Annex to Circular 1008/2004 (H 27/04 M)

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Non-binding announcement by the Association of German lnsurers (GOV )
For optional use. Other agreements are possible.

Special Conditions and Descriptions of Risks for Recall Liability

lnsurance for Manufacturers and Commercial Companies
GDV Specimen Conditions
(Status: June 2004)

1. Subject matter of the insurance

1.1 Subject to the General Conditions of lnsurance for Liability lnsurance (AHB2) and the provisions set out below,
cover applies in respect of the Policyholder's legal liability for pure financial losses as defined in 2.1 AHB 2004
(Article 1, point 3, AHB 2002), arising out of a recall as defined in 2 that has been carried out

because of defects discovered in products on the basis of the results of adequate random sampling or
assumed to exist on the basis of other objective facts, or
by order of the authorities

in order to avoid bodily injury, and a claim has been made against the Policyholder in respect thereof.

1.2 For the purposes of these Conditions, "products" may mean both products manufactured, supplied or
distributed by the Policyholder and third-party products containing the Policyholder's products.

1.3 The Policyholder is also covered if, in order to comply with its statutory recall requirement, it carries out a
recall, as defined in 2, itself under the above conditions and suffers purely financial loss as a result.

1.4 No cover shall apply under this contract for claims arising out of bodily injury or property damage and any
indirect pure financial loss arising therefrom, as defined in 1.1, AHB 2004 (Article 1, point 1, AHB 2002).

2. lnsured event

Contrary to point 1.1 AHB (Article 1, point 1, AHB 2002 and Article 5,point 1, AHB 2002), the insured event is a
recall carried out during the validity of the insurance.

A recall is the request, based on statutory obligations, made

by the Policyholder,
competent authorities or
other third parties

to end-users, dealers supplying end-users, authorised garages or other workshops to have the products checked
by a competent authority for the defects indicated, and to have any defects found rectified or other specified
measures carried out.

Warnings of unsafe products also constitute recalls where, under statutory requirements, a warning is adequate
to avoid bodily injury.

3. Scope of the insurance cover

Cover applies only in respect of the costs of the following measures to avert danger, insofar as they are
necessary as part of a recall. lf the danger can be eliminated by any of a number of measures that are eligible for
the cover, cover shall only apply in the amount of the cost of the most economical insured solution.

The insurance covers the cost of

3.1 notifying end-users, dealers supplying end-users, authorised garages or other workshops, including the cost of
announcements through the media;

3.2 sorting the products affected by the recall;

3.3 transporting the products to the Policyholder or to authorised bodies;

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Gesamtverband der Deutschen Versicherungswirtschaft e.V.
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Al/gemeine Versicherungsbedingungen fr die Haftpflichtversicherung.
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3.4 checking the products affected by the recall, the check serving to identify which products suspected of
being defective are actually defective, and which of the products require the measures to eliminate the
danger that are insured under 3.5 to 3.10. Checking also includes the necessary sorting, segregation and
repacking of the products.

lf. however, it is likely

that, based on the defect rate observed or assumed to exist on the basis of objective facts, the cost of
checking the products affected by the recall plus the costs covered under points 3.5 to 3.1O

is higher

than the costs covered under points 3.5 to 3.1O in the event of all products affected by the recall
actually being defective,

cover shall be limited to the insurance benefits in accordance with points 3.5 to 3.10. In such cases, or
where it is only possible to ascertain whether the product is defective by destroying it, no proof that the
products suspected of being defective actually are defective will be necessary.

3.5 any temporary storage of the products affected by the recall, for a period of up to 3 months;

3.6 replacing defective products (but not the individual components thereof), i.e. the cost of dismantling, taking out,
exposing or removing defective products and installing, fitting, laying or applying non-defective products. The
insurance does not cover the cost of supplying new or replacement non-defective products from the policyholder
nor non-defective third-party products.

3.7 replacing defective components in products, i.e. the cost of dismantling, taking out, exposing or removing
defective components and installing, fitting, laying or applying non-defective components. The insurance does
not cover the cost of supplying new or replacement non-defective components;

However, the cost of replacing defective components will only be covered where the danger cannot be eliminated
more economically by supplying new or replacement non-defective products from the policyholder or non-
defective third-party products;

3.8 repairing defective products and replacemenUretrofitting measures, but only where the danger cannot be
eliminated more economically by supplying new or replacement non-defective products from the policyholder or
non-defective third-party products;

3.9 transporting replacement or re-supplied non-defective products as defined in 3.6, or individual spare parts as
defined in 3.7, or non-defective third-party products, with the exception of the cost of transportation to the
destination of the Policyholder's original delivery. Where the cost of direct transportation from the
Policyholder/third parties to the place where the danger is to be averted is less than the cost of transportation
from the destination of the Policyholder's original delivery to the place where the danger is to be averted, only the
cost of direct transportation will be insured;

3.10 the disposal/destruction of the products, where the danger cannot be eliminated by other means;

3.11 progress and efficacy checks.

4. lnsured risk

Cover applies solely to the products manufactured, supplied or distributed by the Policyholder, as specified in the
description of the risk given in the insurance policy.This does not include motor vehicles and aircraft or parts and
accessories that are clearly intended for use in motor vehicles or aircraft.

5. Coinsureds

Cover also includes the personal legal liability

5.1 of the Policyholder's legal representatives and of such persons as the Policyholder employs to manage or
supervise the insured plant or part thereof, whilst acting in that capacity, and

5.2 of other employees arising out of their activities for the Policyholder .

6. Risk limitations / Exclusions

No cover applies in respect of claims

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6.1 for costs resulting from products which, at the time of the recall, had not yet been supplied/handed over to the
end-user or dealers supplying the end-user;

6.2 arising out of recalls of genetically-modified products or products containing genetically-modified organisms;

6.3 for costs resulting from products whose use or effect with regard to their specific purpose have not been
adequately tested according to the state of the art or otherwise;

6.4 against the Policyholder or any Coinsured, where these have brought about the insured event by deliberately
failing to comply with statutory or official regulations, orders or warnings, or with the client's written instructions or
conditions;

6.5 arising out of recalls resulting from alleged, threatened or actual wilful and/or malicious product tampering;

6.6 under warranties or any other contractual extensions of liability;

6.7 in respect of costs other than those referred to in point 3, in particular

for the supply of new or replacement non-defective products (including individual components) including the
cost of transporting them from the Policyholder to the destination of the original delivery;

arising out of consequential losses, such as business interruption, lost production and loss of profits;

financial penalties or fines and the costs of criminal or administrative proceedings; this does not apply to the
costs of proceedings under administrative law brought at the lnsurer's instigation;

punitive damages.

7. Sum insured

The sum insured is EUR ...... each and every loss. The lnsurer's maximum liability in respect of all loss events
within any one policy year is EUR ......

8. Serial losses

Several loss events occurring within the policy's period of validity

arising out of the same cause, e.g. the same faulty design, manufacture or instructions, unless there is no
inherent connection between the several like causes, or

arising out of the supply of products affected by the same defects,

shall be deemed to have occurred on the date the first such loss occurred, irrespective of the actual date of
occurrence.

Point 6.3, AHB 2004 (Article 3, point III 2, paragraph 1, 3rd sentence, AHB 2002) is deleted.

9. Deductible

On each and every loss, the Policyholder shall bear EUR ......of the insured costs itself.

10. Time limit

Cover applies in respect of those loss events occurring during the policy's period of validity which occur within a
period of 3 years from when the product was supplied by the Policyholder.

Claims for costs caused by the Policyholder's products that were supplied before this policy came into force shall
be covered by special agreement only.
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11. Risks abroad

11.1 Contrary to 7.9, AHB 2004 (Article 4, point I 3, AHB}, cover also applies to losses occurring in other countries as
a result of products supplied by the Policyholder to other countries, or which the Policyholder has arranged to
have supplied to other countries, or as a result of the Policyholder's products which have gone to other countries
without the Policyholder having supplied them or arranged for them to be supplied there.

Where the loss event relates to products situated in the USA, US territories or Canada, cover shall apply only
following special agreement.

11.2 Contrary to 6.5, AHB 2004 (Article 3, point III 4, AHB), amounts paid by the lnsurer in respect of costs will
count toward the sum insured.

"Costs" as referred to in paragraph 1 means:

Lawyers', experts', witnesses and court costs; expenditure to avoid or minimise the loss at the time of or
following occurrence of the loss event, and claims investigation costs, including travel expenses not incurred by
the lnsurer itself. This also applies where these costs are incurred on the lnsurer's instructions.

11.3 In the case of loss events occurring in other countries, the lnsurer's payments will be made in euros. lf the place
of payment lies outside the countries belonging to the European Monetary Union, the lnsurer's obligations shall
be deemed to have been met as soon as the amount in euros has been transferred to a bank situated within the
European Monetary Union.

12. Provisional cover for new risks

The provisions of point 3.1 (3) AHB 2004 (Article 1, point II 2 c, AHB 2002) and point 4 AHB 2004 (Artic/e 2, AHB
2002), do not apply.

13. lncreases and expansions of the risk

13.1 Notwithstanding point 13.1, 4.1 AHB 2004 (Articles 8, point II 1, and 2, point 1, AHB 2002), the Policyholder shall
without delay declare any significant increases or expansions in the extent of its production or activities (3.1 (2)
AHB 2004 [Article 1,point 2 b), AHB 2002]} so that new premiums can be agreed and the conditions reviewed.

13.2 lf the Policyholder fails to comply with this duty of disclosure, the deductibles referred to in point 9 shall
increase in the case of loss events connected with such increases or expansions or with new risks, to EUR
......

14. Policy period

This policy is entered into for a period of one year with effect from the inception date stated in the certificate of
insurance. The policy will be automatically renewed from year to year, unless legally valid notice of termination is
given. The notice of termination shall be legally valid if it is received by the other party in writing no later than
3 months prior to any expiry date of the p o l i c y .