Michigan industrial and product design firm insurance has to answer a question a standard business policy wasn't built for: what happens when a product someone else made, from your design, fails or hurts someone. Industrial design firms create the designs and specifications that set a product's materials, mechanisms, shape and finish, and often its safety and how efficiently it can be produced. That work sits between engineering and manufacturing, and the insurance has to cover both edges.
The short version: General liability covers injury and property damage, not the financial loss of a design error, and many carriers add a professional services exclusion to it. You need professional liability that covers your design services, including bodily injury and property damage arising from them; coverage for intellectual property claims; and protection for prototypes and the CAD files your firm runs on.
What "industrial design" covers
The federal industry definition (NAICS 541420) describes these firms as "creating and developing designs and specifications that optimize the use, value, and appearance of their products," including materials, construction, mechanisms, shape, color and surface finishes, with consideration of safety, market appeal and efficiency in production. The category includes automotive, tool, packaging and furniture design. Engineering services and clothing, shoe and jewelry design are classified separately.
Why general liability isn't enough
- Design errors usually cause financial loss. A client whose tooling has to be recut because of a design error has an economic loss, not "bodily injury" or "property damage," so the standard general liability policy usually doesn't respond at all.
- Professional services exclusions. The standard general liability form has no blanket professional services exclusion, but carriers commonly add one by endorsement, such as ISO's CG 22 43 for engineers and architects or CG 21 16 for designated professional services. Once attached, even an injury claim arising from your design work can fall outside the general liability policy.
- The fix is a professional liability policy written for design services that covers both financial loss and bodily injury or property damage arising from your work. Read how the policy defines your professional services, and make sure it matches what you actually do. Many professional liability forms exclude bodily injury, property damage or product claims, so confirm in writing that yours doesn't.
Product claims can name the designer
In a Michigan product liability case, "production" includes design (MCL 600.2945), and plaintiffs commonly sue everyone involved with a product, including the firm that designed it. A few Michigan rules worth knowing:
- Three years to sue. Michigan's limitation period for product liability actions is three years (MCL 600.5805), and there's no general statute of repose for products. After ten years of use, a plaintiff loses the benefit of any legal presumptions but can still sue.
- The construction repose statute doesn't help you. MCL 600.5839's six-year repose applies to licensed architects, professional engineers and contractors on improvements to real property, not to consumer or industrial product design.
- Licensed professionals are treated differently. Michigan's shorter two-year malpractice period applies to licensed architects, professional engineers and professional surveyors. Our engineering and architecture firm guide covers those firms.
Your contracts matter as much as your policy. Manufacturers often ask designers to indemnify them for product claims. Have your agent and attorney review indemnity and limitation-of-liability language against what your professional liability policy actually covers.
Intellectual property disputes
Design firms face infringement claims (a design too close to someone else's patent or trade dress) and disputes over who owns the work. The standard general liability policy excludes intellectual property infringement, except for certain claims arising from your own advertising. Coverage for IP claims usually comes from a professional or technology errors and omissions policy that includes it, or a standalone IP policy, and those vary widely. Ask specifically whether patent infringement is covered, because many policies exclude it.
Prototypes, equipment and CAD files
- Prototypes and models, including client property in your studio, need to be scheduled or covered as property of others.
- 3D printers, CNC equipment and computers should be listed at replacement cost, with equipment breakdown where it makes sense.
- CAD files aren't "valuable papers." ISO's valuable papers and records form covers drawings and documents but excludes converted data and programs used in data processing. Recreating lost or corrupted design files is a cyber and electronic data question.
- Client confidential information on your systems makes cyber liability coverage worth discussing.
Workers' comp classification
Michigan has no workers' compensation class named "industrial design." Michigan's manual includes designers and drafting personnel in the clerical class (8810) when they're physically separated from other operations, and consulting engineers in 8601. Employees who build prototypes in a shop need their own manufacturing class, with separate payroll records. See our post on Michigan class codes.
Frequently Asked Questions
Do industrial designers need professional liability insurance?
Yes. Design errors usually cause financial loss, which general liability doesn't cover, and many general liability policies carry a professional services exclusion. A professional liability policy written for design services is the core of a design firm's program.
Can a product designer be sued for a defective product in Michigan?
Yes. Michigan's product liability statute defines production to include design, and plaintiffs commonly name the designer along with the manufacturer. The limitation period is three years, and Michigan has no general statute of repose for products.
Does general liability cover intellectual property claims against a design firm?
Generally not. The standard general liability form excludes intellectual property infringement except for certain claims arising from your own advertising. IP coverage usually comes from a professional or technology errors and omissions policy that includes it, or a standalone IP policy.
Are CAD files covered by a property policy?
Often not adequately. ISO's valuable papers form excludes converted data and programs, and a standard property policy may limit electronic data. Recovering lost design files is usually handled through cyber or electronic data coverage.
The bottom line
A design firm's program has to cover the work product, not just the office. Professional liability, product exposure, IP and your files are where the real risk is.
We work best with established Michigan industrial and product design firms — payroll on the books, real client contracts, and a few years of loss history. For most of our commercial clients, $1 million per occurrence is the floor for liability, with an umbrella above it. Send us your current declarations pages, a sample client contract, a description of your services and the industries you design for, and your loss runs, and we will tell you where the gaps are before we talk about price. J. Jacobs & Associates has insured Michigan businesses since 1981, and as an independent agency we take your program to multiple preferred commercial and professional liability carriers. Call (248) 693-6455 or start with our professional liability page.