Food and drink firms face increase in liability claims

Impending EU legislation will reduce the risk of contamination in the food and drink sector but could also increase the number of product liability claims against industry firms, says ACE.

The new EU regulation 1169/2011 streamlines two directives relating to the labelling, presentation and advertising of foodstuffs and nutritional labelling for foodstuffs. The first part of the regulation will apply from 13 December 2014 and the second from 13 December 2016.

All food businesses will be required to provide allergy information on food sold unpackaged in catering outlets and shops. Existing legislation on labelling will include changes regarding the inclusion of novel ingredients, such as nanotechnology and the types of vegetable oil or other ingredients in pre-packed foods.

Although the regulation aims to reduce the risk of contamination in the food and drink sector, ACE regional technical and underwriting casualty manager Continental Europe Connie Germano believes it could also increase product liability exposure for businesses in the industry.

Germano said: “This important new EU legislation should help reduce the risk of accidental contamination for consumers.

“As the regulation is rolled out across Europe and public awareness grows, another consequence is that it may drive increased product liability exposure for a wide range of businesses involved in the food production and distribution chain.”

Germano welcomes the legislation, which promotes the health of consumers but warns risk managers to consider what the increasing reputational and financial effects of an incident concerning contamination could have on their business.

She said: “Today, a contamination incident can develop into a full-blown crisis for a business almost instantly. At ACE, we believe that comprehensive insurance combined with advance risk assessment, robust food safety systems and crisis management is the best defence.”

ACE launched its contaminated product insurance for Continental Europe in 2012, which provides a combination of liability insurance, as well as pre-incident risk management advice and 24/7 crisis support following an incident in conjunction with specialist consultancy red24assist.

Losses covered include recall costs, both first and third party depending on class; redistribution costs; product rehabilitation and/or restoration costs; destruction costs; extortion costs; business interruption costs following a contamination incident; and crisis consultancy costs.