What’s In A Product Recall Policy?

David Fiske

Senior Vice President

Lori Hunter

Executive Vice President

June 12, 2019

Product recall insurance is vital for protecting businesses against financial loss. But do your clients understand how they’ll be covered under their product recall policy? 

The number of product recalls has increased exponentially over the past 10 years. Unfortunately, when a recall occurs it is often prohibitively expensive, affecting a business both financially and reputationally. Whether your client’s exposure is manufactured goods or food-related products, having the right insurance coverage for every recall situation is critical. For example, coverage for consumer parts and products will differ from recall coverage for products that are consumed. Here, we’ll look at the basics of both. 

Recall Insurance for Consumer Parts and Products

For consumer parts and products, product recall insurance is a two-part coverage.

Coverage A provides coverage for first-party expenses that are directly associated with a product recall event and typically includes:

  • Shipping costs
  • Disposal of products
  • Warehouse and storage expenses
  • Personnel expenses to conduct the recall 
  • Costs for notifying customers, retailers, and distributors

Coverage B provides protection for damages or third-party expenses sustained due to a product recall and typically includes: 

  • Losses due to the business interruption of others
  • Costs associated with repairing and restoring a company’s reputation
  • Additional costs for purchasing substitute goods to replace the company’s products
  • Third-party expenses associated with a recall of a product that incorporates the business’s

Recall Insurance for Consumable Products

Insurance coverage for consumable products differs from a consumer parts and product recall policy. For companies that produce edible products, Contaminated Product Insurance is a vital part of an insured’s risk management.  Contaminated Product Insurance helps mitigate expenses in the event of a product recall caused by a product contamination, whether accidental or malicious. For consumable products, contaminated product insurance includes coverage for events or incidents triggered by:

  • Accidental Contamination
  • Malicious Tampering or Contamination
  • Product Extortion
  • Government Recall

When looking at individual policies for consumer parts and products and consumable products, critical coverages that should also be considered include:

  • Product extortion coverage
  • Product refusal coverage
  • Intentionally impaired ingredients
  • Coverage due to a U.S. government-mandated recall
  • Crisis management services in the event of a recall
  • Assistance with governmental agencies, media, and clients during and after a recall event

Your clients may think that their general liability policy alone will provide them with protection against a product recall when in fact, it is often excluded. Generally, when some coverage is provided under a general liability policy, it is often very limited. The best way to mitigate product recall risks is with a stand-alone product recall or contamination product insurance policy. 

At Worldwide Facilities, we work with you to customize product recall coverage based on your client’s industry and product type, with primary limits up to $5 million and excess markets with capacity up to $100 million. For more information, please contact: David Fiske at (312) 465-5305, dfiske@wwfi.com or Lori Hunter at (213) 236-4585, lhunter@wwfi.com.

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