Product Recalls and Business Continuity

According to the American Bar Association, the best plan is to take proactive preventive measures by establishing a product safety team.

Next, decide if you need recall insurance, but be careful, you get what you pay for, and you do not want to end up under insured.

Some policy's only cover cost of the announcements, mailings, press, and ads. Other policy's are more comprehensive, and will cover wages and other costs incurred in the recall, but be sure you understand the terms, many policy's require pre-approval on all expenses, so if you method of recovery is different than your insurer's position on what is right are at odds, you may not have the protection you need.

The cost of a recall can be high in direct costs, for example a tire distributor in New York got caught in the recall of Chinese made tires, the estimate is they can afford to replace 10% of the defective tires then they will be bankrupt.

Intel's past recall on Pentium chips had costs exceeding $500,000,000, a ceiling fan company had a recall in excess of $700,000,000, Black and Decker recalled coffee makers to the tune of $49,000,000.

The right insurance can play a critical role.