Three Things Food Safety Directors Should Know About Insurance

Food & Agribusiness, Property & Casualty

Read through food safety director’s job description and chances are you won’t see “insurance decision maker” listed as one of the key functions. While the food safety director is responsible for diligently controlling the risks associated with food processing, the responsibility of transferring those risks to the appropriate insurance coverages typically falls to the CFO, controller or, in some operations, the owner or president. But what can happen when the managers of these two critical business functions – food safety and insurance – operate in silos with limited interaction or information sharing?

A food safety director has intimate knowledge of food safety risks. If the organization’s insurance decision maker is not privy to this information – or is working with an insurance broker with limited food processing knowledge – these risks could be left underinsured or, worse, not covered at all.

Below are three questions that can facilitate a conversation between the insurance decision maker and the food safety director:

1. Does our insurance provide liability coverage should a consumer contract a foodborne illness from eating our product?

This may seem like an unnecessary question. A food processor often assumes if they have general liability coverage it includes coverage for bacteria or viruses that could cause a foodborne illness. But, as Jim Brunker’s article in the June 9, 2017 issue of The Cheese Reporter highlighted, this isn’t always the case:

Today’s issues with inconsistent product liability coverage can be traced back to 1986 when the “absolute pollution exclusion” was added to general liability insurance policies by the Insurance Services Office (ISO). ISO is the larger of two national insurance service organizations that collect statistical data and develop standard insurance policy coverage forms on behalf of insurance companies.

In addition, courts throughout the United States have wrestled with the applicability of the pollution exclusion when it comes to food related issues. The result: inconsistency from state to state in interpretation of the policies. For example, the Wisconsin Supreme Court in Wilson Mut. Ins. Co. v. Falk, 857 N.W.2d 156 (Wis. 2014), determined that bacteria are pollutants. If bacteria are pollutants and general liability policies exclude coverage for claims caused by a pollutant, then a claim arising out of Listeria M. contamination could be denied under a typical general liability policy.

2. What type of product recall coverage does our company have?

Recall is almost always on a food safety director’s mind. Dairy processors often have written recall plans and regularly practice mock recalls. Due to the increasing number of recalls over the past five years, insurance carriers are narrowing the scope of the coverage and/or offering lower limits for product withdrawal and product recall insurance. Many of property and general liability insurance policies available today may include a modest amount of limited product withdrawal coverage. This coverage, however is not a true product recall coverage and is called “limited” for a reason. Limited product withdrawal coverages will generally cover the withdrawal expenses incurred by the dairy processor only up to the stated limits in the policy. They will not, however, cover the costs that your customers incurred as a result of your recall.

The CFO has the option of exploring a broader stand-alone product recall coverage solution which provides not just product withdrawal coverages, but also can come with pre-event food safety consultation. A robust product recall policy can be written to cover costs associated with the business interruption caused by the recall, third-party consultant fees, the expenses your customers incurred as a result of the recall and over-time costs of employees. The right policy could provide access to a crisis management team to help protect and rehabilitate your company’s brand and reputation as well.

Simply put – not all product recall or withdrawal coverages are created equal. If the CFO is aware of the critical steps involved in a recall as well as the impact a recall will have on the company’s customers and reputation, he or she will likely find that the limited product withdrawal coverage is just too… well, limited.

3. What resources can my food safety team access from either our insurance carrier (company) or insurance broker?

Not every insurance carrier likes covering food risks. In fact, in the past few years, several insurance carriers who historically provided coverage for food processors, have exited the food business completely. When a dairy processor chooses to work with an insurance broker and an insurance carrier who specialize in the food industry, the processor gains more than just good coverage. Carriers and brokers who specialize in food insurance coverages will often provide food safety consulting and support or access to discounted or even free food safety training. They essentially become an extension of the food safety team.

When the insurance decision maker and the food safety team connect on the topics of risk management and appropriate insurance coverages, the entire dairy plant can benefit. Connect with M3 today.


This blog post is an article originally published by The Cheese Reporter in August of 2018.
M3’s Food & Agribusiness professionals are regular contributors to the Cheese Reporter. Read the most recent M3 articles on

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