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Product Recall Insurance – Food Manufacturers – Part 1

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  • Product Recall Insurance – Food Manufacturers – Part 1

Over the next few posts I’m going to talk about product recall insurance and get into what a product recall is, what triggers a recall, what costs are associate with a recall and how insurance can reimburse a portion of the cost associated with a recall.

Let’s start with, what is a product recall?

In the simplest of terms, a product recall is the need to physically recall or remove a product that may be contaminated or could cause bodily harm to a consumer, from store shelves, and from consumers.

What triggers coverage in a product recall insurance policy?

For coverage to be triggered under a product recall insurance policy, there needs to be some evidence that the insured food products are unsafe and could result in bodily injury or property damage if used or consumed. In most policies the triggering event can be the insured’s decision to voluntarily recall a potentially dangerous product or an involuntary one. Meaning it’s a mandated recall by a government agency that deems the product potentially unsafe.

How can food products become unsafe or potentially dangerous?

There are many ways food products can become harmful. The most common is from bacterial contamination during the production process, or from change in temperature during transportation or storage of the products.  Microbial and physical contamination are also common issues in the food manufacturing business.

What are the costs of a product recall?

That’s a good question, and the answer is: It depends.

The average cost of a product recall is about $10 million, according to a study by the Food Marketing Institute ( and the Grocery Manufacturers Association ( That average includes small and very large food producers so if you were looking only at mid-market producers (Producers with sales of $20M to $100M) that number would be lower – more likely in the $5 million range. Nevertheless, a recall can be extremely expensive, and uninsured recall could easily lead a firm to bankruptcy. This is why product recall coverage is a critical element of a food manufacturer’s coverage program.

In our next post we’ll discuss NY business insurance coverage features in most Food Products Recall policies. Interested in learning more? Click the button below to connect with us…..

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