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Product Recall Insurance

Today, more than ever, product recalls are affecting business owners in every industry. According to Chubb, from 2012-2016 the United States Department of Agriculture initiated over 500 recall events which involved more than 114,000,000 million pounds of product being recalled. A product recall can have severe financial impacts and could debilitate your business. Protecting your products and your reputation is vital to your business. This is where product recall insurance comes in.

Product recall insurance is designed to cover you and your business in the event a product recall affects your products.

If you are producing consumer products on your operation, you know the danger of a defective product going to market. One example of these dangers is if you are changing the product in anyway yourself. If you are sending your product to a processor to be altered or changed then that processor would most likely be responsible for any contamination or recall. However, if you are doing anything such as washing or packaging vegetables then you would be responsible. Being responsible in a recall situation could result in severe financial and reputation repercussions.

Our product recall insurance can help you navigate these unique situations.

Product recall coverage helps protect the following:
  • Product replacement
  • Loss of income from the sale of the product
  • Notification and communication expenses
  • Loss of reputation and consumer confidence
  • Rehabilitation expenses
  • Third party liability expenses

Product recall insurance sounds great and all but let’s address some of the more common misconceptions regarding this type of coverage.

I already have coverage under my general liability policy. General liability insurance is a third-party coverage and it typically does not cover product recall events. Product recall insurance is a first party coverage which protects you from financial loss and expenses in the event of a recall. These policies usually do not require your product to have caused actual bodily injury or property damage. 

We have everything under control. Human factor is always a consideration when looking at what causes a recall event. Mistakes happens and can hurt the financial and reputational stability of the business.

We have a strong quality control program. Even businesses with the most rigorous quality control programs have the potential to manufacture a defective, impaired, or adulterated product. These events can be triggered by the simplest deviations in the routine operations of a company, as well as through vendors or other entities utilized in the supply chain.

We carefully screen out suppliers. Even the most trusted suppliers can make a mistake. Such mistakes can fall back on your business in the event of a recall and can leave you open to financial losses.

We have never had a product recall incident in all of our years of operation. No business is immune from the possibility of having a recall event. Even those who have the best quality assurance programs can find themselves dealing with a product recall.

We pass all governmental inspections and have certification from third party auditors. Inspections and compliance with governmental standards do show a picture of critical features associated with the companies operation. However, they do not mean that accidents or production errors or defects won’t occur at some point.

We are a small business, so our risk is lower than those of big companies. Recalls do not discriminate on business size. Large businesses and small businesses both have the potential to be impacted by a product recall event. However, a smaller business is less likely to have the resources to handle the financial and reputational losses that can come with a product recall event.

Product recall insurance is too expensive. Product recall insurance is actually quite affordable. The specific cost will depend on your business and coverages chosen. You also need to consider what it would cost to recover from a recall event verses how much the product recall insurance costs you. Typically, your insurance costs will be significantly less than those of recovering from a recall event if you are uninsured.

At ASA, our product recall coverage offers a vary competitive rate structure and coverage options, so you can build a policy based on your individual needs.