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. What is the difference between moral hazard and adverse selection?

    Adverse selection occurs when there's a lack of symmetric information prior to a deal between a buyer and a seller, whereas ... Read Full Answer >>
  2. What is the difference between an operating expense and a capital expense?

    An operating expense (OPEX) is an expense required for the day-to-day functioning of a business. In contrast, a capital expense ... Read Full Answer >>
  3. What is the theory of asymmetric information in economics?

    The theory of asymmetric information was developed in the 1970s and 1980s as a plausible explanation for common phenomena ... Read Full Answer >>
  4. How legally binding is a letter of intent?

    A signatory may be bound to a letter of intent depending on how the letter is drafted. In a business-to-business transaction, ... Read Full Answer >>
  5. What is the difference between the loss ratio and combined ratio?

    The loss ratio and combined ratio are two ratios used to measure the profitability of an insurance company. The loss ratio ... Read Full Answer >>
  6. How can a company resist a hostile takeover?

    Several different defense strategies can be applied by existing corporate boards to ward off a hostile takeover. The most ... 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. Retirement

    IUL Insurance: An Alternative Retirement Plan?

    Indexed universal life insurance is the rise. But critics argue that wisely allocated IRA and 401(k) funds will normally offer better returns.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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 ...

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center