Successful businesses generally need to carry a variety of different types of insurance to mitigate operational liability. Some types of coverage are nearly universal. Almost all companies need to carry workers’ compensation coverage and general liability protection.
Other types of coverage depend on the purpose of a business. For companies that manufacture products, product defects liability insurance is an important investment. In a situation where a business discovers that a batch of products recently released did not conform to standards or that there is a design defect that could lead to consumer injuries, a recall might be necessary.
Manufacturers sometimes make the difficult decision to initiate a voluntary recall even before there are reports of consumer injuries. In such scenarios, securing a prompt payout from product recall insurance coverage can be of the utmost importance.
Voluntary Recalls Can be Incredibly Costly
Recalling products means absorbing both direct expenses and possibly a decline in sales due to the reputation damage a recall can cause. Product recall insurance exists to help defray the expenses generated by replacing or repairing defective products. It can cover shipping expenses, disposal costs and even restocking fees charged by retail establishments.
Recall insurance can also help cover the losses sustained when refunding purchase prices to consumers. Recall insurance theoretically helps immediately cover the massive expenses associated with a voluntary recall.
Unfortunately, the scope of a product recall insurance claim might prompt insurance company claim professionals to drag their feet or engage in various negotiation tactics intended to limit or delay payment on large claims. As such, businesses filing a claim against a product recall policy generally need to prepare fastidiously.
A review of the policy is necessary to ensure that the policyholder follows all appropriate steps for a smooth and quick claims process. The policyholder may also need to put together clear documentation explaining the underlying reason for the recall to convince the insurance company that the situation qualifies for coverage.
Need Help Navigating a Complex Product Recall Claim?
Organizations preparing for a recall generally have a complex process ahead of them. Leadership may benefit from securing outside assistance to help manage the insurance claims process. Preparing for a potentially frustrating claims process can help organizations take action promptly to mitigate liability and complete a recall of potentially dangerous products. If your business is facing a recall and struggling to get the insurance coverage you paid for, our team is here to help.