Unfortunately, every business owner can face a product recall and there’s no knowing when it will happen. The smallest mistake may cost you thousands of dollars and your business could be making up for the financial strain in the coming months or years. While it is a common business practice to include product liability insurance to your business plan, you may want to consider adding a product recall endorsement and give your business an extra layer of protection. Not sure how a product recall endorsement can be beneficial in your business? We broke down the types of recall business owners face, what it covers, how to file a claim, and recalls from actual businesses. Check it out.
PRODUCT RECALL + PRODUCT LIABILITY INSURANCE
What is a product recall endorsement?Simply put, an insurance endorsement is an addition or change to an existing insurance policy. A product recall endorsement is designed to cover involuntary or voluntary recall costs.
- Involuntary recall: An involuntary recall means that a regulatory or government agency requires business owners to remove a certain product off the shelves.
- Let’s say the Food and Drug Administration (FDA) issued a statement saying that CBD oil is dangerous and products will not be sold in the U.S. starting in the next few months. Business owners who manufacture, distribute, or sell products with CBD oil would need to go through an involuntary recall.
- Voluntary recall: This type of recall occurs when a business owner deals with an issue with their product and decides to remove it from the market.
- Here’s an example, a customer purchases an e-cigarette from you and it explodes. Unfortunately, the explosion causes third-degree burns and the customer needs to be hospitalized. Due to this incident, you decide to recall the latest batch of e-cigarettes and move forward with a voluntary recall.
What does product recall cover?Whether you deal with an involuntary recall or a voluntary recall, there are going to be costs associated with removing your product from the market. Depending on the severity of the recall, you may have to pay for the following:
- Hiring extra people to manage the recall
- Product disposal
- And more!
How To File A Claim
- Let your carrier know that you are dealing with a product recall
- Fill out the claim form
- Submit expenses spent on the recall
- Be patient!