» 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
Posted by Rachel Clark in Mitigate Risk With A Cyber Insurance Policy