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FOOD & BEVERAGE: Preparing for a Product Recall

Despite recall frequency and the potential for extraordinary costs, most companies don’t adequately plan, prepare and practice for – or buy insurance to protect against – product recall events. In addition to proper insurance covers, careful planning is essential in managing the risk of a recall.

There are two categories of exposure for a company faced with a product recall incident: first-party operational losses to the company and third-party liability losses to injured persons.

First-party loss is often overlooked. In addition to initial recall expenses, the potential long-term losses from the damage to a company’s reputation and loss of sales may continue for months or even years.

It is a common misconception that product recall is covered under a general or product liability policy. Those covers do a good job of covering bodily injury and property damage but generally exclude contamination and recall events. The addition of a product contamination or product recall policy protects your bottom line by covering the direct costs of recall.

Regardless of size, every company offering consumer products should establish solid product risk management policies and procedures for handling a recall or contamination event.

The three basic contamination perils when designing a risk management programme that provide the best protection for the least cost are:

  • Malicious tampering     
  • Accidental contamination    
  • Product extortion

So, what actions can be taken to eliminate the majority of threats, such as unwanted bacteria, disgruntled employees, malfunctioning equipment, sloppy suppliers or lax testing?

  • Total commitment to quality.       
  • Prepare with a continuity plan.       
  • Focus with training.          
  • Respond with expertise and decisiveness.      
  • Transfer risk where possible.

A solid product recall insurance programme is one that indemnifies for the host of increased expenditures and losses in revenue that come with product withdrawals.  Choose to work with ProAktive to ensure your product recall policy provides indemnity for:

  • Recall expense.    
  • Replacement cost.     
  • Lost profits.       
  • Brand rehabilitation expense.

Our team of experts can help secure the cover you need and collaborate with you to develop a business continuity plan that meets your specific needs.

By Sam Leeder

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