What type of liability coverage offers the best protection for a business against unknown product defects?

An occurrence policy offers the best protection for a business against unknown product defects because it covers any incidents that occur during the term of the policy, regardless of when the claim is reported. This means that if a product defect leads to an injury or damage to a third party, and the incident occurred during the time the occurrence policy was active, the business is covered even if the claim is filed years later, after the policy has expired.

This is particularly important for product liability, where defects may not be discovered until long after the sale of the product. Since the coverage is linked to when the incident occurs rather than when the claim is made, it provides reassurance for businesses that they are protected against unforeseen issues that may arise from products they have sold.

In contrast, claims-made policies generally require that both the incident and the claim occur within the policy period, which can leave gaps in coverage for claims related to events that happened outside that timeframe, even if the product defect existed when the policy was active. Additionally, while options like the claims-made policy with an extended tail provide some extended coverage, they may still have limitations compared to the comprehensive nature of an occurrence policy.