Common Public & Product Liability Extensions

In addition to the standard cover provided under a Public and Products Liability (PPL) policy, there are a variety of optional extensions available that provide cover for additional exposures your client’s business may face. In this article we look at some of the most common extensions that are offered and the cover they provide.

Errors & Omissions

Standard PPL policies provide cover for third party personal injury or property damage that arises from the supply of professional services by the client provided there is no separate fee charged for those professional services. The Errors and Omissions (E&O) Extension will extend a PPL policy to cover pure financial loss incurred by a third party as a result of the professional services provided by the client.

Some important points to keep in mind when you arrange an E&O Extension for your client include:

• Cover under the extension is issued on a claims made and notified basis. Other covers under the PPL policy are issued on an occurrence basis.
• It is critical to get the retroactive date right. For a client who has previously had E&O cover, retaining the same retroactive date as the previous cover will assist to avoid gaps in cover. For a client who is taking out E&O cover for the first time, the insurer will generally align the retroactive date to the date the E&O extension is incepted.
• The extension does not provide cover for any losses arising from any professional services supplied by the client where a separate fee has been charged for those services. This is because the extension is not intended to be a substitute for a Professional Indemnity (PI) policy. If your client provides professional services for which they do charge a separate fee, then you will need to consider whether a separate PI policy is required to cover this exposure.

Product Recall Expenses

As the name suggests, this extension provides cover for the expenses that are incurred in recalling products that are known or suspected to be faulty or deficient in some way which may cause personal injury or property damage. The kind of expenses this extension will cover include:

• the cost of issuing recall notices;
• transporting the recalled products;
• hiring additional staff or storage facilities to handle the recalled products;
• the cost of destroying or disposing of unusable products or packaging.

A product recall expenses extension does not cover the actual value of any of the recalled products, the cost of repairing or treating the products to return them to a usable or sellable state, or any loss of income or reputation associated with the recall. Also important to note is that the extension does not cover the cost of recalling products where the client knew about the issues with the products prior to their sale or distribution.

Driving risk extension

PPL policies usually exclude cover for the use of registered vehicles and provide only limited cover for third party vehicles in the client’s custody or control.

The driving risk extension will extend the policy to the client’s liability for property damage arising out of the use of a customer’s vehicle, or damage to the vehicle itself, when it is being driven by the client during normal business hours immediately before, during or after the alteration, repair or maintenance of the vehicle by the client. The cover provided by this extension is generally limited to driving the vehicle for the purpose of road testing, or picking it up from or delivering it back to the owner.

Conditions apply to this extension, including that the driver of the vehicle must be appropriately licensed and not impaired by drugs or alcohol, and that the vehicle must not be driven in an unsafe or unroadworthy condition.

Faulty Workmanship

Generally, a standard PPL policy provides cover for property damage or personal injury caused by faulty work but will exclude cover for the cost of rectifying or re-doing the work itself. A faulty workmanship extension provides cover for the cost of rectifying the faulty work performed by or on behalf of the client, in addition to covering the resultant property damage or personal injury.

Faulty workmanship extensions are usually subject to small sub-limits and/or high excesses. This is to ensure that the client continues to be incentivised to diligently perform work correctly the first time.

Related Articles

Why Combining GL and PI Policies Makes Sense For Your Professional Clients

Solving the Public and Products Liability Puzzle

Medical Devices Powered by Lithium-Ion Batteries: Safety Considerations

Important Notice

Berkley Insurance Company (limited company incorporated in Delaware, USA). ABN 53 126 559 706 t/as Berkley Insurance Australia is an APRA authorised general insurer. Information provided is general only. Intended for brokers and has been prepared without taking into account any person’s particular objectives, financial situation or needs. It is not intended to constitute legal advice. You should always obtain legal or other professional advice appropriate to your own circumstances. Insurance cover is subject to terms, conditions, limits, and exclusions. When making a decision to buy or continue to hold a financial product, you should review the relevant Policy Wording.