Insurance Coverage for Product Recalls, Property Damage and Injuries

Risk Management

PUBLISHED ON: February 1, 2010

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Product recalls can be enormously expensive. So too can liabilities to claimants who assert that they have either been injured or suffered property damage from using or handling tainted goods: whether toys, construction materials, beverages, food products, etc. An event giving rise to a product recall often presents a double edged sword for policyholders: the huge costs of pulling a product from the marketplace; and potential liability to those claiming injury or damage as a consequence of using or handling the offending product.

Product recall insurance policies may protect against losses suffered by policyholders where their product or component parts of a product have the potential to injure, contaminate or damage property. Such insurance coverage may also cover situations where the contamination or damage is deliberately undertaken, such as scenarios involving product tampering claims and product extortion claims. Other insurance policies may apply to such claims too. For example, some kidnap and ransom insurance policies may provide coverage for instances of extortion by a threat to cause damage or loss to property through the alteration or contamination of raw materials, goods or stock.