The world of business and manufacturing is often closely connected with one manufacturer making products using pieces that have previously been made by different manufacturers. Therefore, each step in the process heavily relies on the expertise and high quality of the businesses before them. When a product is not made correctly, many businesses may suffer. During these situations, it may be useful to have a product liability cover like error and omissions insurance.
If a manufacturer builds a faulty product, other manufacturers and businesses who then use that product to make their own products may themselves build things that do not work properly. This can lead to loss in business sales and profits. As a result, that latter company may sue the original manufacturers for not designing and manufacturing a piece that works like it is supposed to.
The manufacturer may then be found liable for the declining profits of these businesses due to their mistake. Additionally, if that manufacturer sells their products to many companies, then these businesses may all suffer financially, potentially leading to multiple lawsuits. Having a product liability cover like errors and omissions insurance may provide financial assistance to help pay for legal expenses and possible settlement costs.
Manufacturers that make faulty products may be sued by other manufacturers and businesses. Insurance may financially protect them in such events.