Food Safety Legislation Spurs Insurance Changes

Despite being stalled in the Senate, the Food Safety Modernization Act of 2010, which would give the FDA greater authority in ordering recalls of contaminated food, is propelling insurance companies to offer coverage for such recalls, an industry insider said.

Bernie Steves, a managing director of Aon Risk Solutions crisis management practice in Chicago, said more and more carriers started offering coverage for government-mandated recalls shortly after the legislation passed the House in July 2009.

Standard coverage provided by product contamination policies is triggered by the contamination itself, not a recall. “There are two types of triggers, either accidental contaminations or malicious contaminations,” Steves said. “This adds another trigger to the policy: accidental contamination, malicious contamination, or government recall.”

Steves said the coverage is worth purchasing. “Depending on the carrier, that coverage could be worth up to the full policy limit of 200-million plus, at least in theory,” he said. “Practically speaking, it probably wouldn’t be that high, but it could be significant. I would say that most of our clients are looking to add this coverage if they haven’t already.”