Despite the frequency and high costs of a recall, a lot of businesses don’t plan adequately or prepare for these events. Careful planning and practicing is essential for risk management.
Policies generally include Product Liability, Product Guarantee and Financial Loss, or any combination of, and each are designed to cover different aspects of liability in a recall or contamination case. Lloyd & Co Insurance Services can set up a policy to cover the following:
- Recall Expense This expense is associated with executing a large-scale product withdrawal, including costs such as additional temporary employees, overtime, public safety messages, special testing and handling, destruction and disposal costs and crisis management and/or PR consulting fees.
- Replacement Costs This is the cost of replacing any product that had to be destroyed. This includes the cost of materials, labour and overheads directly associated with producing the product.
- Lost Profits This protects the business for profits which would have been earned on the withdrawn products and also for profits which would have been earned on future product sales.
- Brand Rehabilitation. This protects against costs like extra advertising, increased expenditures to rush a new product to market and special promotions to rebuild public trust in the manufacturer and its products.