Question

Blue Chip, Inc. discovers a defect in its hard drive product. Blue Chip decides to recall the product and replace it with another. Will Blue Chip's business liability insurance cover the recall and replacement?

Group of answer choices

Only if they have group insurance coverage and liability coverage.

Yes, unless they could have foreseen the possibility of a product recall and not taken any steps to prevent the defect.

Only if they have a "comprehensive general liability" policy or if recall/replace is stated in the insurance policy.

Only if they have liability coverage.  

Answer 1

Answer- Only if they have a "comprehensive general liability" policy or if recall/replace is stated in the insurance policy.

Explanation- Product liability for the injuries as a result of using the product or selling a faulty product can be covered in a comprehensive general liability. Usually, the comprehensive general liability insurance includes the risks that the insurer agrees to cover however it has to be specific. Coverage for product recall/replace can be obtained in a comprehensive general liability policy or as a separate policy in it. This coverage includes all the expenses incurred in recalling the product and also the cost of replacing the product in the event it proves to be faulty.

Other options- Only if they have group insurance coverage and liability coverage- this is irrelevant because group insurance is usually for the employees.

Yes, unless they could have foreseen the possibility of a product recall and not taken any steps to prevent the defect.- This is an ethical issue and not included in an insurance.

Only if they have liability coverage- this is incorrect because the liability needs to be specific such as product liability, general insurance liability, etc.