If your company manufactures, sells, or distributes any type of commercial good—from toothpaste to furniture to electronics—it almost certainly has liability insurance to protect it from potential product liability suits alleging that its goods injured consumer(s) or damaged their property. Specifically, most companies have a general liability policy that provides "first dollar" coverage after any applicable deductible or retention is satisfied, and at least one umbrella/excess policy—or sometimes several excess policies, for larger companies. But what is in the fine print of these policies and how can you ensure that your company is truly protected from a series of product liability claims?
Batch Clauses Ensure That Your Coverage Is Greater Than Your Deductible
Batch clauses are provisions that aggregate or combine different injuries into a single "occurrence," allowing policyholders to maximize coverage for a series of product liability suits. Modern liability policies are written on an "occurrence" basis, meaning coverage applies separately to each "occurrence"—a term of art that is usually defined as "an accident, including continuous or repeated exposure to substantially the same harmful conditions." Think of an "occurrence" as an incident or discrete set of circumstances that may produce one injury (e.g., a car crash that injures one driver) or multiple injuries (e.g., a car crash that injures two drivers and two passengers). The scope of an "occurrence" is a critical consideration for any policyholder's insurance program for at least two reasons: (i) most liability policies have a per-"occurrence" limit and (ii) deductibles are usually written on a per-"occurrence" basis as well, meaning you must pay a separate deductible for each "occurrence." Because of the deductible in particular, batch clauses can be tremendously beneficial, as illustrated by the following hypotheticals.
Let's assume your company manufactures widgets, one of which caused an injury in Louisiana in 2022, while another injured a different individual in Michigan in 2024, and a third injured a different individual in California in 2025. All injured consumers have filed lawsuits seeking $500,000 each. Without a batch clause, a court might find that these three injuries stem from three different "occurrences" because each injury occurred in a different time and place and the injuries were unrelated (except that all were caused by widgets).[1] This would mean each claim would likely be subject to a separate per-"occurrence" deductible. In that scenario, if your company's general liability policy has a $500,000 deductible, these three lawsuits would be effectively uncovered because each underlying lawsuit would be subject to a separate deductible that equals the value of the suit. If each suit were settled for $400,000 ($1.2M total), your insurer would not pay anything, and your company would have to absorb the entire $1.2M loss.
Now let's assume the same facts, but your liability policy has a batch clause that combines injuries stemming from the same product type into one "occurrence." In this scenario, the deductible would be almost fully satisfied by the first underlying lawsuit, leaving the next two suits almost completely covered. Your company would still have to pay the $500,000 deductible—but likely only once, and your insurer would cover the remaining $700,000 of the $1.2M total loss. The benefits of a batch clause increase almost exponentially with more claims. With no batch clause, 50 claims settled for $400,000 each under the same policy would cost your company $20M—none of which would be covered by insurance. With a batch clause that aggregates all 50 claims into one "occurrence," $19.5M of that total loss (95%) would potentially be covered by insurance, assuming your tower of insurance provided at least $20M in limits.
Not All Batch Clauses Are Equal
Batch clauses are not standard provisions in "off-the-shelf" general liability policies. There is no industry-standard language for them, and the terms of a batch clause offered to one insured might vary significantly from that offered to another. Some might define a "batch" narrowly, limiting a "batch" to the same products, the same production run or production facility, and/or only to injuries that occurred in a certain year. Other batch clauses might define "batch" more broadly such that production of multiple, similar products can be batched together into a single occurrence.
The examples above regarding hypothetical lawsuits all assume the batch clause at issue is broad enough to group all of the hypothetical individual lawsuits into a single "occurrence." Although such broader batch clauses are generally more favorable for policyholders, there are a variety of factors that will determine which batch clause is best for your company, including budget for your insurance program and details about the products your company makes. For a smaller company with only one manufacturing facility, a batch clause that limits a "batch" only by production facility will be just as favorable as one that does not include this limitation, and likely cheaper. On the other hand, for a major company with 10 different manufacturing plants, it would likely be worth the extra expense to purchase the broadest possible batch clause to avoid a situation where 50 different lawsuits over injuries from widgets would be treated as 10 or more "batches" under its liability policies.
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Venable has represented policyholders in numerous product liability insurance disputes, including many cases specifically focused on batch clauses. Whether your company needs litigation support for an active dispute or guidance as you are renewing your insurance policies, we have robust expertise and can help your company meet its insurance goals in any scenario.
[1] The determination of the number of "occurrences" that a claim is deemed is heavily dependent on the facts of the injuries and the cause(s) thereof, as well as the laws of the jurisdiction that governs the lawsuit.