NU Online News Service, Aug. 26, 3:17 p.m. EDT
As about a half a billion eggs have been recalled due to possible salmonella infection, it is likely recall contamination insurance coverage has been triggered.
Ian Harrison, an executive director of Lockton in London, said contaminated products insurance (CPI) goes into effect by an event like the egg recall.
"It is triggered when you have made someone sick or are likely to have made someone sick," Mr. Harrison said.
According to the latest report, about 1,300 Americans have gotten sick from salmonella. Health officials continue to investigate the reasons behind the contamination. Likely sources of salmonella outbreaks on egg farms include rodents, shipments of contaminated chicks or hens, lack of bio security controls, and tainted feed, said Margaret Hamburg, commissioner of the Food and Drug Administration during a recent conference call.
The CPI coverage protects a company against financial loss, Mr. Harrison explained. It provides for short-term costs such as crisis management and notices to the public or media, plant clean-up costs and loss of gross income, such as if the producer loses a contract because of the recall.
The egg recall is different than other recent recalls involving peanuts and dried milk because it is mandatory, not voluntary, as the other recalls were. Therefore, there will not be claims issues where primarily insurers deny coverage because there was no evidence that an insured's product did or would have caused bodily injury.
"The other recalls were precautionary recalls and that caused some issue with coverage, but you do not have that situation here with the eggs," Mr. Harrison said.
Buyer interest, awareness and purchases of CPI have increased with the recent food recalls, according to a report from Lockton. Competition and pricing are each favorable for this specific market, the broker said.
Also, new regulations could give recall power to the FDA, which now cannot compel recalls. This development could also affect CPI sales.
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