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WHERE PCB CLAIMS GET STUCK
Why Exclusions Matter More for PCB Manufacturers
Insurance gaps are rarely obvious until you have a claim. PCB manufacturers face a mixture of high-value physical assets (plant, stock, WIP), sensitive processes (contamination, corrosion), and complex contractual exposures (quality requirements, delivery obligations, export territories, and sometimes “fitness for purpose” language). A policy can look comprehensive but still fail to respond as expected due to definitions, deductibles, sub-limits, or the type of loss (property damage vs pure financial loss).
This page explains the most common exclusions and grey areas that impact PCB claims, and what you can do to reduce surprises. It’s not legal advice and it’s not a substitute for reading your policy — but it is a practical guide to the issues we see repeatedly in the PCB sector.
If you want a quick “gap check”, Insure24 can review your existing programme and highlight where wording or declared values are misaligned with your real exposures.
The 10 Most Common PCB Insurance Exclusions & Gaps
Most gaps fall into two categories: (1) the policy is not designed to cover the type of loss (for example, “your own product replacement”), or (2) the policy would respond, but the definitions/values are wrong (for example, WIP not included or undervalued). Below are the most common issues we see when PCB manufacturers make claims.
Material Damage & Stock/WIP Gaps
- WIP not clearly insured – part-processed boards not included or valuation unclear.
- Underinsurance – declared values based on averages, triggering average clause reductions.
- Contamination ambiguity – smoke/soot/water contamination treated inconsistently unless wording is clear.
- Flood sub-limits/deductibles – flood often has higher excess and lower limits than fire.
- Wear and tear / gradual deterioration – corrosion, ageing and maintenance-related issues are commonly excluded.
These issues typically arise after fire/smoke, water ingress or “near miss” events where the factory remains standing but product integrity is compromised.
BI, Liability, Recall & Cyber Gaps
- BI indemnity period too short – requalification and customer audits extend recovery beyond 12 months.
- “Your own product replacement” – product liability may not pay for replacing your boards without third-party damage.
- Pure financial loss – many disputes are framed as economic loss without property damage (often PI, not PL).
- Recall/rectification not in place – field action costs often need a specialist cover section.
- Cyber BI triggers – waiting periods, trigger definitions and exclusions can restrict payments.
This is where many PCB disputes land: contract language, customer pressure and the difference between “damage” and “loss of performance”.
Property & Damage Exclusions That Matter in PCB Factories
Property policies cover defined insured perils. The “surprise” happens when a PCB loss doesn’t fit neatly into an insured peril, or when damage is “functional” rather than visibly physical. For example, contamination can make stock unusable even if it looks intact. Water ingress can cause corrosion risk even if equipment appears to work on day one.
This section highlights the exclusions and grey areas that commonly affect PCB property and stock claims.
Contamination, Smoke & “Physical Damage” Tests
- Some policies treat contamination as physical damage; others require visible alteration.
- Smoke/soot can be accepted as damage, but sub-limits for cleaning may apply.
- Controlled areas can require revalidation — BI needs to allow time for this.
- Stock and WIP spoilage is often assessed against definitions and valuation basis.
- Mitigation expectations apply: insurers expect reasonable steps to reduce further loss.
If your business relies on clean discipline, make sure your policy story matches how contamination creates loss.
Water Damage, Corrosion & Maintenance Exclusions
- Escape of water is commonly covered, but long-term leakage and maintenance issues are excluded.
- Corrosion can be treated as gradual deterioration unless tied clearly to an insured event.
- Roof leaks are often disputed if insurers believe maintenance was lacking.
- Flood often has higher deductibles and sub-limits than fire.
- Electrical and control systems are particularly sensitive after water events.
The difference between “sudden event” and “gradual issue” is central to water claims. Good documentation helps.
Stock & WIP: The Quiet Gap That Causes Big Reductions
Stock and work in progress are where PCB manufacturers often carry their biggest “hidden” value. WIP can be higher than finished goods because it includes labour and machine time already invested. If your policy doesn’t explicitly include WIP, or if you declare values based on averages, claims can be reduced by average clause or argued on the basis that the item is not stock as defined.
The goal is to align definitions to how PCB work exists in the factory: panels at multiple stages, batches moving between processes, and customer-owned goods.
Common Definition Problems
- WIP not mentioned, or only “finished goods” covered.
- Stock defined as “owned by you” but you hold customer materials/prototypes.
- Valuation basis excludes labour or process value in WIP.
- No allowance for peak values (seasonal uplift not used).
- No clarity on scrap, spoilage or salvage methodology.
These gaps usually show up at the worst time — after a fire, water loss or contamination event.
How to Reduce Stock/WIP Claim Friction
- Declare peak stock and peak WIP, not “typical” numbers.
- Ensure WIP is explicitly included and examples match PCB processes.
- Include customer-owned goods where you have contractual responsibility.
- Describe controlled storage and resilience measures to insurers.
- Maintain traceability and batch records to evidence loss values.
If you can evidence values clearly, settlement tends to be faster and disputes are reduced.
Business Interruption: The “Recovery Time” Gap
PCB manufacturers often underestimate how long recovery takes after an insured event. It’s not just “repair the building”. It’s replacement machinery lead times, commissioning, clean-down, validation, trial batches, and sometimes customer requalification and audits. If your indemnity period is too short, BI payments stop before you are fully trading again — even if the claim is accepted.
BI also has technical details: waiting periods, calculation bases, and conditions around mitigation. Getting these right is often more important than saving a small amount of premium.
Common BI Exclusions & Restrictions
- Indemnity period too short for equipment replacement and requalification.
- Underdeclared gross profit (incorrect accounting basis).
- Insufficient increased cost of working to outsource and protect customer commitments.
- BI only triggered by property damage (cyber or utility failures not covered unless arranged).
- Strict conditions around mitigation and documentation.
BI is often the survival cover. If you want one part perfect, make it BI.
BI Enhancements PCB Manufacturers Often Need
- Longer indemnity periods where specialist plant lead times are significant.
- Higher increased cost of working allowance for subcontracting, overtime, expedited freight.
- Supplier dependency / contingent BI where critical materials are single-sourced (availability varies).
- Claims preparation costs to speed up settlement (where valuable).
- Clear recovery plan that supports underwriting acceptance.
BI is easier to negotiate when underwriters understand your recovery plan and maximum loss scenario.
Product Liability vs PI vs Recall: The “Wrong Policy” Gap
Many PCB disputes are framed in ways that standard product liability does not cover. Product liability generally responds to third-party injury or third-party property damage caused by your products. But many PCB disputes involve pure financial loss — delays, rework costs, production line downtime at the customer, or allegation of negligent advice/specification input. Those exposures may sit under professional indemnity (PI), not product liability.
Separately, the cost to replace your own products in the field is not automatically covered under product liability. That is often addressed by product recall or rectification cover (if arranged) — again, subject to policy definitions and triggers.
Common Liability Exclusions in Practice
- No cover for pure financial loss under product liability without injury/property damage.
- Contractual liability beyond “negligence” may not be covered unless agreed.
- Exclusions for known defects or failure to withdraw/mitigate after discovery.
- Territory/jurisdiction mismatch (export claims can fall outside cover).
- Work-away activities not declared (installation, commissioning, on-site testing).
Claims often become disputes about how the customer frames the loss and whether it is “damage” or “financial loss”.
How to Reduce Dispute Risk
- Review customer contracts for liability language and insurance requirements.
- Consider PI if you provide design/DFM/spec advice or engineering sign-off.
- Consider recall/rectification if field replacement is a realistic scenario.
- Align territories/jurisdictions to where your boards are supplied and used.
- Document quality, traceability and change control (helps defence and settlement).
Better policy structure + better documentation usually means fewer expensive legal battles.
Cyber & Data: Trigger, Waiting Period & Control Gaps
Cyber policies can be extremely valuable, but they are technical. PCB manufacturers often assume cyber BI will respond automatically, or that “data loss” is the main risk. In practice, the main risk is operational disruption: ransomware, locked files, downtime of CAM/traceability systems, and vendor remote access issues. Policies can include waiting periods, specific trigger conditions, and exclusions related to security controls.
The most important step is aligning the policy to how you operate and ensuring baseline controls (MFA, backups, patching) are in place and documented.
Common Cyber Exclusions / Restrictions
- Waiting periods before BI starts (hours/days) — can reduce payouts for short disruptions.
- Cover triggers requiring network outage vs degraded operations (wording dependent).
- Security warranty conditions (e.g., MFA requirements) — non-compliance can affect claims.
- Limits and sub-limits for ransomware/extortion and restoration costs.
- Third-party provider incidents may need specific wording (availability varies).
The goal is not to buy cyber “cheap”. The goal is to buy cyber that responds when production is down.
Practical Steps to Reduce Cyber Gaps
- Implement MFA and document it for underwriting and claim defensibility.
- Maintain offline/immutable backups and test restores regularly.
- Control vendor remote access (least privilege, logging, time-limited access).
- Segment OT/production systems where feasible.
- Align cyber BI triggers and waiting periods to your operational dependency.
Strong controls can also reduce premium and widen insurer appetite.
We had “insurance in place” but a customer dispute exposed a gap between product liability and what the customer was actually alleging. Insure24 helped us restructure the programme, align the wording to our contracts, and clarify stock/WIP values so we were far more confident at renewal.
Commercial Director, UK PCB ManufacturerFREQUENTLY ASKED QUESTIONS
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Why do PCB claims get reduced by “average clause”?
Average clause can apply when declared sums insured are lower than the true values at risk. Many PCB manufacturers declare average stock/WIP values and
forget peak exposure. If a loss occurs during a peak, the claim payment can be reduced proportionally.
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Does product liability cover the cost to replace my PCBs?
Not usually on a standard basis. Product liability typically responds to third-party injury or third-party property damage caused by your product.
The cost to replace your own products and run field actions is commonly addressed by recall/rectification cover if arranged, subject to definitions.
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When do I need professional indemnity (PI) as a PCB manufacturer?
If you provide advice, design input, DFM guidance, engineering sign-off or specification support, claims may be framed as negligence with pure financial loss.
That is typically PI territory, not product liability. PI can be important even when you “only manufacture” if you influence specifications.
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Is smoke contamination treated as physical damage?
Often yes, but wording matters. Some policies treat smoke/soot as physical damage; others can create ambiguity around “contamination”.
It’s important to ensure stock/WIP and specialist cleaning are addressed for sensitive PCB manufacturing environments.
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Why does cyber insurance sometimes fail to pay business interruption?
Cyber BI often has waiting periods and specific trigger definitions. Some policies require complete network outage rather than partial disruption, and insurers
may expect certain controls (like MFA and tested backups). The best approach is aligning triggers and controls to how your factory actually operates.
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How quickly can Insure24 review our policies for gaps?
If you provide your current schedule and key values/activities, we can often identify common gap areas quickly. More complex programmes or contract-heavy
exposures may take longer to review. As a guide, allow 1–2 business days once core information is provided.
UNIQUE INSURANCE
TAILORED FOR YOU
Exclusions and gaps don’t matter until you have a claim — and then they matter more than price. Speak to Insure24 to check your stock/WIP definitions, BI indemnity period, contamination wording, and liability structure against your real PCB manufacturing exposures.
PROTECT YOURSELF
- Align stock and WIP values to peak exposure to avoid average clause reductions
- Ensure contamination and smoke/water scenarios are treated appropriately for PCB operations
- Set BI indemnity periods that reflect equipment lead times and requalification reality
- Close the gap between product liability, PI and recall/rectification exposures
- Align cyber triggers and controls to your operational dependency