Manufacturing Insurance
Sutherland Insurance is a fifth-generation independent brokerage in Guelph, Ontario that places manufacturing insurance across the province. A manufacturer's programme combines commercial property, equipment breakdown, business interruption, product liability and product recall coverage. Sutherland Insurance has placed commercial business from Guelph, Ontario since 1870.
Key takeaways
- Under the Canada Consumer Product Safety Act, a manufacturer, importer or seller must report an incident involving a consumer product to Health Canada within two days of becoming aware of it.
- Product liability covers third-party injury and damage caused by a product; product recall covers the manufacturer's own cost of withdrawing it. The two are separate coverages.
- Business interruption on a manufacturing policy is triggered by physical damage, so a supplier failure is covered only where contingent business interruption is added.
- Equipment breakdown covers sudden mechanical and electrical failure of production plant, which a commercial property policy excludes.
- Who it is for
- Ontario manufacturers, fabricators, processors, assemblers and importers
- Legally required in Ontario
- No provincial statute requires property or liability coverage
- Commonly required by
- Lenders, landlords, customer supply agreements and distribution contracts
- Federal incident reporting
- Two days to report a consumer product incident to Health Canada
- Core policies in a programme
- Property, equipment breakdown, business interruption, product liability
- Employee injury
- Covered by the Workplace Safety and Insurance Board, not by the liability policy
What is manufacturing insurance?
Manufacturing insurance is a programme of policies arranged around a production operation. It covers the building and its contents, the machinery that runs the line, the stock at every stage from raw material to finished goods, the income lost when production stops, and the liability arising from products once they leave the premises.
Two coverages carry most of the weight and are the ones most often underbought. Business interruption is valued on the gross earnings or profits the operation would have made, and setting that figure correctly is the single largest determinant of whether a manufacturer survives a serious fire. Equipment breakdown covers the sudden failure of production machinery, which every commercial property wording excludes.
What can an Ontario manufacturing insurance policy cover?
What a policy can cover
- Buildings, plant, machinery and equipment against insured perils including fire, water damage and impact
- Stock at every stage, including raw materials, work in progress and finished goods held on site
- Equipment breakdown, covering sudden mechanical, electrical and pressure-system failure of production plant
- Business interruption and extra expense, including contingent interruption arising at a named supplier or customer
- Product liability for third-party bodily injury and property damage caused by goods after they leave the premises
- Optional coverages including product recall, cargo and transit, crime, cyber, and goods held at a third-party warehouse
Commonly excluded under standard Ontario manufacturing insurance wordings
- The cost of repairing or replacing the manufacturer's own defective product, which product liability does not cover
- Recall and withdrawal costs, unless a product recall policy is arranged alongside the liability programme
- Wear, tear, gradual deterioration, corrosion and the ordinary breakdown that maintenance addresses
- Injury to the manufacturer's own employees, which the Workplace Safety and Insurance Board system addresses
- Losses arising from a supplier failure, unless contingent business interruption is added and the supplier is named
- Pollution and environmental impairment beyond the limited sudden-and-accidental extensions in the wording
Exclusions vary by insurer and by policy form; the issued policy governs.
How much does manufacturing insurance cost in Ontario?
The factors that move an Ontario manufacturing insurance premium, in approximate order of influence, and why insurers look at each one.
| Rating factor | Why |
|---|---|
| Product manufactured and its end use | Food, health and automotive components carry the highest product liability severity. |
| Construction, sprinklers and fire protection | Sprinklers are the single largest property rating credit available. |
| Total insured values on building, plant and stock | Insured values set the insurer's maximum property exposure. |
| Business interruption indemnity period selected | A longer indemnity period covers more of a slow machinery replacement. |
| Annual sales and export markets | United States product liability awards sit far above Canadian ones. |
| Hot work, dust and flammable processes | Welding, wood dust and solvent processes drive fire frequency. |
| Quality control and traceability systems | Traceable batches contain the scope and cost of a recall. |
| Claims history over the past five years | Loss history is a filed underwriting factor for every commercial insurer. |
What insurance is a manufacturer required to carry in Ontario?
No Ontario statute requires a manufacturer to carry property or liability insurance. Workplace safety insurance through the Workplace Safety and Insurance Board is mandatory for most Ontario employers. Under the Canada Consumer Product Safety Act, a manufacturer must report an incident involving a consumer product to Health Canada within two days of becoming aware of it.
Beyond those duties, coverage is driven by lenders and by customer contracts. Which policies are arranged, and at which limits, depends on circumstances that vary from one operation to the next:
- What limits customer supply agreements, distribution contracts and lenders specify.
- The product manufactured, its end use, and whether it reaches consumers directly.
- The replacement cost of production machinery, and the lead time to source a replacement.
- How long the operation could not produce after a serious loss, which sets the indemnity period.
- Which suppliers and customers the operation depends on, and whether they should be named for contingent interruption.
- Whether goods are exported to the United States or held at a third-party warehouse.
What situations does manufacturing insurance commonly address in Ontario?
Manufacturing programmes are arranged for a wide range of production circumstances across Ontario, and the coverage available differs in each. The situations below are common among Sutherland Insurance clients in Guelph and across the province, and each one changes which markets will write the risk.
- A Guelph fabricator whose press fails and stops the line while a replacement is sourced from overseas.
- A food producer whose ingredient supplier is shut down by fire, halting production downstream.
- A component manufacturer whose part is alleged to have failed in a customer's finished assembly.
- A producer required to withdraw a production lot from distribution after a quality failure.
- A manufacturer exporting into the United States and asked by a distributor to name it as additional insured.
- A plant taking a sprinkler leak overnight that damages both machinery and finished stock.
How Do I Get Business Insurance Through Sutherland Insurance?
Getting insurance through Sutherland Insurance is simple. You can request a quote online or call 519-822-0160 to speak with a licensed broker. We take the time to understand your business, identify your exposures, and find coverage options that fit your needs.
Our Process:
- Request a Quote. Complete an online quote request or call our office to speak with a licensed insurance broker.
- Tell Us About Your Business. Your broker will gather information about your operations, property, revenues, employees, vehicles, contracts, and any other areas that may require coverage.
- Review Your Risks and Coverage Needs. We assess your business exposures and insurance requirements to determine the appropriate coverage limits and options.
- Market Your Account. Sutherland Insurance compares the available commercial markets to help find the best combination of coverage, service, and price.
- Present Your Options. Your broker will review the available quotes and provide recommendations based on your specific needs and goals.
- Bind Coverage and Provide Documentation. Once you select coverage, we arrange the policy and provide any required documentation, including certificates of insurance for clients, landlords, lenders, or other third parties.
What makes Sutherland Insurance different from a direct insurer?
When a claim happens, Sutherland Insurance acts for the client with the insurer, and an in-house claims representative is available on any claim. Sutherland Insurance is an independent brokerage and compares the markets it holds contracts with rather than selling one company’s product. A person answers the phone at Sutherland Insurance, 519-822-0160, Monday to Friday, 8:30 a.m. to 5:00 p.m.
Frequently asked questions
What insurance does a manufacturer need in Ontario?
An Ontario manufacturing programme commonly combines commercial property on building, plant and stock; equipment breakdown; business interruption; commercial general liability including products and completed operations; and cargo where goods are shipped. Product recall and cyber are added where the exposure warrants. Which policies apply depends on the product, the process and the contracts in force.
Does business insurance cover product liability?
Products and completed operations liability is part of a commercial general liability policy and covers third-party bodily injury and property damage caused by a product after it leaves the premises. It does not cover the cost of repairing or replacing the defective product itself, and it does not cover recall costs. Those are separate coverages.
What is the difference between product liability and product recall insurance?
Product liability covers third-party injury and property damage caused by a defective product once it has been sold. Product recall covers the manufacturer's own cost of withdrawing the product from the market, including notification, transport, storage, destruction and lost income. A single quality failure can trigger one, the other, or both.
What is equipment breakdown insurance for a manufacturer?
Equipment breakdown covers sudden and accidental mechanical, electrical and pressure-system failure of production machinery, along with the damage and lost income that follow. Commercial property wordings exclude that failure, so the coverage sits on a separate policy or endorsement. It commonly extends to spoiled stock where refrigeration or process control fails.
Does a manufacturer have to report a product incident in Canada?
Under the Canada Consumer Product Safety Act, a manufacturer, importer or seller must report an incident involving a consumer product to Health Canada within two days of becoming aware of it, and provide a fuller report within a further period. That duty applies regardless of what insurance is in place, and it operates alongside any recall coverage.
How is business interruption calculated for an Ontario manufacturer?
Business interruption is valued on the gross earnings or gross profit the operation would have earned had the loss not occurred, over a stated indemnity period. Setting the indemnity period realistically matters most for manufacturers, because machinery lead times commonly exceed the twelve months many policies default to. The issued policy governs.
How many markets does Sutherland Insurance place manufacturing business across?
Sutherland Insurance places commercial business, including manufacturing, across the markets it holds contracts with together with multiple managing general agents and affiliates across Canada. It is an independent brokerage licensed by the Registered Insurance Brokers of Ontario. It is not tied to any single insurer.
Get your manufacturing insurance quote
A licensed Sutherland Insurance broker compares the available markets on every quote request.
Get your manufacturing insurance quote Call 519-822-0160
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