Product recalls are on the rise in many industries. The year 2016 saw over 8,000 products recalled by the Food and Drug Administration and nearly 15,000 warning letters issued. Regulatory and consumer protection standards are becoming more stringent and notices of violations more frequent. At the same time, product supply chains are getting more widespread and complex. This increases the potential risk of errors, defects and contamination at all levels of those supply chains, and often these problems do not manifest themselves until after a product hits the market. All of this can lead to staggering expenses for food and product manufacturers facing the risks and realities of product recalls.
To protect against the substantial costs that can result from these recalls, many businesses purchase insurance policies that apply specifically for expenses, lost income and claims arising from recalls. This coverage is triggered when a product causes injury to consumers and reimburses for a variety of expenses arising from a recall. The full scope of recall coverage can vary: Some policies cover out-of-pocket expenses of product disposal and costs of notifying consumers, while broader policies can also cover business interruption and reputational losses.
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