With the increasing frequency and speed of modern-day lawsuits, every manufacturing unit has started to become more proactive to minimize the fallout and recover customer trust. An auto component manufacturer should buy product liability insurance and product recall insurance in order to get coverage against client-related lawsuits.
Following expenses are covered under auto-component manufacturer policy:
1. Liability Expenses: Product liability insurance will trigger third-party claims arising due to bodily injury or property damage incurred by your client because of your product. Bodily injury of your visitor on your premises is also covered under product liability insurance. Design defects, manufacturing defects, and warning defects are covered. Product liability lawsuits are time-consuming and costly and all the expenses related to settlement cost and litigation cost will be reimbursed by the insurer.
1a. Legal expenses: Product liability insurance policy provides cover for the defence cost. Be it lawyer’s fees, administration expenses, investigation cost or other legal expenses; all are covered. Some insurance company also provide legal assistance to defend the case.
2. Product Recall Expenses: The policy will pay for the cost incurred to withdraw a product from the market. A product recall can cause the financial damage to a firm if not handled properly. Having product recall insurance can save you from the following expenses:
2a.First party cost: Cost incurred by the firm in advertising the recall, storage, disposal and repair of recall products are covered. Cost of re-working, re-designing a defective product can also be covered. All the expenses incurred for the removal of defective products are covered in product recall insurance.
2b. Third party cost: Financial loss suffered by any third party, say your client’s customer buy substitute goods as a direct consequence of recall can also be covered. Settlement cost will be borne by the auto-component manufacturer insurance.
Product liability and recall assume hefty cost and time which can make your organization financially unstable. Auto manufacturer insurance can help in recovering the trust of the customer. It is a crisis management plan for a manufacturing unit.
Apart from standard coverage, an auto manufacturer can also include business interruption expenses cover, property damage coverage, third-party liability expenses coverage in the auto component manufacturers policy. Ensure total protection by including additional extension coverages in your insurance and get your auto manufacturing firm covered against all business legal liabilities.
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Case Study: VW Car manufacturing firm recalled 23,500 sedan cars because there was some technical issue in the emission control system. Such a design defect would have caused severe injuries to the car owners and environmental harm as well. The product recall decision was one of the toughest decision taken by the firm but in order to save their reputation in the market, they decided to recall the product.
Fortunately, the auto manufacturing unit has product recall insurance which saved the firm from various product recall losses. The product recall policy has covered the following expenses:
1. Recall cost- Cost of storage, disposal, recovery
2.Loss of profit
Since the manufacturing unit has covered for both first and third party loss, customer loss is also covered under the policy, all the car-owners have received compensation against the design defect. Product recall cover has saved the car manufacturing unit from the financial crisis.
Product recall and product liability lawsuits can wipe out all your savings and profit. Hence, it is important to buy the insurance policy in order to add a protection shield to your business operations.