Product Recall Expenses

Your latest product is sent to hundreds of customers. After a few days the complaints start to come in. There is a problem and you need to recall your shipments. You call your insurance agent who asks, “Was anyone hurt?” The answer is no, but their could be injuries if the items are left in the marketplace.

General liability insurance includes product liability (for most insurance buyers). The policy will pay for the liability resulting from bodily injury and property damage from contaminated or unsafe products. The standard policy will not cover the expense of recalling suspected or actually tainted products – even if leaving the product on the shelves would cause covered claims.

Some insurance companies do offer recall coverage – either as an addition to the general liability policy or as a stand-alone policy. It is, however, a rarely purchased coverage.

The exposure of a product recall is just an example of the analysis every business needs to do of their risks.