30 May 2019

Product recall think tank focuses on crisis management

Our Gallagher National Head of Food Production Stephen Elms was a presenter and panellist at a recent industry workshop on product recalls aimed at identifying the legal and insurance issues involved.

Stephen Elms-1The Queensland Intensive 2019 Under the Magnifying Glass workshop was hosted at The Calile Hotel at Fortitude Valley in Brisbane by the Australian Insurance Law Association. The program included

  • trends and predictions
  • what to do when an incident occurs
  • how the insurance market is responding to product recall risk
  • defamation and reputational issues
  • legal liability.

Elms was part of the panel discussion on Product Recalls ‒ Insurance Issues and Impacts, examining the recent Queensland strawberry needle contamination crisis which made headlines around Australia.

“Damage mitigation is the overriding goal where product recalls are concerned,” Elms says. “Being able to cover off a program of required actions is essential to riding out a crisis like the strawberry needle contamination.”

Some of the costs involved might typically be

  • recall costs, including customer and retailer recall costs
  • replacement
  • business interruption
  • rehabilitation expenses
  • extortion, if applicable
  • consultants' and advisers’ fees
  • fines and penalties.

Interestingly malicious product tampering, like the strawberry needle contamination, is the least damaging product failure any company can experience, provided the response is swift and effective in minimising ongoing risk.

Public and media reaction to negligence or accidental contamination when a food product is involved can be intense and the way that the company’s management deals with the recall can have a dramatic effect on whether the business can rebound or ceases to continue operations. .

AILA product recall guest panel

Elms’s co panellists on the day were Dr Martin Miller, Director, Crawford & Company(far left)  and Donna Niblock, Assistant Vice President, Crisis Management, Liberty International Underwriters (centre). Kiley Hodges, partner, Sparke Helmore Lawyers (second from right), was moderator for the session.

“Having a widely recognised recent example of a dramatic malicious tampering case helped bring our various perspectives – broking, underwriting and claims – vividly into focus,” Elms says. “It’s also helpful to look at the integrated picture, how the elements come together and what the larger implications are.

“No one wants to have to deal with a product recall, but if an incident occurs you need to be prepared and you need to be protected. That’s what product recall insurance is for.”

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