Supply Chain Dependency

        Liability Coverage in Economic Downturns


It’s no secret that in times of economic downturn, cutting costs is a necessity. However, it is important to remember that the financial security of your business can hinge on that of your partners, vendors and suppliers.

In a tough economic climate, do not rely on the insurance coverage of your business partners to protect your assets or protect against third-party liability claims. Any member of the supply chain can be held responsible for its counterparts’ torts. A distributor, for example, may be liable for a claim filed against a supplier that has gone out of business.

Therefore, in order to protect your company, it is a wise long-term investment to expand your coverage limits. While it may be tempting to cut costs by limiting coverage, this decision could expose you to severe liabilities due to your supplier’s shortcomings. If you currently deal with foreign manufacturers – or if you’re considering outsourcing for the first time – talk to a professional about covering the associated risks.

An economic downturn can be a turbulent time for businesses in every sector, worldwide. Sinking revenues and economic uncertainty can exacerbate the frequency of lawsuits in our already litigious society, and even companies that successfully weather economic downturns relatively unscathed can still face long-term risks.