Tobacco Manufacturers Insurance Policy Information
Tobacco Manufacturers Insurance. People have been cultivating tobacco for around 7,000 years, while its earliest documented use dates to an even earlier era.
Tobacco manufacturers produce cigars, cigarettes, chewing tobacco, pipe tobacco, and snuff. The process begins with the stem being removed from the tobacco leaf, which is then cleaned and cured. Curing involves drying the leaves and sometimes adding flavoring agents.
Tobacco for "light" cigarettes is produced by saturating the tobacco with carbon dioxide and heating it before curing. Once the tobacco is cured, it may be conditioned, blended, shredded, and packaged, either as loose tobacco or in paper (for cigarettes) or leaves (for cigars).
With time, tobacco use has become truly ingrained in societies across the globe - and in modern times, tobacco is chewed, inhaled in the form of snuff, smoked in pipes, hookahs, and used to produce various nicotine-based products including liquids for electronic cigarettes and nicotine patches.
While large cigarette companies hold a significant share of the global tobacco market, the fact that tobacco is incorporated, in various forms, into a broad spectrum of products means that smaller businesses, too, can be successful in this industry.
The fact that long-term tobacco exposure is well-documented to represent a significant health hazard alone highlights that businesses within this field face a broader range of risks than those within many other industries.
Any company making tobacco products needs to implement an air-tight risk mitigation plan, and the right tobacco manufacturers insurance coverage is an essential part of that.
Tobacco manufacturers insurance protects your manufacturing business from lawsuits with rates as low as $97/mo. Get a fast quote and your certificate of insurance now.
Below are some answers to commonly asked tobacco manufacturing insurance questions:
- What Is Tobacco Manufacturers Insurance?
- How Much Does Tobacco Manufacturers Insurance Cost?
- Why Do Tobacco Manufacturers Need Insurance?
- What Type Of Insurance Do Tobacco Manufacturers Need?
- What Does Tobacco Manufacturers Insurance Cover & Pay For?
What Is Tobacco Manufacturers Insurance?
Tobacco manufacturers insurance is a type of insurance policy designed for companies that manufacture and distribute tobacco products.
This insurance provides coverage for the financial losses that can arise from lawsuits, product recalls, and other risks associated with the tobacco industry. It covers the cost of defending against lawsuits, compensating injured parties, and covering the cost of product recalls or damages to the company's reputation.
The policy may also include coverage for liability claims related to environmental contamination, workplace safety, and other issues.
How Much Does Tobacco Manufacturers Insurance Cost?
The average price of a standard $1,000,000/$2,000,000 General Liability Insurance policy for small tobacco manufacturing businesses ranges from $97 to $149 per month based on location, size, revenue, claims history and more.
Why Do Tobacco Manufacturers Need Insurance?
Every business is vulnerable to a range of risks - unforeseen circumstances that incur significant unplanned costs that can sometimes be catastrophic in nature. Companies that make diverse types of tobacco products face some of the same hazards that would be familiar to all businesses, but are also vulnerable to perils unique to their own field.
Theft and vandalism are two examples of risks common to all commercial ventures; both could lead you to lose valuable physical assets as well as potentially causing significant damage to your building, raw materials, and the machines you rely on in your production line.
Acts of nature like tsunamis, hurricanes, serious floods, and wildfires can also hit any company hard, no matter where they are based or what they do.
Examples of threats exclusive to companies that make tobacco products include, but are by no means limited to, the risk that pests or molds damage your raw materials, the possibility that employees fall ill as a result to exposure to tobacco dust, and the risk that an end consumer files a lawsuit after the use of a tobacco product you manufactured caused them health damage.
The more complex a company's risk profile, the greater its need for outstanding insurance coverage that will help their business recover from accidents and other unforeseen circumstances.
For companies that make tobacco products of any kind, being armed with the correct types of tobacco manufacturers insurance is absolutely crucial.
What Type Of Insurance Do Tobacco Manufacturers Need?
Numerous factors influence your exact insurance needs - the exact product you make, where you source your tobacco and how it is transported, your number of employees, the equipment you use in your manufacturing process, and the location of your facility are merely a few examples.
To discover what types of coverage a company that makes tobacco products needs to protect itself against all possible perils, in-depth consultation with a veteran commercial insurance agent who is deeply familiar with your industry is strongly recommended.
The following, however, are examples of tobacco manufacturers insurance coverage vital to companies within your field:
- Commercial Property: This key form of insurance shields your manufacturing facility as well as all the assets therein - including raw materials, manufacturing equipment, and finished products in storage - in case of unforeseen circumstances such as fire, theft, or other accidents.
- Commercial General Liability: Designed to protect you against financial damage resulting from third party personal injury or property damage claims, this type of tobacco manufacturers insurance helps cover your attorney fees and any settlement costs that you may incur in case of a lawsuit. This generally applies to third parties being injured on your premises or as a result of an action an employee took.
- Product Liability: This type of insurance covers third party injury and property damage that may result from the use of or exposure to your product, and is absolutely essential for companies making tobacco products.
- Workers Compensation: Whether an employee suffers a physical injury at work, due to something as simple as slipping and falling, or sustains an occupational illness due to contact with hazardous substances, this kind of insurance assists you in covering the costs. That means it pays injured employees' medical expenses, but also any wages lost if their injury renders them unable to return to their job.
Any of the risks that face your business could, without the correct insurance, lead to major financial losses.
Because this list is not exhaustive and each company's insurance needs are unique, it is vital to consult a commercial insurance broker who will guide you through the process of designing the comprehensive tobacco manufacturers insurance plan your company needs.
Tobacco Manufacturing's Risks & Exposures
Premises liability exposure is normally low due to limited access by visitors. If tours are offered, visitors may be injured by slips, trips, or falls, or may be exposed to toxic or caustic chemicals.
Toxins released in a fire or fumes, spills or leaks from chemical tanks may cause serious injury or property damage to neighboring properties.
Products liability exposure is low. Tobacco products receive a federal exemption from most types of product liability claims because tobacco has been a known carcinogen since the 1960's. Extensive warnings and labels are required on all finished goods alerting users as to the product's dangers.
While some lawsuits have prevailed in lower courts, appellate courts have generally upheld the federal exemption enjoyed by tobacco manufacturers.
Environmental impairment exposures are moderate. Sudden or cumulative discharges of chemicals used as additives (which are both toxic and combustible) may contaminate air, surface or ground water, or soil. Disposal procedures must adhere to all EPA and other regulatory standards.
Workers compensation exposure may be high. Injuries from production machinery are common, as are burns, cuts, slips, trips, falls, hearing loss from machinery noise, and back injuries from lifting. Employees should be provided with safety training and protective equipment.
Flammable liquids and chemicals can cause skin and eye irritation. Cumulative exposure to tobacco dust creates a potential for lung and respiratory diseases and injuries. Drivers of forklifts and vehicles may be injured in accidents.
Property exposures include offices, processing areas, and warehouses for raw tobacco and finished goods. Ignition sources include electrical wiring, heating systems, and production machinery. The large draft spaces in storage warehouses can contribute to the spread of a fire. Chemical additives may be highly flammable and add to the fire load.
Accumulations of dust can result in explosions. This hazard increases in the absence of well-maintained dust collection systems. Raw goods and finished products, which are highly combustible and easily contaminated by smoke, temperature changes, and humidity, are also targeted by thieves due to the high resale value in the black market.
Vandalism can result from trespassers and protestors. Appropriate security controls must be taken including physical barriers to prevent entrance to the premises after hours and an alarm system that reports directly to a central station or the police department.
Equipment breakdown exposures include breakdown losses to production equipment, dust collection and ventilation systems, electrical control panels, and other apparatus. Breakdown and loss of use to the conveyor and other production machinery could result in a significant loss, both direct and indirect, such as time element.
Crime exposures are chiefly from employee dishonesty and theft of money and securities due to the high resale value of tobacco products on the black market. Employees may act alone or in collusion with outsiders in stealing money, raw materials, or finished stock.
Background checks should be conducted on all employees. There must be a separation of duties between persons handling deposits and disbursements and handling bank statements.
Inland marine exposures include accounts receivable if the manufacturer offers credit, computers (which may include computer-run production equipment), goods in transit, and valuable papers and records for customers' and suppliers' information, as well as quality control testing results.
Backup copies of all records should be made and stored off premises. Goods in transit may be damaged by fire, theft, collision and overturn, or contamination.
Business auto exposure may be moderate if the manufacturer transports raw materials or finished products. Manufacturers generally have private passenger fleets used by sales representatives. There should be written procedures regarding the private use of these vehicles by others.
Each driver should have an appropriate license and an acceptable MVR. All vehicles must be well maintained with documentation kept in a central location.
What Does Tobacco Manufacturers Insurance Cover & Pay For?
Tobacco manufacturers face numerous lawsuits for various reasons, often involving health-related issues and deceptive marketing practices. Here are some examples, along with how insurance can protect them from these lawsuits:
1. Health-Related Lawsuits: This is the most common reason why tobacco manufacturers are sued. Plaintiffs allege that the manufacturers failed to warn them about the health risks associated with smoking, leading to illnesses like cancer, emphysema, and heart disease. In such cases, manufacturers could potentially rely on product liability insurance. This type of insurance covers the policyholder's legal liability for losses or injuries to a user, buyer, or bystander caused by a defect or malfunction of the product. The insurer would cover the costs of legal defense, as well as any damages or settlements, up to the policy limit.
2. Misleading Advertising: Tobacco companies have historically been accused of misleading advertising, with lawsuits claiming that they downplayed or hid the health risks associated with smoking. In such cases, companies could have recourse to advertising injury coverage, typically included within a commercial general liability (CGL) insurance policy. This coverage helps with the legal costs associated with claims of false advertising, slander, libel, and copyright infringement.
3. Addiction Lawsuits: Tobacco manufacturers are often sued because their products are addictive, which plaintiffs claim has led to various health and personal problems. In these cases, product liability insurance could again come into play, offering protection from legal liability for losses or injuries caused by their product.
4. Secondhand Smoke Lawsuits: These lawsuits come from non-smokers who claim to have suffered health problems due to exposure to secondhand smoke. This could be covered under the tobacco company's general liability insurance policy, which would help pay for legal defense costs and any damages awarded, up to the policy limit.
However, it's important to note that not all insurance policies will cover all types of lawsuits. For example, many insurance companies specifically exclude coverage for tobacco-related claims due to the high risk and predictable nature of these lawsuits. Also, insurance can't protect a company from all the negative impacts of a lawsuit, such as damage to their reputation or loss of market share. It's always important for businesses to work closely with their insurance providers and legal team to understand what is and isn't covered.
Commercial Insurance And Business Industry Classification
- SIC CODE: 2111 Cigarette Manufacturing, 2121 Cigar Manufacturing, 2131 Chewing And Smoking Tobacco And Snuff Manufacturing, 2141 Tobacco Stemming And Redrying
- NAICS CODE: 312230 Tobacco Manufacturing
- Suggested Workers Compensation Code(s): 2172 Tobacco Products Manufacturing NOC, 2174 Tobacco - Rehandling or Warehousing
Description for 2111: Cigarette Manufacturing
Division D: Manufacturing | Major Group 21: Tobacco Products | Industry Group 211: Cigarettes
2111 Cigarette Manufacturing: Establishments primarily engaged in manufacturing cigarettes from tobacco or other materials.
Description for 2121: Cigar Manufacturing
Division D: Manufacturing | Major Group 21: Tobacco Products | Industry Group 212: Cigars
2121 Cigar Manufacturing: Establishments primarily engaged in manufacturing cigars.
Description for 2131: Chewing And Smoking Tobacco And Snuff Manufacturing
Division D: Manufacturing | Major Group 21: Tobacco Products | Industry Group 213: Chewing And Smoking Tobacco And Snuff
2131 Chewing And Smoking Tobacco And Snuff Manufacturing: Establishments primarily engaged in manufacturing chewing and smoking tobacco and snuff.
- Tobacco: chewing, smoking, and snuff
Description for 2141: Tobacco Stemming And Redrying
Division D: Manufacturing | Major Group 21: Tobacco Products | Industry Group 214: Tobacco Stemming And Redrying
2141 Tobacco Stemming And Redrying: Establishments primarily engaged in the stemming and redrying of tobacco or in manufacturing reconstituted tobacco. Establishments which sell leaf tobacco as merchant wholesalers, agents, or brokers, and which also may be engaged in stemming tobacco, are classified in Wholesale Trade, Industry 5159. Leaf tobacco warehouses which also may be engaged in stemming tobacco are classified in Transportation and Public Utilities, Industry 4221.
- Tobacco thrashing (mechanical stemming)
- Tobacco, stemming and redrying of
Tobacco Manufacturers Insurance - The Bottom Line
Tobacco manufacturers insurance policies can be different in coverage, costs and exclusions. To see if your tobacco manufacturing operation has the best fit insurance policies - talk to an experienced business insurance broker.
Often they are able to save you on premiums and offer you better policy options than you currently have.
Additional Resources For Manufacturing Insurance
Learn all about manufacturing insurance. Manufacturers face many unique risks such as product libility and/or product recall exposures due to the nature of their business operations.
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- Metal Toys
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- Plastic Goods
- Plastics Molding, Forming & Extruding
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The manufacturing industry is a vital part of the economy and plays a significant role in the production of goods and services. However, it is also an industry that is prone to risks and accidents, which can result in costly damages and lawsuits. Therefore, it is essential for businesses in the manufacturing industry to have insurance to protect them against potential losses.
Business insurance can cover a wide range of risks, including property damage, liability, and worker injuries. For instance, if a fire were to break out in a manufacturing facility and destroy equipment or inventory, commercial insurance could cover the costs of replacing or repairing the damages. Similarly, if a worker were to be injured on the job, business insurance could cover medical expenses and lost wages.
In addition to protecting against physical damages, insurance can also provide financial protection against legal liabilities. If a customer were to sue a manufacturing business for a faulty product, the commercial insurance could cover the costs of legal fees and settlements.
Overall, insurance is essential for the manufacturing industry as it helps to mitigate risks and protect against unexpected costs. Without it, businesses in the industry could face financial ruin in the event of an accident or lawsuit.
Minimum recommended small business insurance coverage: Building, Business Personal Property, Business Income with Extra Expense, Equipment Breakdown, Employee Dishonesty, Accounts Receivable, Computers, Goods in Transit, Valuable Papers and Records, General Liability, Employee Benefits Liability, Environmental Impairment Liability, Umbrella Liability, Hired and Non-owned Auto Liability & Workers Compensation.
Other commercial insurance policies to consider: Earthquake, Flood, Cyber Liability, Employment-related Practices Liability, Business Auto Liability and Physical Damage and Stop Gap Liability.