There is a common misconception that Errors & Omissions (E&O) policies are for professionals that give advice such as doctors, lawyers, and accountants. But, E&O insurance isn’t just to cover potentially bad advice, it can also cover mistakes – and we all make mistakes.

Manufacturers’ E&O policies are designed to address financial loss when a mistake has been made as your General Liability insurance does not provide coverage. Let’s have a look at a few examples where an E&O policy would cover the financial loss.

  • Your company manufactures a part or parts to client specifications, but due to an error that occurred during the production process, the part or parts aren’t made to the clients’ specifications. The clients’ disrupted production schedule causes him to miss deadlines to ship the final product to his customers and file a lawsuit against your company for the financial loss.
  • Your company manufactures 20,000 parts for a customer. It’s discovered that the material you used was not up to the required specifications and you didn’t realize until the product was at the customer’s facility. This rendered the parts unusable by the customer, ultimately affecting their business operations.

Neither of these scenarios (or similar incidents) would trigger a manufacturer’s commercial general liability policy as there is no bodily injury or property damage trigger, but they would leave the manufacturer liable for the costs.

So why don’t more manufacturers purchase E&O?

  • It’s optional. Most contracts between a retailer and a manufacturer only require the manufacturer to purchase CGL. This is changing in the USA but many Canadian retailers haven’t yet asked for this requirement.
  • Bodily injury claims tend to be fairly expensive – and scary – so they get the most attention. But all it takes is one financial loss event to cripple a manufacturer.
  • A lot of manufacturers think they will just be able to make it good themselves, which is fine for a small problem, but this situation can be surprisingly costly.

Take advantage of our exclusive program coverages.

Click here to contact our manufacturing team leader Aaron MacFarlane, for an in-depth review that will assess your currents risks/exposures and create a customized plan using our exclusive PowerGuard Advantage program.