in Late July 2024 the bores head Provisions company announced a recall and consumer alert for a leria contamination affecting several of their deli meat products across a wide swath of states in the Northeast as of this writing three people have died and 43 have been taken ill I thought breaking down the business and insurance implications that a company like borad would face from this type of scenario would be helpful especially for smaller food manufacturers and Distributors I'll explain these issues and More in just a minute hi I'm Gordon Coyle welcome to my channel where we talk about the risk and insurance issues on the minds of business owners as an expert business insurance broker my goal is to help business owners be more informed buyers of business insurance all right so let's jump into this first I have to say that I don't know any of the board's head Insurance details what I want to do here is take the scenario and explain it from the perspective of a smaller food manufacturing company and break down what coverages and what coverage elements come into play in an event like this many of these issues we'll discuss are often dangerous coverage gaps we've identified in food industry company insurance programs so to kick it off is legal liability this is a very serious contamination event and when there's fatalities involved you'll likely see substantial litigation in fact if you look on Google for news about this event you'll see sponsored ads from law firms that are investigating this outbreak so the event is drawing the attention of personal inury lawyers trolling for clients the point is that anytime a product consumable or non-consumable triggers bodily harm to others the manufacturer the Distributors and the retailers will face significant liability claims this is where the general liability comes into play specifically the products liability portion of that policy most small and medium-sized businesses will purchase this coverage with limits of a million per occurrence and $2 million in the aggregate often an umbrella is purchas to provide excess limits on top of the general liability policy for an extra million dollar or $5 million or more depending on the size of the client in situations where multiple individuals become ill or Worse die the general liability and umbrella policies are going to be stressed and it's going to be too late when you find out that that million-- dooll umbrella policy is insufficient the propensity for a food products manufacturer and others in the distribution chain of any consumable product to be sued multiple times for illnesses or fatalities will strain their liability policies so purchasing high limits of protection in your umbrella or excess policies is critically important to safeguarding the company's balance sheet the next issue to talk about is product recall Insurance product recall differs from product liability as they cover two different things product liability insurance covers the business for claims meaning lawsuits that arise from harmful products product Rec on the other hand covers the business for the cost associated with pulling a potentially harmful product from the marketplace in the case of the BS head event there are multiple layers of how a product recall policy will respond the first thing a company has to determine is how do you communicate a large recall without blowing up your entire brand and suffering years of unfavorable standing in the marketplace the answer is that is that you hire a crisis management PR firm to notify the media retailers and others in the distribution chain to begin the process as quickly as possible of stopping the public from using the contaminated products a product recall policy will not only pay for that crisis management firm but most insurance companies have a list of experts on file ready to call 24/7 remember minutes count in a recall scenario and you don't want to waste a lot of time trying to find that right expert after the event is started next you've got to recall and destroy that contaminated product that's on the retailer shelves this may include Transportation costs replacing the contaminated product with wholesome products disposing of the contaminated products Etc all very costly but more importantly done very quickly like lightening quick the sooner you get that product out of the distribution stream the fewer potential liability claims will occur again this is what a product recoil policy will pay for and give you access to the experts to arrange of fast remedi iation to the situation what other considerations are there well next there would be lost profits when a product recall is initiated there are two reasons for profits being lost which can be covered on a product recoil policy the first is the loss of income that is suffered by the insured by not selling the products that were produced or distributed that were destroyed by the recall process the second is the decline in sales that typically occur following recall when consumer confidence plummets both forms of lost profits can be covered by a recall policy the business Interruption section of your property policy will not respond to this type of claim the next issue to talk about is brand Rehabilitation once the recall is complete even smaller Brands will need to rehabilitate their brand so consumers have the confidence to purchase their products again and this is also an optional endorsement to the product recall policy so those are the major elements that need to be considered in a scenario like this and it begs the question is your business insurance written to protect you from claims like this often when I speak with a decision maker at a food manufacturing or Distributors company I hear a lot of well that's not going to happen to us we're not that big or the chances of a big recall are unheard of or I think my policy already covers that stuff the fact is is that recalls happen to small companies just like they do to larger companies and the financial impacts can even be more devastating to a smaller firm that doesn't have a huge balance sheet to absorb the cost related to a claim like this in my opinion it pays to be informed and know if you have the protection your company actually needs and that's what we do for our clients want to learn more about our process and how our team of experts works with small and large businesses across the spectrum of Industries contact me and let's chat my contact info is in the description box below and I'd really love to hear from you thanks for watching and if you found this information helpful please give it a like And subscribe thanks