The St. Paul Unveils Manufacturing Cover

"Its not a line of business that we havent been doing, but we wanted to make sure we did more of it–and profitably," and to bring "the right kinds of products and services to our customers," she said.

Ms. Preston said mid-market commercial is the largest business unit in The St. Paulit will produce about $1.4 billion in premium volume at the end of 2003.

She said Dennis Crosby, president of middle market commercial, identified five areas where most business was being written: manufacturing, wholesalers and distributors, retailers, service industries and real estate.

Of those groups, she said, manufacturers "make up about 20-25 percent of our overall premium volume"more than $300 million.

She said agents and customers queried about their needs identified specific exposures of customers, such as food processors.

The new product was built around an existing broad property product called Premiere Property Protection, she said.

An enhancement endorsement was added that includes coverage for loss of liquid stock as a result of leakage, and contamination of the stock and subsequent equipment cleanup if the leakage is due to a covered loss, such as a fire.

An example of a situation where there is loss of liquid stock, she said, might be at a malt beverage manufacturing firm or beer manufacturer that stores the beverage in a tank or barrel.

Explaining contamination of stock, she gave the example of a kosher food manufacturer. "If an element gets into the manufacturing process that renders that food non-kosher, and the food is contaminated, we would pay for the damage to the stock as a result of the contamination," she said. "We would also pay for the cleanup of the equipment to get it back into kosher shape."

On the casualty side, the product includes a manufacturers liability enhancement endorsement, Ms. Preston noted. She said that a key element here is the inclusion of worldwide products liability.

"A lot of [policies] provide for worldwide occurrences, but the suits have to be brought from inside the United States," she explained. "Ours provides coverage for suits brought from outside the United States as well."

Also included is product recall coverage, which previously was available for food processors and now is available to all manufacturers.

This covers the expenses an insured incurs as the result of either a government-imposed recall or a self-imposed recall, she said.

As an example, she described a manufacturer that makes office chairs. "Say the legs are defective and they fall off," she said. "But before anybody gets injured, the insured decides to recall the chairs."

Manufacturers errors and omissions coverage is also included, she noted. This is for financial loss to a third party resulting from a negligent act, error, omission or design of the insureds product.

Here she cited an example of an insured who is an electroplater of high-end silverware with a customer who is a high end retailer.

"Say somewhere in the process something goes wrong and due to the manufacturers error the silverware comes out pitted," she said. "Now the customer will sustain a loss because [the retailer] cant sell it at their retail prices." Instead, the retailer "will probably have to sell it at an outlet for a reduced price," she said, explaining a possible manufacturers errors and omissions situation."

The limits on the enhancement endorsement can go as high as $1 million or $2 million and can include umbrella limits. Limits on product recall and manufacturers E&O are up to $1 million. "Typically we would not put those coverages into the umbrella because they are a little more volatile," she noted.

The program is geared to mid-size manufacturers with 50-1,000 employees and premiums in excess of $100,000.

Certain situations are excluded from coverage. For example, for product recall, expenses are excluded when the manufacture fails to perform or meet specifications of recall due to use of banned or unsafe materials. For the manufacturers E&O coverage part, exclusions include: costs of complying with contracts or agreements, or for recall, removal or withdrawal; credits or voluntary payments; delay in delivery or failure to deliver the products.

Medical manufacturing is not included in the program.

Target industries, she said, are furniture and fixture manufacturers, household electronics and food processors. Other manufacturers include clocks, watches, jewelry and metal goods manufacturers.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, October 17, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.