Full Service Trade Association Representing Dairy Processors, Manufacturers and Distributors Since 1928
New Member Service
2010 Food Safety and Modernization Act
Products Recall Group Discount Insurance Now Available
To: All Northeast Dairy Foods Assoc., Inc. Members
From: Bruce W. Krupke, Exec. VP
January 14, 2011
As you may be aware, the passage of the Food Safety Modernization Act recently passed and signed into law by President Obama will impose new regulations that require you to implement approaches to identify and prevent product contamination and assure the safety of your product from field to shelf. This new Act will empower the FDA with authority to issue mandatory recalls and impose penalties on companies that fail to comply with safety requirements. You can no longer rely on your own voluntary decision-making process to initiate a recall event.
Northeast Dairy Foods Association, in partnership with Agri-Services Agency, has arranged to create a new member Risk Purchasing Group (RPG) for products recall protection. Whether real or perceived, the frequency of food recalls seems to be on the rise, and with this new Act, it is likely the FDA will seek to bring a number of early cases in order to put its new powers to the test and demonstrate to the industry how the legislation will be made to work in practice. The need for products recall is truly greater than ever before.
Our RPG allows you to participate in a products recall program that provides comprehensive coverage, including government-mandated recalls. This is a unique coverage that is not found on most products recall forms. Additionally, our cost of this new protection is discounted through its group purchasing arrangements.
Please take a few minutes to review the details on Recall Insurance from Agri-Services Agency and if you would like to purchase this insurance protection and or have questions feel free to give myself at 315-452-6455 or our representative David Wallace a call at 800-582-2552 ext. 5573. We can help answer your questions and provide you with recommendations concerning your risk management approach to these new food and safety regulations.
Thank you very much!
Bruce W. Krupke
Executive Vice President
Food Recall Insurance: What it is, and What it does
Food recall insurance -- which is sometimes included under the broader heading of product recall, or recall insurance -- began in late 1980's as a result of the well known and publicized Tylenol tampering incident. In that case, a number of Tylenol bottles were intentionally laced with cyanide. As a result, seven people died, the company spent over $100 million dollars in remedial costs, and the Tylenol brand went from owning 35% of the non-prescription pain reliever market to around 8%. After this incident, a few insurers began offering recall insurance; however, at that time, coverage really only included malicious or intentional tampering. Nevertheless, and largely as a result of an increased number of recalls, accidental coverage began appearing in the early 1990s.
Recall insurance has proven to be very popular in Europe, and with the passage of E.U. Regulation 179 -- requiring that all food and beverage companies recall any product which violates the European Commission's food safety regulations -- it will continue to grow. This type of coverage is also becoming increasingly more visible in the United States through some recent and well publicized recalls. Although a number of insurers still do not offer this type of insurance, a handful of respected carriers do. Of course, as in any industry, companies that manufacture, sell, transport, or otherwise handle food, come in all shapes and sizes. Food recall insurance can and should be specifically tailored to meet the needs of a particular company. For example, a local bakery whose distribution network extends to only a few counties or states would not need the same amount of coverage as a massive manufacturer who distributes globally. In order to determine the right amount of coverage for your company, it is wise to consult a professional.
Generally, your recall insurance will cover most if not all of the costs associated with the recall. One prominent insurer provides a policy that covers both malicious and accidental contamination as well as product extortion. As always, however, the value of the policy is in the details. You want to make sure your company's policy covers shipping and destruction costs, media and public relations costs, and the amount you spend on replacing the recalled product in the market as well as restoring its name with the public. In short, these are the logistical and reparative measures that are always associated with a recall. Without adequate "recall" insurance protection, these expenses will not be covered.
Given the increasing number of recalls in today's food industry, can your company afford to be without food recall insurance?