Computer Electronics Corporation (CEC) discovers a defect in its newly developed, recently marketed hard drives. CEC decides to recall the product and replace it with another. CEC's insurance policy with Delta Business Insurance Company will cover any harm to customers that occurs before the drives are returned. Is it likely that the policy will also pay for the recall and replacement? If so, what type of policy does CEC have?
What will be an ideal response?
It is likely that CEC's policy will pay for the recall and replacement, as well as any harm to a customer that occurs before the drives are returned. But to obtain such coverage, CEC, or any other insured, generally has to pay a higher premium. Coverage under a general comprehensive liability policy or a specific product liability policy may also include expenses involved in recalling and replacing a product that has proved to be defective.
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