Undisclosed allergens and product mislabelling 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.

Health Canada and the Canadian Food Inspection Agency (CFIA) list several priority allergens, including eggs; milk; peanuts; crustaceans and molluscs; sesame seeds; sulphites; tree nuts; and wheat. These allergens, plus several others, are found in the majority of recalled food products in Canada.

Undisclosed allergens and product mislabelling 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 labelled “gluten free.”

In 2021, Health Canada has recalled several products due to dairy mislabelling, including barbeque rub, cookies, gyoza and others.

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 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 $3 million product recall cost the manufacturer $14 million 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 Health Canada and the CFIA, food manufacturers must disclose any of the priority allergens on their packaging. Make sure to have a process in place for this.
  1. Consider risks and liabilities in your supply chain. 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.
  1. Create a process to check labelling prior to releasing a product. Many product recall losses are as a result of incorrect ingredients on labels.
  1. 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.

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.

Montreal Gazette, “The most recalled foods in Canada and Quebec over the past two years,” January 9, 2015.