Maximizing Recovery. Minimizing Risk.

Leveraging Opportunity

Is Your Insurance Provider Complicating a Product Recall?

On Behalf of | May 20, 2024 | Insurance Recovery |

Businesses in a variety of different fields carry many unique types of insurance. Organizations that produce physical products for public consumption may invest in product recall insurance in addition to, among other things, basic liability coverage.

Product recall insurance provides protection if the insured discovers issues with one or more of its products, which require their removal from the marketplace. During a recall, the insured typically requests the return of affected, as-of-yet unsold merchandise from its retailers and allows for the return or exchange of defective products already sold to consumers.

Recall insurance can help mitigate the massive expenses involved in that process. However, what happens if an insurance provider delays approval of a recall-related claim?

Waiting To Conduct A Recall Can Be Dangerous

Particularly when defects are serious or a product is something used by vulnerable people, like children, delaying a recall can be a dangerous choice. The longer a company takes to initiate a recall, the more likely it becomes that a customer could end up seriously hurt due to a defective product.

An organization with product recall insurance is often confronted with the need to both conduct a product recall and process the accompanying insurance claim.  Policy proceeds can often be a lifeline to organizations inundated with the substantial expense tied to a recall campaign.  In these situations, it is often imperative for insureds to understand what actions must be taken to protect the right to policy proceeds, while at the same time conducting the recall to mitigate the insured organization’s liability.  As part of this process, among other things, insureds will want to document all communications with the insurance provider and track all expenses related to the recall.

In investigating these claims, insurance companies sometimes take extended periods of time to process the claim. These delays can cause severe prejudice to the insured, which often need access to the policy proceeds expeditiously to timely process the product recall.  In delaying processing of the insurance claim, insurers may seem to be taking advantage of the insured’s financial hardships.  Such circumstances can place undue hardship on the insured organization, as well as its handling of the claims process.

How to Handle a Business Insurance Dispute

When an insurance provider has unreasonably delayed processing or even denied a claim made under product recall insurance policy, insureds can find themselves in a difficult position. One of the first steps that leadership within the organization may need to take is to understand both the scope of coverage afforded by its product recall insurance policy, as well as the obligations of the insured in the processing of the insurance claim (and the recall itself). Beyond that, it may be necessary to secure guidance when reviewing the policy, learning about bad faith insurance laws, and communicating with the insurance company.

When an insurance company unreasonably delays responding to or paying out on a valid claim, an organization could incur numerous financial losses as a result. Don’t let delays put your business at risk. If you’re experiencing challenges with your insurance provider regarding a recall-related claim, it’s essential to act promptly. We specialize in helping businesses navigate insurance disputes and maximize their insurance recovery. Let us help you hold your insurance provider accountable and secure the coverage for which substantial premiums were paid.