Shreya Kalra
Product defects and recalls are increasingly commonplace in a world of mass market manufacturing, with Tesla, Ford and Dell hitting the headlines this week after shipping defective products.
Tesla Motors has recalled all 90,000 of its Model S cars over a defective seatbelt, marking the company’s largest ever recall. Ford had a somewhat bigger issue on its hands, recalling 450,000 cars across Canada and the US over a possible malfunction in the fuel system.
Meanwhile, US computer maker Dell, the third largest PC maker in the world, said that some of its recent PCs come with a security flaw potentially giving hackers access to sensitive information. Dell said that a security hole was “unintentionally” placed on its computers that could allow hackers to access personal information like bank details and other personal information.
In this regard, Andrew Carle, a broker at RHG, told Insurance Business that ensuring a company has the right coverage really “boils down to how the products are damaged”. Typically, professional indemnity would cover anything that “falls in the realm of faulty design”. And product liability insurance would cover the company in case the fault caused damage to a third party.
But more often than not it is damage to brand and reputation that has most consequences. What’s interesting about the Dell case is that customers of the computer manufacturer could potentially suffer a security breach as a result of the flaw, affecting the customer’s reputation.
Carle said that increasingly, insurance companies are including PR and crisis management in their cyber liability policies to handle the damage a cyber-attack can cause to a company’s brand and reputation. But with cyber liability becoming increasingly broad in its definition, insurers could soon begin to scrutinize their liability.
General Motors, Volkswagen, and Lenovo are other big names that have issued product recalls in the last year.
