Product defects, and resulting product recalls, can be a significant test for businesses in many industry segments – food & beverage, automotive, medical device, pharmaceutical, restaurants, consumer goods and so on – up and down the supply chain. These challenges are constantly evolving in part due to the fluctuation of product recall risk levels. An incident requiring the recall of affected product can be a very costly and logistically complex process, which can significantly impact commercial relationships, and can result in costly brand damage and loss of market share. As regulatory oversight expands and global supply chains become increasingly complex, manufacturers, their supply chain and those who become legally liable for the product downstream must be able to recognize their potential exposure to a product recall, be proactive vs. reactive, be able to mitigate its risks quickly and efficiently, and be in a position to maximize its cost recovery options.

In 2019, there were
337
food recalls in the U.S. alone.1
Undeclared allergens accounted for
52%
of food recalls in 2019.1
20M+
pounds of food recalled in 2019.2
Approximately
80%
of a food and agribusiness loss from a food-borne illness event applies to losses not included in the scope of a standard general liability policy.3,4
 

1 https://www.foodsafetymagazine.com/enewsletter/a-look-back-at-2019-food-recalls/
2 https://www.fsis.usda.gov/wps/portal/fsis/topics/recalls-and-public-health-alerts/recall-summaries
3 https://www.delish.com/food/news/a37332/new-report-shows-foodborne-illness-costs-77-billion-dollars-annually
4 https://www.foodsafetynews.com/2014/10/foodborne-illnesses-cost-usa-15-6-billion-annually

The Gallagher Product Recall team offers dedicated specialists who spend 100% of their time advising clients on these risks. The team offers a comprehensive examination of each client’s exposure and helps to “best position” clients from loss mitigation and cost recovery standpoints. Our product recall experts help each client evaluate its unique exposures and negotiate custom tailored Product Recall, Product Contamination and Restaurant Contamination insurance coverage to address the risk. These same dedicated experts provide comprehensive service, including claims advocacy and forensic accounting, contractual feedback as related to recall liability (and more), regulatory consulting, coverage advisory and risk management solutions to help our clients from production to distribution within its industry sector.

Product recall insurance coverage

With hands-on industry experience, our Product Recall team seeks to understand your unique risk needs and tailors a risk management program that proactively and comprehensively maps out a financial recovery strategy beyond transactional insurance placement, including a response plan for a contamination event. Our Product Recall team works with our clients in assessing product contamination and recall risk exposure, navigating product defect incidents, governmental enforcement actions and reporting to corporate boards. We help to mitigate losses by working with you to create a business continuity plan and training for your team.

We work directly with leading carriers around the globe to design a program to properly respond to your risks and to prepare you and your business should you experience a product recall event. Some common cost recovery obstacles include: 

  • Limited recall claims experience and resources
  • Failure to financially plan for or insure an event
  • Misunderstanding/misapplying contractual language
  • Gaps in or confusion about breadth of other insurance coverage
  • Poor communication across departments
  • Underestimation of impact on brand or reputation
  • Impact on supplier and/or customer relationships

Understanding coverage gaps between product liability insurance and product recall insurance

A product recall is the action of removing a batch(es) or hours, days, months or years of production run(s) of products from the marketplace. This could be for an assortment of covered incidents as available by the underwriting community (depending on the product class) ranging from posing risk to bodily injury/property damage to malicious tampering to products simply not working properly. Our product recall insurance coverage, once properly designed based on your risk and preferences, helps to mitigate that risk.

For example, according to the USDA, approximately 80% of food and agriculture losses from a food-borne illness event apply to losses not included in the scope of a product liability policy. Understanding the differences between product recall insurance and product liability insurance will help your organization avoid significant financial losses and minimize business interruption which can harm your balance sheet and enterprise value.

While product liability insurance policies may not completely cover your losses resulting from product contamination, product recall insurance can help minimize risk exposures and protect your product driven business.

General/Product Liability Insurance Product Recall Insurance
Triggered by actual bodily injury or property damage.

Food & Agribusiness: Triggered by actual or imminent bodily injury or property damage due to an accidental or malicious contamination.

Non-Food: Triggered by actual or imminent bodily injury or property damage arising from a defective product, and where applicable to the risk, property impairment of a third-party product.

Covers:

  • Suffering/anguish/expenses arising from bodily injury
  • Damaged third-party property

Excludes:

  • Recall efforts
  • Your product value/replacement 
  • Business interruption 
  • Brand rehabilitation 
  • Crisis consulting
  • Your customers’ economic loss
     

Covers:

  • Recall and replacement costs
  • Business interruption
  • Brand rehabilitation
  • Crisis consulting
  • Your customers’ economic loss

Excludes:

  • General liability covered losses

Mitigate potential business interruption with loss control expertise

Our loss control experts have the product industry expertise to help you plan an effective business continuity and loss control plan. We offer simulation exercises conducted from both an operational and financial/cost recovery standpoint with a particular focus on supply chain and business interruption.

Choose Gallagher for your product recall insurance

With a rapidly growing coverage specific team of experienced, creative and innovative brokers, attorneys and forensic accountants, this group is equipped to support its clients with a broader scope of service. We work with you to create a custom tailored policy as a part of your overall risk management program that meets your risk needs and provides guidance prior to, and through a crisis event. Our experts have the demonstrated capabilities backed by Gallagher’s global resources to help you mitigate your risk in a cost-effective manner should you experience a product recall-related risk, so you will be able to face the future with confidence.

Product Recall Insurance Summary

  • Experts in product recall, contamination, FDA/USDA regulations, and forensic accounting
  • Dedicated coverage/claims consultancy and advocacy
  • Industry loss control expertise with event-specific simulation exercises

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