Product Liability - Business Interruption Cover

[zuglubuglu]

Other than property damage, bodily injury and death, would a product liability insurance cover (PL) any business interruption loss (BI) by a third party? I am specifically thinking of products that act as parts for other products.

For example consider a manufacturer of specialised screws used for airplanes. If these develop a fault, airplane manufacturers and airlines would suffer some loss of business while these are fixed.

Would these losses be included in the PL of the screw manufacturer? Or would these need to be covered by the BI of the airlines?

 

[maz1987]

I don't know for sure but I can't imagine the manufacturer of the screw being liable for the loss of earnings of the airline if the plane is grounded due to a faulty screw.

The airline probably purchases its own blanket business interruption policy that covers, amongst other things, the peril of grounding due to a faulty part.

 

[zuglubuglu]

Yes. If I purchase a pizza that causes illness due to poisonous tomatoes, I'd expect to seek compensation from the Pizza place (negligence I guess).

However possibly the insurer of the Pizza place may use its subrogation rights to seek compensation from the tomato producer, no?

 

[maz1987]

Interesting twist! I suppose it depends what's in the contract (explicit or implicit) between the two parties.

When you purchase from a pizza restaurant, you should be able to expect to not get ill from the food, and if you do then the pizza place hasn't lived up to its side of the contract. They (hopefully!) have insurance to be able to pay for your hospital bills and loss of earnings, and may make a recovery against the insurance of the tomato company if it were faulty before it arrived at the pizza restaurant.

If you are an airline and a faulty screw results in the plane being grounded and you lose revenue, then I suspect they can claim for costs to replace the screw, hire a replacement plane, etc (ie restoring it to the position it would have been before the contract), but not claim sums of money that are commensurate with lost earnings during that time.

Perhaps the disctinction comes between "loss of earnings" and "loss of revenue".

By the way I don't know the exact answer, I'm just trying to use some intuition! Don't take what I say as being correct.

 

[maz1987]

By the way this makes for an interesting read:

http://www.iclg.co.uk/practice-area...financial-loss-in-product-liability-insurance

(particularly the end of section 3, and all of section 6).

 

[zuglubuglu]

Thanks

That is truly a good read.

 

[td290]

Have a look at:

www.iua.co.uk/CMDownload.aspx?Conte...34DwCQ&usg=AFQjCNENF_nKpTloCvdU9XM0XzxswHJtYw

I haven't read all of it, but it looks to me like the airline makes a claim to the aircraft manufacturer, who in turn is indemnified by the insurer.

 

[Darren Michaels]

The reality here as Maz1987 and the article suggest will be determined by exactly what is/isn't covered under the insuring clause of the product liability treaty.