Vendor’s Endorsement Under Product Liability

Manufacturers and distributors typically purchase their own General Liability policy (which includes Products Liability) under which they are the “named insured”.

What is a Vendor’s Endorsement?

The General Liability endorsement entitled “Additional Insured-Vendors” (CG2015) is commonly referred to as a Vendor’s Endorsement. The purpose of a Vendor’s Endorsement is to provide Products Liability coverage to vendors that sell or distribute your product. This endorsement is intended to give primary Products Liability coverage over and above any coverage the vendor may already carry.

Having a Vendor’s Endorsement added to your Products Liability policy provides your vendor “additional insured” status on your policy and gives your vendor added confidence to sell and distribute your product without fear of having a claim adversely effect their General Liability coverage or premiums.

Most major distributors and retailers are now requiring “Additional Insured-Vendor” status as a condition of doing business. Typically, these vendors will require, within their contracts, specific insurance limits of coverage such as $1M, $2M, or $3M and may even require an “occurrence” policy form.

The additional cost to add the Vendor’s Endorsement to your General Liability policy varies by insurance carrier. The additional cost of a “blanket” Vendor’s Endorsement to cover all your vendors ranges from 0% to 7.5% of the existing General Liability premium depending on the insurance carrier. On the other hand, the additional premium to add coverage for an individual vendor ranges from $100 to $250.

Common Limitations of Vendor’s Endorsement

  1. Coverage extends only to products scheduled on the endorsement.
  2. All vendors listed on the policy share the aggregate limit stated in the policy. In other words, if one of the other vendors or you (“named insured”) had a claim and exhausted the aggregate limit, there are no additional limits for the remaining vendors to access.
  3. Vendors must rely on you (“named insured”) to satisfy all of the policy conditions and pay your premiums on a timely basis so coverage does not lapse.
  4. Express warranties are excluded from coverage unless they are specifically authorized by you (“named insured”). If a vendor’s advertisement or salesman were to promise a certain fitness of a product or an express warranty that is not specifically authorized by you (“named insured”), any liability arising out of such promise or warranty is not covered.
  5. Any physical or chemical change intentionally made to a product by a vendor will void coverage.
  6. Any repackaging of a product will void coverage, except when it is repackaged solely for the purpose of inspection, demonstration, testing, or the substitution of parts under the instructions from you, and then repackaged in the original container.
  7. Failure by a vendor to complete inspections, adjustments, tests or servicing that has been agreed to or that is normally undertaken in the course of business in connection with the distribution or sale of the product will void coverage.
  8. Any demonstration, installation, servicing or repair operations will void coverage, except such operations performed at the vendor’s premises in connection with the sale of the product.
  9. Coverage is voided if the vendor (or another party on the vendor’s behalf), after receiving the products, has labeled or relabeled or used as a container, part or ingredient of any other thing or substance.
  10. Coverage does not apply for “bodily injury” or “property damage” arising out of the vendor’s assumption of contractual liability in a contract or agreement (unless the vendor would have such liability in the absence of the contract or agreement).
  11. Coverage does not apply to “bodily injury” or “property damage” arising out of the sole negligence of the vendor for its own acts or omissions or those of its employees or anyone acting on its behalf. However such coverage does not apply to the exceptions contained in 6. or 8. above or such inspections, adjustments, tests, or servicing as the vendor has agreed to make or normally undertakes to make in the usual course of business in connection with the distribution or sale of the products.