Understanding Manufacturers E&O Insurance
As a business owner in the manufacturing industry, you prioritize the safety of your products, but what if a manufacturing error leads to a costly lawsuit? How will you protect your business? Your general liability policy won’t cut it. That’s where manufacturers E&O comes into play.
Key Points
Manufacturers Errors and Omissions Insurance (E&O) covers you from financial losses in the event of a lawsuit related to the manufacturing of a product.
E&O insurance covers errors and omissions like failure to follow product specifications, inadequate quality control, failure to deliver products on time.
There are certain risks that manufacturers E&O doesn’t cover, such as bodily injury and property damage, manufacturing delays, and patent infringement.
What Is Manufacturers Errors and Omissions Insurance?
Manufacturers Errors and Omissions Insurance (E&O) is a type of E&O policy that protects you from liability for any errors or omissions made during productions. In the event of a lawsuit or claim against you, E&O insurance can help cover legal fees, settlements, and judgments. Additionally, it can help protect your reputation by keeping your name out of the media and public sphere during litigation.
E&O Meaning in Manufacturing
A manufacturers E&O professional liability policy covers errors and omissions like failure to follow product specifications, inadequate quality control, failure to deliver products on time, and more. Below are a few examples of when E&O insurance can come in handy:
In manufacturing, a claim can be filed related to errors in a product’s design. Let’s say you manufacture a solution that keeps perishable goods at adequate temperatures to make sure they arrive in optimal condition. One of your customers alleges that your equipment didn’t accurately record temperatures at established intervals, resulting in a wholesale grocery distributor rejecting a load of their goods. As a result, the company is suing you for their financial losses. A manufacturers E&O policy would cover the cost of your defense and any awards given to the claimant.
Errors and omissions in manufacturing can also relate to defective products. Let’s say you manufacture conveyor systems, and several large distributors file a claim against you, alleging that your systems are defective, resulting in additional costs, late deliveries, and lost income. A manufacturers E&O policy would cover your court and claim costs.
What Does Manufacturers Errors and Omissions Insurance Cover Exactly?
Manufacturers E&O insurance covers a variety of scenarios:
Errors in Professional Services Provided
If your manufacturing business offers additional services to customers, such as design, development, or consultancy, any errors associated with these services will be covered with E&O insurance.
Faulty Products and Material Defects
If an error in your processes leads to a faulty product or material defect, manufacturers E&O insurance gives you peace of mind that your business is protected against any financial repercussions. Manufacturers E&O insurance can also include additional coverage, such as breach of contract and negligent misrepresentation.
Who Needs Manufacturers E&O?
Do you make a product or offer a service that could put your customers at financial risk? If so, you probably need a manufacturers E&O policy.
Component Part Manufacturers
If you make a component for another product, you’re at risk for errors in your production processes. If an error occurs, it can result in delays, product recalls, or lost contracts for your final product manufacturer. E&O coverage can help protect you in the event of a lawsuit due to errors and omissions during production.
Manufacturers With Value-Added Services
Manufacturers who provide value-added services to customers, retailers, and distributors are at a greater risk for an E&O claim. If your business model heavily relies on assembly, kitting, sequencing, labeling, pad printing, packaging, or welding, you should consider purchasing a manufacturers E&O insurance policy.
B2B Manufacturers
If you manufacture products for other businesses, you’re at financial risk if a customer files a claim alleging that you sold them a faulty product. E&O coverage can help protect you in the event of a lawsuit.
Several small, common errors can expose your business to professional liabilities and potentially lead to a lawsuit.
What Isn’t Covered in a Manufacturers E&O Policy?
There are certain risks that E&O insurance doesn’t cover:
Bodily Injury and Property Damage
E&O coverage doesn’t protect you from lawsuits resulting from bodily injury or property damage caused to third parties. Your commercial general liability (CGL) policy covers bodily injuries and damages.
Manufacturing Delays
Financial harm resulting from delays in getting your product to customers in a specified timeframe isn’t generally covered under a manufacturers E&O policy. Additionally, if you promise deadlines that you can’t meet and incur a contractual penalty as a result, you likely won’t be able to recoup those losses under E&O insurance.
Patent Infringement
Designing and manufacturing products that infringe on the patents of others aren’t covered under manufacturers E&O insurance. While this may be concerning to some, there are certain patent infringement policies that can help you address risks related to patents.
Secure a Manufacturers E&O Policy With Southpoint
At Southpoint Insurance, we understand how important it is for manufacturing companies to have adequate protection from unexpected liabilities. That’s why we work daily to provide our clients with superior customer service backed by extensive knowledge. We have a variety of robust E&O policies available through our network of industry partners. We work closely with you to ensure a smooth and transparent approval process. Our team strives to help clients understand the different E&O options available and their benefits, ultimately finding the right policy to address their risks at an affordable rate. Contact us today to secure the right E&O insurance.
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