Coverage A exclusions

Coverage B

Coverage B exclusions

Supplementary payments

Who is an insured

Limit of insurance

Conditions

Definitions

Endorsements

Coverage A

 Coverage A – Product Withdrawal Expense

1.Insuring Agreement

a.We will reimburse you for “product withdrawal expenses” incurred by you because of a “product withdrawal” to which this insurance applies.

The amount of such reimbursement is limited as described in Section III – Limit of Insurance. No other obligation or liability to pay sums or perform acts or services is covered.

b.This insurance applies to a “product withdrawal” only if the “product withdrawal” is initiated in the “coverage territory” during the policy period because:

(1)You determine that the “product withdrawal” is necessary; or

(2)An authorized government entity has ordered you to conduct a “product withdrawal”.

c.We will reimburse “product withdrawal expenses” only if:

(1)The expenses are incurred within one year of the date the “product withdrawal” was initiated;

(2)The expenses are reported to us within one year of the date the expenses were incurred; and

(3)The product that is the subject of the “product withdrawal” was produced after the Cut-off Date designated in the Declarations.

d.The initiation of a “product withdrawal” will be deemed to have been made only at the earliest of the following times:

(1)When you first announced, in any manner, to the general public, your vendors or to your employees (other than those employees directly involved in making the determination) your decision to conduct or participate in a “product withdrawal”. This applies regardless of whether the determination to conduct a “product withdrawal” is made by you or is requested by a third party; or

(2)When you first received, either orally or in writing, notification of an order from an authorized government entity to conduct a “product withdrawal”.

e.”Product withdrawal expenses” incurred to withdraw “your products” which contain the same or substantially similar “defects” will be deemed to have arisen out of the same “product withdrawal”.

f.With respect to products of which “your product” is a component part, we will only reimburse you the amount to replace, repair or repurchase “your product”.

 Analysis

 The insurer will reimburse the named insured for product withdrawal expenses under the terms of this insuring agreement. “Products withdrawal expenses” is a term that is defined in the policy and will be discussed later, but it can be noted here that the expenses must be incurred by the named insured, the expenses must be reasonable and necessary, and they must be paid and directly related to a withdrawal of the named insured's products from the market.

 It is interesting to note that the insuring agreement declares that the insurer will reimburse the insured for expenses incurred. To reimburse someone means to pay that person back or to make restoration of an amount paid, and yet, the word “incurred” just means becoming liable or subject to and not necessarily being already paid. In other words, the insurer promises to repay the insured for expenses it only incurs and not necessarily already has paid. Presumably, this means the insured need only draw up a list of the reasonable and necessary expenses the insured estimates for the amount of the products withdrawal, present the list to the insurer, and the expenses will be paid.

 The withdrawal expense coverage applies when the product withdrawal is initiated in the coverage territory during the policy period and when it comes about through the initiative of the named insured or an authorized government entity. The coverage territory is the world, not just the United States, Canada, and Puerto Rico. So, if the European Union or Japan demands that the named insured withdraw its product from use, CG 00 66 will pay the insured for its expenses in meeting this demand; there is no requirement in this policy for the insured's responsibility to be determined in a lawsuit filed in the United States, Canada, or Puerto Rico.

 There are time limits that must be observed by the insured under this insuring agreement. The expenses must be incurred within one year of the date the withdrawal was initiated, and the expenses must be reported to the insurer within one year of the date the expenses were incurred.

 As for when the initiation of a product withdrawal is deemed to have been made, CG 00 66 describes that point as either when the named insured first announces the withdrawal or when the named insured first receives an order to conduct the product withdrawal, whichever is earlier. So, for example, if the government orders the named insured to withdraw its defective product from the market on December 15, 2015, the one year time period starts to run and the insured will have its incurred withdrawal expenses from December 15, 2015, to December 15, 2016, covered by CG 00 66. In the current egg recall involving Rose Acre Farms, after the FDA advised them that the strain of salmonella currently causing illness was present at its facilities, Rose Acre Farms voluntarily recalled eggs from that particular farm. Expenses from this recall will be covered.

 Note that the reporting period language does give the insured some leeway. The withdrawal expenses must be incurred within one year of the date the withdrawal was initiated, but the reporting of the incurred expenses can be done within one year of the date they were incurred. In other words, if the initiation of a product withdrawal occurs on December 15, 2015, the insured has until December 15, 2016, to incur covered withdrawal expenses, but if the insured incurs such expenses on February 14, 2015, he has until February 14, 2016, to report those incurred expenses to the insurer in order for the coverage to apply.

 Coverage A Exclusions