Date: Oct 01, 2013
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Produce contamination events continue to occur periodically throughout the industry, causing lost revenue and extra expense for producers.  In spite of the best efforts of producers to protect produce from contaminants, produce recalls are going to happen, even though many of the recalls are ordered on a precautionary basis and not the result of people actually getting ill.  Western Growers Insurance Services recently found a product recall policy with “produce refusal” coverage that addresses this specific issue.

Product recall insurance has been available for some time, but most policies have limited coverage for very specific situations and do not cover some of the costs incurred in a typical recall.  Most recall policies only pay for certain costs incurred when a grower’s own product/commodity is recalled.  These policies do not pay for expenses or losses when the produce recalled was grown/shipped by another grower.  For example, romaine lettuce may be recalled from a specific grower when testing identifies the presence of a pathogen.  If you also grow romaine lettuce, and consumers stop buying all lettuce out of fear of contamination, you will incur problems.  This “collateral damage” loss is not covered by most recall insurance policies.

This policy has an endorsement which provides coverage for recalls that are caused by a similar product from another company.  This endorsement is called “product refusal” coverage, and pays a grower’s recall expenses if buyers refuse to accept the product or ask for it to be removed due to a product contamination event in the marketplace.  This coverage does not require that the recall be caused by the policyholder’s product.  The policy pays for losses if a competitor’s similar product is recalled.  This addresses a major shortfall of most product recall policies and helps provide coverage that was previously not available to growers.  Although it does not provide coverage for all expenses related to a recall, it does help the grower recover some of their recall costs.

 Some of the more significant recall costs include:

  • Costs to remove the product from the shelves and destroy it
  • Costs to replace recalled product with a replacement product
  • Marketing costs of advertising to protect the reputation of the retailer and the grower
  • Cost of consultants to evaluate the most effective steps to deal with the recall
  • Extra expense to hire additional employees to handle phone calls and record recall issues
  • Costs to destroy any crop in the field that can’t be sold due to the recall

This “collateral coverage” is not available from most recall policies, but can be secured with this endorsement.  In addition, in some situations the grower may be held liable for some of their buyer’s costs involved with the recall, including the extra expenses incurred to remove the product from shelves, ship or destroy it, and replace it with other products.  This policy has another endorsement, “third party liability coverage,” which addresses this issue.  If this endorsement is added to the policy, it will pay for losses related to third party claims against the producer as a result of this kind of product recall.  Adding both of these endorsements, “product refusal” and “third party liability coverage,” to the policy provides extensive coverage that is not usually found in most product recall policies.

Growers spend a lot of time and money getting produce to the marketplace.  No recall policy will reimburse growers for all these costs.  In addition, there currently is no way for a grower to insure lost profit in the event of a recall.  A grower may be able to recover some growing costs by purchasing federal crop insurance.  However, crop insurance is not available for many crops and does not specifically cover losses due to a recall.  This produce recall policy and these endorsements provide coverage for situations that are not found in many standard product recall policies.

If you are interested in finding out more about product recall insurance or crop insurance, please contact your local Western Growers Insurance Services representative or Greg Nelson, AVP of Commercial Lines at (949) 885-2287 or

WG Staff Contact

Greg Nelson
Vice President, WGIS Sales

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