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Product contamination and recall insurance
Product contamination insurance covers a company's own losses when one of its products may pose a threat to consumer health and has to be withdrawn from the market.
Key points
Product contamination and recall insurance covers the cost of withdrawing a contaminated or defective product from the market and the loss this causes. It is distinct from liability insurance, which only covers damage to third parties, and is particularly relevant in the food industry.
European legislation requires a food business that discovers a product is unsafe to withdraw it immediately, notify the authorities and, if it has reached consumers, inform them and recall it (Article 19 of Regulation (EC) 178/2002). A large part of the cost of that recall falls outside the liability policy.
What it covers
Accidental contamination and manufacturing errors
Contamination or an error in production, labelling or packaging that means the product could harm health.
Malicious tampering
Intentional alteration of the product, actual or alleged, by an employee or a third party.
Extortion
A threat to contaminate the product in order to demand payment.
Recall costs
Inspection, withdrawal, destruction, replacement, redistribution and storage of the affected products.
Business interruption
The profit the company loses following the contamination and the extra expenses incurred to keep operating.
Brand rehabilitation
Communication and advertising to recover sales, and support from specialist crisis management consultants.
Cover, limits and excesses vary from one policy to another.
Types of contamination
Undeclared allergens
An allergenic ingredient not shown on the label, such as gluten, nuts, milk or egg. The list is set by Regulation (EU) 1169/2011.
Microbiological
Bacteria, viruses, moulds or toxins, due to a failure in packaging, preservation or storage.
Chemical
Residues of pesticides, heavy metals or cleaning and maintenance products.
Physical
Fragments of glass, metal, plastic or wood from the premises or the raw materials.
Malicious
Intentional alteration of the product to make it dangerous or to make it appear so.
How it differs from liability insurance
What liability insurance covers
Damage the product causes to third parties and, if purchased, part of the cost of recalling products already delivered.
What the contamination policy adds
First-party losses: recall of product that has not been delivered or not directly affected, the value of the product, business interruption, sales recovery and consultants.
Who it is for
- Food manufacturers
- Beverages
- Pet food
- Chain restaurants and catering
- Food distribution
- Topical cosmetics
What to check before taking it out
What triggers cover
Whether it covers only a recall ordered by the authorities or also one the company decides on itself as a result of its own checks.
Limits and sub-limits
Brand rehabilitation and consultants may have their own sub-limits, lower than the overall limit.
The manifestation period
The time, from sale or consumption, within which the contamination must appear in order to be covered.
The recall plan
An up-to-date recall and crisis management plan and HACCP system make it easier to obtain cover and to respond to an incident.
What can happen
Metal fragments
An internal check detects metal fragments in a batch of biscuits that has already been distributed and the company decides to recall it.
An undeclared allergen
A labelling error fails to state that a product contains milk and it has to be withdrawn from points of sale.
A bacterium
The authorities order a batch to be recalled because of the presence of listeria.
These are illustrative examples, not real cases.
Frequently asked questions
Who can initiate a recall?
The authorities, the company itself as a result of its internal checks, and also alerts from customers, consumers or suppliers.
Where are food alerts published in Spain?
On the Food Alert Network of the Spanish Agency for Food Safety and Nutrition (AESAN).
Isn't a liability policy enough?
Liability insurance responds to damage to third parties. The company's own recall costs, loss of profit and brand recovery need a specific policy.
What is usually requested for a quote?
The insurer's questionnaire, the HACCP plan, the recall and crisis management plan, quality certifications such as IFS or BRC, and the claims history for recent years.
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