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of the insured’s products and it also can cover loss of income and the extra expenses incurred when a product has to be withdrawn from the marketplace.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.
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.
Endorsements available to extend coverage include:
- Cost to Refund, Repair or Replace Insured’s Product
- Worldwide Coverage
- Impaired Property Recall Response is available
Product recall coverage can be provided for both: first party and third party exposures. This very complicated and evolving insurance product is made simple when working with our casualty professionals. Let us help YOU with coverage forms best suited to your specific needs.
- All Types of Consumer Products
- Importers of Food (Non-Invasive)
- Medical Products
- Bottle Manufacturers
- Labeling & Packaging Companies
- Food Processors
- Ingredient Suppliers
- Raw Meal & Poultry
- Can Manufacturers
- Safety Products
- Food flavorings
- Small Farms
- Furniture & Fixtures
- Sporting Goods
- Growers of Food
- Toys & Games
- Household Appliances
Coverage is available for
- Loss due to adverse publicity
- Business interruption for loss of profits
- Accidental contamination & malicious tampering
- Extra expense lo rehabilitate insured’s brand name
- Costs associated with having to withdraw and dispose of products for the named inured AND for the named inssured’s customers (third party)
- Product extortion
- Customers’ loss of gross profits
- Governmental recall
- Primary limits of $5,000,000 available
- High excess limits available depending On class of busines
- Minimum premium start at $2,500
Coverage A pays the first party expenses associated with the recall, such as notification, shipping, warehousing and additional personnel. Through attachment of an endorsement, Coverage A can be extended to include the cost of repair, replacement or refund of the product.
Coverage B provides coverage for the claims by third-parties seeking damages due to a product recall. Coverage B may be extended by endorsement to cover liability for impaired property. The optional impaired property endorsement provides coverage for the insured’s products being incorporated into another company’s product and causing it to not function properly.
Contaminated Products Insurance
Designed for food and beverage companies, Contaminated Products Insurance covers losses associated with malicious product tampering and accidental product contamination. Coverage encompasses the far-ranging costs associated with these incidents, including the costs of the recall itself and related business interruption, business rehabilitation and consultant expenses.