Uninsured Financial Loss
We were approached by the owner of a market leading food processing company to give an independent view of a particular insurance claim arising from providing allegedly tainted product to their customer – an international processor and retailer.
The Insured’s broker, since receiving the notification of the claim had, the Insured said, “gone very quiet on us” and the loss adjustor was not prepared to talk directly to the Insured. At a time when the client needed their broker to help them it appeared the broker’s own self-interest took precedence.
The allegedly tainted item was part of a more complex product and although the Insured’s ingredient was of nominal value the financial loss to the customer had been estimated at £250,000. The possible cause of the problem may have been engine oil from a gear box leaking into a vat.
No third party financial loss cover
On examination of the Public/Products Liability policy, it was clear that there was no cover for third party Financial Loss arising from a defective product. Correspondence between the Insured and their broker showed that although the broker had carried out a renewal review it appeared to have been nothing more than a figure checking exercise and the review and other risks had been brushed over. Whether this was an oversight or a reluctance to discuss because the cover was difficult to obtain or another reason, one could only surmise. However, as the Insured had suffered a claim against them for damage to a customer’s teeth from a sliver of wood in an own-produced foodstuff (covered under a standard Public and Products Liability policy) a year earlier, the possibility of contamination should certainly not have been overlooked.
Belmont International’s solution
The solution was completely to review the business and its working practices, identify the risks inherent in the business and arrange appropriate cover. This included Financial Loss in spite of the above occurrence.
We were also able to identify to the client their exposure to the insolvency of their suppliers and arranged Credit Insurance cover, some three months before their largest supplier went into liquidation.
In summary, the benefits to the client included:
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production of robust evidence for a potential claim against their broker;
- identification of the risks to the business and the arrangement of adequate cover, including Financial Loss at no extra cost, and Credit Insurance; and
- possible mitigation of losses in excess of £300,000 should a claim arise in future.