New coverage protects food industry against reputational damage following product recall

Food producers must be better prepared to manage not only the possibility of a product recall, but any reputational damage that could sink the company as a result.”It takes 20 years to build a reputation, and about five minutes to ruin it,” Ed Mitchell, senior underwriter for product recall at XL Insurance Company Limited, said.He was speaking at a public unveiling of XL’s new product recall insurance for the food and beverage industry. The coverage is intended to protect food producers against accidental contamination (contamination due to a manufacturer’s problem, or contamination issues associated with a supplier), a malicious contamination (bio-terrorism) or extortion. The program has a primary capacity of Cdn$10 million and an excess capacity of Cdn$25 million (attaching above Cdn$10 million). It covers a risk size of between Cdn$10 million through Cdn$5 billion. The new cover also includes pre- and post-crisis consultation to help a company mitigate damage to its brand name in the event of a recall.Steve Gruler, president of Global Quality Consulting Inc., observed some companies have actually seen their stocks increase after a product recall, based on how they handled the negative publicity.Other companies, however, have suffered irreparable harm. Topps Meat, for example, closed its 76-year-old business only five days after it expanded an initial recall of 331,582 pounds of frozen hamburger patties. The Topps Meat recall happened two full months after the first reported illness related to E.coli contamination.”Insurance will only go so far in protecting against a product contamination catastrophe, but effective crisis management can be the difference between brand damage and brand success,” Gruler noted in his presentation notes.