When an E. coli outbreak linked to lettuce in pre-packed sandwiches hit the UK in 2024, three manufacturers pulled products from shelves as a precaution. For the businesses involved and their insurers, a harder question followed – whether any of it counted as a recall under the policy.
George Gough (pictured), head of specialist and international liability at Charles Taylor, said it wasn't clear at the time which supplier the lettuce had come from. Any one of around five sandwich makers could have been involved, each buying lettuce from different suppliers, so the Food Standards Agency contacted all of them. In one claim his team handled, nothing found in the insured's factory established a risk to health.
That left the decision with the underwriter. Gough said some would conclude the policy was written to cover that scenario even without an explicit instruction from the regulator, while others would say it didn't meet the definition of a government recall and decline to pay.
"It all depends on their intention," he said.
Gough said a recall policy can be triggered where a product is likely to be injurious to health, or where there has been a government recall. In the UK, "a government recall in this country means a letter from the regulator saying recall the product".
That letter doesn't always come. Gough said UK agencies can be more cautious than the US Food and Drug Administration, which will tell a business exactly what to do, because no one wants to be blamed if something goes wrong. Instead, a business may hear something along the lines of "you may wish to consider your responsibilities under the Food Safety Act very carefully", which he said is "not technically a government recall".
To claim, the insured has to show the policy has been triggered, which can mean bringing in engineers, food scientists or pharmaceutical consultants to establish that the product is likely to cause harm. Those costs are picked up if the resulting report triggers the policy.
The definition becomes harder to apply once a supply chain crosses borders. Gough said pharmaceuticals are increasingly made in outsourced labs in places such as Africa or India, and in certain African territories a manufacturer can write to the regulator saying it intends to recall a product. If it hears nothing back, that constitutes a recall.
Gough said that can be difficult for a London market underwriter to grasp, but it is what they signed up to in writing the policy.
Even where recall cover responds, it won't pay for the defective product itself – an old insurance principle that a business cannot profit from its own mistake. What it can cover is retrieving product from the market, disposing of it through licensed contractors with certificates of destruction, recall notices, and the extra staff costs of reworking stock or clearing shelves.
Pursuing a supplier further up the chain depends on the contract. Gough said suppliers may cap their liability, at £100,000 or the cost of the product, whichever is greater, for example, and that a common mistake is for businesses not to read the terms and conditions on the back of order forms, quotes and invoices, where a limitation of liability may sit.
"If you've bought something, you're in a contract," he said. "It might be a simple contract, but nevertheless, at law, it's still a contract."
In parts of Europe, an ill-defined concept of gross negligence can override those caps, for example where a business knew of a mistake and didn't disclose it – a significant difference where a €500,000 cap sits against a €3m claim.
Where a UK regulator stops short of a formal instruction, whether a recall claim pays can turn as much on how a policy definition was meant to be read as on what went wrong.
