Automotive
In the automotive sector, the part leaves the plant and the obligation continues to travel with it: to the assembly it integrates into, to the line where it is mounted, and to the vehicle that is already on the road. What is insured is the distance between these three points and the cost of retracing it.
Component recall, line stoppage and product liability
The cost of a defective component is measured on the line where it is mounted.
An automotive supplier insures both what is inside the plant and what has already left it. Inside are the warehouse, the current series, and the tooling that the client provides to manufacture their part, which rarely belongs to the custodian. Outside are the cost of reaching an already integrated component, the damage to the assembly it joined, and the hours the client's line was stopped, and none of these three guarantees are included by default in general public liability.
Tooling and moulds owned by the client
The moulds and tooling that the manufacturer provides to produce their part are third-party goods in deposit and do not always appear in the declared content capital. Reviewing this capital at the start of each project is what keeps the cover up to date throughout the series' life.
Dismantling and assembly costs
When the defective part is already integrated into the assembly, the cost lies in reaching it. The extended product liability incorporates these dismantling and assembly costs and the damage to the foreign product it joined or mixed with, each with its own sub-limit.
The client's line stoppage
The claim for hours of line stoppage is a financial loss without prior material damage and, as such, is excluded from general public liability unless expressly guaranteed. It is advisable to compare this sub-limit with the penalties set by the supply contract.
The scope of a campaign is decided in the traceability of the component
Traceability determines how many vehicles are included in the campaign, and with it the cost of recovering them. Withdrawal expenses cover locating and replacing; product liability covers the damage caused. They are different covers and are dimensioned separately.
The covers that support a company in this sector
Each one is designed based on the company's real exposure. None are contracted the same in two companies in the same sector.
Lo que nos preguntan en automotive
Our client is claiming for the hours of line stoppage. Is it covered?
Only if the policy includes the guarantee for financial losses derived from defective products. General liability covers material and personal damages, and a line stoppage without prior physical damage is a purely economic loss that is excluded by default. When the guarantee exists, it comes with its own sub-limit, and it is advisable to compare it with the penalties in the supply contract.
What exactly does product liability cover in a Tier supplier?
It covers the damage that the part causes to people or to goods other than itself. When the affected party is a consumer, that damage is governed by Book III of Royal Legislative Decree 1/2007, with the legal excess of 390.66 euros for material damages. The claim from the manufacturer whose production has been damaged is a business-to-business relationship and is resolved by articles 1101 and 1902 of the Civil Code, which is the route through which it usually reaches a Tier supplier. Book III excludes damage to the product itself, so neither its value nor its replacement is compensated through that route; in the contractual claim of article 1101, they are indeed discussed. What no liability policy covers is the value of the part itself, and for the rest, there are extended product clauses —dismantling and assembly, joining and mixing, withdrawal expenses— each with its own sub-limit.
Our client's tooling has been destroyed. Who replaces it and in how much time?
Loaned moulds and tooling are third-party goods on deposit and are covered by the policy of whoever is safeguarding them, provided they are declared at their replacement value, which does not match the accounting value. The tooling contract usually also specifies who is responsible for replacing them, and it is advisable to read it alongside the terms and conditions. That manufacturing period marks the actual indemnity period, as supply does not resume before then.
