For a business, potential accidents are around every corner. Someone can sustain an injury from falling on a newly mopped floor. Or, an overhead box falls from a top shelf and hits someone on the head. These events can quickly become disastrous and result in lawsuits, medical bills, expenses for injured parties and property damage. By the time everything is said and done, a business may no longer be able to afford to keep their doors open.
To keep accidents from happening, and costing thousands, every business needs to have the protection that insurance provides. Every vendor who affiliates with a business needs to add an extra layer of protection with vendor insurance opens in a new window. A vendor is someone who sells a product that was manufactured by another person or company. That person can be held liable, in addition to the manufacturer, in the event the product malfunctions or causes property damage.
For example, Matt sells patio chairs that are manufactured by the Fun in the Sun chair company. A woman purchases a set of chairs from Matt for an outdoor party she is having next week. During the party, two of the chairs break, sending the occupants to the hospital for sprains.
The woman takes legal actions against Matt and the Fun in the Sun chair company for monetary damages as a result of the related medical bills her guests incurred. Now, Matt is facing financial ruin for simply being a vendor in the situation. If he had the right type of business insurance, he could have avoided much of the damage.
What Is It?
Vendor insurance works to provide protection against accidental injury or damage caused by a manufacturer’s product. This insurance creates protection in the form of a vendor’s endorsement. An endorsement is essentially an attachment to a current insurance policy already in effect. It adds, removes or alters the coverage of that policy to provide protection for a vendor.
Under a vendor insurance endorsement, a vendor receives protection through the short phrase “as is” being written in their policy. Basically, when a vendor provides a buyer with a product, the buyer accepts the product “as is” from the vendor. If the product malfunctions, resulting in injury or property damage to the buyer or anyone that uses the buyer’s product, the buyer cannot hold the vendor legally responsible.
Some vendor insurance policies will issue limitations on a vendor’s coverage. These limits can be one of the following:
- limit is required by the contract
- limit is stated in the policy
For example, for Matt to serve as a vendor for the Fun In the Sun chair company, their company requires him to insure them at a $150,000 each occurrence limit. An each occurrence limit relates to damages for “coverage a” and medical expenses under “coverage c” that result from the same event. Matt’s coverage provides protection up to $1 million dollars, yet, because of this limitation, he will only have protection with this company for up to $150,000 for each incident.
As with any standard insurance policy, a vendor policy comes with a certain set of exclusions. These are things that will result in a vendor not receiving insurance protection. Something that may exclude the vendor from receiving coverage is the process by which the vendor provides a product to a buyer.
In the event a vendor assumes liability in the contract with a manufacturer for injury or property damage that a buyer incurs from use of a product, the vendor will not receive insurance coverage protection. Another exclusion opens in a new window that prevents a vendor from receiving coverage occurs when the vendor offers a buyer a product warranty without permission from the product manufacturer.
Vendors may alter product packaging after picking it up from the manufacturer and before selling it to the buyer. When this happens, a vendor loses insurance coverage protection. By altering the product packaging, the vendor knowingly tampered with the product that the manufacturer made. In the event the buyer sustains an injury or property damage from using the product, the vendor bears some degree of responsibility despite having insurance protection in place.
The final situation that can exclude a vendor from receiving coverage involves vendor negligence. If injury or property damage occur as a direct result of the vendor’s negligence, the vendor will not be covered. More exclusions may be present depending on your specific plan, but these are the most common ways vendors forfeit their coverage.
Why Is It Needed?
A vendor insurance policy provides protection if the unthinkable takes place. Business can be very unpredictable, and it can be hard to know how a transaction will process or how a customer will respond to the receipt of a product. Although everything should be done fairly, and everyone accepts responsibility for their role in a customer transaction, that rarely happens.
Vendors need to have additional insurance protection plans in place that expand upon what their manufacturer may offer. This extra insurance will protect them in the event something goes wrong with a product. The buyer will most likely take legal action in order to recoup some of the expenses the accident brought upon them.
In addition to this, the manufacturer may try to place some blame of the product malfunction on the vendor. Having vendor insurance coverage in place will prevent the vendor from becoming legally or financially responsible for anything that takes place after the customer transaction is complete.
Marine Agency Insurance is ready to help you implement a vendor insurance policy today so that you can have protection tomorrow. Contact us today opens in a new window to see how we can help you.