When “Made in Mexico” Meant Litigated in Texas
The bus never made it to the maquiladora.
On a stretch of road outside a small Mexican town, a company bus carrying young workers to their shift at an American-owned garment plant overturned and caught fire in a drainage ditch. Twenty-six people were killed or injured. The workers were Mexican citizens. The accident happened entirely on Mexican soil. The subsidiary that owned the bus was a Mexican company.
By every conventional measure, this was not America’s legal problem.
The parent company, Salant Corporation, thought so too. When the victims’ families filed suit, Salant moved to dismiss — arguing the case belonged against its Mexican subsidiary, in a Mexican court, under Mexican law. It seemed like an easy motion to win.
It wasn’t. A Texas court found that Salant’s Texas office made key operating decisions for the Mexican plant — enough control, the judge ruled, to keep the company answerable in a U.S. courtroom for an accident that happened thousands of miles outside it. The case that was never supposed to leave Mexico ended up settling for $30 million.
Here’s the part that should stop every risk manager mid-sip of their coffee: Salant almost certainly had general liability coverage. It just wasn’t the right coverage. Most domestic GL policies are built around a simple, comfortable assumption — that the company’s operations, and its exposure, stay within U.S. borders. The moment a subsidiary, a contractor, or even a single business decision crosses into another country, that assumption quietly stops being true.
That’s the gap Foreign General Liability insurance exists to close.
Why “We Have GL Coverage” Isn’t the Same as “We’re Covered Overseas”
Most standard Commercial General Liability (CGL) policies in the U.S. are written with a “coverage territory” clause — language that limits where a claim will actually be paid. Typically, that territory is the United States, its territories and possessions, Puerto Rico, and Canada. Some policies extend slightly further for short business trips. Almost none of them anticipate a bus accident in rural Mexico, a warehouse fire in Vietnam, or a slip-and-fall at a trade show in Germany.
That doesn’t mean the exposure isn’t there. It means the exposure is uninsured — or worse, the company doesn’t find out it’s uninsured until a lawsuit is already underway, the legal bills are stacking up, and someone is combing through the policy’s fine print looking for a way out that doesn’t exist.
Although the Salant case is over 20 years old, it continues to be instructive because it shows how a company can be pulled into U.S. litigation even for an accident that happened entirely abroad, simply because a U.S. entity was found to exercise enough control over the foreign operation. This is not a fringe legal theory. Courts have repeatedly allowed suits against U.S. parent companies for the actions — or accidents — of their foreign subsidiaries, when the parent’s involvement in day-to-day decisions was significant enough to blur the corporate line between “them” and “us.”
In other words: the more control a company exercises over its foreign operations, the more legal exposure it may be creating back home — exposure a domestic GL policy was never designed to absorb.
What Foreign General Liability Actually Covers
Foreign General Liability (FGL) fills that gap by extending liability protection to a company’s operations, employees, products, and premises outside its home country. Depending on how it’s structured, it typically responds to:
- Bodily injury and property damage claims arising from company operations conducted abroad — whether that’s a corporate office, a manufacturing facility, a job site, or a company vehicle.
- Products liability exposure when goods manufactured or distributed domestically cause injury overseas, or vice versa.
- Claims brought in foreign courts, including the cost of local counsel, foreign judgments, and settlements — often in jurisdictions with very different legal standards, damage caps, and procedural rules than the U.S.
- Coverage in countries requiring “admitted” insurance — many countries legally require that liability coverage be purchased from a locally licensed insurer, not simply added as an endorsement to a U.S. policy. Operating without a locally admitted policy can mean the coverage isn’t just insufficient — it may not be legally valid at all.
That last point trips up more companies than almost anything else in this space. A U.S. business can genuinely believe it has purchased adequate foreign coverage, only to discover after a loss that the policy wasn’t compliant with local insurance regulations — leaving the claim, and the company, exposed regardless of what the policy documents say.
Who Actually Needs This Coverage
FGL isn’t just for multinational conglomerates with factories on five continents. It’s relevant for:
- Companies with any foreign subsidiary, branch office, or joint venture, especially where the U.S. parent is involved in operational decision-making.
- Businesses that send employees abroad — for sales, installation, training, inspections, or short-term assignments.
- Manufacturers whose products are sold, distributed, or used internationally, even through third-party distributors.
- Companies that contract with foreign vendors, agents, or subcontractors where a shared premises or joint operation creates overlapping liability.
- Organizations attending international trade shows, conferences, or client visits on a regular basis.
The common thread isn’t size — it’s footprint. The moment a company’s people, products, or decisions touch foreign soil, the question isn’t whether foreign liability exposure exists. It’s whether anyone has actually looked at the policy to check.
The $30 Million Question
Salant’s leadership almost certainly never expected to be answering to a Texas jury for a bus accident in Mexico. That’s exactly the point. Foreign liability exposure rarely announces itself in advance — it surfaces after the accident, after the lawsuit is filed, after the coverage gap has already become the company’s problem instead of the insurer’s.
The question worth asking before that happens isn’t “do we do business internationally?” It’s: if something happened tomorrow at our facility, office, or job site overseas — or because of a decision made from our U.S. headquarters — would our current policy actually respond? For a growing number of companies, the honest answer is no. And that’s a $30 million lesson worth learning from someone else’s case file, not your own.
Have questions about how this could affect your business? Contact Us to learn more.
