Product Recall Insurance


What is it for


What a company does during the first days of a product recall is key to its success or failure. If the company is not insured, product recall could result in bankruptcy or negative consequences for the company's future operations. Product recall expense insurance offered by GARDIA provides the effective management of risks associated with product recall. This type of insurance covers the main expenses of the policyholder for the product recall and includes the expenses of the consulting companies’ expertise in the area of crisis management and public relations whose activities involve helping the policyholder in managing the reputation and company image during the especially important period of the first weeks after the product recall.

Why is product recall expense insurance necessary? A single product recall may cost the company its profits and potentially lead to the cessation of all of its operations. Such cases are not uncommon, and if they occur, they attract the increased media interest, which may have negative impact on public opinion about the products concerned. The company may incur significant costs associated with both the recall and replacement of products as well as restoration of consumer confidence in the product and its manufacturer.

What can be insured

Manufacturer / seller of goods in accordance with the law has a number of obligations, among which are the following:

Obligation to ensure safety of goods placed on the market

Obligation to notify the state control body on non-compliance of products released into circulation with the requirements of technical regulations.

Obligation to take measures to prevent damage to consumers.

Owner of low-quality and dangerous foodstuffs, materials and products pays the following types of expenses in case of their recall:

  • Obligation to verify accuracy of the information received
  • Duty to develop a program of measures to prevent damage
  • Obligation to withdraw products from the market (voluntarily / involuntarily)
  • Obligation to compensate for losses caused to buyers in connection with product recall
  • Expertise costs
  • Storage and transportation costs
  • Disposal/destruction costs
Insured risks

Product recall expenses include (but are not limited to):

  • Expenses of newspaper, magazine or any printed communications (electronic or otherwise), radio and television statements as well as the cost of shipment and delivery necessary to carry out the insured products recall
  • Necessary travel and accommodation expenses directly related to the insured products recall
  • Expenses of hiring additional employees, who are not full-time employees of the Policyholder, necessary solely for the implementation of the insured products recall
  • Overtime paid to the policyholder’s full-time employees to pay for the work related solely to the insured products recall
  • Necessary transportation expenses for the insured products recall
  • Necessary expenses for rental of additional warehouse facilities or areas for the recalled insured products’ storage for a period not exceeding 12 (twelve) months
  • Expenses of the insured products delivery from any buyer, distributor or consumer to the place or places specified by the Policyholder
  • Expenses incurred to properly dispose of unused packaging and point-of-sale marketing materials for any of the recalled insured products if such packaging or materials can no longer be used
  • Actual cost of the insured products destruction
Who can insure

Manufacturers and distributors of products in the following market sectors:

  • Food
  • Beverages
  • Tobacco products
  • Perfumes and cosmetics

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What are the main responsibilities of the insurance company in administering a contract for this type of insurance?
The obligation of the insurance company under the product recall liability insurance contract is to ensure compensation for the expenses incurred by the policyholder in connection product recall campaign.
What specific information is required to make a commercial offer for this type of insurance?
Quality of manufactured products’ input and output control, the company’s turnover, the type of products manufactured, and the countries where finished products are delivered.
What are the criteria by which an event can be recognized as insured event for this type of insurance?
These criteria include:
Discovered threat to consumer in connections with the quality of the products which may lead to bodily injury or property damage
Governmental product recall request