While some had deliberately opted for product liability insurance to reduce costs, others were unaware that it only insured against liability for third party damage and bodily injury, said Kevin Smith, JLT food sector practice leader, at the recent Food Manufacture Business Leaders round table in London.
Product liability insurance does not cover direct losses incurred by the manufacturer of a defective product such as recall costs, consultancy fees, lab expenses, re-work and replacement costs, plus loss of profit due to dented brand equity, he said.
Similarly, traditional public liability insurance only covered environmental liability to third parties as a result of a sudden and accidental event such as an explosion, he said. “It does not cover liability to an environmental agency for clean up costs or the cost of cleaning your own site.
It does not cover liability for gradual pollution such as leaking underground storage tanks.”
As a result, many manufacturers were now considering more specialist environmental insurance policies, he said, while the Environmental Liability Directive (ELD), had also spurred others into action. The ELD makes those responsible for environmental damage liable for remedying it and covering the costs of improving or maintaining a similar natural habitat elsewhere if the damaged area cannot be restored.
Finally, compensatory remediation – a new concept built into the ELD – requires polluters to compensate society for the time that the damaged habitat is not available for use or enjoyment.
Food Manufacture’s business leaders’ debate, which attracted food manufacturing bosses from a variety of sectors, was held at Eversheds’ HQ in London and sponsored by Eversheds, Jardine Lloyd Thompson.
A version of this article was first published in our sister publication Food Manufacture.