Foreign Policies

U.S. business continues to grow overseas, and many insured's are obtaining general liability insurance quote to cover the exposures. Unfortunately, they may not be getting the coverage that they think they are buying. The gaps that appear between domestic and foreign liability policies are reviewed, and some suggestions are provided for eliminating them.

Each year more U.S. companies begin selling their products overseas in search of markets. Most of these companies purchase general liability policies for their operations in the U.S., but may neglect to do the same for their foreign exposures. After reviewing the liabilities they are self-insuring and discovering the relatively low cost of insuring this exposure, many insured's decide to buy a foreign general liability policy.

Unfortunately, buying a foreign general liability policy does not guarantee that a company is fully covered. The territorial wordings of both policies may present gaps even though a foreign general liability policy is purchased. The problem arises from the fact that U.S. general liability policies are written so that coverage applies worldwide as long as:

(1) The suit is brought within the United States, and

(2) the product is made or sold in the United States. This is based on the 2003 ISO Commercial General Liability form. Foreign general liability policies on the other hand, are usually written on the basis that coverage applies as long as the occurrence takes place and the suit is brought overseas.

The two product liability matrixes contained in this article may be of use in determining where the gaps exist with respect to your particular client's insurance program.

A U.S. manufactured razor is sold in New York and the customer is injured in the U.S. The customer goes to a foreign country and files suit. Is there coverage under the U.S. or foreign policies! No, because U.S. policies exclude suits brought outside the United States, and foreign policies exclude suits arising out of U.S. occurrences.

The same razor is sold in France, and a customer takes it to the U.S. where they are injured. The customer returns to France and files suit. Is there coverage under the U.S. or foreign policies? No, because U.S. policies exclude suits brought outside the United States, and foreign policies exclude suits arising out of U.S. occurrences.

If the U.S. Company has foreign operations, the gaps become even greater. The U.S. policy will no longer respond because the products are neither made nor sold in the United States. The following are scenarios involving foreign made and/or sold products.

The French manufacturing location of the U.S. company sends the product back to the U.S. for sale in New York and the customer is injured in the U.S. The customer goes to a foreign country and files suit. Is there coverage under the U.S or foreign policies? No, because U.S. policies exclude suits brought outside the United States, and foreign policies exclude suits arising out of U.S. occurrences.