Undisclosed allergens and product mislabeling are the leading cause of food recalls nationally.1 This happens when a food’s label doesn’t accurately reflect its ingredients, whether due to cross contact during manufacturing, or cross contamination in a restaurant or home.

The Food Allergen and Labeling Consumer Protection Act (FALCPA) lists eight major allergen categories: milk, eggs, fish, crustacean shellfish, tree nuts, peanuts, wheat and soybeans. These allergens, and their derivatives, are found in the majority of recalled food products in the U.S. New laws coming into effect in 2023 will add sesame as the ninth major food allergen recognized in the United States.

Undisclosed allergens and product mislabeling are the result of one of the following:

Cross contact, or the mixing of food with an allergen inadvertently during the manufacturing process. For example, an allergen-free food was processed on the same equipment as food containing allergens, without a thorough cleaning.

Cross contamination, the mixing of food with an allergen inadvertently, at the point of service, in a restaurant or home. This happens, for example, when the same oil is used to fry something that contains gluten and something that is labeled “gluten free.”

In 2021, the FDA has recalled several products due to gluten mislabeling, including kimchi aioli, chicken nuggets, pretzels, protein powders and others. In the first few months of 2020 alone, there have already been more than a dozen products recalled by the FDA due to gluten mislabeling - from ice cream and chicken nuggets to pretzels, protein powders and more.

When a product is recalled, the manufacturer faces two risks which can be insured under two separate policies:

Product Recall Policy. The actual product recall requires the food manufacturer to take its product off the grocer’s shelves, return it to the manufacturing facility and reimburse the grocer/consumer for their loss of product. Product recall and the resulting business interruption costs, including loss of revenue and extra expense, can be insured under a dedicated Product Recall policy. Many of the Product Recall policies will provide a certain dollar amount to bring in a third party to help develop a plan of action.

Product Liability Policy. If the recalled product actually hurt someone, or something in the product was damaged or ruined, lawsuits can come from consumers, the retailer or grocer and any other manufacturer that used the product in theirs. This is deemed a property damage claim and is significantly more costly, insured only under a dedicated Product Liability policy. In one recent case, for example, a $3M product recall cost the manufacturer $14M in liability/property damage.

In order to reduce expenses during a potential product recall, retailers, grocers and other food manufacturers that use a product/ingredients in theirs will require the manufacturer to have Product Liability, Property, Product Recall and even Umbrella coverage with ample limits, based on their perceived risk of using your food product in theirs or selling your product.

Reduce Risk of Product Recalls due to Allergens

Manufacturers can reduce their risk of product recall and its associated liability by maintaining industry best practices and processes in their facilities, including the following:

  1. Establish processes to eliminate and, if necessary, disclose cross contact. What processes are in place to eliminate an allergen-free product from coming into contact with one containing an allergen, like gluten? If these products utilize the same assembly line, is there a cleaning process between runs? Per the FALCPA, food manufacturers must disclose any of the eight allergens on their packaging. Make sure to have a process in place for this. Be prepared to add sesame as the ninth allergen as of January 1, 2023.
  2. Consider risks and liabilities in your supply chain.
  3. Know where you’re getting ingredients and products from, and make sure they meet your standards. Consider conducting inspections at ingredient suppliers’ facilities. Make sure they carry the proper Product Recall and Product Liability insurance limits so that a recall of their product doesn’t fall on your shoulders.
  4. Create a process to check labeling prior to releasing a product.
  5. Many product recall losses are as a result of incorrect ingredients on labels.
  6. Create a recall plan and team. A well-thought-out recall plan can save lives and prevent further injuries as well as limit your business’ costs and brand damage. Gather key stakeholders and decision makers and clearly define team roles and responsibilities in the event of a recall. Create ready-to-go procedures, templates and scripts. Practice and test all recall procedures to ensure they are deployable on a moment’s notice. Refer to the U.S. Consumer Product Safety Commission’s tips in doing so.

Contact your HUB Agribusiness expert for more information on reducing your risk and sourcing optimal coverages and policy limits for product manufacturing and allergen recalls.

1 https://www.foodengineeringmag.com/articles/97168-food-product-recalls-in-2017