Manufacturers E&O
A product can fail without injuring anyone or damaging property.
That is where the boundary between product liability and manufacturers errors and omissions becomes important.
The financial-loss gap
Suppose a component fails to meet specifications and shuts down a customer’s production line, but causes no bodily injury or property damage. A general liability policy may not address the customer’s lost production or replacement expense. Manufacturers E&O may be designed for certain negligent-act or performance allegations, subject to its terms.
Claims-made discipline
Manufacturers E&O is often claims-made. Review the retroactive date, definition of claim, reporting requirements, extended reporting options and continuity before replacing coverage.
Contract obligations
Warranties, guarantees, liquidated damages, broad indemnity and assumed contractual obligations may be excluded or restricted. Insurance should not be expected to convert every commercial promise into a covered loss.
Coordinate, do not substitute
E&O does not replace products-completed operations liability, and liability does not replace E&O. The two should be reviewed together when both physical-injury and financial-loss scenarios are plausible.
Product liability guidance