Product recall insurance coverage

It doesn’t matter how much time, energy and money that an organization puts into ensuring that their products are safe for their customers—mistakes still happen that can lead to potentially dangerous products being released to the public. When this happens
recalling a product from the market can prove to be very expensive.

What is product recall insurance?

Whether it be done voluntarily or at the request of the government or regulators, recalling a product from the market can be a very expensive task. Product recall insurance protects against these high costs by covering the financial losses that occur when a recall takes place

What does product recall insurance cover?

Product recall insurance provides coverage for the cost associated with recalling a product that has been released to the market.

The costs can include:

  • Notifying customers
  • Shipping and warehousing costs
  • Disposing the recalled products
  • Repairing or replacing faulty parts
  • Hiring extra personnel needed to conduct a recall
  • Cancelled contracts
  • Loss of sales and customers
  • Brand or reputational damage

It’s important to note that not all product recall insurance policies are created equally. Make sure to work with one of our experienced brokers to select one that will provide the coverage that you need.

Who needs product recall insurance?

Regardless of a business’ size or the industry that they’re in, if a product fails to function
the way that it was meant to, then it may have to be recalled. When this happens, it’s
important to have product recall insurance to cover the high cost associated with the

Some industries that are more prone to product recalls include:

  • Automotive components
  • Food and beverage
  • Consumer products

Make sure to give one of our expert brokers a call to find out if your organization should have product recall insurance in place.

Frequently asked questions about product recall insurance:

The cost of product recall insurance varies from company to company. There are many factors that go into determining the cost of product recall insurance – these can include the type product being sold, the size of the company, the amount of products that have gone to market and much more. Another factor is that not all product recall insurance policies are created equally – usually the broader the coverage, the more expensive the policy.

There is no set answer to this question. The cost associated with a product recall will vary from company to company. That’s why it is important to speak with an insurance broker. They will work with you to identify the potential cost of a claim, and help you determine a limit of insurance that will provide you with the coverage you need!

Here are a few examples of product recall insurance claims:

  1. A cookie company received a complaint from a customer stating that they had found a piece of glass in one of their cookies. Not only did the cookie company have to recall all of the possibly contaminated cookies that were released to market, but the retail chain where the cookie was purchased removed all of the company’s products from their shelves and canceled all of their future orders. The combinations of these things have led to a loss of a large chunk of their profit. Luckily for the cookie company, they purchased product recall insurance that not only covered the cost of the cookie company and its retailer recalling the products from the market, but also their lost income, the cost of cleaning and inspecting the factory, and the cost to rehabilitate the brand’s reputation.
  2. A meat processing company that provides cuts of beef for wholesalers discovered that their products have begun testing positive for salmonella, and it turns out that the farm that supplies all of their beef was identified as being at fault for the contaminated product. Because of this, the farm was shut down by regulators and its operation was suspended. The processing company did have a contract in place with the farm which would reimburse them for any losses, expenses, or liabilities that they suffered as a result of the farm supplying them with unsafe products. Sadly, the contract was not able to be enforced, because shortly after the shutdown and suspension occurred, the farm declared bankruptcy. Thanks to the product recall insurance policy they purchased, the meat processing company had the cost of the recall reimbursed.

This is a common misconception – companies should never rely on a third party to pay for a recall. Here are a few situations where it can be tough to recoup recall costs from

  • The supplier may refuse to pay all costs associated with the recall.
  • The supplier may not have enough funds to cover the cost.
  • The supplier may dispute that they are the one at fault for the recall.
  • A contract may have been signed that either limits or waives the suppliers liability.

Your business is unique, so are your insurance options.

Being a brokerage for over 70 of Canada’s top insurance companies means our commercial brokers have access to a wide range of coverage options as unique as your business – at some of the best rates in Ontario. We sweat the details so you can focus on your business. Want to learn more about the coverage options available to you? Here’s a few of them: