Harrison and Mills came from Aon to Marsh together in January 2010 as Product Recall Practice Leaders, focusing on client exposures relating to product recalls and contamination.

“We started working together at AIG as underwriters; then we went to Aon together to start their recall practice,” Harrison says. “Our core team has been together for 16 years. We do more product-recall insurance in the U.S. than anybody else.”

The primary goal of MRC's Product Risk Practice is to help its clients better understand their exposures to contamination or a failing product, he says: “The first step is to understand the risk. Everyone has some idea what their risk is, but generally their risk is more involved than they appreciate. Our job is to help them understand that risk.”

Product Recall is a major risk for a large manufacturer or restaurant chain: one supplier mishap can cause a major recall for a large company, or for more than one company, if one of its products fails or is contaminated.

For example, in November 2006 more than 70 franchisees of the Taco Bell fast food chain suffered from a product contamination outbreak when lettuce from a supplier to the chain's northeastern U.S. restaurants was found to be infected with the e. coli bacteria. At least 39 people were infected in central New Jersey and on Long Island. Some 1,300 Taco Bell restaurants saw sales plummet.

“Are there things you can do with risk management to look at your contracts, investigate your insurance needs and recall-related insurance products?” Harrison says. “The risk, if unattended, can put a company out of business.”

He cites Chi-Chi's Mexican restaurant chain, which went out of business in 2004 following a November 2003 fatal outbreak of Hepatitis A in the Pittsburgh area. Four people died, and hundreds became sick. The hepatitis was traced back to green onions at the Chi-Chi's at Beaver Valley Mall in Monaca, Pa.

The restaurant chain did not use crisis management services, and had already filed for Chapter 11 bankruptcy protection prior to the outbreak. Afterward, it was partially acquired by Outback Steakhouse, which did not buy the Chi-Chi's brand; all of the chain's restaurants eventually closed.

Product Recall vs. Contamination

Product Recall Insurance is usually for non-food companies and is triggered by recall of a product for specific types of risks, generally because a product either has or would cause bodily injury or property damage. Product Recall for a component parts manufacturer can also cover recall due to Impaired Property, where a faulty component caused the final product to be recalled because it either doesn't work or doesn't work as well as it should.

Product Contamination Insurance is entirely different, and is targeted for food companies. The policy is triggered by a contamination event whether or not there's been a recall—say, if a food manufacturer discovers a problem before the food is shipped. Insured events include Accidental Contamination, Malicious Tampering, Government Recall, Adverse Publicity and others. A policy can include coverage for Business Interruption caused by a contamination; pharmaceutical companies have their own specialty policy, which is a form of Product Contamination policy.

Each event covered under a Product Contamination policy has its own specific definition unique to each underwriter, so a brokerage has to be aware not only of the different types of events, but their definitions of coverage as used by each underwriter.

The wording on the policy is key; having a brokerage team that specializes in different types of events is MRC's advantage, Harrison says.

“We come across companies every week that have the wrong form or policy, and if they have a loss, the policy is not going to respond,” he says. Additionally, every underwriter uses a different form.

“We've got more than a dozen underwriters, and most of them have multiple forms for different types of companies: restaurants vs. food manufacturers vs. mechanical products,” Harrison notes. “Each one of them has unique wording, so if I'm trying to create a program for XYZ Cupcake Co. and get quotes from four or five different underwriters, I'll get four or five different quotes, and all the terms and definitions are different.”

There's a long history of companies that have experienced huge losses because their broker gave them the wrong policy, he says.

The earlier-mentioned Taco Bell e. coli contamination case from 2006 did more than sicken the chain's customers. In August 2009, National Underwriter reported that a New Jersey court had ruled against Lloyd's in a lawsuit launched by Taco Bell over policy wording that prevented the company from receiving payment for its business losses. The wording excluded “any alleged involvement of a supplier,” which Lloyd's contended meant that the e. coli-tainted lettuce was not coverable, so the entire contamination wasn't coverable.

It's the fine details—or fine print—that can make or break a policy, and a client relationship.

“You have to make sure it's a fit for their risk; these are all tailor-made programs,” Harrison says. “If it's not done right, the client is exposed. We spend an awful lot of time asking questions up front, trying to really understand a client's business so we can put together the right program for them.”

“I don't want to spend 1,000 hours on a claim because we didn't put the right program together for them,” he adds. “We take the extra time to make sure it's right.”