Food recalls, product defects, contamination events, oh my.
These are just a few examples of the potential food contamination disasters that can detrimentally disrupt the supply chain and quickly become a major financial nightmare for all parties involved. Costs from a product recall or contamination can easily cripple even the most conscientious organizations, and understanding the roles and purposes of the different types of insurance coverage involved can be the difference between losing money and losing your company.
A recent study by the Food Marketing Institute and Grocery Manufacturers Association estimated the average cost of a recall for food companies to be $10 million in direct costs, plus brand damage and lost sales. Take, for example, the salmonella contamination that triggered the peanut butter recall in 2009, costing peanut producers nearly $1 billion. Or the beef recall in 2008 in which Hallmark/Westland Meat Packing Company paid close to $500 million after recalling 143 million pounds of meat products, following an investigation into animal cruelty.
Having proper product contamination insurance coverage, product recall coverage and product liability coverage is crucial to surviving a contamination event. More importantly, these lines of insurance need to be tailored to fit the individual needs of each company. That’s where Western Growers Insurance Services’ (WGIS) latest resource in loss control and claims management, Western Growers Shield®, comes in.
The Shield is Western Growers’ (WG) newest solution that can guide food and agriculture companies through managing a recall-related event, mitigating exposure and preventing future recalls. Unlike other insurance brokerages, WGIS specializes in agribusiness and food clients, and knows exactly what the industry’s needs are when it comes to loss control.
“Many times, companies avoid getting coverage because they feel that the policies don’t apply to them, are too expensive or are simply just too complicated to understand,” said Jeff Gullickson, WGIS senior vice president. “The Shield is a comprehensive program and not an ‘off the shelf’ insurance policy.”
The program covers three distinct segments—pre-event planning, event response and post-event recovery—and also offers resources and expertise dedicated to assist members in those areas. The WGIS team of experts understands that each contamination event has a different fingerprint, and solutions must be developed based on the exact circumstances of a specific outbreak. Through a consultation process where specific business needs and risks are discussed, knowledgeable WGIS representatives assemble a complete and ideal solution.
There are multiple building blocks available in the Western Growers Shield®:
• General Liability: Specific coverage for damage or injury to others caused by products and operations (i.e., someone gets ill from eating product).
• Property: An insurance program where the client receives continuous and unbroken coverage for damage to the products, including shipments from all destinations, no matter where they are in the world.
• Workers’ Compensation: A high-level solutions program that provides workers’ compensation policy coverage from A-rated carriers and specializes in loss prevention and claim cost mitigation services to ensure members have the right risk management strategy in place. The program helps minimize claims, reduce premiums and lower the costs associated with workers’ compensation.
• Product Recall and Loss of Market (Contaminated Products Program): A recall and contamination coverage program that helps manages all risk related to a recall. WGIS walks businesses through the steps of understanding the costs of a recall, managing economic risk and planning for financial recovery.
With the last component of this comprehensive insurance coverage program finalized earlier this year, WG is currently working with members to develop the perfect solution for their business needs. The WGIS team worked with Harold McClarty, president of HMC Farms and WG board member, to develop a tailored Contaminated Products Program.
“Harold was committed to buying recall coverage from another vendor, but heard about the potential offerings of The Shield at a past Western Growers Board Meeting and decided to hold off. We went through a number of iterations to ensure that this was the perfect program for HMC Farms,” said Gullickson.
A turnkey solution was provided for HMC Farms, allowing McClarty to better prepare for, manage and recover from a contamination event.
“They did a great job, put a lot of hard work and research to give us a good product that I hope I will never use,” McClarty said.
WGIS leverages its proprietary approach, industry partnerships and access to multiple carriers across global markets to deliver a comprehensive recall management solution. For example, WG’s new strategic alliance with JLT Specialty USA offers customers direct access to international insurance carriers, provides the opportunity for clients to tap into 140 offices around the world and gives WG members the ability to meet specific company needs with the help of subject matter experts.
WG collaborated with JLT to create the “property” component of The Shield. This industry-leading cargo insurance coverage solution and administration platform is exclusively available to WG members and provides ag-related companies with an insurance program, as well as continuous and unbroken transit coverage for all product shipment to and from all points on the globe.
Mission Produce, the world’s leader in producing, distributing and marketing fresh Hass avocados, recently purchased the cargo protection program from Western Growers.
“The experience demonstrated WG’s knowledge in the field and their willingness to tailor a solution to meet our needs,” said José Maldonado, director of global logistics at Mission Produce. “We are very satisfied with the product and the experience in general.”
WGIS is taking it a step further and is collaborating with other agriculture organizations to bring the solution to the industry. WGIS recently entered into formal marketing agreements with United Fresh Produce Association and Almond Alliance of California. Under the partnerships, United Fresh and Almond Alliance will promote The Shield to their respective members and work together to provide several other proprietary WG solutions to the fresh produce industry.
Merely having insurance coverage, however, is not enough to eliminate the potential for disputes and litigation in cases of contamination disasters; nor does it guarantee a swift settlement of a claim. Companies need to have trusted professionals who can expertly navigate them through a crisis—as well as before and after an incident—to ensure that the policies in place address first and third party coverage. Experts on the WGIS staff are committed to working with agribusinesses to create a highly-customized solution to reduce exposure of a brand and balance sheet to losses.
The individual types of coverage under Western Growers Shield® fit together like a puzzle to create the right fit for each individual business. To take the next step in shielding your company from the vulnerabilities inherent in product recalls, call WGIS at 800.333.4WGA.
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