Liability Insurance

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The 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 a business liability policy is important and it is equally important to know the important aspects of 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 insurance 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 a guarantee, any kind of 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 won’t cover under product liability cover and recall insurance. One can cover loss due to business interruption by including an additional extension in the policy.

3. Any fines and penalties by regulatory authorities:

Punitive damages do not cover 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:

The product prone to contamination and tampering does not cover under the auto-component manufacturer insurance policy. Product extortion is the result of product contamination so a product that has a high risk of contamination will not be covered under a product liability policy.

5. Professional negligence:

If incurred any loss because the insured acted negligently or he is at fault, such claims do not cover under auto component manufacturers’ insurance policy. For example, If there is a high risk of rust contamination, then must do proper precautions such as coating in order to avoid probable damage. But if do not perform, this will prove to be a negligent act. Hence, such a claim will not cover under an auto-component manufacturer insurance policy.

6. Claims arising, made, and reported before the policy insuance:

Reported claims because of issues coming up before rejecting purchasing insurance. The insurance company will scrutinize the matter carefully to know when automobile manufacturers became aware of the issue. Can address this by clearly revealing the information you have on a matter prior to buying insurance.

Also Read: 4 Features of Manufacturing and Automotive Insurance

7. Non-compliance with industry standards:

Manufacturing and selling outdated models or parts, the government strictly banned. And if the auto manufacturer used outdated technology even after advising to upgrade the technology, the claim reported due to recall or liability of such products will not cover.

Case Study:

RT Auto Manufacturers have bought the product liability insurance policy. They launched a sedan car in the market but filed various lawsuits against the product. Because a serious ignition issue caused the failure of security measures available in the car. The company decided to recall the product which incurred a huge cost. The insurer covers the litigation expenses against product liability claims. 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, it didn’t cover the cost of recalling, replacing, or repairing products 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 auto-manufacturer. You have to review the list of exclusions carefully.