What Are Nonmerchantable Goods?

Nonmerchantable refers to goods or products that are not suitable for sale in the open market due to their nature, quality, or condition. These goods may be defective, damaged, or otherwise unfit for use, and cannot be sold as new or at a profit. Nonmerchantable goods may include items such as seconds, rejects, or overstocked inventory that cannot be sold through normal channels.

In the context of insurance, nonmerchantable goods are often excluded from coverage under commercial property policies. This means that if a loss occurs to these types of goods, the policy will not provide coverage. For example, if a company has a warehouse full of defective products that are not fit for sale, and those products are damaged in a fire, the policy may not cover the loss because the goods are considered nonmerchantable.

It is important for businesses to carefully review their insurance policies to understand what types of goods are considered nonmerchantable and what exclusions or limitations may apply. This can help avoid unexpected surprises when filing a claim.