Understanding Product Liability Insurance (Aka Product Recall Insurance)
As consumers, we read, watch and hear about product recalls in the news, on television, the radio and online – from airbags for passenger cars to convertible high chairs to contaminated food and more. No matter how hard a business works to make quality products, there is always the risk that something could fail to work properly. It’s important to be prepared.
A common misunderstanding about product liability insurance is that only manufacturers of the product are liable in the event of a product recall. This is not the case. Consumers can be harmed by how a product is manufactured, designed, marketed or misused. This means that even though a consumer uses a product incorrectly, the business could still be liable for resulting damages. Product liability insurance goes beyond a product guarantee or warrantee; it protects a business from any fallout that a product recall can cause. It is definitely needed for any business with a role in the manufacturing, sales or distribution process of a product.
You’ll see from the graphic below, published in the February 2019 issue of National Underwriter Property & Casualty magazine, that product recalls from 2018 alone bring to light the need for product liability insurance coverage.
This is something very important for our clients to understand. A closely related aspect to product liability insurance is product recall insurance, a typical exclusion on all General Liability (GL) products:
“Recall Of Products, Work Or Impaired Property: Damages claimed for any loss, cost or expense incurred by you or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of: (1) “Your product”… if such product, work, or property is withdrawn or recalled from the market or from use by any person or organization because of a known or suspected defect, deficiency, inadequacy or dangerous condition in it.”
At Rose & Kiernan, Inc., we do work with several specialty markets to obtain coverage when needed. Also, some of our standard carriers will offer varying limits and degrees of coverage alongside the GL coverage. At base, it can cover notification, product recall, transportation and replacement.
A longtime client of one of our producers is a fruit broker with over $60 million per year in domestic sales. Our client asked R&K to put together a timely quote for product recall liability insurance coverage. Through networking, our producer had met a broker with a specialty in agribusiness and farms from Risk Placement Services, Inc. (RPS), a nationally focused wholesale insurance broker. He had a special, consumable products recall product geared towards this industry. In just two days, the broker was able to put together a program and several variations of coverage levels and self-insured retention (SIR) for our client.
For more information on product recall insurance with Rose & Kiernan, please contact us here or by calling 800-242-2433.