Here are a few examples of product recall insurance claims: A cookie company received a complaint from a customer stating that they had found a piece of glass in one of their cookies. Not only did the cookie company have to recall all of the possibly contaminated cookies that were released to market, but the retail chain where the cookie was purchased removed all of the company’s products from their shelves and cancelled all of their future orders. The combinations of these things have led to a loss of a large chunk of their profit.
Luckily for the cookie company, they purchased product recall insurance that not only covered the cost of the cookie company and its retailer recalling the products from the market, but also their lost income, the cost of cleaning and inspecting the factory, and the cost to rehabilitate the brands reputation.
A meat processing company that provides cuts of beef for wholesalers discovered that their products have begun testing positive for salmonella, and it turns out that the farm that supplies all of their beef was identified as being at fault for the contaminated product. Because of this, the farm was shut down by regulators and its operation was suspended.
The processing company did have a contract in place with the farm which would reimburse them for any losses, expenses, or liabilities that they suffered as a result of the farm supplying them with unsafe products. Sadly, the contract was not able to be enforced, because shortly after the shut down and suspension occurred, the farm declared bankruptcy. Thanks to the product recall insurance policy that they purchased, the meat processing company had the cost of the recall reimbursed.