Product recall coverage
Manufacturers aim to produce quality products or components that meet customer expectations. However, unexpected issues can arise, such as delivery delays, raw material defects or manufacturing breakdowns. These incidents can result in significant costs, including product recalls, factory shutdowns, lawsuits or even bankruptcy.
There are many factors to be taken into account when choosing the right insurance coverage. While general liability policies may offer protection for certain injuries and damages caused by defective products, they do not include coverage for recall expenses, creating an insurance gap. With this in mind, having product recall coverage to mitigate risks is an important consideration.
Product recall expense coverage
Product recall coverage from 华体会 reimburses for expenses incurred to remove a defective product from the marketplace for up to one year after a recall. Covered expenses also include:
- Shipping
- Transportation
- Disposal of defective products
- Costs to notify customers (including direct mail and advertising)
- Employee expenses (including overtime pay, transportation, accommodation and temporary employee salaries)
Also covered is the cost of inspecting and testing of defective products to determine whether or not a recall is warranted鈥攁 valuable coverage enhancement that sets 华体会 apart from other carriers.
Additional covered expense
A product recall can impact many parties鈥攚hether the defective product is a component, part, or finished product. Each manufacturer involved can suffer lost business, injury, incurred expenses, and irreparable damage to their reputation.
With our optional additional covered expense coverage, the insured will be reimbursed for recall-related expenses and losses incurred by other parties, such as:
Repair, replacement or repurchasing costs
Covers the cost to repair a defective product, replace product with a similar one, and/or repurchase product or reimburse customers for payments. Also covers the cost to redistribute and install replacement products to customers.
Customer鈥檚 lost profit coverage
When a product recall affects customers being able to deliver their goods, this feature covers the cost of their profit losses as a result of that product recall
Good faith advertising coverage
A brand can be damaged after a product recall. This coverage compensates for costs to help repair the company鈥檚 damaged reputation through paid advertising, social media, and public relations services. This coverage covers these costs for up to 90 days after the end of a recall.
Product recall liability coverage
What happens if the company with the product recall and its customers can鈥檛 agree on how much should be reimbursed for costs and lost profit after the recall? The customers are likely to sue. This type of lawsuit would not be covered by general liability insurance.
Optional product recall liability coverage covers subsequent claims for damages, including legal representation. It is not uncommon for middle-sized manufacturers to fail due to the cost of a recall. Help prevent that from happening with product recall coverage.