Legal Definitions - sistership exclusion

Definition: Sistership exclusion is a provision in some commercial general liability policies that excludes coverage for damages arising from the withdrawal, inspection, repair, replacement, or loss of use of the insured's product or work, to the extent that the product or work is withdrawn or recalled from the market because of a known or suspected defect or deficiency.

Example: A company manufactures a toy that is found to have a defect that could cause harm to children. The company issues a recall of the toy and offers refunds or replacements to customers who purchased it. If the company has a sistership exclusion in their liability policy, they may not be covered for any damages or losses resulting from the recall.

This example illustrates how a sistership exclusion can limit an insurance policy's coverage for damages resulting from a product recall. In this case, the company may have to bear the financial burden of the recall themselves, rather than relying on their insurance policy to cover the costs.