Head of product recall, Bowring Marsh
Globalization has led to a tremendous increase in market growth and, in many cases, decreased the cost of manufacturing and producing food and consumer goods. However, it has also led to an escalation of product liability and recall risk. This risk has progressively emerged due to challenges with manufacturing technology and distribution logistics, as well as the practice of sourcing food, component parts, and ingredients from countries lacking strong regulatory oversight.
Marsh’s product liability and recall advisory services can help support your business in making critical risk reduction decisions and responding to situations as they arise. Our specialized team has the industry expertise and global perspective to offer carefully tailored insurance and risk management solutions, allowing you to focus on your business and operations in a crisis.
Product liability and recall insurance helps protect your business from the financial fallout of claims that one or more of your products caused injury or other damages to a third party (generally, a consumer or group of consumers).
Someone could be harmed by a product in a variety of ways, from the way it was manufactured or designed to how they were instructed to use it. Companies also are often sued for injuries sustained when a product was misused.
With the possibility of settlements running to multi-millions of dollars, even a single injury claim or recall could cause significant harm to a company’s balance sheet.
Product liability and recall insurance has the potential to cover a wide range of issues related to a liability claim or recall involving your product. In general, it helps protect your company from damages when it is claimed that a product made by your organization allegedly caused bodily injury or led to property damage. The settlements and costs of litigation can be significant, particularly if more than one party is involved in the claim. Insurance policies can cover everything from a claimant’s medical bills to fees for your legal representation, as well as any judgments or settlements made against your company.
Any company engaged in the manufacture, distribution, or supply of consumer products should consider obtaining product liability and recall insurance, no matter where the company is located or if regulations are lax in certain areas of business practice. Your product or products may have an established track record of safety and reliability; however, this does not prevent claims from arising unexpectedly. Whenever potential litigation or settlements are involved, the situation will likely prove costly for your company.
Marsh, as your trusted advisor, can support the development of a product liability and recall risk management strategy, so should you experience a product liability loss or recall event, you have more than just an insurance policy. You have a strategy backed by specialists that can help you resolve any claims that may emerge.
Although it may seem like general liability insurance would also extend to cover product liability claims, that is not always the case. Product liability claims and necessary recalls are highly specific, and tend to be more expensive than a general liability insurance policy will allow.
Indeed, most general liability policies have a per-occurrence payout maximum of US$1 million. The average damages for a single product recall exceed US$1.5 million. Multiply that by several products that might, for example, share a contaminated assembly line, and the uninsured cost could bankrupt a company. The cost of adding an additional layer of insurance is worth it in the long run.
Product recalls can be costly to a company, and often exceed the limit of traditional general liability policies. The industry-specific, high-payout structure of product liability insurance can help protect your company against recall costs that threaten your bottom line.
By considering product liability and recall coverage together, you protect your business from first party (for example, lost income) and third party (for example, injury claims) losses, all arising from the same event.
Head of product recall, Bowring Marsh