Recall Insurance

     A company that is run responsibly is likely to take action when it finds out that there is something wrong with their product. That action is often a recall….sending out a public notice that a problem has been discovered and that customers are urged to return the product. It should be obvious that there are costs associated with such an action. Fortunately, there is a type of coverage that can handle many of these costs: recall insurance.

     Recall insurance is also known as products recall or withdrawal insurance. It is usually a form of optional coverage that can be added to a policy that handles an operation’s regular commercial liability. However, it may also be purchased as separate coverage.

     Recall insurance responds to instances when a company either knows or suspects that its product contains a flaw or defect that may result in bodily harm or property damage to person buying and/or using the product. The coverage applies to instances of both voluntary and involuntary recalls. Regardless, it usually provides coverage for various recall expenses including:

• Added payroll due to overtime or for hiring and paying temporary employees to assist with recall/withdrawal
• Computer expenses
• Costs for transportation and accommodations for withdrawal/recall personnel
• Paper, design and printing cost of withdrawal announcements
• Postage or fax expense
• Proper product disposal
• Public notification of recall or withdrawal
• Warehouse or storage space costs

     A broader (usually separate) form of coverage can handle added costs of battling against a company’s impaired reputation. Also called crisis insurance, it handles the expense of PR and advertising activity that follows a recall event.

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