How will a financial loss extension help with my business?

Do you:

• Have an in-house design team and manufacture products?
• Install and service products?
• Provide instruction and training in relation to the installation, application, storage or use of products?
• Produce sales and marketing documents or employ a sales and marketing team?

If so, then you could be exposed to liability for pure financial loss suffered by your customer, as a result of making a mistake, a negligent act, error or omission.

Standard public and product liability policies in the market cover liability for injury and damage caused by a negligent act, error or omission or statutory breach.  This means that you may have no cover for pure financial loss.

Professional Indemnity (PI) policies are typically not available where the services rendered are not considered ‘professional’ in nature.

Financial Loss cover fills the gaps between a public and products policy and a traditional PI policy.

Typically financial loss claims involve allegations of breach of contract, misrepresentation, negligence, breach of the Trade Practices Act and Fair Trading Acts or a mixture of all of these.

Financial Loss cover is aimed at clients who principally manufacture and supply products. It covers claims resulting from a negligent act, error or omission, including non-deliberate breaches of Sections 52, 53, 55 and 71 of the Trade Practices Act. Examples of this might include:

• A product not working in the way represented that it would work.
• Incorrect statements or exaggerations of performance given by sales and marketing representatives.
• Incorrect or wrongful instructions and advice provided in relation to a product and its application or use.

The variety and size of claims that can be brought against clients are broad.  Following are claims examples, which highlight the dangers of liability policies that do not protect clients from pure financial loss claims made against them.