Product Recall Insurance
Recalls are a common and costly risk for anyone running a food or beverage business. Learn how product recall insurance responds to these incidents to cover the resulting costs.
What Is Product Recall Insurance?
Food product recall insurance is a type of coverage designed to cover the expenses your business could face if you voluntarily or involuntarily recall a product over concerns regarding its safety or quality.
FLIP does not offer product recall insurance at this time.
Voluntary vs. Involuntary Product Recalls
There are two types of product recalls:
- Voluntary: When you decide to recall a product, even though it isn’t legally required, to protect your customers or address a safety concern
- Involuntary: When a government regulating agency forces you to recall one of your products because it determines the product poses a risk to customers
Product recall insurance can cover the costs associated with managing both voluntary and involuntary recalls.
What Does Product Recall Insurance Cover?
Product recall insurance typically covers costs stemming from voluntary and involuntary recalls, such as expenses you face while:
- Investigating product defects
- Collecting recalled products
- Disposing of recalled products
- Hiring a public relations representative or a crisis management team
These expenses may include:
- Lost revenue caused directly by a covered recall incident
- Costs exceeding normal business expenses to fix a product issue and restore expected sales
- Legal fees, costs, or expenses connected with investigating, defending, settling, or appealing a claim made against you
What Does Product Recall Insurance Not Cover?
Like any insurance policy, product recall coverage has exclusions. These often include:
- Product recalls due to banned substances, carcinogens, or lead
- If you knew about a product’s safety concerns/defectiveness before purchasing a policy from FLIP
- Any recall-related expenses that occurred outside of the policy period
- Your employees’ salaries
- Your overhead costs
Always refer to your policy documents for a full list of exclusions.
Who Needs Product Recall Insurance?
If you make, sell, or distribute food or beverage products, you may need this coverage to protect your business in the event of a recall.
Don’t see your business listed here? Learn more about the types of businesses FLIP covers.
What Are Common Product Recall Claims for Food Businesses?
Some of the most common food product recall claims include:
- Defective packaging
- Food contamination
- Foodborne illnesses
- Foreign objects in food
- Improper storage or handling
- Incorrect labeling/advertising errors
- Unlabeled allergens
Product liability helps cover the cost of lawsuits over third-party bodily injury and property damage claims caused by your food or beverage products. It doesn’t offer any reimbursement for the expenses you face handling a product recall.
If a customer has an allergic reaction to your granola bars and sues you, product liability could cover the expenses associated with this claim (legal fees, medical bills, etc.). Meanwhile, your recall insurance could cover the cost of collecting and destroying these granola bars after you recall them.
No, product recall coverage is not included in your general liability policy. FLIP does not offer product recall insurance at this time.