Which of the following is true about product liability coverage?

Product liability coverage is designed to protect businesses from claims related to injuries or damages caused by their products. Understanding the nuances of what this coverage entails is essential for anyone involved in manufacturing or distributing goods.

The assertion regarding the exclusion of recall costs is a critical point. Product liability insurance typically does not cover the financial costs associated with recalling a product that has been deemed defective or harmful. Recalls can be costly and may include expenses for notifying customers, retrieving products, and replacing or repairing them. Since such expenses are anticipated to be borne by the manufacturer as part of the risk of producing goods, they fall outside the typical scope of product liability coverage.

In contrast, the other options regarding production losses, automatic worldwide coverage, and coverage for lost income from recalls are inaccurate interpretations of what product liability insurance covers. Losses incurred during production are generally not covered, as product liability focuses mainly on damages arising after the product has entered the stream of commerce. Automatic worldwide coverage might vary by policy and insurer and isn't a given. Lastly, losses from recalls pertain to business interruption or lost income, which are usually addressed under different kinds of insurance policies, such as business interruption insurance, not under product liability coverage.

Understanding these distinctions helps clarify the specific protections that product