Companies warned of potential for multi-million pound losses in wake of product recall problems

Companies have been warned they could face costs running into the millions of pounds if they fail to properly insure themselves against the risk of a product recall.

That’s the advice today from the sector specialists at Arthur J. Gallagher — the international division of Arthur J. Gallagher & Co. outside of the United States and one of the UK’s largest risk management and insurance brokerages — after chocolate manufacturer Mars was forced to recall both Mars and Snickers bars, reportedly across more than 50 countries, after pieces of plastic were found in products.

Garry Moseley, a director within Arthur J. Gallagher’s specialist Food and Drink Practice – which works on behalf of a range of sector-leading clients – said that in some cases, costs have quickly spiralled into the millions for companies without adequate protection.

Garry said: “With a company of its size, you can bet your bottom dollar that Mars has extensive product-checking procedures in place so this just goes to show that a recall can happen to any company.

“These types of recalls, particularly when you’re talking about an international issue, can lead to a myriad of issues from communicating the recall to consumers and sellers across a range of different countries in different languages, to managing the media response and the logistics of getting the products themselves out of circulation.

“There may also be legal costs involved should any harm come to consumers, which can be covered under product liability insurance.

“It just goes to show how vital it is that companies are properly protected with both well-tested crisis response plans and comprehensive insurance policies in place to cover costs.”

For 2016, Arthur J. Gallagher’s specialist Food and Drink Practice is producing a series of podcasts designed to encourage the food industry to confront and prepare for potential problems before they occur.

Produced in association with product liability expert QC, Malcolm Sheehan, of Henderson Chambers, one of the UK’s leading experts in the field, the first, which will be released soon, will focus on the operational journey around a product recall.

Other planned podcasts topics include product recall insurance claims, management of product recall issues, supply chain litigation and the health and safety of food products.

For more information on Arthur J. Gallagher’s Food and Drink Practice please visit
http://www.ajginternational.com/corporate-insurance/food-drink-major-risks