30 May Could Your Clients Have a Product Recalled?
With increased frequency, we are hearing about various products being recalled. Some products were food related: peanut butter, baby formula, lettuce, onions, cheese, hard-boiled eggs, etc. Other recalls involve eye drops, various health powders, fishing games, motorcycles, cars, tools, etc. While researching this topic, I encountered recalls involving mattresses – who would have thought? The items noted are only a partial list. The other day, I received a notification from a food delivery service to destroy any of the Chicken Cordon Bleu I had purchased due to possible salmonella.
I will admit that when I read a story about a recall, it sometimes surprises me that the product mentioned could ever be subject to a recall (mattresses – really?). When agencies perform their exposure analysis (you are doing these, right?), is there a possible perception that the products your client makes/manufactures/sells could never be subject to a recall, or are the chances at least very minimal?
Likely due to my 49 years in the business, when I hear about a recall, I wonder if insurance was in place to cover that exposure. After all, the costs of a recall can be very substantial. The cost can involve shipping, handling and disposal, and manufacturing if the recalled product requires remanufacture. Then there are also lost profits as well as damage to the reputation of that client.
OK, so hopefully, you would agree that the list of products that can be recalled is very significant. Hopefully, you will agree that if one of your clients recalls one of their products, the resulting costs will also be very significant. As noted in the recent blog featuring the Swiss Re claims stats, the #1 cause of E&O claims is when the client suffers a loss for which there is no coverage or insufficient coverage to handle the loss.
For the producers and sales staff of the agency, 1) verify that product recall is on the exposure ehecklist that you use religiously, and 2) be sure to ask the client if they feel they have any products that could be recalled and what impact would that have on the firm. Hopefully, this will lead to you providing the client with a proposal for this exposure. If there is no interest on the client’s part, make sure there is quality documentation in the file and back to the client memorializing this discussion.
Bottom line – don’t be surprised. You may sell more insurance.