According to a report by Lexology, Thruway Produce supplied apples to Milnot Holding Company for its baby food. Their agreement required Thruway's apples to be free of poisons used to kill mice and rats because no one wants their babies to ingest that stuff.
The report states a few apples were contaminated with rodenticide, and Milnot had to recall its baby food, which isn't cheap. Milnot sued Thruway over breaching implied warranties, and for all its time and trouble, it sought $1.5 million in damages.
Fortunately, Thruway had a General Liability policy, so it requested the insurer Massachusetts Bay Insurance Company to defend it against the claim. As Lexology notes, the insurer denied the request and tried to argue the policy excludes coverage when the policyholder's products are recalled.
Good thing Thruways challenged the insurer because the court ruled this exclusion wasn't applicable. The report states the court found…
- Thruway's apples weren't the subject of the recall; the baby food was.
- Because Thruway’s apples weren't recalled, the product recall exclusion did not apply.
It goes to show you that really understanding your policy can help you fight for the benefits you're entitled to. How do you like them apples?
Know Your Commercial General Liability Insurance
No one expects you to be an insurance maven (unless you're an insurance agent). At the same time, when you purchase an insurance policy, you are agreeing to a contract, and you are expected to understand its terms. In exchange for your premium (i.e., the price you pay for your coverage), your insurer agrees to pay for certain losses under certain circumstances. It makes sense, then, that you'd want to know what your insurer will and won't do before you sign the dotted line.
You have an Internet's worth of resources at your disposal to give you a general sense of what various small business insurance policies can do. However, policies vary from provider to provider, and yours is tailored to your specific operations and risks. In other words, you must understand the policy in front of you because general knowledge can only take you so far.
That's why working with an insurance agent who understands small businesses in your particular industry is so important. They can help you understand…
- How your coverage may apply to common claims you might face given your line of work.
- How your policy's exclusions may affect you in certain claim situations.
Learn more about what to look for in an agent in "How to Find a General Liability Insurance Agent."
Understanding the mechanics of your policy is essential if you're ever in a position where you need to challenge a provider's decision about your coverage. Filing a suit against an insurer is a big step, but so long as you really know the coverage your General Liability Insurance provides, it can be a smart financial move.
To learn more about the nuances of General Liability Insurance, read "Want Additional Insured Status? Start with These 3 Things" and "Does Your General Liability Insurance Cover Your Contractors?"