Business Risk Exclusion

AAA

DEFINITION of 'Business Risk Exclusion'

A type of coverage that is often omitted from product liability insurance. Business risk occurs when a company manufactures or sells a product that does not meet the level of performance that the company promises. For example, if a company advertises a product as having a life span of 10 months but the product only lasts 6 months, the policy does not cover the company.

It is sometimes referred to as "product failure exclusion".

INVESTOPEDIA EXPLAINS 'Business Risk Exclusion'

The only exception to business risk exclusion is bench error. Bench error is an error made during the manufacturing of a product. If a business can prove that the failure of a product is due to bench error, then that business will be covered under a product liability policy.

RELATED TERMS
  1. Work And Materials Clause

    A provision in many property insurance policies that allows the ...
  2. Business Recovery Risk

    A company's exposure to loss as a result of damage to its ability ...
  3. Against All Risks - AAR

    An insurance policy that provides coverage against all types ...
  4. Mutual Exclusion Doctrine

    An agreement between federal and state and local taxing authorities ...
  5. Liability Insurance

    Any type of insurance policy that protects an individual or business ...
  6. Certificate Of Insurance

    A document issued by an insurance company/broker that is used ...
RELATED FAQS
  1. What is the difference between adverse selection and moral hazard?

    In economics, moral hazard and adverse selection are two possible consequences of asymmetric information or ineffective information ... Read Full Answer >>
  2. Which markets are most prone to market failure from adverse selection?

    Adverse selection causes market failure -- a sub-optimal level of beneficial trades -- whenever material information cannot ... Read Full Answer >>
  3. How does adverse selection affect insurance premiums?

    Any limits on an insurance provider's ability to appropriately price risk – to economize on important information – might ... Read Full Answer >>
  4. What is the pro rata condition of average on an insurance claim?

    The term "pro rata" is used to describe a proportionate distribution. In the insurance industry, "pro rata" means that claims ... Read Full Answer >>
  5. How does adverse selection contribute to market failure?

    Adverse selection is perhaps the most academically cited example of market failure in a laissez-faire economy. The problem ... Read Full Answer >>
  6. How can a business determine its most effective value proposition?

    To determine its most effective value proposition, a company must make a purposeful effort to craft a unique value proposition ... Read Full Answer >>
Related Articles
  1. Home & Auto

    Cover Your Company With Liability Insurance

    Every business is susceptible to legal action. Find out how to protect yours.
  2. Home & Auto

    Filling The Gaps In General Liability Insurance

    Standard liability coverage may not be enough. Special needs call for specialized policies.
  3. Insurance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  4. Economics

    What is Adverse Selection?

    Adverse selection occurs when one party in a transaction has more information than the other, especially in insurance and finance-related activities.
  5. Insurance

    Homeowners Insurance Losers: States That Pay Most

    Which states charge you the most for homeowner's insurance? Hint: They're regularly featured on the Weather Channel.
  6. Professionals

    Helping Clients Choose Long-Term Care Insurance

    The need for long-term care has become an inescapable (and pricey) issue for retirees. Here's what financial advisors can do to help.
  7. Economics

    Gas Dispute Poses Risks For Both The EU And Russia

    The Russia-Ukraine gas dispute has caused energy insecurity for the EU, which is seeking new gas suppliers, and market uncertainty for Russia's Gazprom.
  8. Stock Analysis

    3 Things That Could Hold Intuitive Surgical Back

    Taking a long-term view that favors Intuitive Surgical developer increasing in value, doesn't mean that there are near-term headwinds facing this company.
  9. Investing

    What's a Monopolistic Market?

    A monopolistic market has a significant number of characteristics of a pure monopoly. Though there may be more than one supplier, the market has high prices, suppliers tightly control availability ...
  10. Insurance

    Life Insurance: How Much Does Age Raise Your Rate?

    If you need life insurance, try to get it before your next birthday. Here's why.

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center