Blog Question: Run off cover under a Product Liability policy
First of all, I need to explain that I am now receiving so many questions from all around the world, each and every day, including weekends, that I am struggling to keep up and so there may be a delay to some of you, particularly as I travel around delivering my training sessions.
The team at LMI are helping me as much as they can and I thank them for this but there can be delays as there is with this one which came in earlier this month. Sorry Anthony in my response to you in answering your important question which I reproduce below.
Long-time no see.
As usual, us brokers, annoying you with the technical beauty of insurance!
Question: Under the attached wording, would you be advising the client they need to purchase Products Liability run-off cover?
Background: Client is a rubber manufacturer (rubber goes into seals on buss doors and pipes etc)
Policy Period: 31.10.15 to 31.10.16
Date of Sale of Business: February 2016 (past liabilities were not purchased by the purchaser and the legal entity remains with my client)
My conventional training is there is an exposure for past sales and a policy needed to be in force at the time of the “Occurrence”.
I will say, my view is the policy doesn’t make this position overly clear.
The definitional I thought would apply are below:
The verbal advice the Underwriter provided, is that essentially any sales that occurred during the insurance period 31.10.15 to 31.10.16 are covered into the future.
The underwriter confirmed the “Occurrence” date of the claim would be deemed where such sold products were “relinquished to others” as stated more fully in definition 1.19 Products Liability below and with reference to definition “1.14 Occurrence”
I will say, my view is the policy wording doesn’t make this position overly clear.
The definitions I thought apply are below:
Love to hear your views if you have the time.
Anthony [surname and email provided]
In this case I disagreed with the underwriter and advised that Run off cover was required for this client. Here is my response and reasoning:
Sorry for the delay Anthony. I have had a punishing schedule and have got more than a bit behind. The issue is in the Cover clause 2.1 above which clearly states that cover is afforded for “2.1.1 personal injury, and/or 2.1.2 Property Damage happening during the period of insurance”.
This means it does not matter when the negligent act was committed or the issue in the product occurred, cover is only provided if the personal injury or property damage occurs during the period of insurance.
I therefore disagree with the underwriter and believe that the client definitely needs run off cover and it is my understanding that products liability has always required run off cover as does client’s relying on protection under a public liability, or financial lines coverage where the business ceases but there is an exposure of a loss or some sort, in the case of public or products liabilty physical injury or property damage occurring after the policy lapses.
I hope this helps explain the situation.