Katie Reid owns Hair Begone, LLC, a small company that manufactures one product, a lightweight, solar powered, pet hair removal device. Katie is excited that she has a long-term patent for the key component in the machine, which creates a powerful magnetic like field that instantly lifts all pet hair from any surface.
Katie understands that she must assemble a distribution network to stock and sell her product to her customers, and sets up a meeting with Kathryn, the owner of The Cat House, Inc., a pet company with twelve retail outlets. Katie demonstrates the product to Kathryn who is impressed, and willing to stock the devices and see how they sell. Amid negotiations, Kathryn insists that Hair Begone’s General Liability insurance policy include a “Vendors Endorsement” which will add The Cat House as an additional insured.
What does a Vendors Endorsement accomplish?
The endorsement includes vendors as “additional insureds” on the manufacturers’ General Liability Insurance policy, and provides liability insurance protection to the vendor for damages arising out of the manufacturers’ products sold or distributed by the vendor. However, the endorsement does include restrictive exclusions that any vendor relying on this coverage should be aware of.
Excluded are:
- Contractual Liability – Excludes damages for bodily injury or property damage that the vendor is obligated to pay because it has assumed liability for such damages in a contract.
- Unauthorized Warranties – Excludes coverage for product warranties made by the seller; only manufacturer’s warranties are considered for coverage.
- Physical or chemical changes intentionally made by the vendor. For example, if the vendor repackages or alters the product, there is no coverage.
- Demonstration, Installation, Servicing or Repair; these activities are all excluded, except if they are performed on the sellers’ premises in connection with the sale of the product.
- Injury or damage caused solely by the vendor’s negligence.
The terms & conditions of each insurance company’s Vendors Endorsement vary, and thus the endorsement should be carefully reviewed. Our Commercial Insurance Team can perform a review of your current insurance program to determine potential exposures, coverage enhancements, or cost savings. Give us a call to start the dialogue.
