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Errors & Omissions Insurance for Solar Photovoltaic Manufacturers

Time: 7/17/2013 4:27:36 PM                       Publisher: Staff
 
 
Errors & omissions (E&O) claims involve your most important business relationship, your customer. Often, the successful resolution of a claim will allow you to maintain an important relationship, while building others. With over 30 years of experience handling product and service E&O claims, our expertise allows us to understand both your legal responsibilities while not overlooking the need for you to preserve your reputation. 
 
Product liability insurance is an effective way to deal with sudden and unexpected accidents that result in bodily injury or physical damage to tangible property, including the resultant loss of use of such property. Dovetailing with products liability insurance, is our purpose built Errors and Omissions insurance for the PV Solar industry. The E&O policy responds to economic injuries (absent of physical damage) arising from defects, deficiencies, inadequacies in your products or your service; or the failure of your products or your services to perform in accordance with a contract or agreement. Whether contractually obligated or not, purchasing E&O insurance is a prudent decision, and may help differentiate your organisation from others, choosing to “self-insure” this exposure.
 
Products Liability and E&O Liability insurance policies are purchased on an annual basis and are subject to change from year to year. They insure you for your legal obligation to pay damages and the legal costs incurred to defend a lawsuit. A claim for compensation under the E&O insurance policy must be made against you during the annual period of insurance and not directly to the insurance company.
 
Errors & Omissions v. Product or Performance Warranties  
E&O insurance is designed to respond to claims made against you during the policy period for economic losses sustained by your customer because of a defect, deficiency or inadequacy in the PV modules or the failure of the PV module to meet the obligations of a contract or agreement.
Most Clean Tech manufacturers, including those in the PV Solar industry, provide both product warranties and long term performance warranties. The remedy under a product warranty or performance warranty is limited to the repair or replacement of the product. Warranties only apply to design defects and faulty workmanship and warranties explicitly disclaim responsibility for all other damages, loss, and any other costs or expenses. 
 
E&O insurance fills an important gap, by affirmatively affording defense and indemnification to the solar PV manufacturer for economic damages because of product defects or failure to perform. In addition, E&O insurance also responds to a myriad of additional causes of loss beyond design defects and faulty workmanship, including advice, consulting, maintenance and support in conjunction with a PV Solar module product. Additionally, the E&O policy may  respond to other third party damages, provided the PV manufacturer agreed to assume liability for such damages, in a written contract, prior to the loss, provided the policy would otherwise insure such damages.
 
If E&O insurance is not warranty insurance, why purchase E&O insurance?
 
Consider the following Loss Examples.
Loss Scenario One – PV Manufacturer Purchases E&O from Chubb  
Two years after commissioning a solar power plant, the owner, an Independent Power Producer (IPP), is concerned that the plant is under performing. After testing a few modules, the root cause is traced to a batch of defective modules installed within several arrays. The PV module manufacturer replaces the defective modules in accordance with the product warranty, but the replacement process is delayed due to shortage of replacement parts and the power plants’ remote location. As a result of the underperforming defective modules (and the delay in replacement), the IPP suffers a financial loss. Additionally, the IPP is facing demands from the local utility for failing to meet their contractual power supply commitments.  
 
The IPP owner sues the module manufacturer for damages for their financial loss.  
 
Errors & Omissions
The economic injury sustained by the IPP owner arose from a defect in the insured’s modules and provided the E&O policy was in force at the time the claim was made, the E&O policy would respond to the IPP owner’s lawsuits for their financial loss. The E&O policy would not pay for costs incurred by the manufacturer to replace the defective modules because E&O insurance is not warranty insurance.
 
Warranty Insurance
Chubb does not assume warranty obligations of any kind.
 
 
Loss Scenario Two – PV Manufacturer Purchases Products Liability and E&O from Chubb
A fire breaks out in a solar array at a power plant, owned by an IPP, causing considerable damage. The root cause analysis determined that the cold solders inside the junction box produced faulty contacts that led to electric arcing, igniting combustible materials in close proximity to the solar arrays.  
 
The PV module manufacturer immediately contacts customers, warning them of the imminent fire hazard. Customers were strongly encouraged to shut down their facilities systems. The manufacturer further outlines the timetables for the warranty replacement of the modules and junction boxes. For some roof mounted models, warranty replacements may take up to six months.  
 
Unfortunately, the problem goes viral on the Internet and on Social Media sites, and within six weeks, the PV module manufacturer is faced with lawsuits in seven countries, including several proposed consumer class action lawsuits in USA, all of which seek unspecified damages and other remedies.
 
Product Liability
The Product Liability Policy is intended to respond to property damage to tangible property (other than the insured’s product) and the resulting loss of use of the damaged tangible property. This policy applies to the damages the PV manufacturer becomes legally obligated to pay the IPP owner who has suffered property damage due to the fire and provides defense against the claims or suits brought by third parties.
 
Errors & Omissions
In this example, claims or suits brought by other customers seeking damages for financial loss because of the actual or suspected defect in the supplied modules are addressed by the E&O policy. As a consequence of the defects, customers suffer financial losses because their systems and operations are temporarily suspended until the defective modules are replaced. This is a typical E&O exposure.  The E&O policy does not pay for costs incurred by the manufacturer or others to repair or replace the defective components, modules or entire arrays because E&O insurance is not warranty insurance.
 
Warranty Insurance
Chubb does not assume warranty obligations of any kind.
 
 
Claims Coordination
Given the geographic diversity of the E&O claims, the complexity of coordinating the litigation adds another dimension of the potential risks that PV module manufacturers face when selling products on a global basis. 
 
 
 
Want More Information
If you would like more information on our products and E&O liability solutions for the PV solar industry, please contact your broker or us at the following email: kmstevens@chubb.com .
 
 
 
Chubb Group of Insurance Companies 
www.chubb.com                                                                                                                                                                                                                                     Form 75-02-1650 (Ed.  
 
Chubb refers to the member insurers of the Chubb Group of Insurance Companies.
The information contained in this brochure is descriptive only and not intended to be comprehensive. Whether or to what extent a particular loss is covered depends on the facts and circumstances of the loss and the precise coverage of the policy as issued. Chubb recommends considering our policy wording in deciding whether to acquire or to continue to hold Chubb insurance products.
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