Businesses that manufacture products have many different risks to address. Obviously, they need to take steps to protect the workers on their manufacturing lines from injury while handling heavy equipment.
It may also be necessary to carry product defect liability insurance, as customers affected by defective products could try to hold the business accountable for their injuries. Occasionally, business leaders might even invest in recall insurance.
A recall policy can help cover the costs associated with repairing or replacing defective products, as well as the expense inherent in refunding the purchase price to hundreds of consumers or more at once. A denied recall insurance claim could cause major complications for manufacturing businesses.
When is recall coverage helpful?
In some cases, recalls must occur because consumer advocacy agencies require a recall. Contaminated produce or vehicle components that fail in traffic could lead to a mandatory recall. Many manufacturers also decide to voluntarily recall products that are likely to fail due to design issues, issues during the manufacturing process or defective components.
Regardless of whether a recall is voluntary or involuntary, the costs involved can be significant. Business leaders often rely on recall insurance to cover those costs or at least offset some of those expenses.
When an insurance company denies a valid claim, that decision could delay the recall process, leading to increased risk of litigation. Additionally, the company may need to absorb recall costs that the policy should cover. Business leaders may need to take legal action.
Communicating with the insurance company or pursuing legal action could both lead to the claim payout or compensation awarded by the courts due to the insurance company failing to uphold its policy in good faith. Business leaders frustrated by denied insurance claims may need help evaluating their coverage and communicating with insurance companies, and that’s okay.