By Chad Klein, Sales Executive, WGIS

It is a common misconception that product recalls are covered under a general or product liability policy. Those coverages do a good job of covering bodily injury and property damage, but generally exclude contamination and recall events. This is referred to as the sistership liability exclusion. The addition of a product contamination or product recall policy protects a company’s bottom line by covering the direct costs of recall, but transferring the risk is only one part of closing the recall exposure gap.

Every company with products on the market, regardless of size, should establish solid product risk management policies and procedures for handling a recall or contamination event.

Insurance for first-party losses caused by product tampering and contamination incidents are broadly labeled as product recall insurance. Product recall policies help to cover the additional costs of a recall, including product loss, costs to withdraw the product from market, product disposal, product testing, overtime wages and crisis management—costs that can be devastating because they arise at a time when a company’s revenues are typically hit hardest.

Here are the top three mistakes your broker may have made when they sold you Product Recall Insurance:

• They don’t fully understand your company’s exposures and what steps you take to reduce foodborne contamination. Your company was generically presented to underwriting and did not receive best-in-class rates and terms. We use a proprietary process to uncover and outline how you actively prevent contamination in order to present you in a way where underwriters fight to win your business.
• Your broker doesn’t understand product recall insurance, so they use a third party to source coverage. You don’t have an advocate at the table who will add and delete the specific endorsements in order to design a policy that responds to your company’s specific needs. Work with a subject matter expert who has partnered with underwriters to design and build policy tailored for the fresh produce industry.
• Your broker didn’t vet the crisis consultant team and has no in-house product recall claims experience. In the event of a claim or incident, you receive poor advice that causes the increased cost to the claim and damage to your brand. Partner with a broker who has a relationship with proven crisis consultation providers and has a tested internal claims team to guide you during the event. That broker would be Western Growers Insurance Services. We’ve spent the last eight years building institutional expertise and capabilities for the agriculture and food industries.

For more information, please contact me, Chad Klein, at [email protected].