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

    A company's legal debts or obligations that arise during the ...
  6. Insurance

    A contract (policy) in which an individual or entity receives ...
RELATED FAQS
  1. How is minimum transfer price calculated?

    A company that transfers goods between multiple divisions needs to establish a transfer price so that each division can track ... Read Full Answer >>
  2. What kinds of costs are included in Free on Board (FOB) shipping?

    Free on board (FOB) shipping is a trade term published by the International Chamber of Commerce or ICC, that indicates which ... Read Full Answer >>
  3. When would a vendor care about its accounts payable turnover ratio?

    Vendors can act as suppliers or manufacturers, so they must pay attention to accounts payable and accounts receivable. An ... Read Full Answer >>
  4. What are some examples of debit notes in business-to-business transactions?

    Debit notes are a form of proof that one business has created a legitimate debit entry in the course of dealing with another ... Read Full Answer >>
  5. How do insurance companies use a whistleblower?

    Fraudulent claims are among the most prevalent and serious business risks that insurance companies face. Many consumers have ... Read Full Answer >>
  6. How is maintenance of standard of living for survivors accomplished in estate planning?

    Estate planning is an integral component of comprehensive financial planning, as it allows individuals and couples to maintain ... 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. Insurance

    Who Needs Extortion Insurance?

    Insurance can help mitigate the financial damage of an extortion plot, but it’s important to read the fine print before taking out one of these policies.
  5. Insurance

    Indexed Universal Life Insurance: The Pros & Cons

    What you need to know, to see if these vehicles fit into your financial plan.
  6. Markets

    What Is the Pharmacy Benefit Management Industry?

    PBMs, acting as third party administrators and negotiators, are essential to facilitating transactions between the moving parts of the healthcare industry.
  7. Insurance

    Why Is Health Care So Expensive In The Us?

    The U.S. is the world leader in only one area of health care: costs. Why is it so hard to rein in these expenses?
  8. Insurance

    Do You Need Kidnap & Ransom Insurance?

    Americans working abroad – and high-profile individuals traveling frequently in kidnapping hot spots – should consider this type of protection.
  9. Insurance

    A Guide To Kidnap & Ransom Insurance

    Every year, thousands of people are kidnapped for ransom all over the world. This insurance offers protection – and peace of mind.
  10. Insurance

    Should I Insure My Wedding Ring?

    It depends, in part, on the ring's value and your current insurance coverage. Here's a guide to making a decision that's right for you.

You May Also Like

Hot Definitions
  1. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  2. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  3. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  4. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  5. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  6. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!