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Recalls and more that can close your door

Hamburger_2According to a recent article I read,  the Centers for Disease Control and Prevention estimates that there are 76 million cases of food-borne illness that occur each year. There has been an alarming number of food contamination outbreaks in the past two years putting America’s food supply under intense scrutiny.

Just earlier this year, we had the largest beef recall in history. The U.S. Department of Agriculture ordered 143 million pounds of beef to be recalled from Chino-based Westland/Hallmark Meat Co.

Westland/Hallmark provided meat to the National School Lunch programs and about 150 school districts. It also provided meat to two fast food chains: Jack-in-the-Box and In-N-Out Burger.

So what does this mean to the retailer or restaurant owner?

  • Who is liable?
  • Do you have coverage for this under your insurance policy?
  • Wouldn’t your General Liability coverage cover it?
  • What other ramifications are there?

Well, the law is clear. Everyone in the chain of distribution is liable.

If someone becomes ill while eating at your establishment or from food they purchase at your store, you can be sure the first person they will name in a suit will be the store/restaurant owner. Things will just progress from there.

In regards to insurance, the area that a business owner with this type of risk should be concerned with is the Products and Completed Operations Coverage. This is an area of coverage that I have noticed that does not get much focus.

This type of incident is a huge exposure for distributors, manufacturers, processors, retailers and restaurant owners – these industries can’t afford to have mediocre limits for this coverage. The Products and Completed Operations limits is the part of the policy that will come into play should a loss like this occur.

Other ramifications can be business interruption. Often times the establishment(s) can be shut down while the appropriate agencies complete their investigation. Loss of revenue is immediate should this occur. Having business interruption coverage on your policy can help to keep your monthly income coming in while your investigation is underway.

Brand image can also be damaged. With having the proper business interruption coverage in place it can also help the establishment stay afloat while it rebuilds its reputation in the community until it reaches its pre-loss operating condition. The rebuilding phase can be the most fragile one. If proper business interruption coverage is not in place, many companies may have to close their doors.

Even if you're not in the restaurant/food industry - you may face situations that put your business at risk.

I encourage all business owners to be aware of their risks, consult with their agents to ensure that they have the proper coverage for their industry.

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