Food manufacturers require special insurance coverages and are exposed to a variety of potential losses, several of which are unique to the food industry. Virtually all businesses face loss to property by fire, theft, or severe weather, as well as liability from claims by customers or vendors injured on the premises, claims by injured workers, or liability arising out of auto accidents with company vehicles. Food manufacturers, however, simply by virtue of being in the food production business, are more exposed to certain types of losses than other businesses. Here are some of them:
— Terms such as listeria, salmonella, E.coli and “mad cow disease” are all too familiar to the public and to those in the food industry. Food-borne illness affects approximately 48 million people in the United States (1 in 6) each year. The Centers for Disease Control and Prevention (CDC) estimates that each year in this country 128,000 people are hospitalized and 3,000 die of food-borne diseases. 1 If a food product spoils or becomes contaminated, it cannot be sold to the public. This could result in a significant monetary loss to the manufacturer, including loss of food stock, loss of income, and loss of reputation.
— Food manufacturers depend on the reliable operation of their equipment. If a mechanical or electrical breakdown occurs, food processing could come to a halt. Expenses would be incurred to repair or replace the equipment, and loss of income may be incurred as a result of the equipment failure.
— Food manufacturers ordinarily are dependent on other businesses for their raw materials and supplies. What happens when a supplier sustains a serious property loss and cannot provide the necessary raw materials to the food manufacturer to produce its products? This is a potential major problem for the manufacturer and can lead to a suspension of operations and loss of income until the supplier’s property is repaired. The same scenario could involve a property loss to a customer’s facility, creating a loss of income for the manufacturer.
1 Virginia L. White-Mahaffey, Coverage Issues Arising From Food Contamination Claims, March 21, 2014, American Bar Association.