Tag Archives: Product Recall

Time to check your vehicle for recalls at NHTSA site

Airbags help save thousands of lives every year, but in the case of Takata Corp, the company’s exploding inflators have been linked to at least 16 deaths worldwide and more than 180 injuries.

Takata’s filing for bankruptcy protection in the U.S. and Japan and $1.6 billion sale of its assets to Key Safety Systems is the latest twist in what has been described as the largest and most complex automotive recall in history.

From Bloomberg:

“The Chapter 11 bankruptcy in Delaware listed more than $10 billion in liabilities, including those from automakers like Honda Motor Co., Toyota Motor Corp. and Tesla Inc., which have claims over the airbags, and people who have brought class action lawsuits.”

Also:

“In the U.S. alone, about 43 million air bag inflators are currently subject to recall, and only about 38 percent have been repaired as of May 26, according to data on the U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) website.”

This is a reminder of how important it is to check your vehicle for airbag­–and indeed any other recalls–at the NHTSA website.

The NHTSA Vehicle Identification Number (VIN) search tool allows you to access recall information provided by the manufacturer conducting the recall which may not yet be posted on the website.

Finding out fast about safety problems with your vehicles, tires or car seat allows you to get your car repaired (manufacturers are responsible for costs) and to protect you and your passengers.

The National Safety Council and Fiat Chrysler just launched an awareness campaign “Check to Protect” to encourage vehicle owners to make recall checks.

Check out Insurance Information Institute facts and statistics on product recall insurance.

Samsung Recall Underscores Emerging Tech Fire Risks

A formal recall by US safety regulators of the Samsung Galaxy Note 7 smartphone due to serious fire and burn hazards should put users on notice to power down and stop using their devices immediately and return them for a free replacement or refund.

Samsung has received 92 reports of batteries overheating in the United States, including 26 reports of burns and 55 reports of property damage, including fires in cars and a garage.

In its warning, the Consumer Product Safety Commission (CPSC) states:

“The lithium-ion battery in the Galaxy Note7 smartphones can overheat and catch fire, posing a serious burn hazard to consumers.”

The recall covers 1 million phones in the U.S., but some 2.5 million of the devices need to be recalled globally, Samsung said.

It follows a Federal Aviation Administration (FAA) brief last week urging passengers not to use Samsung Galaxy Note 7 devices on planes, nor to stow them in their checked luggage.

As the Wall Street Journal reported, identifying a specific brand or model as a potential hazard is a highly unusual move for the FAA, though agency officials previously issued warnings about the overall dangers of checking any kind of cellphones, other battery-powers electronic devices or spare batteries in the holds of planes.

Following the FAA announcement, Samsung accelerated its massive recall.

The cost of the recall to Samsung have been estimated at about $1 billion, but the costs in terms of the hit to market value, tarnished brand and reputation, and lost revenues, as well as opportunity cost could be much higher, as Forbes reports. (Note: Apple’s new iPhone 7 goes on sale today)

From the insurance perspective, the story does underscore broader concerns over increased fire risks from lithium-ion batteries.

As this National Fire Protection Association blog post explains:

“Rechargeable lithium batteries overheat more than any other type of batteries and tend to have manufacturing defects. They are also very poorly regulated. The low weight batteries house substantial energy and fit into smaller devices, but have been causing fire safety issues in smart phones, tablets, hover boards and other emerging tech devices that are popular with the buying public.”

The homeowners line of business saw the majority of fire losses in 2014, according to Insurance Information Institute facts and statistics on fire losses here.

The risks of lithium batteries are also on the radar of commercial insurers. FM Global has partnered with fire protection groups to research the fire hazards of lithium-ion batteries in warehouse storage and cargo containers, for example.

 

 

Time to Consider Product Recall Insurance?

The decision by Texas-based Blue Bell Creameries to recall all of its products after two samples of its ice cream tested positive for listeria is a timely reminder of the importance of product recall insurance.

Product recalls can be costly and logistically complex. In Blue Bell Creameries’ case the expanded voluntary recall announced Monday night includes ice cream, frozen yogurt, sherbet and frozen snacks distributed in 23 states and international locations.

Blue Bell said it was pulling its products “because they have the potential to be contaminated with listeria.”

The company had issued an earlier more limited recall last month after the U.S. Centers for Disease Control and Prevention (CDC) linked ice cream contaminated with listeria to three deaths in Kansas.

As of April 21, 2015, the CDC says a total of 10 people with listeriosis related to this outbreak have been confirmed from four states.

A 2014 report by Aon notes that the number of product recalls in the United States  and Canada for both food products and nonfood products continues to grow year over year.

Each year, hundreds of products are recalled in the U.S. Some historically significant recall events have included such well-known brands as Tylenol, Perrier, Firestone Tires, Pepsi and Coca-Cola.

The Insurance Information Institute (I.I.I.) reminds us that product recalls can be financially devastating and potentially put a company out of business. No organization is immune to the risk of a product recall–even those with the best safety records, operational controls and manufacturing oversight.

In a  post in  the Wall Street Journal’s Morning Risk Report, crisis management experts note that how well a company succeeds at regaining customer trust following a product recall will likely determine whether it recovers from the negative hit to its reputation and bottom line.

True. Insurance can also help defray the financial hit on a company.

Product recall insurance  helps cover a wide range of costs including advertising and promotional expenses to launch a recall, as well as  the costs related to product destruction and disposal, business interruption and repairing a damaged reputation, the I.I.I. says.

Another coverage worth considering is product contamination insurance, which protects a company’s bottom line in the event its product is accidentally or maliciously contaminated.

Cantaloupe Concerns

Once again food safety is in the news. This time it’s cantaloupe.

The current outbreak of listeria infection linked to cantaloupes grown at Jensen Farms in Colorado, so far has caused at least 13 deaths and left 72 people ill.

According to reports, this makes it the deadliest foodborne outbreak in the United States in more than a decade. And  the number of illnesses and deaths are expected to rise, officials say.

It comes just months after a deadly E. coli outbreak in Europe.

The Food and Drug Administration (FDA) earlier issued a press release announcing that Jensen Farms issued a voluntary recall of its Rocky Ford-brand cantaloupes after being linked to a multi-state outbreak of listeriosis.

According to Centers for Disease Control and Prevention (CDC) estimates, each year roughly one in six Americans (or 48 million people) gets sick, 128,000 are hospitalized, and 3,000 die of foodborne diseases.

CDC also notes that some 3 or 4 outbreaks of listeria-associated foodborne illness are diagnosed each year in the U.S. The foods that typically cause these outbreaks have been deli meats, hot dogs, and Mexican-style soft cheeses made with unpasteurized milk.

Produce is not often identified as a source, but sprouts caused an outbreak in 2009 and celery caused an outbreak in 2010.

Listeria, along with other pathogens such as salmonella, toxoplasma, and norovirus are the leading cause of foodborne deaths, according to CDC statistics (see chart via CDC website below).

Meanwhile, check out this Q+AÂ  at Businessweek about listeria in fruit.

A report from Aon last year noted that the increasing frequency and severity of food contamination incidents is prompting greater awareness among food system, agribusiness and beverage companies to insure against such events.

 

Growing Demand for Product Recall Insurance

Food recalls and product recalls in general can be an expensive business.

Just yesterday Abbott Laboratories announced that it will take a one-time charge in the third quarter 2010 for expenses related to its voluntary recall of five million cans of certain Similac powdered infant formula due to possible contamination by beetles.

The Food and Drug Administration (FDA) has determined that while the formula containing these beetles poses no immediate health risk, infants who drink it could experience symptoms of gastrointestinal discomfort that could cause them to refuse to eat. A Wall Street Journal article has more on this story.

(Note: Abbott said that parents and caregivers can go to www.similac.com/recall10Â  and call toll-free number: 1-800-986-8850 for more information)

The latest contamination event underscores the point that whether it’s eggs, toys, cars, peanut butter or pet food, product recall as a precautionary step or worse following actual injury or damage can be costly to a business and its reputation.

A just-released Aon study notes that the claims costs connected to the recent half billion egg recall will be unprecedented and include liabilities such as business interruption and reputation damage.

Aon also reports that the increasing frequency and severity of food recalls is prompting greater awareness among food system, agribusiness and beverage companies to insure against such events.

But it’s not all about insurance.

According to Aon,  the best strategies to improve an organization’s chances of recovery from a major contamination or recall incident include:

Pre-incident planning: every company should have a well-documented and practiced product recall or retrieval plan, with a clear chain of command and communication. No amount of insurance can replace customer confidence lost due to poor planning and/or execution of a crisis or recall.

And

Crisis management planning: an appropriate crisis program goes beyond the pre-incident plan to coordinate all activities associated with a crisis. Team members may include the CEO, general counsel, risk manager and other company reps.

A recent paper by Lockton Companies has more on the innovative coverages developed by insurers to respond to product recall and contamination events.

Toyota: Legal Implications

Everywhere you look there’s a story about Toyota and the gathering momentum behind a growing number of lawsuits filed against the company following its now three separate but related recalls of about nine million cars worldwide. An article in the L.A. Times today quotes a number of lawyers and legal experts discussing the legal implications for Toyota. For example, Richard Cupp, a professor at Pepperdine University School of Law is quoted as saying: “This has the potential to be the biggest product liability case in the automotive industry.† Others, like David Owen, a law professor at the University of South Carolina also quoted in the article, suggest that while litigation could tie up Toyota for a number of years the ensuing economic damages will be painful but manageable and the company will survive. Another article in the National Law Journal describes the growing number of lawsuits being filed. The cases appear to fall into three or more categories: personal injury cases filed by or on behalf of individuals injured or killed in Toyota crashes; class actions filed on behalf of consumers due to depreciation or decline in the value of their vehicles in the wake of the recalls; and securities class actions filed on behalf of shareholders who bought stock and are claiming a loss in share value. Time will tell how successful these cases will be. Out of interest, we typed “in defense of Toyota† into Google and came up with this post on the WalletPop blog where Bob Cesca reminds us of Ford Motor Co’s handling of safety concerns related to its Pinto hatchback vehicle in the 1970s and 1980s. It makes for an interesting read. Check out I.I.I. facts and stats on litigiousness.

Toyota and Reputational Risk

As auto manufacturer Toyota begins a publicity offensive in response to two separate but related recalls of around nine million autos worldwide, a couple of reports make the important point that the long-term damage to the company’s reputation could be much more costly than the immediate financial fallout. The recalls and sales stoppages announced by Toyota come after floor mat or accelerator pedal problems in a number of its vehicles and several crashes. An article in the Wall Street Journal observes that if Toyota’s problems escalate, it could cause irreparable damage to its brand identity, requiring the company to spend billions of dollars in advertising, sales incentives, legal bills and, possibly, interest payments. Meanwhile, an article in Business Insurance cites various analysts saying that the damage to Toyota’s reputation for quality and safety could be extremely costly. What action a business should take to limit this damage and the topic of recall insurance are also discussed. There’s no doubt that product recall as a precautionary step or following actual injury or damage can be costly to a business and its reputation. As we’ve  said before, just one example is the 1990 worldwide recall by Perrier when traces of benzene found in the water eventually led to the recall of 160 million bottles of Perrier. There have been other notable examples, but the bottom line is that product safety in any business is paramount.