement offer.
Most D&O insurers expect that D&O insurance is only a part of a company’s wider insurance portfolio. In some cases, however, this assumption doesn’t always prove to be true. Certain firms may go without Umbrella insurance or even General Liability insurance policies, making D&O one of their only forms of insurance. Because of this, many D&O insurers write exclusions in their policies stating what claims they won’t cover because other types of insurance would potentially cover the claim.
“Other Insurance” Exclusions. D&O insurance is just one form of insurance in a comprehensive risk management plan for most companies. Because of this, most D&O policies have exclusions for claims that involve bodily injury, property damage and fiduciary claims, which could be covered by other types of insurance such as a Commercial General Liability policy or a Fiduciary Liability policy. To protect their best interests in the event of a claim, the insured should notify all insurers from their various policies, thus allowing the insurers to determine who is liable for the claim.
Contractual Liability Exclusion. This exclusion is especially pertinent to private companies and non-profits that have broad entity coverage under a D&O policy. Since contractual obligations are not liabilities imposed by law but rather an obligation that is voluntarily undertaken, many D&O policies have an exclusion that prevents insurers from having to cover contract-related claims, especially breaches of contract that arise when the company enters into a contract with another party.
When examining this exclusion in your D&O policy, make special note of the wording of this clause. This exclusion can substantially affect the extent of your coverage under the policy—the narrower the scope of the exclusion, the better for you.
D&O insurance protects directors and officers from poor business decisions, but most policies do not protect them from wrongful acts and gross misconduct. These exclusions include:
Conduct Exclusions. Most D&O policies have exclusions that deny coverage for certain types of misconduct. There are two categories of misconduct exclusions:
For loss relating to fraudulent or criminal conduct
For loss relating to illegal profits or remuneration to which the insured was not legally entitled.
It’s especially important to look at the wording on these exclusions in the policy; subtle wording differences can significantly impact the accessibility of the coverage.
Insured vs. Insured Exclusion. In some D&O cases, one insured director may bring a claim against another insured director, and some insurers do not want to cover this because they don’t want to get involved in the infighting between a company’s directors and officers.
Obtaining D&O insurance is important to protect the directors and officers of your company; but simply purchasing the policy won’t benefit you unless you know the extent of your coverage.
Do you understand your D&O insurance policy? Contact Reith & Associates Insurance and Financial Services Limited today for more information about your coverage and exclusions.
Reith & Associates Insurance and Financial Services Limited
Post pandemic supply chain issues and inflationary pressures have certainly impacted the cost of life. Inflation and supply delays are not limited to groceries, vehicles and household items. Commercial/industrial materials and equipment have been equally impacted. The impact has been a tremendous delay in obtaining parts, new equipment and inflation has driven up the cost of everything.
Through monitoring of recent claims expense across the commercial sector it is apparent that the inflation guard, contained in most commercial property policies protecting buildings, stock, equipment and inventory, has not been sufficient to bring standing limits to where they need to be as a result of the current inflationary upward spiral. The result is a business that has not adequately adjusted/increased their insured limits will be prejudiced at the time of a claim. That is a fact. No insurance policy wording gives a pass because of radical inflation spikes caused by a pandemic. It is the responsibility of the policyholder to make certain the insured limits for buildings, stock, equipment, inventory etc., (all real property insured under the policy) is sufficient to be able to afford to replace lost items NEW for OLD. Now, if your policy is written with an Actual Cash Value (ACV) claims settlement then the impact may be lesser but there is still a negative impact as the cost of “new” is so much higher today.
When purchasing or renewing their commercial property insurance, it’s vital for businesses to ensure such coverage includes correct property valuations. Doing so can make all the difference in providing sufficient protection and preventing coinsurance penalties amid covered property losses. That’s where conducting accurate insurance-to-value (ITV) calculations comes into play. Generally speaking, ITV refers to an approximation of the full cost to replace or restore insured property.
Businesses may end up with inaccurate ITV calculations for a wide range of reasons—whether it stems from leveraging ineffective property valuation methods, intentionally underestimating costs in efforts to secure reduced premiums or being impacted by factors outside of their control (e.g., inflation). Regardless, such inaccuracies are all too common. In fact, an estimated 70 per cent of commercial properties are underinsured by 40 per cent or more, according to industry data.
With these findings in mind, it’s evident that businesses need to take commercial property valuations seriously. This article offers more details on ITV, outlines factors to consider when determining a property’s value, explains the pitfalls of property undervaluation and provides best practices for improving property valuation measures.
An accurate ITV calculation represents as close to an equal ratio as possible between the amount of insurance a business obtains and the estimated value of its commercial property—thus ensuring adequate protection following property losses.
However, it’s important to keep in mind that a property may be assigned several different values, including the following:
Market value—This value is an estimate of what a property could be sold for in the present real estate market. The market value of a property is based on elements such as lot size, building condition and location desirability.
Assessed value—This value is an estimate generated by the municipality where a property is located. Such a value is typically utilized to determine local property taxes.
Replacement value—This value is an estimate of the current cost to replace or rebuild a property. The replacement value of a property depends on characteristics such as material and labour expenses, architect services, debris removal needs and building permit requirements.
Generally, insurance experts recommend using the replacement value of a property to conduct correct ITV calculations. Common approaches to accurately estimating this value include getting a property appraisal from a third-party firm, leveraging fixed-asset records that have been adjusted for inflation or relying on a basic benchmarking tool.
While appraisals often require more time and resources than other property valuation methods, they are largely deemed the most thorough and accurate.
Factors Impacting Property Value
Apart from utilizing replacement value estimates within ITV calculations, businesses should consider the following factors to determine correct property valuations:
Direct and indirect expenses—In addition to direct costs, such as material and labour expenses, property valuations should incorporate indirect costs, such as consulting fees, engineering services and other expenses not directly associated with rebuilding.
Property age—In the case of older structures, property valuations should include additional construction costs that may arise from upgrading outdated building materials and equipment.
Building codes—Older properties may also require certain modifications amid the rebuilding process to comply with modern building codes (e.g., plumbing improvements, energy efficiency upgrades, sprinkler system changes and safety enhancements). These adjustments may further compound construction costs, driving up property valuations.
Property accessibility—Properties situated at steep locations or adjacent to neighbouring structures may need to have bracing or other safety measures put in place during demolition and rebuilding operations to ensure accessibility. These measures should also be factored into property valuations.
Unique features—Some custom property elements (e.g., stained glass) could necessitate specialized construction work, elevating rebuilding costs. Therefore, it’s crucial for these unique features to be incorporated into property valuations.
Consequences of Property Undervaluation
Businesses could face a number of ramifications if they conduct inaccurate ITV calculations and undervalue their properties. Namely, businesses may lack sufficient coverage following property losses, forcing them to pay out-of-pocket expenses in order to fully rebuild. Depending on the severity of property losses and associated rebuilding operations, paying these costs out of pocket could lead to major financial setbacks and—in certain scenarios—bankruptcy.
Additionally, property undervaluation can sometimes result in coinsurance penalties. Most commercial property insurance policies include coinsurance clauses, which encourage policyholders to carry reasonable and accurate amounts of coverage. Under a coinsurance clause, a policyholder is subject to a penalty—generally, a reduced payout—if their coverage limit is not at least equal to a predetermined percentage of the value of their property.
Ways to Improve Property Valuations
Here are some additional best practices businesses can review to help ensure accurate ITV calculations and improve their property valuation measures:
Find a reputable appraiser. Third-party appraisals are considered the gold standard in property valuations by insurers, as they offer reassurance that calculations were conducted by experienced and objective professionals. As such, it’s vital to secure a trusted and reputable appraiser.
Consult other parties. Determining the value of a property should be a team effort. Make sure to compile a variety of property data from multiple qualified parties (e.g., accountants, contractors, real estate experts, risk managers, insurance professionals and chief financial officers) when making valuation decisions.
Make updates as needed. The value of a property is always changing. This means it’s imperative to update property valuations on a regular basis. For instance, appraisals should be conducted at least every three to five years. Take note that property valuations may need to occur even more often. The frequency will depend on factors such as changing property exposures, altered operations, building upgrades or modifications, the implementation of new technology or equipment on-site, shifting market conditions and property construction trends (e.g., inflated labour and material costs). It’s best to work closely with trusted insurance professionals when updating property valuations to maintain ample coverage and prevent coinsurance penalties.
Ultimately, it’s clear that correct property valuations are critical in securing adequate commercial property insurance. By better understanding how to conduct accurate ITV calculations, businesses can stay protected when covered events occur and avoid potential coinsurance penalties.
Contact Reith & Associates today for additional insurance guidance and solutions.
Reith & Associates Insurance and Financial Services Limited
Some of the most important assets in your business may be your intellectual property. These are intangible assets, including patents, trademarks and trade secrets. The Canadian government created these protections to keep your intellectual property safe from infringement.
What is a patent?
A patent is a legal protection granted by the federal government to an inventor to encourage progress and prevent others from benefiting from the invention. Patents cover inventions new to the marketplace or improvements on existing inventions.
There are three basic criterion an invention must meet in order to be patentable in Canada: novelty, utility and ingenuity. An invention is novel if it is the first of its kind in the world. Utility is established if an invention has a useful and functional purpose. Lastly, an invention’s ingenuity is demonstrated if an invention represents something new to an industry that is not already available and readily apparent to someone skilled in that industry.
What does patent protection provide?
Patent protection involves the right to exclude others from making, using or selling anything that would fall under the claims of the issued patent. Canadian patents have a maximum life of 20 years from the date the patent application is filed.
What factors are considered when determining whether a patent has been infringed?
Determining whether a patent has been infringed entails the court examining the claims of the patent and comparing them to the invention or evaluating the validity of the patent. This may be more complex in situations where the claims terms are unclear or ambiguous. The court can determine that infringement exists even if the invention isn’t identical to the original. If the device performs substantially the same function in largely the same way to produce substantially identical results, a court may find infringement.
What are my rights if someone infringes my patent?
You may file a lawsuit for damages in the appropriate court to enforce your patent against an infringer. If you are successful, there are many possible outcomes. Courts have the authority to compensate the patent holder for losses associated with the infringement.
What is a copyright?
A copyright is the legal protection granted by the government to an author. In the case of works created by an employee during the course of his or her job, the copyright would belong to the employer.
What can be protected by a copyright?
The Copyright Act of Canada sets types of creative works to be protected. A non-exhaustive list of material that may be protected under copyright includes:
Books, magazines, advertising copy and computer programs
Dramatic works, including any accompanying music
Paintings and designs
Sound recordings (CD, cassette, digital audio tapes, MP3 files)
The Copyright Act of Canada provides immediate protection for creative works. As soon as works are written down or recorded, they are immediately copyright-protected. The copyright protection lasts until the author’s death and for an additional 50 years after the date of the author’s death.
What does copyright protection provide?
Copyright ownership grants the author or owner of the work the sole and exclusive right to reproduce the work in any form. These rights can be limited by some doctrines, like fair dealing.
What factors are considered when determining whether a copyright has been infringed?
A copyright can be infringed by violating any of the rights granted: reproduction, modification, publication, performance and public display of the work.
However, “fair dealing” is allowed without the author’s permission if an individual uses a copyrighted work or a portion of copyrighted work for personal use, or for limited instances of news reporting, criticism or review if certain requirements are met.
What are my rights if someone infringes my copyright?
The Copyright Act of Canada gives you the right to receive civil remedies, including court costs. Additionally, an infringer may be subject to criminal prosecution. If convicted of copyright infringement, an individual may face criminal penalties of $25,000 or imprisonment up to six months, or both.
What is a trademark?
A trademark is a mark that is used by a person for the purpose of distinguishing wares or services manufactured, sold, leased, hired, or otherwise entered into commerce from others in the marketplace. Canadian federal law and common law allows for the protection of trademarks.
What does trademark protection provide?
The scope of the protection can vary widely, depending on the strength and fame of a mark. For instance, many brand names are famous marks that are very strong. The length of time that a mark can be protected is indefinite because it is based upon use, but registered marks in Canada have an initial term of 15 years. A mark may be renewed in successive 15-year increments as long as the mark is still in use.
What factors are considered when determining whether a trademark has been infringed?
Whether a trademark has been infringed is most often dependent upon whether a likelihood of confusion has been found. In determining whether there is a likelihood of confusion, courts generally look at factors like the inherent distinctiveness of the marks, the extent to which the marks are known, the time the marks have been in use, the nature of the goods or services associated with the marks and the degree of resemblance between the marks.
What are my rights if someone infringes my federally registered trademark?
Remedies are available for trademark infringement under both federal law and common law. After a finding of infringement, damages can include, but are not limited to, a temporary or permanent injunction, damages and legal costs.
What is a trade secret?
A trade secret is any information that is or may be used in business that is not generally common knowledge in that trade or business. The information must also have economic value because it is not common knowledge in the trade or business and the holder of the information must make efforts to keep it from becoming generally known.
What factors are considered when determining whether a trade secret has been misappropriated?
The owner of the trade secret must prove that a misappropriator owed an express or implied duty of confidentiality or some other fiduciary duty to the owner, or that the misappropriator obtained the trade secret through some improper means.
What are my rights if someone misappropriates my trade secret?
A lawsuit may be filed for trade secret infringement, depending upon the circumstances. Individuals may be subject to injunctions, may be ordered to pay damages and will be subject to any other remedy the court finds appropriate if convicted.
Are there applicable common laws?
Quebec also has its own trade secret laws which may need to be considered when developing your policy.
Protect Your Business
Patents, copyrights, trademarks and trade secrets may be integral parts of your business. It is vital that you understand the laws associated with these concepts to protect your intellectual property. You also need to ensure that your behaviour does not infringe on someone else’s intellectual property. This piece is not exhaustive and should be read as an overview. For more information, consult legal counsel.
Reith & Associates Insurance and Financial Services Limited
As intellectual property becomes a vital part of more firms’ assets, businesses must consider the additional exposures they face. There are several types of intellectual property protected under federal law: trademarks, copyrights, patents, trade dress and trade secrets. To help protect your business, there are two types of intellectual property coverage available: the first protects a company sued for infringement by paying for legal defense, and the second helps pay the legal expenses of suing an alleged infringer.
If your company could be sued by a competitor for infringement or intellectual property theft, or you do not have the funds to cover legal fees associated with defending your patent or trademark, it is vital that you purchase coverage. Defending infringement litigation can cost hundreds of thousands of dollars, not including the cost of damages and prejudgment interest. In patent infringement cases, attorney’s fees can easily top $1 million.
Budgeting and planning for the protection of intellectual property rights may not only save your company a significant amount of capital; it may also help keep your business viable when legal bills accumulate rapidly. There are several options to cover these exposures: the “advertising injury” provision in the standard Commercial General Liability policy, endorsements to Errors and Omissions policies and specialized policies offered by certain insurers specifically designed for the protection of intellectual property rights.
Commercial General Liability Policy – Advertising Injury
The Commercial General Liability Policy, or CGL, is a standard liability policy offering broad coverage. Coverage for an advertising injury often falls under Coverage B in a CGL. Any act by the insured that somehow violates or infringes on the rights of others (referred to in the policy as an offence) is the subject of personal and advertising injury liability coverage, although only those acts that are specifically listed in the policy are covered. The coverage under the “advertising injury” provision is limited to those injuries that are directly related to the advertisement. Therefore, the policy covers debts owed by the insured party due to claims filed against it.
Coverage B policyholders are sometimes covered in cases relating to trademark infringement; however, copyright claims are only successful where they are directly related to advertising, and patent claims are rarely covered under the “advertising injury” provision. The cases which allow for coverage in a patent infringement case are generally limited to instances in which a court finds contributory infringement or inducement to infringe through an advertising medium. Since the “advertising injury” provision in a standard CGL is rather limited, many businesses consider additional coverage.
Special Endorsements and Policies
Beyond the CGL, specialized policies can be better suited to a business’s unique exposures. These are Errors and Omissions liability policy endorsements that can vary in focus from media and communications to patent infringement. Note that these policies have not been the subject of much litigation, and therefore, judicial guidance on coverage determinations is comparatively limited. It is important to consider multiple carriers, since available coverage varies widely from carrier to carrier.
Infringement Defence and Abatement Insurance
A third option relates primarily to patents, though riders for copyrights and trademarks may be available. Carriers have developed policies specific to intellectual property, generally with patents in mind. In relation to patents, there are three basic policy types: defense and indemnity, defense only and offensive, or infringement, abatement insurance.
A defense and indemnity policy provides defense coverage in a patent infringement suit and, if the party in question is found liable, pays for damages, including prejudgment interest. A defense only policy, much like it sounds, covers only the cost of defense and does not cover damages awarded to the successful party. In addition, an offensive policy covers only the costs of pursuing an infringer. Certain carriers will amend some of the above-mentioned policies to include endorsements for trademark and copyright infringement for an additional premium.
Exclusions to Coverage
In addition to special exclusions, there is a general exclusion to the CGL stating that there is no coverage “for an offence committed by an insured whose business is advertising, broadcasting, publishing or telecasting.” With the increase in claims, many carriers are drafting exclusions that specifically omit coverage for copyrights that fall outside of infringement of copyrighted advertising materials, patents, trademarks and the like.
It is important to be aware of the exclusions to any policy that you purchase. The most common exclusions specified in intellectual property policies are for willful infringement, anti-trust violations, infringement existing or known on the effective date of the policy and criminal acts.
To maximize coverage, there are a number of steps that your company should follow. Failure to investigate the existence of coverage in a timely manner can absolve a carrier of liability and create grounds for a malpractice case against the intellectual property legal counsel. While courts have held outside intellectual property counsel liable for failure to pursue coverage determinations, companies should still proactively recognize and review the potential for insurance coverage for protection of their intellectual property assets.
If a claim has been asserted against your company, you have a duty to notify your carrier. In fact, notifying your carrier immediately is in your best interest because a delay could be grounds for denying coverage. In the case where a formal complaint has been served on the company, the following six steps are recommended.
The policy or policies should be analyzed by counsel to determine under which policies the claim may be covered. In this step, the complaint should be closely examined for types of issues raised and should be compared to the relevant policy clauses.
The company should promptly tender defense to the carrier. In the tender, all policies that may provide coverage should be identified, including the specific clauses.
Demand a prompt response to the tender. If a sufficient extension of the time to answer is not granted, it is possible that a response to the complaint will be due prior to the issue of coverage being resolved. If that is the case, then defense counsel should be retained until the issue of coverage is determined.
Review the carrier’s response to the company’s tender. The carrier may accept defense; it may defend under a reservation of rights; the carrier or the policyholder may seek a declaratory judgment for a coverage determination; or it can reject tender.
If there is a conflict in the interests of the carrier and the policyholder, the policyholder should insist on the right to control the litigation and should further insist upon independent counsel.
Be diligent about which documents are shared with the carrier, especially in cases where the carrier has reserved its rights to deny coverage. While the policyholder has a duty to cooperate with the carrier, in a case where a reservation of rights to deny coverage has been tendered, the production of certain documents to the carrier could result in the waiver of the attorney-client privilege as to the subject matter of the produced documents.
Insuring your company’s intangible assets and its liability is a vital part of risk management. Insurance for both infringement of intellectual property and for an assertion of infringement against your company can provide financial security and peace of mind.
Reith & Associateswill compare your desired coverage to the specifically named offences in policies based upon enumerated risks and will examine any exclusions that may weaken the coverage you seek. We are skilled at identifying the perils associated with intellectual property and high-technology companies, and we can assist you in selecting the right policy. Let us help you protect your most precious assets. Contact us today to ensure that the coverage you buy meets your needs in today’s marketplace
Reith & Associates Insurance and Financial Services Limited
Consider this scenario: A customer asks your company to manufacture a part according to certain specifications, which were outlined in a contract. It is needed to add the part to an existing product and ship it to their customers by a set deadline.
Your company creates the part, but due to an error that occurs during the production process, the part isn’t made to the customer’s exact specifications. You ship it, they receive it, and realize it can’t be use it in the final product and requests that the part be remade. The delay in production causes your client to miss the deadline to ship their final product to their customers. As a result of them missing their contractual obligations they face penalties and/or loss of business income/reputation and so they files a lawsuit against your company. Now what?
Exclusions in General Liability Insurance
You might assume that your Commercial General Liability (CGL) policy will cover this claim, but in many cases it will not. Most CGL policies contain “damage to impaired property” and “property not physically injured” exclusions. That means that unless the manufacturing error results in bodily injury or property damage, the CGL policy will not cover the loss.
The customer’s financial loss in the scenario described above would not fall into either of these two categories, so it would not be covered under a typical CGL or products liability policy. In order to protect your business from a product failure resulting in a third-party financial loss without bodily injury or property damage, you need Manufacturers Errors & Omissions (E&O) coverage.
Manufacturers E&O Insurance
Manufacturers E&O is professional liability insurance that covers a manufacturing mistake or negligent service that results in a third-party financial loss without bodily injury or property damage. E&O insurance covers damages that result from:
Poor, incorrect or faulty products that you manufacture, handle, sell or distribute
Errors and omissions when caused by material defect, including property damage to the product, property damage to the work and property damage to impaired property
Negligence or failure to deliver promised services
If customers allege that your product failed or that you were negligent in performing services outlined in a contract, they will likely seek to recoup their financial losses by suing you. You could be saddled with significant legal costs, as well as potential damages if the case is lost. Even if the customer’s lawsuit is found to be frivolous, you’d still incur the cost of defending yourself. That’s where Manufacturers E&O insurance comes in.
Manufacturers E&O insurance will cover both the customer’s financial loss and your defense costs. Most E&O policies are “claims-made policies,” which means that in order for the claim to be covered, both the work in question must be performed and the claim must be made during the policy period.
E&O premiums vary based on the type of product or service you need coverage for, your company’s financial stability and the policy’s limits. Contact Reith & Associates at 519.631.3862 to learn more about adding this important coverage to your risk management portfolio.
Reith & Associates Insurance and Financial Services Limited