Discontinued Products coverage
Out of the blue, 3 years after the business was sold, you get a call asserting that one of your products just failed causing an explosion at a former customer’s processing plant. The facility was significantly damaged and 2 workers were badly injured.
You immediately call your long term, insurance agent who explains that you have no coverage. What? You always bought “occurrence” coverage so you though that the coverage remained in place for years & years, even decades into the future. Isn’t “claims made” coverage, that other type of General Liability policy, the one that creates problems with claims in the future?
Even if your product was made decades ago, an Occurrence policy will protect you against Bodily Injury and Property Damage from your product failures, but only if the policy is still in force! Occurrence policies, just like Claims Made policies, must be in force when the Occurrence happens in order to provide coverage. So that explosion that just happened is not covered by your old insurance program, even though you bought the best coverage that was available at the time.
When you are selling your business you must consider losses that could happen in the future. In order to cover future events you much purchase a policy specifically designed to cover possible incidents in the future. These “occurrences” ,such as an explosion, need what is known as Discontinued Products Liability Coverage. Once your old Commercial General Liability policy is cancelled, the Products Liability coverage, and Completed Operations coverage, that you relied upon for years, ceases.
“Discontinued Products” liability insurance is designed to cover these big or small claim events that may happen in the future. Discontinued Operations and Products coverage will defend you in court and pay damages (Bodily Injury & Property Damage) for which you are found legally liable, up to the limits of the policy.
Remember that your product does not even have to fail for you to get sued. We frequently see claims that the plaintiff’s attorney alleges are a result of your product’s failure, only to find out through the slow, extensive discovery process that, in fact, it was really one of your competitor’s products! Unfortunately it may take tens of thousands of dollars in legal expenses to determine this.
Discontinued Products policies can be written for one to five years into the future. They even will cover claims that happened before the sale of your business, that you did not know had happened, at the time of the business was sold.