Product recalls can be extremely costly and complex as well as damaging to a company’s reputation. Why would your client want to take this risk?
Often times, companies believe their general liability (GL) or product liability (PL) insurance policies will cover product recall losses when in fact, it is often excluded. For example, GL does not address business interruption or the decrease in revenue related to a contamination event. Nor, does it cover reputation damage or the revenue lost from adverse publicity. GL may cover the expenses and medical bills of a third-party sickness caused by your product, but not the numerous other losses that can result from a recall.
While there can be extensions added to a GL or PL policies that will offer some coverage for product recalls, the sublimit is generally low and limited to first-party expenses only and typically don’t cover the financial losses or recall expenses of the insured’s customers, which can be a significant portion of the loss.
On the other hand, standalone product recall and contamination coverage can effectively fill the gap and help mitigate your client’s risk.
Here are some examples:
- Stock Throughput Policies (STP) – This coverage is designed for companies that distribute or import/export merchandise. The policy covers all moveable goods including raw materials, semi-finished and finished products. Berkley Global Product Recall policies are complementary for insured products during distribution (transit) and storage. The STP policy coverage better aligns for transit related losses while the CPI or Recall policy would respond to the non-product related loss and third-party liability caused by an insured occurrence.
- Property (All Risk) – This insurance covers all risk of direct physical loss or damage to the insured property, unless excluded. Berkley Global Product Recall policies are complementary for losses arising from perils covered under the property policy during production and manufacturing. Not all policies will cover contamination, however, where there is covered loss or damage to property, i.e., infestation or chemical seepage, the property policy should respond on a primary basis. The CPI or Recall policy would then respond to the non-product and any third-party losses caused by the insured event.
- B&M Equipment Breakdown (Broiler & Machinery) – This insurance covers the financial expense of repairing or replacing damaged equipment as well as business losses incurred due to equipment malfunction. A B&M policy should be primary for the equipment damage and corresponding business losses. The CPI or Recall policy can complement this coverage with third party liability and business interruption as well as extra expense.
Disclaimer: Berkley Global Product Recall is pleased to share this material with its customers. Please note, however, that nothing in this document should be construed as legal advice or the provision of professional consulting services. This material is for general informational purposes only, and while reasonable care has been utilized in compiling this information, no warranty or representation is made as to accuracy or completeness.