Manufacturing Insurance FAQ

• At the minimum, manufacturing businesses need general liability insurance.
• If they have employees they will need workers compensation in most states.
• If they have vehicles registered to the business, or use vehicles for the business purposes, they will also need commercial auto.
• There are also other specialty coverages and endorsements that might be needed based on their operations.

At one time the only package option for manufacturers was the commercial package policy (CPP). A number of insurance companies are now allowing smaller, less hazardous manufacturers to be written on their businessowners policies as well. One especially positive feature of this is that business income coverage is automatically included in the form on a 12-month actual loss sustained basis.

Types Of Manufacturing Package Policies:

• Businessowners Policy (BOP)
• Commercial Package Policy (CPP)

Output policies were designed for manufacturers as a way to close coverage gaps as raw material moved through the manufacturing processes and became finished stock. The same coverage may be achieved by combining the inland marine coverages with the building and business personal property coverage form, but the coverage is not as seamless, leaving the potential for a coverage gap.

A number of valuation options are available that should be considered. Time element coverages are a vital component and the form and limits should be reviewed carefully.

Business income from dependent and secondary dependent properties is an especially important coverage to be considered as companies utilize fewer and fewer suppliers and may supply fewer and fewer very large customers.

Types Of Property Coverages:

• Building
• Business Personal Property
• Personal Property of Others
• Improvements and Betterments

Stock and other property is constantly on the move and must be covered wherever it is. Inland marine coverages are designed to follow that stock and other property. A thorough review of the manufacturing processes and operations helps determine potential coverage gaps and highlights the correct coverages needed in each situation.

A transportation policy should always be written, even if the insured does not have a fleet and uses carriers for hire. Patterns and dies can be extremely valuable and are sometimes overlooked because they are located away from the insured's premises.

Types Of Inland Marine Coverages:

• Accounts Receivable Coverage
• Bailee Customers Coverage
• Builders Risk Coverage
• Commercial Articles Floaters
• Difference in Conditions (DIC) Coverage
• Electronic Data Processing Equipment Coverage
• Fine Arts Coverage
• Furriers Block Policy
• Installation Coverage
• Installment Sales Coverage
• Jewelers Block Policy
• Patterns and Dies Coverage
• Transportation Coverage
• Valuable Papers and Records Coverage

Employee theft is the most important crime coverage needed by most manufacturers. Because of the way business is now transacted, computer fraud and funds transfer fraud are also major coverage and loss concerns. Forgery coverage should not be overlooked because checks are regularly written for large amounts.

Money and securities are not usually subject to holdup losses but loss to or destruction of them is only covered under crime forms. Extortion, kidnap and ransom coverages should be seriously considered if international travel makes up part of the operation.

Types Of Crime Coverages:

• Computer and Funds Transfer Fraud Coverage
• Employee Theft Coverage
• Forgery or Alteration Coverage
• Inside The Premises-Theft of Money and Securities Coverage
• Inside The Premises-Robbery or Safe Burglary of Other Property Coverage
• Money Orders and Counterfeit Money Coverage
• Outside The Premises Coverage

Bonding may be a major coverage concern for some manufacturers, especially if they enter into service or supply arrangements with governmental entities.

Types Of Surety Coverages:

• Contract-Performance of Service or Supply Bonds
• Court Bonds
• Fiduciary Bonds
• License and Permit Bonds
• Miscellaneous Surety Bonds

Products liability is the major liability exposure for most manufacturers. The limitations within the CGL on products-related issues have prompted some new coverages that should be carefully reviewed with the customer. A liquor and alcoholic beverage manufacturer is wise to purchase a liquor liability policy because even limited liquor exposures are excluded in the CGL policy.

If a manufacturer has a railroad sidetrack or spur on the premises, a railroad protective liability policy may be needed. When the CGL coverage form is moving from a claims-made basis to occurrence basis form then a claims-made to occurrence coverage form is vital in preventing a significant coverage gap.

Types Of Liability Coverages:

• Claims-Made to Occurrence Coverage
• Commercial General Liability (CGL) Coverage
• Employee Benefits Liability Coverage
• Employment-Related Practices Coverage
• Liquor Liability Coverage
• Owners and Contractors Protective (OCP) Liability Coverage
• Product Contamination Insurance
• Product Recall or Product Withdrawal Expense Coverage
• Railroad Protective Liability Coverage
• Special Events Liability Coverage

The commercial automobile exposures of manufacturers can vary tremendously. Some may have no exposures while others have only a salespersons' fleet. In other cases, a manufacturer may use a fleet of owned commercial trucks to deliver its finished products.

The amount of international travel, if any, should be determined, due to territorial limits restrictions in the commercial auto policy, and due to restrictions, laws and regulations in a number of foreign countries.

Types Of Business Auto Coverages:

• Auto Medical Payments
• Business Auto Coverage
• Collision Coverage
• Comprehensive Coverage
• Hired & Non-owned Auto Coverage (HNOA)
• Uninsured/Underinsured Motorists Coverage

Employers are required by state statute to provide coverage for on-the-job injuries sustained by their employees through either a workers compensation policy or a state-approved self-insurance plan.

If the manufacturer uses independent contractors at off-site locations, they must verify that they actually qualify as subcontractors before an accident occurs. Otherwise, the injured party could be treated as an employee.

Types Of Workers Comp Coverages:

• Excess Workers Compensation Self-Insurance Bonds
• Stop-Gap or Employers Liability Coverage
• Workers Compensation and Employers Liability Coverage

The types of injuries that might occur because of a faulty manufactured product are the major issues in considering the appropriate higher limits and type of excess or umbrella policy to use. If the underlying coverage is written on a claims-made policy, retroactive excess liability coverage should be considered.

Types Of Excess Liability Coverages:

• Excess Liability Coverage
• Retroactive Excess Liability Coverage
• Umbrella Coverage

The coverage needs for a manufacturer vary widely. Below are some considerations:

Types Of Specialty Coverages:

• American Expatriate Coverage
• Business Legal Expense Coverage
• Commercial Credit Coverage
• Cyber Liability Coverage
• Directors and Officers Liability Coverage
• Environmental Impairment Liability Coverage
• Export Credit Insurance Coverage
• Fiduciary Liability (Pension, Welfare and Employee Benefit Funds) Coverage
• Identity Theft Insurance Coverage
• International Insurance Coverage
• Nuclear Energy Liability Coverage
• Nuclear Energy Property Coverage
• Patent Infringement Liability Coverage
• Risk Retention Group Liability Coverage
• Solar Energy System Coverage
• Tax Liability Coverage
• Tender Offer Defense Expenses Coverage
• Terrorism Insurance Coverage
• Underground Storage Tank (UST) Liability Coverage