Product Recall Insurance Explained
Product Recall Insurance Explained
Product Recall History and Overview
The coverage has been around since the 80’s of XX’s Century. The first type of product recall insurance was called malicious product tampering, which only responded to malicious incidents. The limits were $3 million, with six-figure premiums. That’s the way it was for a couple of years. Slowly the book of business grew which allowed larger capacity and to sell higher limits of insurance as well as to expand the coverage. Because it’s catastrophic insurance in nature, when losses occurred, they are generally major. Businesses are not concerned with the smaller losses they can handle financially in-house. What they are looking for is protection from the large losses. So today, it’s financially plausible for small companies as well. When coverage first came out, because of the price tags and the minimum deductibles required, it was accessible only to large, multinational food companies. But now almost every insurer has a strategy to go after smaller businesses. Products Recall is designed to help the insurance manage the crisis of such an occurrence and help protect against product degradation and third party lawsuits.
Most Commercial General Liability policies do not provide coverage for the cost to recall products. Stand alone Product Recall insurance fills this gap because it provides coverage to the cost to recall, withdraw and dispose of the insured’s products and it also can cover loss of income and the extra expenses incurred when a product has to be withdrawn from the marketplace.
Recalls can happen because of mislabeling, malicious tampering, accidental contamination or for a variety of other reasons. Now due to new legislation. the FDA can mandate insured’s conduct recalls in some cases.
Coverage Parameters
Products Recall offers insurance protection in the event of a recall of an insured’s product. This protection includes coverage for the insured’s product recall expenses and liability to third parties kidnapping; bodily injury extortion; property extortion; product contamination extortion; trade secret/computer virus extortion; wrongful detention and hijacking.
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