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Companies have been experiencing product recalls for generations. Even the best companies have had issues with their products, which has forced them to go through a recall.
Products get recalled because of contamination, tampering, or a design flaw. Not only does this mean financial loss for a company, it can lead to damaged corporate and professional reputations, a management overhaul, and even a total rejection of company and product.
Let us introduce you to Product Recall Insurance. The insurance that can save your business should you need to recall one of your products.
Read on to understand if this insurance type is right for your business.
Product Recall Insurance is a first party, specialty policy that covers tampering, contamination, crisis management expenses and recall costs for the negative publicity that may ensue after a product is recalled. This coverage can supplement general liability or be purchased as a stand-alone policy.
This type of insurance will help you manage the negative fallout from a recall and provide you with a safety net as you work to repair your business reputation and regain the public’s trust and patronage. It’s important to keep in mind that a recall can happen through no fault of the company.
There are two types of this specialty Insurance: Voluntary and Involuntary. Many companies are opting for voluntary recall which means they don’t have to wait for the government to announce a mandatory recall. This minimizes the adverse effects that happen when the government steps in.
With a voluntary recall, the company is admitting its error. With involuntary recall, you take the risk of being negatively perceived by the public for not practicing due diligence, or worse, hiding the truth.
Getting into details...
This happens when a product is accidentally tainted with a substance that is harmful to consumers. Example: A food product that is contaminated while in the production line because an ingredient was accidentally added causing consumers to get sick.
Improper labeling can cause a consumer to get sick after taking or using it. Example: People with allergies need to see all the ingredients used in making a product. Labeling is crucial to the wellbeing of the customer.
This is caused by poor design or insufficient testing. Example: Some products that have been recalled because of design flaws in hoses, overheating lights or appliances.
This happens when a product is deliberately sabotaged so that using it becomes dangerous to life or limb.
This usually happens on a small scale by disgruntled employees who have access to the product before it is released to the market. Example: A person urinating on the production line of a Kellogg’s factory which caused severe damages to the company’s reputation and sales.
Often, this kind of product recall is caused by misleading marketing to push the sale of a product.
This happens when the government steps in and orders the involuntary or mandatory recall of a product because it is deemed to be unsafe for consumers.
The limits on Product Liability Insurance can vary but often are a part of the limits on a General Liability policy. The most common range from $500,000 - $5,000,000. The exact amount will depend on whether you decide to get basic coverage or opt for advanced coverage.
This type of insurance comes in handy if your business:
The cost of this insurance will depend on several factors such as:
All companies that manufacture, package or distribute products for wholesale or retail must have a Product Recall Plan. It will minimize the financial liabilities if any of your products have to be recalled. Think of this type of insurance as your first line of defense should something go wrong with one of your products.
This plan covers an employer in the event of an errors or omissions claim from an employee around a benefits plan. Errors and omissions covered in this plan can include failure to advise an employee of benefits they are entitled to, failure to enroll an employee, and giving incorrect advice in regards to benefits.
A Fiduciary Bond and a Fiduciary Liability policy are two separate things, but they also work together to protect your business’s retirement plan or pension fund. The bond protects the plan from losses due to dishonesty or fraud while the liability coverage provides protection in the case of breach of fiduciary duty on the part of the plan managers.
This is a promise by a surety to pay the obligee an agreed upon amount if the principal fails to meet an obligation that was set forth by the obligee. This bond holds the principal liable for losses should they fail to fulfil their obligations.
A fidelity bond is an insurance product that protects a business from any financial losses they are subjected to as a result of fraudulent or dishonest acts committed by their employees. This bond will protect you should your employees engage in activities such as embezzlement, identity theft, or other fraudulent, dishonest activities.
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