General Liability vs. Professional Liability for Manufacturing Companies

    Most people have a good understanding of the needs for professional liability or errors and omissions insurance for the industries that provide the public with services. Lawyers need professional liability, Doctors need malpractice and insurance agents, engineers, computer consultants and stock brokers all need errors and omissions insurance. Likewise, there is a general consensus that if you are manufacturing, fabricating or assembling a product you need a commercial general liability policy which includes product liability. What a lot of risk managers, CFOs, owners of manufacturing companies and insurance agents for manufacturing companies fail to realize is their risk exposure for Professional Liability Insurance as a manufacturer of a product.

    Companies that manufacture technology tend to have a huge professional liability exposure, but most companies that manufacture a product whether it would be considered technology or not have the exposure as well. As the operator of Internet Risk Specialist I see technology companies all the time which should have this coverage. But at ALC Risk Solutions we deal with companies in all industries that manufacture, assemble and fabricate products whose liability extends past the general liability's products liability definition.

To fully understand the gap of coverage, you need to understand what the commercial general liability policy covers. A commercial general liability insurance policy general will cover the company for suits brought against the company for a number of things: Bodily Injury, Property Damage, Advertising Injury and Personal Injury. As you can see, there is no coverage listed in there for "Financial Damage".

Let's say you manufacture computer servers. You have a product liability policy. So if the server catches on fire and causes the loss of life, the loss of property or a bodily injury to a customer, your policy will protect you. But what if that server catches on fire at a stock broker's office right after a client put in an order to sell $1,000,000 worth of stock which was about to tank and be worthless. Who does the stock broker's client sue? Who does the stock broker blame? What if it really was an error or omission on your company's part which caused the server to catch on fire?

Think about the product that your company manufactures. Does your product enable others to make money? Would your product failing cause your customers to not make money? If your product was to fail, explode, implode or malfunction due to an error or omission, or perceived error or omission on your part, what will happen? If you only have a product liability policy, than you are partially self-insured.

Some of you may be saying, "My carrier offered me a professional liability quote, and it was more than my general liability quote". Well your carrier has been insuring you for a few years now and they probably have a decent understanding of your business. If they charge you $2,000 for products liability and $4,000 for professional liability, maybe that's because they know that your professional liability exposure is two times as great as your product liability exposure. It might be even more than twice as great, but they know you're not going to buy it if it's that expensive so the insurance company is taking a little risk with providing the quote.

So now your thinking, "Great I have this huge exposure, revenues are down, insurance was too expensive last year, how can I afford to buy more coverage?" Well, the good thing for you as a manufacturing company is that this is a soft insurance market. Insurance companies are stepping over each other, and some are even taking underwriting losses to write accounts and get them on the books. So as a business owner, CFO, risk manager, this is a good time to shop around your insurance, get the General Liability down, scrimp and save on the workers compensation, beat down the property insurance quote and apply the savings to the professional liability insurance. If you're agent can't do it, give me a call. I am Andy Cohn with ALC Risk Solutions in Miami, FL. You can contact me by email at acohn@alcrisk.com or by phone at (786) 382-6833.