Comparing Recall Insurance Policies
More and more brokers are starting to write recall insurance that offers coverage extending far beyond the standard recall endorsement available in a typical liability policy. Recall managers responsible for developing recall strategies now realize that recall insurance is an important part of any recall preparedness and risk mitigation plan.
Recall insurance coverage is triggered when there is a government-ordered recall caused by a defective product, malicious tampering, or accidental contamination.
A recall insurance plan may be divided into two parts: Coverage A that covers “First-Party Expenses” – essentially the out-of-pocket costs involved with a recall – and Part B for “Third-Party Liability”. This is important if the insured manufacturers’ products are sold under labels other then their own.
Risk managers should ask additional recall insurance coverage questions:
- Does the recall insurance policy you are considering cover third-party assistance with recall preparedness planning and recall logistics? Some policies cover the cost of recall preparation. Others do not. Regulatory agencies will demand a recall preparedness plan, which requires prior approval before the recall can be executed. The same goes for expert recall management and logistical assistance during the recall itself.
- Does the policy cover recall management support from outside experts? The impact of a major recall on a company’s reputation and brand value can often be controlled by an effective crisis communications strategy before, during and after the recall. Many companies do not have the internal capabilities to handle crisis communications and would need outside communications support immediately if they suddenly were called upon to handle a recall. Some recall insurance policies cover crisis communications support. Others do not. It pays to know in advance what you are buying.
Not only do some recall insurance providers offer all these benefits and more, they can often suggest third-party recall experts who can guide companies through the recall planning process and be available at a moment’s notice to manage logistics and communications when a recall occurs.
Companies considering recall insurance policies need to conduct a careful assessment of their risks and shop wisely for appropriate recall insurance coverage so that they can avoid nasty surprises if a potentially expensive recall is suddenly necessary.
