Manufacturers E&O insurance, also known as professional liability, is a form of insurance every company should have. Manufacturing companies provide a specific good or service. If that good is not built to the correct specifications, defective, or there is a faulty component, the company can be held liable from professional negligence.
Most insurance companies will demand a manufacturing company buy this form of insurance. It protects the company if they cause financial harm to a third party. It provides protection to the manufacturer from having to pay the entire defense cost for lawsuits filed because of a professional liability claim.
All businesses are required to have commercial general liability insurance. It protects a business against personal injury claims, advertising injury, bodily injury, and property damage. But, if a product does not work properly and causes loss that is not listed under general liability, it will not be covered by this insurance.
A primary example is software manufacturing companies. Faulty software will not cause property damage or bodily harm, but it can cause financial loss. This would be an element of professional negligence the creator had by misrepresenting the product capability. In a case like this, professional liability insurance would be required.
If a defective product is sold and a claim is made, this insurance is activated. There are different areas where it is determined if this insurance should be used. Two examples is negligence and breach of warranty.
Manufacturing companies work along high standards because many individuals and other businesses rely on the quality of their work, and buy it under the circumstances that it will not be faulty and will work effectively. Commercial insurance should be a key part of any company business insurance package. It provides the necessary protection when other insurance types, such as commercial general liability, fail to provide adequate protection.
By John Benson