Isn’t Product Recall covered under a standard Public and Products Liability policy?
Businesses of all sizes involved in growing, manufacturing, importing, exporting, wholesaling, distributing and retailing food, beverage, cosmetics and pharmaceutical products need to have a Product Recall cover in place.
In most cases Product Recall is excluded under Public and Products Liability policies. If some limited cover is provided via recall expense cover, the coverage limit provided is normally very small compared to the overall exposure.
As Public and Products Liability policies do not cover the client’s own losses, there is no cover for replacement of the product, additional expenses to re-establish sales or loss of profits as a result of an insured event.
PRODUCT RECALL INSURANCE
The Australian Consumer Law (ACL) introduced the new law relating to consumer product safety and in particular a mandatory reporting regime that requires suppliers to report consumer product recall incidents where death or serious injury or illness has resulted.
Mandatory reporting was introduced by the Australian Consumer Law (ACL) on 1 January 2011. Suppliers are now required to submit a report within two days of becoming aware of a reportable incident.
WHAT DO I DO IF I HAVE A CONTRACTUAL OBLIGATION TO PURCHASE PRODUCT RECALL INSURANCE?
If you have a requirement by your distributors, retailers or wholesalers to hold product recall insurance we can provide coverage for the third party recall expense and loss of profits that these parties may incur as a result of an insured event.
HOW LARGE IS A TYPICAL CLAIM?
Product recalls are not the most common of claims but the financial impact can be severe.
WHAT ARE THE INSURED EVENTS?
- Accidental Contamination
- Malicious Product Tampering
- Product Extortion
- Government Recall
- Alleged Contamination
- Intentionally Impaired Ingredient
WHAT LOSSES ARE COVERED?
- Business Interruption
- Replacement Costs
- Recall Costs
- Third Party Recall Costs
- Consultants & Advisor Costs
- Rehabilitation Expenses
- Extortion Costs
AN ACTUAL EXAMPLE OF THE POTENTIAL IMPACT OF AN INCIDENT.
A manufacturer of chilled foods was contacted by their retailer customer, who advised of several reported customer complaints of possible contamination of the dessert products. As the manufacturer had a turnover of several million dollars, the contamination incident had the potential to cause a large loss to its bottom line. Once a contamination was identified, it was agreed that the products needed to be withdrawn from sale as they posed a threat of injury if consumed.
The following kinds and magnitudes of losses are typical of this type of incident; Replacement Cost: $53,500, Recall Cost: $40,000, Loss of Profit: $10,000 and Transport Cost: $5,000. Each case depends on its own facts, and this example provides an illustration of typical claim circumstances. These are the kinds of losses which can be covered by an appropriate Contaminated Products Insurance policy.
For further information or a confidential discussion about your situation, please contact:
ANDREW BOURKE, BRECKNOCK INSURANCE BROKERS
p +61 8 8413 6300
e andrewb@brecknock.com.au
