General Liability vs. Products Liability: What Texas Manufacturers Need to Know
If you make, assemble or distribute products, you'll hear two terms over and over: general liability and products liability. They overlap, they're often on the same policy, and they're easy to confuse. But the difference matters, especially when a customer contract asks for specific limits, or when a part you shipped years ago causes a problem.
The short answer
General liability covers injuries and property damage your business causes to other people. Products liability is the part of that protection that covers injuries and damage caused by something you made or sold, after it has left your hands.
Most small businesses get products coverage inside their general liability policy. Manufacturers, importers and distributors with a large product exposure often need it written separately, or with higher limits.
What general liability covers
A standard commercial general liability (CGL) policy has two main parts.
Premises and operations
Injuries or damage that happen at your location or while you're doing the work. A visitor slips on your shop floor, or your crew damages a customer's equipment while installing something.
Products and completed operations
Injuries or damage caused by your product or finished work after it's out of your control. A machined part fails in a customer's equipment and injures someone, or a fitting you installed leaks after the job is done.
On most CGL policies, products and completed operations has its own aggregate limit, separate from the general aggregate. That's why certificates and contracts often list both.
What products liability insurance is
Products liability insurance is the coverage for that second part, injury or damage caused by your product. It comes in two forms:
- Included in your general liability. For most small businesses, the products and completed operations coverage in the CGL is enough.
- A separate products liability policy. Used when the products exposure is too large or too specialized for a package policy, when a carrier excludes or limits products on the general liability, or when a customer requires higher limits for products than your general liability provides.
Separate products liability is common for companies that make parts going into vehicles, aircraft, medical devices, industrial machinery or semiconductor equipment, and for importers bringing products into the U.S.
Side by side
| General liability (premises and operations) | Products liability (products and completed operations) | |
|---|---|---|
| When the problem happens | While you're operating or working | After the product or work has left your control |
| Typical example | Visitor injured at your shop | Part you made fails and injures someone |
| Who usually needs more of it | Businesses with customer foot traffic or on-site work | Manufacturers, importers, distributors |
| How it's bought | Part of the CGL | Part of the CGL, or a separate policy |
| Limit | General aggregate | Its own products and completed operations aggregate |
What neither one covers
This is where many manufacturers are surprised. Standard general and products liability policies are built to pay for injury and damage to others. They usually do not pay for:
Your product itself
Replacing or repairing your own defective part isn't covered. The policy pays for the damage the part caused, not the part.
Recalling a batch
The cost of pulling products back from customers, inspecting them and notifying people is excluded. Product recall insurance covers it.
A part that simply doesn't work
If your part fails to meet spec but doesn't cause injury or property damage, the customer's claim is usually for financial loss, not bodily injury or property damage. Manufacturers' errors and omissions coverage is designed for that.
What this means for distributors
Distributors and retailers can be named in a lawsuit over a product they didn't make. Two things help:
- A vendor's endorsement on the manufacturer's policy, which extends the manufacturer's coverage to you for claims about their products.
- Texas law generally requires a manufacturer to indemnify an innocent seller in a products liability action. That can help, but it doesn't replace your own coverage, especially if the manufacturer is overseas or out of business.
How customer contracts come into it
Large customers often set separate minimums for general liability and for products and completed operations, and ask to be named as additional insured for completed operations. If you supply a fab or a large manufacturer, check the contract's insurance section closely.
We cover what those terms mean in our guide to vendor agreement insurance requirements.
How Travis Ridge helps
We're an independent agency in Round Rock that writes semiconductor and manufacturing supplier insurance. We look at what you make, who you sell to and what your contracts require, then decide whether your products coverage belongs inside your general liability or in a separate products liability insurance policy, and whether you need recall or errors and omissions coverage too.
Start your quote with your current policies or your customer's insurance requirements. We respond within one business day, and most quotes are ready in 3–10 business days. Prefer to talk? Call (512) 640-5989.
Frequently asked questions
Does general liability cover a defective product?
It covers injury or property damage the defective product causes to others, through its products and completed operations coverage. It usually doesn't cover replacing the product, recalling it, or a claim that it simply didn't perform.
Do I need a separate products liability policy?
Not always. Many small businesses are covered through their general liability. Manufacturers, importers and distributors with significant product exposure, or with contracts that require higher products limits, often need a separate policy.
What is the products and completed operations aggregate?
It's the most a general liability policy will pay in total during the policy period for claims caused by your products or finished work. It's separate from the general aggregate, which applies to premises and operations claims.
Is product recall covered by general liability?
No. Standard general liability policies exclude recall costs. Product recall insurance is bought separately.