December 05, 2013 Articles

A Primer for Food and Beverage Attorneys on Contamination and Recall Insurance

By Jonathan Cohen, Adrian Azer, and John Girgenti

Despite improvements in food safety standards over the past two decades, incidents of food-related contamination and recalls continue to rise. According to the Centers for Disease Control, in 2011, 48.7 million Americans contracted a food-borne illness, leading to 127,839 hospitalizations and 3,037 deaths. Increased food contamination has also resulted in increased food recalls. As reported by the Food and Drug Administration (FDA), the number of recalls just among fruit and vegetable companies in the United States jumped from only 2 in 2005 to 37 in 2011.

Contamination and recall events can be expensive. A company can not only be responsible for the recall itself but also may incur substantial costs to investigate the contamination event, repair damaged facilities, and replace lost inventory. The company may lose profits due to any business interruption, and it may be required to pay liabilities to claimants alleging bodily injuries resulting from the contaminated product (as well as the costs to defend against those claims). Moreover, a company may incur substantial costs to its customers to pay for their recall costs and any other losses or liabilities resulting from the contamination.

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