Does a company's general liability policy cover its own defective product?

Usually no: products liability cover pays for the loss your defective product causes to third-party property or health, but not the value of the product itself, its repair or its replacement – that is treated as a warranty or contract matter. The cost of removing and refitting the product is also often an exclusion in a standard policy, and for manufacturers it can only be solved with specific extensions.

When this answer applies to your situation

• A manufacturer's product (a window, a panel, a machine) turns out to be defective after it has been installed at the client's site.
• A defective component damages the client's machinery or property.
• The client demands that the removal and replacement costs be covered.

What can change the answer

• What exactly the loss affected: the product itself (not covered) or other property (can be covered).
• Whether the policy has an extension for removal and refitting costs.
• The pure financial loss clause – without physical damage the cover usually does not respond.
• Contractual obligations that go beyond liability at law are often an exclusion.

What to check in the policy or quote

• Whether there is a products liability section and what its limit is
• The wording of the exclusion for the product itself
• The extension for removal and refitting costs
• Cover for pure financial loss
• Territory (where the product is delivered) and jurisdictions

The typical mistake

The manufacturer assumes that "we have liability insurance, so complaints are covered". Most complaints concern defects in the product itself – precisely what the policy does not cover.

Example

A situation typical in practice (generalised example, not a specific client)

A typical situation: a batch of façade panels with a production defect has to be taken out of a building that is already built. Replacing the panels themselves is the manufacturer's cost; removal and refitting only with the relevant extension; if moisture has also damaged the insulation, products liability can cover that part.

Related content

• Business insurance

This is not individual insurance advice; actual cover always depends on the chosen insurer's wording and the special conditions of the policy.