Wednesday, September 6, 2023

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Product Recall Expense Extensions: A safety net for manufacturers, distributors & importers 

Public and Product Liability insurance helps businesses mitigate their exposure if their product causes bodily injury or property damage to third parties. However, businesses can also suffer significant financial impacts if their product is deemed defective or suspected of a defect that may cause harm. This can result in costly situations where the business must notify the affected third parties and remove their product from circulation. However, a product recall expense extension can cover expenses directly related to a product recall. This article explains how. 

What is a product recall expense extension?

Public and Product liability insurance typically provides coverage for third-party bodily injury, property damage, or advertising injury claims arising from your business operations or products. However, it may not automatically cover the costs associated with a product recall. Under a public liability insurance policy, the term "product recall expense extension" refers to a coverage option that can be added to the policy to cover expenses related to a product recall. This extension can benefit smaller manufacturing businesses as well as distributors and importers.  


What does this extension cover?

When added to a public liability policy, a product recall expense extension expands the coverage to expenses directly related to a product recall. These expenses may include:

Notification and communication costs

The costs associated with informing customers, retailers, distributors, and other stakeholders about the product recall, such as sending out letters, emails, or making public announcements

Transportation and disposal costs

Expenses to retrieve the recalled products from the market, including transportation, storage, and disposal or destruction of the products in a safe and environmentally friendly manner


Additional personnel and expertise

The costs of hiring or engaging additional staff or experts to manage the product recall process, including public relations consultants, legal advisors, or quality control professionals


Expenses required for disposal/destruction of the recalled product


Which businesses benefit from this extension?

It is important to note that this extension is not fully comprehensive product recall cover. As noted above, however, this extension can benefit smaller manufacturing businesses, distributors, and importers.   Full product recall cover will include other first-party loss covers such as cost of loss of products and consequential loss of income as a result of recall.  


How can Honan help?

The availability and specific coverage details of product recall expense extensions can vary depending on the insurance provider and the terms of the policy.  We can review your policy to see if such an extension is available and determine whether comprehensive recall product cover is more appropriate for your business needs.

Please feel free to reach out at any time.


Yvonne Chew 

Client Manager

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Honan Insurance Group Pty Ltd is now fully owned by Marsh Pty Ltd. To find out more, speak to your broker or read the announcement