Vendors Extension and Dual Insurance
In the UK, Dual Insurance and something called a Vendors Extension isn’t something most brokers will come across on a daily basis, unless you are a specialist broker to the USA market (like us). We are frequently contacted to arrange this type of cover so the following is likely to be the frustration, not to mention the pain you are going through to get this cover.
So, you have made it in to the USA Marketplace
So, you’ve got there, you have spent what seems like forever to get your products into what’s probably the world’s largest market place, the USA… Congratulations. Your new customer is one of the USA’s larger supermarket chains as well as online, so with your turnover expected to double what can go wrong, the mansion, the Rolls Royce, ahhhh and that swimming pool, all now in sight.
With so many things to do, arranging carriers, who are you going to use, arrange it yourself, use one of the multitude of forwarders, organise packaging, use a specialist export company, will you need more employees, the list goes on.
In all the excitement the last thing on your mind is insurance, but hey you’re insured in the UK so that’s going to be absolutely fine, just tell your insurer and off you go.
Probably wouldn’t use the word “fine”…
Putting the issue aside that 50% of your turnover is to the USA (probably your first problem actually) you have noticed on the contract with the customer, we are talking the USA now so we will call them the Vendor from here, that they are asking (telling) you to include them as Dual Insured.
You have business insurance in the UK with a UK insurer, just a quick call to your broker to tell them that you will be exporting your products to the USA and you need to add your customer (Vendor remember) to your policy.
Response – Sorry Sir that can’t be done, an insurer will not name another company on your policy, any insurer will only insure you. The response could also be that no we can’t do that it can’t be done but you do have something called Indemnity to Principal on the policy which will be fine.
That word fine again..
It won’t be fine at all, it’s the USA remember so the Vendor requires them to be added as a Dual Insured, having told the Vendor they are now saying without this they won’t deal with you.
Back to the broker who is likely to still be giving you the same response, and anyway they have said that as your turnover is 50% to the USA they will not now provide USA Product Liability Insurance .
So, what started as bad has got worse, through a simple notification you have found that not only can’t you get the Dual Insured your customer is requesting, but you now find that you need to cancel your insurance and find something that will cover you whilst exporting to the USA.
Lets cover the Vendors Extension or Dual Insured part first.
The Vendors extension isn’t generally something you find a UK insurer providing; it is actually including your customer, the Vendor, on the policy as a Dual Insured.
In the USA its quite common that under the Liability section of an insurance policy (they call it General Liability by the way) there will be Product Liability Insurance. This covers you the insured against any Loss, Damage or Injury that your product may cause to the user. The Vendors requirement for Dual Insurance is an extension of this and is there to protect the Vendor if you do something that includes them in the action from the user.
When you sell a product to your customer in the USA (in this case) your customer then retails that product to the general public or another business. They themselves have Product Liability Insurance for their business; this would usually have just them named as the insured.
The insurer will indemnify, that means provide cover to the additional insured against a claim that has arisen out of any wrongful act by you. As an example, a product supplied by you that has broken whilst in use causing an injury to the user, or perhaps caused damage to something else.
What is a Vendor for the purposes of being a Dual Insured?
For this type of extension to operate a Vendor is your customer, someone such as the supermarket, or a distributor that sells products on your behalf.
What’s not covered under this type of policy?
As you would expect the policy needs to be quite specific in what cover it is providing because otherwise naming someone else on a policy as a Dual Insured could mean the insurance company could find themselves being involved in claims that are actually nothing to do with them.
Your product lands at your customers premises or warehouse, as long as there is no intervention in the product from the Vendor such as modification, repackaging, relabelling, in fact any changes whatsoever and they sell it on which subsequently causes a loss then your customer is protected.
However, any changes that the Vendor has done to the product is excluded and therefore would fall under their own Product Liability Insurance.
Phew, that bit out of the way…
I have an increasing turnover or high turnover to the USA and Canada
You can check out our USA Product Liability Insurance page, just to answer why the turnover to the USA at 50% is a problem.
Here’s a snippet though… Usually an insurer in the UK will allow probably 20%, sometimes more of turnover being to the USA or Canada, litigation in the USA is somewhat different to ours here as well as being significantly more costly.
After this they will usually decline to offer any liability cover and ask that particularly the Product Liability Insurance part is placed elsewhere, this can be a problem exaggerated when the Vendor requires to be Dual Insured.
A final note on jurisdiction, whilst a UK insurer might agree to cover the small amount of turnover to the USA, its essential that it includes USA jurisdiction to, a claim brought in a USA court with a policy that has UK jurisdiction only probably isn’t going to end that well.
Why speak to Real Insurance about Vendors, Dual Insured and exporting to the USA or Canada
Real Insurance Group specialise in providing Product Liability insurance for UK companies that export their products to the USA market, even where there is a single product and the exports are to 100% of turnover as well as attaching Vendors extension / Dual Insured
Speak to one of the US team today about your requirements for insurance to the USA or Canada.