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In the manufacturing industry, protecting your business from costly liability claims is essential. While standard general liability insurance often covers many risks, the potential financial damage from a large lawsuit or catastrophic event can exceed those limits. That’s where excess liability insurance becomes a vital safeguard. But exactly how much excess liability insurance do manufacturers need? The answer depends on several factors unique to the nature and scale of your manufacturing operations.
Excess liability insurance is a policy that provides an additional layer of coverage beyond the limits of your primary liability insurance, such as general liability, commercial auto, or employer’s liability policies. For example, if your general liability insurance covers claims up to $1 million but your business faces a $2 million lawsuit, excess liability insurance can cover the additional $1 million, protecting your company from financially crippling losses.
Manufacturers face distinct risks compared to other businesses. These include product liability claims, workplace injuries, property damage, and liabilities linked to hazardous materials or complex supply chains. The high stakes of these risks mean manufacturers often require higher coverage limits than many other industries.
For instance, in 2023, the median “nuclear verdict” against corporate defendants reached $44 million, a 27% increase from the previous year. Such large verdicts indicate why excess liability insurance is crucial for manufacturers to avoid severe financial consequences.
There is no one-size-fits-all amount of excess liability insurance for manufacturers; several factors influence the appropriate coverage level:
Industry Risk Profile: Manufacturers of consumer products, food, industrial machinery, or hazardous materials generally encounter higher liability risks. These sectors often justify more substantial excess coverage.
Company Size and Revenue: Larger companies with more assets, employees, and sales tend to face greater exposure and thus require higher coverage limits.
Claims History: Businesses with previous large claims or lawsuits should consider increased limits to mitigate future risks.
Contractual Requirements: Clients, suppliers, or regulatory bodies may demand specific minimum coverage amounts, which influence how much excess insurance you need.
Business Changes: Recent acquisitions or new product lines might add unforeseen liabilities and require reassessment of coverage.
Risk Mitigation Controls: Strong safety protocols, quality assurance programs, and legal risk management can reduce exposure but do not eliminate the potential for large claims.
Manufacturers commonly purchase excess liability policies ranging from $1 million to $25 million or more, depending on their risk and financial assessment. The coverage is designed to kick in when underlying policy limits are exhausted, providing a critical financial buffer to protect the company’s assets and ongoing operations.
While the U.S. government does not mandate specific excess liability limits for manufacturers, guidance from regulatory agencies like OSHA highlights the importance of risk management and compliance to reduce workplace and product risks. Furthermore, industry and insurance experts from organizations such as the Insurance Information Institute emphasize tailored insurance solutions that reflect the manufacturer’s unique risk exposure.
At Weeks & Associates Insurance Services, we understand that your manufacturing business is unique and faces specialized risks. Our team will work closely with you to evaluate your current liability coverage, assess potential gaps, and recommend tailored excess liability insurance limits to ensure you’re fully protected against costly claims. Don’t leave your company vulnerable to the financial fallout of a major lawsuit. Contact us today for a policy review and secure your mental safety for your business’s future.
