There have been two very large top recalls this week from RC2 Corp (RCRC) and Kolcraft of Thomas and Friends toys and playpens.
Where there is risk you're sure to find some form of insurance to offset that risk. Did you know that companies can purchase recall insurance from some insurers? I was not aware of this type of insurance but after some digging around I found some interesting factoids. From the American Bar Association website:
"Many companies have discovered the hard way that insurance covering general product-liability risk does not usually cover the costs of implementing a recall of an unsafe or contaminated product.
Product-recall insurance policies take the form of extra-expense coverage rather than legal-liability coverage."
Aon (AOC) is just one of the companies offering Product Contamination/Recall Insurance that covers the following and more:
"Recall costs in the event of your own or a third-party recall as well as recalls or sales bans at the direction of public agencies, especially costs for examination, transportation, destruction, analyses, decontamination of plant sites, storage space and cancellation charges, additional storage capacities, installation and dismantling costs, notifications to customers or end users, etc. with the right expert in your country.
Manufactoring costs. Replacement of the recalled goods plus renewed transportation costs for replacement deliveries.
Rehabilitation costs. Advertising measures, sales promotion, re-launch of a product on the market, appropriate expenses to preserve brand integrity."
Companies that sell anything from toys and cars to food and drugs should seriously consider having recall insurance as part of their overall coverage. I wonder if either RC2 Corp or Kolcraft had such coverage?
I was interested to hear an NPR news report that Mattel executives recently went to China to officially and publically "apologize" and "accept the majority of responsibility" for the recalled goods, which they said were "due to a design flaw." Ridiculous. They were then verbally castigated by Chinese officials in front of the Chinese media.
Something tells me the company leaders were just there for a couple of reasons:
1) they were trying to save face for the incredibly face-conscious Chinese leaders.
2) they make a ton of money manufacturing over there, and don't want to screw it up.
3) they don't speak Chinese, anyway, so who cares if they are being cursed out?
4) ...and I just thought of this one when I read this blog -- they might be insured for any of the losses, anyway!
Interesting. It's true, there is niche marketing for all kinds of insurance.
Jerry
www.leads4insurance.com
Posted by: Jerry | October 3, 2007 8:33 PM | Permalink to Comment