A recent nationwide apple juice recall has raised questions on what protection businesses and consumers have in cases where there is a high interest in public health and safety.
“In the case of the apple juice recall, it involves multiple brands and retailers and one supplier. There are many parties involved, including consumers. This increases the stakes given the serious concerns about a mould toxin found in the apple juice concentrate,” explains Soul Abraham, head of retail at Old Mutual Insure.
Abraham says that there are significant risks facing businesses in today’s environment given the introduction of regulations like the Consumer Protection Act, increased vigilance by regulatory bodies such as the National Consumer Commission (NCC), consumers and policyholders being more aware of their legal rights.
“Some businesses can be forced into bankruptcy when incidents like these happen. If a company is compelled to speedily take the product out of the public reach before it causes harm, but fails to act quickly, it can have a long-lasting effect on all stakeholders in the value chain,” explains Abraham.
He says that there are two types of cover when high-risk incidents involve multiple parties, and it is important to know the difference, depending on if you are a consumer, or a business.
Product recall or public liability insurance: know the difference
A specialist product, but one that is not that common in South Africa, is Product Recall insurance. This covers expenses related to the recalling of the products that are already in the market. It further protects companies from financial loss resulting from the recalled products. It also covers the disposal costs, warehousing costs, and restocking, as well as reputation protection of the company.
“If there is cover in the retailer’s name then they would be able to claim costs associated with recalling the product from their shelves,” says Abraham.
He explains that a recall voluntary or mandatory if the regulatory authority of the insured’s client decides that the recall is necessary. This also depends on the cover taken by the insured, as some insured businesses may only opt to take voluntary recall.
On the other hand, Public Liability cover is designed to protect a business against claims that can be lodged against them by customers, suppliers or members of the public if they suffer any injury or damages as a result of negligent business activities. This covers injury and damage, for example, ‘slip and trip’. It would cover the legal costs a business is ordered to pay as a result of a claim or incurred to defend a covered claim incident. This can be extended to include Products Liability insurance, which includes ‘injury or damage’ after handing over defective goods to consumers.
“It is important to note that Products Liability insurance does not cover the costs of a recall if it takes place,” says Abrahams. “Products Liability insurance cover only kicks in where there is damage to third-party property or injury to third parties. If we are talking about a product recall, then both the manufacturer and retailer would be involved. It is advisable that both the manufacturer and the retailer should at least carry Products Liability cover,” explains Abraham.
He adds that as Public Liability insurance is relatively inexpensive, not having this type of cover is a running a large risk.
“While not compulsory in South Africa, it is obviously good business practice to have Public Liability including Products Liability insurance where applicable covering all your risk exposures if you are a business owner with a warehouse, mall, restaurant or shop, manufacturing plant, or if you are providing a professional service,” concludes Abraham.