With the numbers of monthly recalls for pathogen contamination and undeclared allergens growing, more and more food processors are buying recall insurance to cover that potential threat. Food processors should be warned, however, that they may want to consider recalling their insurance policy. This is because insurance companies in many cases are selling recall insurance with fine print that doesn’t provide the coverage they promised, or by finding ways to argue that they don’t have to provide coverage even when the policy they provided expressly requires it.
If the right recall insurance (with the right insurer) can be found, however, it is definitely worth it. Although, in some cases, food product recalls can be adequately contained and controlled, in many cases they can be quite catastrophic. In every case, a recall will be followed by significant regulatory action. In many cases, and depending upon the severity of the underlying issue, FSIS will either threaten to shut a facility down or actually do it until the agency’s concerns are adequately addressed. As you can imagine, the financial impact on any company under these circumstances can be devastating. In some cases, a single recall can force even the strongest companies out of business.