Food Safety Modernization Act (FSMA)
Back in 2007, one of my favorite snacks was Veggie Booty, a rice puff with spinach and kale that was a good healthy stand in for a cheese puff snack. I remember the day that it was recalled because I was sitting at my desk with my hand in the bag, munching away when I received an email about the recall (I was a buyer for a local co-op so I was on the list of people to be notified). The notice said to throw away any product as there were 52 people sick in 17 states and the culprit appeared to be salmonella from a seasoning that had been imported from China. Since I bought it by the case, I had to throw away 7 bags. I have not eaten Veggie Booty since then.
This is a classic example of damages that a product contamination recall can produce. I am not nervous about getting sick but Veggie Booty was out of stock for a while and I just got out of the habit of eating it and I never returned as a customer. A loss in consumer confidence is a risk that is hard to quantify and therefore difficult to insure. Many businesses are driven to bankruptcy by this type of disruption.
Luckily, there are some parts of this scenario that are insurable. With recent and proposed changes to the Food Safety Modernization Act (FSMA), more food manufacturers are looking to Product Contamination and Recall Insurance to assist them. This insurance will pay for loss of product due to contamination, even if the contamination is discovered prior to shipping the product. It will also pay for the expense of recalling the product and some policies include payment for loss of income due to business interruption.
The events that are most commonly covered by this insurance are Malicious Tampering, Accidental Contamination, Government Recall and Adverse Publicity. The policies are tailored and no two are alike so it is important to know your risks and read the policy carefully to be sure that your interests are covered.
If you have questions on this topic, please call me at 877-352-2121 or email me at srichardson@clark-mortenson.com.
