Tag Archives: endorsement

Product Recall Expense Endorsements Becoming More Common

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A positive new trend is emerging for small businesses.  More product liability insurance carriers are starting to offer product recall expense endorsements to their product liability policies. 

The great thing about these add on endorsements are, they provide some product recall expense coverage at a much lower price than if a small business had to purchase a stand-alone or individual product recall policy.  Minimum premiums for a stand-alone product recall policy typically are in the $10,000 range per year and just too expensive for most small and start-up businesses to afford.  The product recall expense endorsements allow the small business owner to choose a smaller sub limit ($25,000 to $250,000) of their product liability limit to be used on for product recall and provides affordable premiums for 5% to 25% of the total product liability premium.  Some of the dietary supplement insurance carriers are offering $25,000 sub limits of coverage for as low as $500 or 5% of total premium, whichever is higher. 

Product recall or withdrawal is necessary when your product is deemed to have or suspected to have a defect that will potentially cause bodily injury or property damage.  The determination that a product needs to be recalled can be made by you or because a government entity has ordered you to withdraw your product from the market place.

Products recall expenses can include the following:

  1. costs of notification;
  2. costs of stationary, envelopes, product of announcement and postage or facsimiles;
  3. costs of overtime paid to regular nonsalaried employees and cost incurred by your employees, including costs of transportation and accommodations;
  4. costs of computer time;
  5. cost of hiring independent contractors and other temporary employees;
  6. costs of transportation, shipping or packaging;
  7. costs of warehouse or storage space;
  8. costs of proper disposal of “your products,” or product that contain “your products,” that cannot be reused, not exceeding your purchase price or your cost to produce the products.

The cost of getting this endorsement can vary greatly depending on limits of coverage you want, the type of products you sell and amount of product you have in the market place. 

If have any doubts about the need for product recall insurance, I highly recommend you go to www.recall.gov and look at the list of all the products similar to yours that are being recalled.  I believe you will quickly conclude that during the life of your business it is much more likely that your business will face a recall than a product liability claim.

Sub-Manufacturers And Suppliers Warranty Endorsement – One Scary Endorsement!

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The other day we were delivering a policy for American Safety Indemnity Company and we notice an endorsement we have never seen before. This endorsement is called Sub-Manufacturers and Suppliers Warranty or ES 98 100 05 04.

 We requested a copy from the underwriter and were completely surprised to find out that this endorsement had the power to remove product liability insurance coverage if the following conditions were not met:

 

  1. All sub-manufacturers and suppliers that supply any goods or products to you must have Product Liability insurance with limits no less than $1,000,000.
  2. You must have Certificates of Insurance from all sub-manufacturers and suppliers.
  3. All sub-manufacturers and suppliers must name you as “Additional Insured” and must be evidences on the Certificates of Insurance provided to you.

 This endorsement goes on to state “ the insured (you) agrees that this insurance policy has been issued upon the above representations and warranties and that this insurance will not apply to claims arising out of work or operation performed by any sub-manufacturer and supplier unless all of the above conditions are met.

 If all of the above conditions are not met product liability insurance will not apply.

 The scary word in this endorsement is “all”.  A more reasonable phasing of this endorsement would be “endeavor to” meet the above conditions.

 If you have this endorsement in your policy, make sure you contact your insurance agent to have it removed or find another insurance policy that does not have this endorsement.