Manufacturer’s Errors & Omissions Insurance: A Needed Safeguard

In today’s blog, we cover manufacturer’s errors & omissions insurance, which is the coverage needed to protect a company from a defect or other mistake resulting in a monetary loss to an end user. Manufacturer’s errors & omissions insurance is separate from a manufacturer’s general liability policy, which applies in cases where a manufacturer’s products, actions and/or operations result in an injury or physical damage.

For manufacturers, both coverages are essential.

Think of it this way: suppose you are a computer company with a warehouse from which your products are shipped.

Now, let’s consider a box of widgets made by your company.

A general liability policy protects your company in the event a visitor trips over the box and ends up in the hospital. It also comes into play if your product, when out of the box and being used, causes an injury to the consumer.

Now, let’s assume a box of widgets is shipped to Vendor A, which will use the widgets to help run the systems operating machinery to make candy corn.

In this example, one of your widgets breaks, and candy corn production comes to screeching halt. Furthermore, the widget break takes five days to fix in October – prime candy corn season.

In that case, manufacturer’s errors and omissions insurance would help to protect you, the widget maker, in the event the candy corn company brings a lawsuit against your firm for financial losses for having to stop the presses.

Manufacturer’s errors and omissions insurance would also cover you in the event your product did not perform as you said it would. For instance, if your widget was guaranteed to last five years but didn’t last five weeks, the E&O coverage would come in handy.

All manufacturers need to consider the ramifications and potential impact of how an error or omission in the production of their product could cause one (or many) of their customers a financial loss. This type of exposure can happen to most manufacturers, and it is important for manufacturers to be aware of their liability risk. For more information, contact a Plexus client executive at 847-307-6100, or contact us via the Web. We’re here to help — and we are happy to help.

 

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