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  1. #1

    Default Buying General Liability, Product Liability and Excess Liability Business Insurance

    My question involves business law in the state of: GA
    I am purchasing the assets of a GA manufacturer that currently has a products liability policy as well as a separate GL policy. The current PL certificate reflects two lines. One is "Commercial General Liability", has a BI/PD Deductable of $5,000, and has an "X" in the boxes for "Prod/CO" and "Claims Made". The coverage is 1,000,000 each occurance and 2,000,000 for "Products- Comp/Op Agg". The other is "Umbrella Liab" and has an "X" for "Excess Liab" and "Claims Made". The coverage is 1,000,000 each for "Each Occurance" and "Aggregate". The GL policy is completely separate and is sold by another broker/agent all together.
    I have requested new quotes for product coverage from a few new brokers/agents. I have received one quote back that seems low. It mirrors the above except that it does not include the second line "Unbrella Liab", it describes the premises and a premium sepecifically for that, has $1,000 Deductible, lists medical expenses (any one person) for $5,000, has a personal and advertising injury line for $1,000,000, and has no mention of "Claims Made".
    Is a separate general liability policy needed if you have one of these policies?
    What is "claims made" and how could it affect me going forward under the new LLC?
    Shouldn't I expect to pay a much higher premium for the required coverages being a new company with no existing policy?
    Perhaps, this is not the right forum to ask these questions, but i get the sense there is a lot of general business experience here.

  2. #2
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    Default Re: Buying General Liability, Product Liability and Excess Liability Business Insuran

    Umbrella coverage provides additional coverage beyond the limits of other insurance.

    A claims made policy stops covering your liability the moment coverage ends. Unless you purchase "tail" coverage, even if the insurance was in effect at the time a claim accrued, you will have no coverage under that policy for any claim made after the policy lapses.

    The cost of a claims made insurance policy tends to increase each year, as during the first year of coverage there is no coverage for any cause of action that accrues before the policy went into effect and the insurance covers only claims made from the date of the policy forward -- so even if the company has a lot of potential liabilities, few will be covered. As time moves forward, the claims made policy covers additional years of corporate conduct, and thus there is greater potential exposure for the insurer.

    In terms of the new business insurance policies, even if not claims made, they may be offering you coverage for corporate acts and omissions from the date the policy starts, forward. Thus they, also, will have far less potential exposure during the early period of coverage. You need to make sure that you are covered for the acts and omissions of the company prior to the date your new insurance coverage begins -- whether under the former policies (either standard liability insurance or through tail coverage on the claims made policy) or the new coverage.

    If there are significant dangers of liability for the past actions of this company, or for product liability claims from this company's past operations, you should speak to a lawyer about your acquisition of the company and whether there is a means of structuring the acquisition that allows you to minimize or avoid liability for those past actions (such as an asset purchase as opposed to a stock purchase, if possible). As part of due diligence, you would want full disclosure by the seller of any known or potential claims that have not yet been officially made. To the extent that you are relying on the prior owners' liability insurance for coverage, you need to make sure that they assign to you the right to insurance proceeds for pre-acquisition occurrences, known and unknown, and ideally will also have the insurance companies consent to the assignment.

  3. #3

    Default Re: Buying General Liability, Product Liability and Excess Liability Business Insuran

    Thank you for the quick response as always. I knew you guys would be able to offer some advice here.
    This is an asset purchase. Therefore, all I am purchasing is the fixed assets, inventories, and non-tangibles (emails, phone numbers, etc.) for a one year period. I am not sure that the insurance provider wouuld agree to continue covering the existing product liability for the new company. Why would they? If i don't or can't get this extended coverage, is the new LLC liable for a product that was built five years ago by the previous corp. simply because we assumed the phone numbers? Given the fact that this is an asset purchase, does the "make sure that you are covered for the acts and omissions of the company prior to the date your new insurance coverage begins" still apply?
    Thanks again for the help.

  4. #4
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    Default Re: Buying General Liability, Product Liability and Excess Liability Business Insuran

    The discussions of whether your asset purchase is sufficient to protect your new company from the liability of the selling company is something you will need to discuss with the lawyer who is helping you structure the transaction. If your transaction is not properly structured, you can get the liability along with the assets.

  5. #5
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    Default Re: Buying General Liability, Product Liability and Excess Liability Business Insuran

    Quote Quoting GeorgiaBusiness
    View Post
    Thank you for the quick response as always. I knew you guys would be able to offer some advice here.
    This is an asset purchase. Therefore, all I am purchasing is the fixed assets, inventories, and non-tangibles (emails, phone numbers, etc.) for a one year period. I am not sure that the insurance provider wouuld agree to continue covering the existing product liability for the new company. Why would they? If i don't or can't get this extended coverage, is the new LLC liable for a product that was built five years ago by the previous corp. simply because we assumed the phone numbers? Given the fact that this is an asset purchase, does the "make sure that you are covered for the acts and omissions of the company prior to the date your new insurance coverage begins" still apply?
    Thanks again for the help.
    You need a lawyer to guide you through the purchase and a qualified commercial insurance agent to inspect and examine your prospective business and explain the insurance needed and obtain it for you.

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