Manufacturing Insurance in Kitchener and Ontario

The appropriate program will depend on your facility, products, machinery, contracts and markets.

Commercial property insurance may help protect insured buildings and business property against specified causes of physical loss or damage.

Depending on the policy and property insured, coverage may apply to:

• Buildings owned by the business
• Tenant improvements
• Production machinery
• Office furniture and equipment
• Computers and business records
• Raw materials
• Work in progress
• Finished goods
• Packaging and supplies
• Property temporarily located away from the facility

The policy should reflect the current replacement value of the building, machinery, inventory and other insured property.

Certain causes of loss may be excluded, restricted or available only through an extension. These can include:

• Flood
• Sewer backup
• Earthquake
• Equipment breakdown
• Utility interruption
• Gradual deterioration
• Wear and tear
• Pollution or contamination

The All-Risks Kitchener team will review the available property options and help you understand the causes of loss, limits and deductibles being offered.

Commercial property insurance does not necessarily cover loss caused by the internal mechanical, electrical or pressure-system breakdown of machinery.

Equipment breakdown insurance may address certain sudden and accidental failures involving:

• Production machinery
• Motors and generators
• Transformers and electrical systems
• Boilers and pressure vessels
• Refrigeration and cooling equipment
• Computer-controlled manufacturing systems
• Electronic equipment
• Heating and ventilation systems

Depending on the policy, coverage may include:

• Physical damage to insured equipment
• Damage to other insured property
• Business interruption
• Extra expense
• Spoilage
• Service-interruption losses

Equipment breakdown insurance is not a maintenance contract. Wear and tear, corrosion, deterioration and known maintenance problems may not be covered.

We will ask for information about the age, value, condition and maintenance of your production equipment when reviewing this coverage.

Commercial general liability insurance may respond to covered claims alleging that the manufacturing business caused third-party bodily injury or property damage.

Potential examples could include:

• A visitor being injured at the facility
• Manufacturing operations damaging property belonging to another party
• A product allegedly causing damage after leaving the manufacturer’s control
• A claim involving work performed away from the facility

A CGL policy may also provide legal defence for covered claims. Coverage remains subject to the policy terms, limits and exclusions.

Products and completed operations liability is commonly included within commercial general liability insurance.

It may respond to certain covered claims alleging that a manufactured product caused bodily injury or property damage after it was sold or distributed.

For example, a component manufacturer may face a claim alleging that one of its parts failed and damaged another company’s equipment. The insurer would investigate:

• What caused the failure
• Whether the manufacturer may be legally liable
• When and where the damage occurred
• How the component was used
• Whether the claim falls within the policy
• Which exclusions, limits and deductibles apply

Products liability does not automatically cover:

• The cost of replacing the manufacturer’s own defective product
• The cost of correcting faulty workmanship
• A voluntary product recall
• Lost market share
• Damage to reputation
• Contractual penalties
• Every loss involving a product

The products manufactured, their end uses and the countries in which they are sold must be accurately disclosed.

Product recall insurance is separate from products liability insurance.

Depending on the product and policy, specialized recall coverage may help address certain costs associated with withdrawing a product from the market.

Available coverage may include some combination of:

• Notification expenses
• Transportation and disposal
• Product testing
• Replacement or rehabilitation costs
• Crisis-management services
• Additional operating expenses
• Certain lost profits
• Customer-rehabilitation expenses

The type of recall coverage required can vary considerably between:

• Food and beverage products
• Consumer goods
• Automotive components
• Medical devices
• Electronics
• Industrial components
• Products incorporated into another manufacturer’s goods

Recall coverage is highly dependent on the policy language and the reason for the withdrawal.

We will ask about quality control, product testing, batch tracking, customer contracts and written recall procedures when reviewing available options for insurance coverage.

Business interruption insurance may help replace certain lost business income when manufacturing operations are interrupted because of insured physical loss or damage.

For example, coverage may be relevant when an insured fire damages production equipment and prevents the facility from operating.

Depending on the policy, coverage may address:

• Lost profits or earnings
• Continuing operating expenses
• Payroll
• Rent or mortgage expenses
• Extra expenses incurred to continue operating
• Costs of using a temporary location
• Additional costs to expedite repairs or replacement equipment

Business interruption coverage does not automatically respond to every shutdown.

Coverage can depend on:

• The cause of the interruption
• Whether insured physical damage occurred
• The selected waiting period
• The indemnity period
• Policy limits
• Co-insurance requirements
• How the loss of income is calculated

Manufacturers should consider how long it would realistically take to replace specialized machinery, obtain permits, rebuild production lines, retrain employees and restore customer volumes.

Extra expense insurance may help pay certain additional costs incurred to continue operating or reduce the duration of an insured interruption.

Examples may include:

• Renting temporary machinery
• Leasing another production facility
• Outsourcing part of the manufacturing process
• Expediting replacement equipment
• Paying additional transportation expenses
• Using temporary utilities or generators

The policy should be reviewed to determine which expenses are eligible and which limits apply.

Manufacturers may hold substantial values in:

• Raw materials
• Work in progress
• Finished products
• Packaging
• Customer-owned materials
• Seasonal inventory
• Precious metals or specialized components

Inventory values may fluctuate throughout the year. If the insurance limit is based only on an average value, it may not be sufficient during peak periods.

Our team may discuss reporting forms, peak-season increases, blanket limits or other options depending on how inventory values change.

Special attention may also be required for:

• Perishable or temperature-sensitive stock
• Property stored outdoors
• High-value materials
• Customer property
• Property at warehouses or third-party locations

Goods temporarily away from the premises

Food processors, pharmaceutical companies and other manufacturers may face losses when products are damaged by changes in temperature, humidity, refrigeration or contamination.

Depending on the policy, spoilage coverage may apply when insured stock is damaged because of a covered equipment breakdown or another insured event.

Coverage can depend on:

• The cause of the temperature change
• Whether refrigeration equipment physically broke down
• How long the interruption lasted
• Whether utilities failed
• The type and value of the affected stock
• Applicable deductibles and sub limits

Contamination, government cond

Commercial property insurance does not automatically provide adequate protection for all goods while they are in transit.

Marine cargo or inland transportation coverage may help protect insured:

• Raw materials moving to the facility
• Finished products being delivered to customers
• Goods transferred between facilities
• Equipment temporarily transported elsewhere
• Imports and exports
• Property held at temporary locations

Responsibility for goods can change based on the sales contract and shipping terms.

We will ask about:

• Who arranges transportation
• Who owns the goods during transit
• Shipping destinations
• Transportation methods
• Maximum shipment values
• Imports and exports
• Warehouses and temporary storage
• Contractual shipping terms

Coverage for international shipments may require additional consideration.

Manufacturers frequently depend on a limited number of suppliers, customers, utilities or service providers.

A disruption at another company’s facility may affect your operations even when your own property has not been damaged.

Contingent business interruption, sometimes called dependent-property coverage, may help address certain income losses resulting from insured physical damage at a qualifying supplier’s or customer’s premises.

For example, a manufacturer could lose production because a key supplier’s facility was damaged by an insured fire and could no longer provide a critical component.

Coverage may depend on:

• Whether the supplier or customer qualifies as a dependent property
• Whether it must be specifically named
• The cause of damage at that location
• The territory in which the dependent property is located
• Direct versus indirect suppliers
• Available limits and sublimits
• Waiting periods
• The applicable indemnity period

Contingent business interruption does not automatically cover supplier insolvency, labour disputes, transportation delays, cyberattacks or every form of supply-chain disruption.

Broader supply-chain products may be available for some manufacturers, but eligibility and terms vary.

A manufacturing facility may be unable to operate following an interruption to electricity, natural gas, water, telecommunications or another essential service.

Utility service interruption coverage may be available for certain losses, but it can depend on:

• Which services are insured
• Whether physical damage is required
• Where the damage occurred
• Whether overhead transmission lines are included
• The length of the waiting period
• Property and business interruption limits

Utility interruption should not be assumed to be included automatically.

Products liability generally addresses bodily injury and property damage. It may not address claims based solely on financial loss caused by a product that failed to perform as promised.

Manufacturers errors and omissions insurance may be considered when a customer could experience financial loss because a manufactured product, component or service allegedly:

• Failed to meet specifications
• Did not perform its intended function
• Was delivered with an error
• Caused production delays
• Required removal, reinstallation or rework
• Did not meet contractual requirements

This coverage may be particularly relevant for contract manufacturers, component suppliers and businesses providing design, engineering or technical services.

Terms, exclusions and available coverage vary significantly. Customer contracts should be reviewed alongside the insurance.

Manufacturing operations increasingly rely on connected machinery, automated systems, enterprise software and electronic customer and supplier records.

A cyber incident can affect both information systems and physical production.

Potential exposures may include:

• Ransomware
• Business email compromise
• Data breaches
• Production-system interruption
• Manipulation of industrial controls
• Fraudulent payment instructions
• Loss of customer or employee information
• Cyber incidents involving technology providers

Cyber insurance may provide coverage for certain first-party response costs, liability claims and business interruptions, depending on the policy.

Property, equipment breakdown and cyber policies should be reviewed together because coverage for damage or interruption involving computer systems can vary.

Manufacturing operations may involve chemicals, fuels, wastewater, emissions, waste products or contaminated property.

Commercial general liability and property policies may contain pollution exclusions or restrictions.

Environmental insurance may be considered for certain claims involving:

• Sudden or gradual pollution conditions
• Third-party bodily injury
• Third-party property damage
• Cleanup expenses
• Emergency response costs
• Transportation-related pollution
• Pollution at owned or leased premises
• Mould or indoor environmental conditions

Coverage depends on the materials used, waste-handling procedures, site history and policy wording.

Environmental incidents must not be assumed to be covered under standard property or liability insurance.

Manufacturers may own vehicles used for sales, service, deliveries or movement of goods.

Commercial auto or fleet insurance may be required for:

• Passenger vehicles used by employees
• Delivery vans
• Pickup trucks
• Straight trucks
• Fleet vehicles
• Trailers
• Vehicles transporting tools or products

Driver information, vehicle use, travel radius, cargo and cross-border operations should all be disclosed.

Insurance for a vehicle does not necessarily insure the goods being transported. Cargo or transportation coverage may also be required.

Manufacturers can face financial losses involving:

• Employee theft
• Fraudulent electronic transfers
• Social-engineering scams
• Theft of inventory or raw materials
• Forged documents
• Funds-transfer fraud
• Computer fraud

Commercial property and cyber policies do not automatically cover every form of crime or employee dishonesty.

Crime coverage can be reviewed according to the business’s financial controls, payment procedures and inventory exposures.

Umbrella or excess liability insurance may provide additional limits above specified underlying liability policies.

This coverage may be considered when:

• Customers require higher limits
• Products are sold throughout Canada or internationally
• The manufacturer supplies critical components
• Products could cause severe bodily injury or property damage
• Operations involve significant environmental or vehicle exposures
• A serious claim could exceed the primary liability limit

An umbrella or excess policy does not automatically broaden every provision of the underlying insurance. Its limits, exclusions and underlying-policy requirements should be reviewed carefully.

Customer and supplier contracts may allocate significant responsibility to the manufacturer.

Contract requirements can include:

• Minimum liability limits
• Additional insured status
• Waivers of subrogation
• Indemnity provisions
• Product-performance guarantees
• Recall obligations
• Consequential-damage provisions
• Cybersecurity requirements
• Insurance requirements that continue after the contract ends

Insurance may not cover every obligation accepted in a contract.

Before signing a significant contract or submitting a bid, send the insurance and indemnity requirements to All-Risks Insurance Brokers Kitchener. Our team can review the requested limits, endorsements and certificate wording, explain how they may affect your coverage, and identify whether insurer approval or policy changes may be required. Legal advice should be obtained from a qualified lawyer.

Manufacturers selling outside Canada should also tell us:

• Where products are sold
• Whether sales are direct or through distributors
• Whether products enter the United States
• Whether products are incorporated into other goods
• Whether foreign subsidiaries or warehouses are involved
• Which courts and laws govern customer contracts

Canadian insurance does not automatically provide appropriate protection for every international operation.