Does product liability insurance cover damages caused by defective products sold in the past?

The coverage provided by product liability insurance depends on the specific terms and conditions outlined in the policy. In most cases, product liability insurance covers damages caused by defective products sold during the policy's active period. This means that if a product sold while the insurance policy is in effect causes bodily injury, property damage, or financial harm to a third party due to a defect, the insurance can respond to the resulting claims.

However, product liability insurance typically operates on either a "claims-made" or an "occurrence" basis, which can affect coverage for damages caused by defective products sold in the past:

Claims-Made Basis:

If your product liability insurance operates on a claims-made basis, coverage is triggered when a claim is reported to the insurance company during the policy period, regardless of when the incident causing the claim occurred. This means that as long as the claim is reported while the policy is active, it may cover damages caused by defective products sold in the past, even if the products were sold before the current policy was in effect.

Occurrence Basis:

If your product liability insurance operates on an occurrence basis, coverage is triggered by the occurrence of an incident during the policy period, regardless of when the claim is reported. This means that damages caused by defective products sold in the past may still be covered if the incident that led to the damages occurred while the policy was in effect.

Summary:

It's important to review your product liability insurance policy carefully to understand its specific terms and coverage provisions regarding past damages. Some policies may have retroactive dates that specify the date from which coverage applies, while others may have prior acts exclusions that limit coverage for incidents that occurred before a certain date.

If your business has switched insurance carriers or obtained a new policy with different coverage terms, you may want to consider obtaining extended reporting period (ERP) coverage or tail coverage. This type of coverage can extend the reporting period for claims to ensure that you have continued protection for past incidents, even after the policy's expiration or cancellation.

As an insurance broker, I will help you navigate the complexities of product liability insurance and ensure that your coverage meets your specific needs and risk exposures. If you have concerns about coverage for damages caused by defective products sold in the past, I recommend discussing your policy with me to determine the best course of action and to explore any available options for extended coverage.