Liability Insurance

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In today’s fast-paced world, products are now reached to customers in less time than ever before. In order to comply with the increasing demands, most of the businesses make use of the mass production, different vendors and suppliers which have their base throughout the nation.

While the vast network has made it feasible to send goods across the various locations, it has also given rise to contamination which can occur anywhere during the supply chain and thus, it has emerged as a big risk for various companies.

Food is susceptible to various accidental or deliberate contamination to get political or financial gain. Whether, the contamination is accidental or intentional, it can have serious impact on the existence of the product and even on the company.

Moreover, disgruntled employees, political and social reasons can also be behind the malicious contamination. Further, considerable costs may need to be paid in order to recall and replace the damaged product. Also, money would need to be spent on rebuilding the lost public confidence.

Therefore, it is essential to go with a food contamination insurance coverage which would come under the product liability insurance policy. The policy will play an imperative role in covering such situations which not only affect you financially but also have an adverse impact on your goodwill. The insurer provides an innovative crisis management solution to protect the policyholder against various potential recall costs, including a loss in profit and extortion costs. The policy covers any accidental or intentional contamination, which may happen during production, preparation, manufacture, packaging or distribution or item, provided the products have caused bodily injury, sickness, disease or death of any person within 120 days after the consumption.


K Sugar is a processor of sugar. The company is involved in bringing refined sugar into their production field from where it is converted into a liquid form, and then it is sent to various customers of K Sugar, who make use of the liquefied sugar towards their various food manufacturing applications.

In May 2016, the government department contacted K Sugar and notified them that salmonella was found in beverage products which were manufactured by two other companies. In both the cases, strains of salmonella have been found back to K Sugar’s liquid sugar product. The series of the test found out that the liquid sugar was the cause of contamination.

As a result of the test findings, K Sugar decided to voluntary recall all its products which were manufactured in the last one month. Along with this, it was decided that all those products which contained K Sugar’s contaminated liquid sugar would also need to be recalled. The consumption could cause serious health ailments and deaths as well, therefore, immediate steps were required to be taken.

It was found that K Sugar sold the contaminated products to its three customers— a bakery, a dairy base manufacturer and a syrup manufacturer. While the bakery owner used the liquid sugar for frosting their various products which were sold at different retail locations, the syrup and dairy base manufacturers had sold their products to other manufacturers who were supposed to use them as ingredients. In all total ten companies, including K Sugar, had to recall their products.

Read more: Does General Liability Insurance Cover Property Damage?

Fortunately, K Sugar had a product liability insurance cover and therefore as soon as the loss arose, the company informed the insurer who came forward to inspect the case. The insurer found the claim to be valid and agreed to settle it. Here, K Sugar’s product liability insurance policy included the recall and related costs which K Sugar had to incur along with third-parties. Some of the coverages which were given under food contamination coverage of product liability insurance were=

  • K Sugar Losses
  • Recall Costs
  • Replacement Costs
  • Loss of Profit
  • Rebuilding of Brand
  • Third Party Losses
  • Recall Costs
  • Loss of Profit