Impaired Property Exclusion – General Liability Insurance

You manufacture widgets. Your widgets go into another product – a blimb – made by your customer. One day your customer calls and tells you that you widgets were not up to spec and that he has had to spend $200,000 to remove the widget and fix it so his blimb worked. He wants you to pay the $200,000. You want your insurance to pay.

Sorry. Not covered.

Most general liability insurance policies exclude the above loss. They also exclude product recall expenses. Both of these are considered business risks and not insured (99% of the time).

In some cases it is possible to find insurance for impaired property and/or product recall expense. Your agent will have to do some fast talking with most underwriters to even start a conversation on the subject. However, coverage is out there – you have to ask for it.