Vendor’s Endorsements in General Liability Policies

vendor’s endorsement

Manufacturers and distributors often add a vendor’s endorsement to their general liability insurance policy to provide product liability protection to retailers and others who sell their products. While many policies specifically identify the vendors that are covered, others describe a generic class of entities or persons. Most major retailers and wholesalers require vendor’s endorsements as a condition for doing business with the manufacturer or distributor. 

The purpose of vendor’s endorsements

Under modern product liability laws, when an injury is caused by defects in products, not only is the manufacturer liable, but the liability extends to distributors and retailers who sell the products. By adding a vendor’s endorsement to their liability policy, manufacturers can provide protection for these vendors – who are liable for design and manufacturing defects even though they had nothing to do with designing or manufacturing the product – and encourage them to carry and sell the products. 

Common exclusions in vendor’s endorsements

Vendor’s endorsements protect vendors from bodily injury or property damage claims arising out of the named insured’s products that are sold in the course of the vendor’s business. However, vendor’s endorsements typically have exclusions. Coverage does not apply to express warranties, distribution or sales that are not authorized by the named insured. Coverage is also voided if the vendor does anything to change the condition of the product, fails to maintain the product in merchantable condition, or fails to perform any inspections, adjustments, tests or servicing that it agreed to do or normally undertakes in the usual course of business. When products are labeled or relabeled by the vendor or used as a container, part or ingredient of any other thing or substance, coverage does not apply.

Scope of vendor’s endorsements

The language in a particular vendor’s endorsement may impact the scope of coverage. For instance, some vendor’s endorsements explicitly limit coverage to that provided by the policy’s product hazard coverage. But if the endorsement says it “covers claims arising out of the named insured’s products,” this language may be interpreted more broadly to include not just product liability actions but negligent sales actions too. For instance, an auto parts retailer sold freon to a minor, whose friend died of “acute freon toxicity” after inhaling the product. The court ruled that, although the case involved negligent sale allegations, the claim was based on bodily injury “arising out of” the freon and therefore the retailer was covered under the vendor’s endorsement.1  However, for coverage to apply, the underlying lawsuit must focus on the product of the named insured. When a soda company employee sustained a slip and fall injury while delivering soda on a retailer’s premises, the court found the retailer was not covered under the soda manufacturer’s vendor’s endorsement because the claim did not involve an injury arising out of the product itself.2    

Disputes over who is a vendor

While the term “vendor” is not defined in most endorsements, it is generally interpreted to mean “seller.” Some cases have turned on whether or not the party asserting coverage did in fact sell the named insured’s product in the regular course of its business. For instance, one court held that physicians did not qualify as vendors under the meaning of the endorsement in a drug manufacturer’s policy since the physicians only prescribed the product and did not sell it. The court, however, held that the hospital qualified as a vendor because it purchased, stored and sold the product, similar to a pharmacy.3   

Disputes over exclusions

Some cases have hinged on whether an exclusion in the policy should be applied. A common exclusion in vendor’s endorsements is when a vendor labels or relabels the product or uses it as a container, part or ingredient of something else. In one case, a manufacturer, assembler and seller of tractor truck cabs sold trucks containing the named insured’s seats. Both the truck maker and the seat maker were named as defendants in 48 lawsuits brought by truck drivers who claimed they sustained injuries while driving the trucks equipped with the named insured’s seats. The truck maker sought coverage under the seat maker’s vendor’s endorsement, but the court held that the exclusion barred coverage where the vendor installed the named insured’s seats into its own products, the tractor truck cabs. The seat maker’s insurer “intended to insure only those persons or organizations that sold [the] seats outright or ‘off the rack.’… Insuring manufacturers of other products, who use the seats as a component part of their finished products was not a risk [the insurer] intended to take.”4  

In deciding whether this exclusion applies, some courts have required that there be a causal relationship between the vendor’s actions and the alleged bodily injury or property damage.  


If you are involved in a dispute with your business insurance company, contact us. We have the expertise, experience and tenacity to make insurance companies keep their promises to you and your business. 

1 PEP Boys v. CIGNA Indem. Ins. Co. of N. Am.300 N.J. Super. 245, 248, 252-55, 692 A.2d 546, 548, 550-52 (App. Div. 1997)

2 Dominick’s Finer Foods, Inc. v. American Mfrs. Mut. Ins. Co.163 Ill. App. 3d 149, 152-53, 516 N.E.2d 544, 546-47 (1st Dist. 1987)

3 Cooper Labs, Inc. v. International Surplus Lines Ins. Co.802 F.2d 667, 673 (3d Cir. 1986)

4 Travelers Ins. Co. v. Freightliner Corp.256 Ill. App.3d 1049, 1052, 628 N.E.2d 325, 328 (1st Dist. 1993)