Product Recalls

Product-recall expense can prove increasingly expensive in this time of international distribution, just-in-time inventories, far-flung shipping, and the like. Of course, the current poster child is Mattel, which seems to be doing a very good job in managing the recall of some of its Chinese-made toys. Policies today routinely seek to exclude the cost of product-recall expense, which can be staggering and life-threatening to a company — both in terms of cost and perhaps more importantly in reputation of the producer. Speciality policies exist to deal with various types of recalls, and there has been litigation concerning product-tampering coverage and the more traditional liability insurance coverage and the scope of the product-recall exclusion (known in the trade as the “sistership” exclusion). The current wave of recalls involving Chinese-made products may well stimulate demand for this product, but I would not be surprised to see provenance exclusions developed or warranties required from assured as to quality control and quality assurance from their foreign contractors.

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