One way to reduce your overall business risk is to produce a safer product. Sometimes, however, outbreaks occur despite your best efforts, and products are recalled. When this happens, companies are increasingly confronted with foodborne illness lawsuits from sickened consumers and significant commercial recall claims from customers. And, on the regulatory side — as demonstrated in the recent Jensen Farms, Blue Bell, ConAgra and Chipotle cases — the government is now initiating criminal investigations against food companies when their products cause human illness.
Processors can better control these risks through the use of two critically important tools: (1) sophisticated supplier agreements, and (2) adequate insurance coverage. Although some companies have some type of continuing guarantee or hold-harmless agreement with their suppliers, these contracts are, in many cases, woefully inadequate. The agreements often are too vague or the indemnity and/or guarantee language has gaps or is not sufficient to provide the desired protections.