Product Recall in the Time of Listeria

Over the last few weeks, the phrase “the product was recalled” has become almost daily vocabulary for many South Africans

Over the last few weeks, the phrase “the product was recalled” has become almost daily vocabulary for many South Africans. But what does this actually mean? We have all noticed a void in the refrigerator section of our local grocery stores. A void that we attribute to this product recall. But what is a product recall really? And who pays for it?

In broad commercial terms, a product recall occurs where a product, which has already permeated the market, shows potential to cause harm to consumers and potentially lead to legal consequences for the supplier of the product. A request is then issued for all the products to be returned to the supplier.

In South Africa, the National Consumer Commission (“the Commission”) has published Consumer Product Safety Recall Guidelines (“the Guidelines”) which detail the steps a supplier must take when a product is recalled. In terms of the Guidelines, a recall may either be initiated by the supplier independently or in discussion with the Commission. Alternatively, and only as a last resort, the Commission may order a compulsory recall in terms of the Consumer Protection Act, No 68 of 2008.

On the face of it, it may seem that a product recall would bring about dire commercial consequences for the supplier of potentially harmful products and it certainly cannot be disputed that the reputational damage may be far-reaching. Fortunately, from a purely financial point of view, insurance is not known as the “handmaiden of commerce” for nothing.

Product Recall cover is available within the General Liability space. It covers the costs incurred in recalling the insured’s products where those products are likely to cause harm to people or their property for which the insured may become legally liable. Although this is not liability insurance, it covers costs which prevent future liability claims.

As soon as a recall is initiated, it is important to ensure that all customers are notified effectively and timeously. The policy would cover the cost of all reasonable and necessary media communication and correspondence.

Products which have been returned by the customers will either need to be transported back to the manufacturer or destroyed. The policy will pay out for the cost of that transport or the cost of destroying the goods if that is the more practical solution.

It is worth noting that the Product Recall section will not pay the cost of repairing or replacing the product (where possible) and this would need to be covered under Product Guarantee.

For more information on this product, please feel free to contact us.

More News Stories

December 11, 2019
Silent Cyber: Unforeseen Data Breach Claim Under a General Liability Policy

On 15 November 2019, Target Corporation (the “Plaintiff”), a listed general merchandise retailer in the United States of America, filed a complaint in the District Court of Minnesota, against ACE American Insurance Company and Ace Property and Casualty Insurance Company (the “Defendant”), now incorporated into Chubb Limited, as a result of the Defendant’s refusal to indemnify the Plaintiff for part of the costs it incurred following a data breach of the Plaintiff’s computer network (the “Complaint”).

Read story
September 26, 2019
IIG International 2019

#IIGlobal2019 Crossword Challenge powered by Camargue

Read story
September 16, 2019
Camargue Turns 18

18 years ago, on this day [16 August 2019], Camargue Underwriting Managers made history by selling its first policy via satellite phone at the mount summit of Mt Kilimanjaro’s Uhuru Peak.

Read story