Does Product Liability Insurance Covers Spoiled and contaminated Food?

Yes, a product liability insurance policy covers spoiled and contaminated food as well. A product liability insurance policy covers the various costs associated with damages, illness, or injuries caused by your products.

If you run a restaurant, grocery store, or wholesale food business, perishable food and beverage are like your ‘food and butter’. You will have to face heavy expenses if a government body shuts down your business due to food contamination or spoiled food. Not only it will cause financial loss; it will have an adverse impact on your goodwill or reputation as well. Therefore, it is necessary to buy product liability insurance cover which can offer a myriad of coverages to give you complete protection.

A product liability insurance policy offers the following coverages=

1. Accidental Contamination
   It covers any accidental or unintentional contamination or mislabeling of policyholder’s product that occurs during production, preparation, packaging, or distribution. However, coverage will only be provided if the contamination results in bodily injury, sickness, disease, or death of a person within 120 days after product use.
2. Malicious Tampering
   If there is an actual, unintentional or wrongful alteration or contamination of the policyholder’s product which has made it unfit for consumption, the product liability insurance company will cover it. The insurer will also offer coverage if the malicious tempering has created such an impression among the public that the product is not fit for consumption.
3. Product Extortion
   If the policyholder receives any threat or connected series of the threat of committing malicious tampering of the product in order to extract money, insurance coverage would be given. Here the insurance policy offers coverage for recall expenses, and consultants costs and includes extortion expenses as well.

While product liability insurance policy plays a significant role by covering against food contamination and spoilage, there are certain situations that are not covered under the policy, like-

Note, it is not an exhaustive list of exclusions, and therefore, it is necessary to read your policy document carefully in order to get the complete information.

Case

M.S. Noodle is a leading name in the food industry. With a vast base of clients spread around India, the company has carved a niche for itself in the industry in a very short span of time. However, in 2015, the company had to face a major brunt when the government’s food safety and drug administration department found excessive levels of lead in its product. Soon the government banned the sale of noodles throughout the country. M.S Noodles subsequently had to recall all its noodles from the market.

In doing so, the company had to incur huge expenses. Luckily, M.S Noodles had a product liability insurance policy. As soon as the company received a notice from the government regarding contamination. It informed the insurer who asked for the complete account of the case to find out the validity of claim. Here, the insurer found the claim to be true and thus, agreed to compensate M.S Noodles. Here, the coverage given under the product liability insurance policy was as below=

• The insurer covered expenses that M.S Noodles had to incur related to recalling, shipping, and destroying the products
• Along with this, the insurer also covered third-party losses or damages. As consumption of noodles caused health issues among some customers, they filed a legal suit against M.S Noodles. Here the insurer also covered third-party liability and covered legal expenses as well

The entire incident hampered the goodwill of M.S Noodles, and the company had to incur expenses in rebuilding its position in the market. Here, also product liability insurance policy helped the company.