Product Recall: Coverage, Pitfalls, and Pressure Points

The stakes involved in a product-recall situation are enormous. Most product recalls present a double-edged sword for policyholders:

1. the not-insignificant expenses incurred in recalling a product from the marketplace; and
2. the potential liability exposure to third parties claiming injury or damage as a consequence of using or handling the offending product.

Policyholders in almost all industries require reliable insurance protection sold by a dependable insurer to respond to the risks posed by product-recall situations. In order to manage and protect against these perils, it is helpful to examine some of the important coverage issues relating to some of the insurance policies that often provide coverage for product recall claims. This article discusses issues that arise under the newer insurance products sold to provide insurance protection against product-recall claims. Also provided is an overview of some of the coverage pitfalls and pressure points that affect liability insurance coverage for claims arising from the repair, removal, or recall of a defective or harmful product.