Food and beverage recalls, regardless of the reason, continue to proliferate in the news cycle. At the end of May General Mills issued a recall of 10 million pounds of flour due to a potential link to an outbreak of E. coli that has sickened nearly 40 people in 20 states since December 2015. A few days later, Hostess Brands, LLC, issued a recall for possible peanut residue in a variety of snack packs. This past week, Frito-Lay issued a similar recall for possible undeclared peanut allergens in certain pretzel products.
These recent recalls were voluntary, but the FDA has the authority to mandate a food product recall under the Food Safety Modernization Act. If your product has been identified as a target for a recall by the FDA, you have little choice but to implement your own “voluntary” recall or run the risk of an FDA-mandated recall. The direct and indirect costs associated with these recalls can be substantial. The costs of recalling and destroying the product, lost profits, liability to third parties arising from the recall, and irreparable damage to your reputation are some of the expenses you may face from a recall. You need to ensure you are prepared.
As we’ve recently discussed, recall insurance policies may provide protection for recall events. Such policies potentially offer quite broad coverage but may leave the policyholder exposed in significant ways. Policy limitations and exclusions can limit, if not eliminate, coverage for the unwary policyholder.