A regional manufacturer of industrial components in southwestern Ontario experienced a catastrophic equipment failure that damaged a customer's production facility and caused significant business interruption losses. The customer, a large automotive parts supplier, filed a claim against the manufacturer alleging defective product design and inadequate quality control. The total claimed damages exceeded $8 million, encompassing property damage to the customer's facility, replacement costs for the failed components, and consequential business losses from 4 months of reduced production capacity.

The manufacturer maintained what appeared to be comprehensive insurance protection. A commercial general liability policy with $2 million per occurrence limits and a $5 million aggregate had been in place for 7 years with one insurer. An umbrella liability policy providing $10 million in excess coverage sat above the primary CGL, placed with a different insurer 3 years earlier when the manufacturer expanded its customer base to include larger industrial clients. A professional liability policy covering design errors, carrying $3 million limits, had been purchased 18 months before the loss following advice from the company's insurance broker. The manufacturer also held product recall coverage and a separate errors and omissions policy inherited through an acquisition 2 years prior.

When the claim arrived, the manufacturer notified all potentially responsive insurers. The primary CGL insurer acknowledged coverage but reserved rights regarding the design defect allegations. The umbrella carrier questioned whether proper attachment had occurred and raised concerns about the underlying policy's "other insurance" clause. The professional liability insurer disputed that the claim fell within its coverage grant, pointing to exclusions for bodily injury and property damage. The inherited errors and omissions policy contained a prior acts limitation that created uncertainty about coverage for design work predating the acquisition.

Within 60 days of the initial claim notification, the manufacturer faced conflicting coverage positions from 4 insurers, 2 reservation of rights letters, and a customer demanding immediate payment to preserve the commercial relationship. The broker who had assembled the coverage program over multiple years had not conducted a comprehensive stacking analysis, and the policies contained conflicting other insurance clauses—some pro rata, some excess, and one containing an escape clause that purported to void coverage entirely when other insurance existed. The manufacturer's risk manager discovered that no single document mapped how the various policies were intended to coordinate, and the total theoretical limits across all policies bore little relationship to the actual recoverable amount once policy interactions were properly analyzed.