​Product Liability Insurance is crucial for businesses that manufacture, distribute, or sell products. It helps protect against claims arising from defective or harmful products. However, like any Business Insurance policy, product liability coverage comes with exclusions—specific situations or circumstances where claims may not be covered. Understanding these exclusions is essential for businesses to avoid unexpected financial risks. Below are some exclusions to look for when getting a Product Liability Insurance Policy:

Intentional Acts and Fraud
Product liability insurance does not cover damages caused intentionally. If a business knowingly sells a defective or harmful product, any resulting claims may be denied. Fraudulent misrepresentation of a product’s safety can also lead to claim denials.

Product Recall Costs
Most standard product liability policies do not cover the cost of recalling defective products. Businesses must purchase separate product recall insurance to cover expenses related to pulling defective products from the market, replacing them, or notifying customers.

Known Defects
If a company is aware of a defect but continues selling the product, any damages caused by the defect may not be covered. Insurance is designed for unforeseen issues, not negligence in addressing known safety concerns.

Professional Services
If harm results from faulty advice, design, or services rather than a physical product, it may not be covered under product liability insurance. Instead, businesses may need professional liability (errors and omissions) insurance.

Damage to the Insured’s Own Product
Insurance policies generally cover damages the product causes to third parties, but not the cost of repairing or replacing the defective product itself. Businesses must cover their own manufacturing defects.

Environmental or Pollution Damage
If a product causes environmental contamination, such as chemical spills or toxic waste leaks, standard product liability insurance may exclude coverage. Specialized environmental liability insurance may be required.

War, Terrorism, and Cyber Risks
Many policies exclude damages related to acts of war, terrorism, or cyber-related losses. If a product is compromised due to a cyberattack, standard product liability coverage might not apply.

Understanding exclusions in Product Liability Insurance ensures businesses are prepared for potential risks and can take proactive steps to mitigate financial losses. Carefully review policy terms to understand coverage gaps. Also consider additional insurance policies for product recall costs, environmental liability, or professional liability. Lastly, maintain strict quality control to prevent product defects. If you have questions about Product Liability Insurance or any other Business Insurance policy, please feel free to contact me.

Jason Matison
Commercial Insurance Agent
Austin, Texas

The term "Products Liability" was almost unknown to the general public and to the legal profession until recently. Today it is a widely known term applied to the liability of a manufacturer, processor or nonmanufacturing seller for injury to the person or property of a buyer. Why is it becoming more and more known? It could be due to the complexity of products for use in home, business, recreation, and other industries. Or it could be that maybe we live in a more litigious society. Either way, it's coverage that every business owner or risk manager should know about, especially if you're manufacturing a product or selling a product. 

In 1979, the United States Department of Commerce established The Model Uniform Product Liability Act. The reason for establishing this act was to "help to assure that persons injured by reasonably unsafe products receive reasonable compensation for their injuries. It should also help to stabilize product liability insurance rates." This act defines the scope and the various terms used in connection with products liability. It also establishes certain basic standards of responsibility for manufacturers and product sellers. It establishes the relevance of compliance or noncompliance with legislative or administrative regulatory standards. It also establishes compliance with whether or not a product is deemed defective.

So, how do you obtain coverage? First, have a conversation with your agent. They will most likely have you fill out an application regarding the details of your product. Questions may range from the products intended purpose and who the end user will be. As far as the premium goes, it's going to depend largely on the overall exposure/risk and estimated gross sales. Certain products have a minimum premium, which means that is the least amount of premium to be charged by the insurance company for providing a particular insurance coverage. 

What if you have a policy, but are not sure whether you have coverage? Look at the Declarations Page of your Commercial General Liability policy. It will look something like this:

The term "Products Liability" was almost unknown to the general public and to the legal profession until recently. Today it is a widely known term applied to the liability of a manufacturer, processor or nonmanufacturing seller for injury to the person or property of a buyer. Why is it becoming more and more known? It could be due to the complexity of products for use in home, business, recreation, and other industries. Or it could be that maybe we live in a more litigious society. Either way, it's coverage that every business owner or risk manager should know about, especially if you're manufacturing a product or selling a product. 

In 1979, the United States Department of Commerce established The Model Uniform Product Liability Act. The reason for establishing this act was to "help to assure that persons injured by reasonably unsafe products receive reasonable compensation for their injuries. It should also help to stabilize product liability insurance rates." This act defines the scope and the various terms used in connection with products liability. It also establishes certain basic standards of responsibility for manufacturers and product sellers. It establishes the relevance of compliance or noncompliance with legislative or administrative regulatory standards. It also establishes compliance with whether or not a product is deemed defective.

So, how do you obtain coverage? First, have a conversation with your agent. They will most likely have you fill out an application regarding the details of your product. Questions may range from the products intended purpose and who the end user will be. As far as the premium goes, it's going to depend largely on the overall exposure/risk and estimated gross sales. Certain products have a minimum premium, which means that is the least amount of premium to be charged by the insurance company for providing a particular insurance coverage.