Most Liability policies exclude the cost of product recall following the discovery of a defect or deficiency in any product which could cause personal injury or property damage.
The exclusion will typically exclude the costs of repairing, reconditioning, modifying, re-installing or replacing the product or claims for loss of use of the product. Some policies may provide a sub limited cover for costs and expenses incurred in recalling products following a claim or otherwise.
However, Insurers recommends that most Insureds with any risk of product recall exposure, particular those involving the manufacture of food or food ingredients for personal consumption, obtain separate products recall insurance which caters for a wide range of necessary expenses that accompany any such event, i.e. public relations advice, advertising, recalling, transporting, cost reimbursement, repair, reinstalling, disposing, legal fees, loss of custom and profit. The cost of product recall insurance has traditionally been regarded as high, however it pales into insignificance against the costs incurred in managing any such event, including the impact on the Insured’s reputation, if not handled professionally and properly.