Business Risk Exclusion

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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.

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