More and more manufacturers refuse to name their clients as Additional Insured on their Product Liability insurance policies. Or, they go to the other extreme and require being named Additional Insured on their clients’ policies.
This is extraordinary. In the past manufacturers used additional insured vendors endorsements to entice retailers and wholesalers to sell their products. This reassured retailers and wholesalers of protection if they were shotgunned into a lawsuit for a product’s manufacturing defect.
I’m of the opinion that this reversal by the manufacturers is due to two factors.
This type of manufacturer is often called a third-party manufacturer. This is because they simply build products based on the specifications provided to them by other parties.
Since third-party manufacturers aren’t responsible for the design and warning labels or instructions, many ask their clients and vendors to name them as Additional Insured. They justify this request saying they make products to the specifications of their clients. Therefore, they should be covered on the client’s Product Liability policy. This is a very convincing argument and not without merit.
This is an odd dilemma.There is no overt Indemnification agreement or contract that declares the third-party manufacturer responsible only for manufacturing defects. Or that states the designer of the product, who is often also the seller, is responsible for design and instructions and warning defect claims. If you’re aware of such an indemnification agreement, please email or fax me a copy. We would love to be able to recommend this to our clients as a simple way of resolving this troubling issue.
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