Auto-component manufacturer insurance policy covers product liability and product recall insurance. In order to secure your business operations against the financial loss due to product-related lawsuits or product recalls, buying business liability policy is important and it is equally important to know the important aspects about this business insurance.

Following are the exclusions under the auto component manufacturer liability insurance policy:

1.Contractual product guarantee: Claims arising due to non-performance of a product containing contractual guarantee will not be covered product liability insurance coverage of auto component manufacturers policy. Any loss incurred by your customer due to non-performance of the product cannot be claimed if the contractual product guarantee is been attached with the product. As the product contains guarantee, any kind of the first-party costs such as repair or replacement expenses is not covered by the insurer.

Read About: What is Product Liability Insurance?

2.Pure financial loss: Loss of goodwill and a decrease in customer base due to product-related lawsuits or damaged reputation is not covered under product liability cover and recall insurance. One can cover loss due to business interruption by including an additional extension in policy.

3.Any fines and penalties by regulatory authorities: Punitive damages are not covered in an auto-manufacturers liability policy. Penalties and fines are imposed upon the manufacturer if he was blamed for the pre-marketing knowledge of the defect and still launched the product in the market, knowing that the product can cause severe damages.

4.Product contamination and tampering: Product which is prone to contamination and tampering are not covered under the auto-component manufacturer insurance policy. Product extortion is the result of product contamination so a product which has a high risk of contamination will not be covered under a product liability policy.

5.Professional negligence: If any loss incurred because insured acted negligently or he is at fault, such claims are not covered under auto component manufacturers insurance policy. For example, If there is a high risk of rust contamination, then proper precautions such as coating must be done in order to avoid probable damage but if not performed, this will prove to be a negligent act. Hence, such a claim will not be covered under an auto component manufacturer insurance policy.

6. Claims arising, made and reported before the policy issuance: Claims reported because of issues that came up before purchasing insurance are rejected. The insurance company will scrutinize the matter carefully to know when automobile manufacturers became aware of the issue. This can be addressed by clearly revealing the information you have on a matter prior to buying insurance.

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7. Non-compliance with industry standards: Manufacturing and selling outdated models or parts which have been strictly banned by the government and if the auto manufacturer is using outdated technology even after it has been advised to upgrade the technology, the claim reported due to recall or liability of such products will not be covered.

Case Study: RT Auto Manufacturers have bought the product liability insurance policy. They had launched a sedan car in a market but various lawsuits have been filed against the product because there is a serious ignition issue which caused failure of security measures available in the car. The company decided to recall the product which incurred the huge cost. The insurer covers the litigation expenses against product liability claim. All the recall cost was borne by the auto manufacturer since he has not bought a product recall insurance coverage under this policy.
As the firm did not include product recall coverage, the cost of recalling, replacing or repairing products was not covered under it. Hence, it is important to include product recall insurance cover in product liability insurance. Because if not included, recall cost will be an exclusion.

Different insurers have a different set of exclusions under product liability and as an auto-manufacturer, you have to review the list of exclusions carefully.