Liability Risk Trends That Are Driving Higher Recall Claims Costs

Liability Risk Trends That Are Driving Higher Recall Claims Costs
David Fiske

Senior Vice President, Branch Manager

Lori Hunter

Executive Vice President

November 6, 2020

This year, many industries have experienced a record number of product recalls as well as product liability claims. As a result, both recall and liability claim trends are on the rise. Today, we’re experiencing some of the largest claims payouts the nation has seen in a very long time, with jury awards and settlements growing to the tens of millions of dollars. The following are two key drivers behind the recent surge in product liability/recall risks that are increasing claims and settlement costs.

More Auto Recalls and Rising Repair Costs
The government and auto manufacturers are tasked with keeping drivers and passengers safe. Unfortunately, things don’t always go as planned when vehicles roll off the assembly line and hit the open road. From faulty ignition switches to braking and airbag issues, the automotive sector continues to account for a large number of product liability and product recall losses.

In fact, in the first six months of 2020 there were nearly 1,000 vehicle safety recalls in the U.S. In addition to the growing number of cars being recalled, the industry has experienced a substantial jump in the price of parts, as well as labor costs, due to the need for a more experienced workforce to complete repairs on today’s tech-advanced vehicles. This has resulted in higher recall costs and higher liability claims costs.

Rising Number of Food Risks and Recalls
According to a joint study by Willis Towers Watson, the average cost of a recall to a food company is around $10M in direct costs and includes brand damage, lost sales, response team set-up, press activities and other fixed costs. While the number of food recalls was down slightly at the height of the pandemic (primarily due to the lack of inspections being performed), food recall events have continued to increase this year. As a result, the number and size of claims being filed by growers, packers and shippers is not decreasing.

On the product liability front, when individuals become ill after consuming a contaminated product, not only are there liability costs from third-party bodily injury, but there can also be other monetary losses such as loss of income/potential income and claims costs involving non-economic compensatory damages that can include pain and suffering, emotional trauma and loss of consortium. Social media has also helped to perpetuate growth in the number and size of product liability and product recall claims, as it can be used as a catalyst for quickly spreading bad news about a company through a variety of online platforms.

From attorney and court fees to settlements, expenses related to a lawsuit involving defective or contaminated products can add up quickly. Today, more than ever, it is important to educate your clients on the fact that a recall isn’t likely to be covered under their more traditional insurance policies, and to ensure they are protected against a costly recall incident.

At Worldwide Facilities, we are committed to staying informed and providing the resources that our retail brokers need during this challenging time. To learn more about our products and services, or for coverage questions, please contact David Fiske at (312) 465-5305 or, or Lori Hunter at (213) 236-4585 or

Looking for a specific solution?