Product recalls are on the rise in many industries. As regulatory and consumer protection standards are getting tougher, product supply chains are becoming more complex. This increases the risk of errors, defects and contamination at all levels of operation. Too often, these problems do not manifest themselves until after a product hits the market. All of this can lead to staggering expenses for food and product manufacturers facing the risks and realities of product recalls.
To protect against the substantial and wide-ranging costs associated with recalling a product, many businesses purchase insurance policies geared specifically for expenses, lost income, and claims arising from recalls. These targeted policies can save a company, but they also are susceptible to rescission. In a recent article published in Corporate Counsel, Hunton insurance coverage attorneys Syed S. Ahmad and Paul T. Moura comment on a recent Third Circuit decision that illustrates the importance of taking the right steps to avoid invalidating insurance coverage for product recalls.