» Product Recall Insurance: Coverage Myths and Misconceptions
November 26, 2018
Most believe a product recall event would have coverage under a general or product liability policy–this is a dangerous misconception. Most policies only go into effect if there is bodily injury or property damage, but exclude contamination or recall events without the presence of a defined coverage occurrence or claim.
In today’s market, consumable, non-consumable products and operations providing components or larger products are being brought into these recall issues. While some companies may never face a product recall matter there are developing statistics to take note:
- In 2017 the CPSC (Consumer Products Safety Commission) reported 280 recalls, and thus far, in 2018 the CPSC reported 232 recalls.
- There has been an increase in the number of reported recalls that never hits the media.
- Many more companies are experiencing their first recalls and find out too late they do not possess adequate coverage for the expenses involved in a recall.
Consider the following “what ifs” about your product:
- What do we do about products in the same batch or production line that have not put to intended use in the marketplace?
- What about expenses related withdrawal from the market, destruction, and restocking/replacing?
- What about a loss revenue to your business or your customer?
- What if the Government Entity forces a business to recall its product after years of R&D expenses?
These exposures are considered a first-party loss and are often overlooked as part of a company’s risk management strategy. This coverage exclusion has the potential to cost your business for the long-term due along with reputational damage along with the loss of sales for months or even years.Download the free checklist to evaulate your brokers