A product recall is a request to return to the manufacturer a batch or an entire production run of a product. This is usually due to the discovery of safety issues associated with a product, which would if not rectified lead to the product causing bodily injury or property damage . By recalling the Product an effort is being made to restrict or prevent such injury or damage. Thereby not only limiting a company’s liability for corporate negligence, but also avoiding potential damage to the manufacturers reputation.
Whilst they certainly limit a company’s exposure to products liability claims and reputational damage, Recalls can still be extremely costly. As they not only cover the physical costs associated with recalling the item(s) concerned, but also they often entail the cost to repair or replacing affected product. It is therefore vital to ensure that adequate insurance is in place with a reliable carrier, who can assist in spreading the cost of such an eventuality and is able to provide support to ensure any incident is handled quickly, discretely and with the minimum damage to the reputation of their client.
A country's consumer protection laws will have specific requirements in regard to product recalls. Such regulations may include how much of the cost the manufacturer will have to bear, situations in which a recall is compulsory (usually because the risk is big enough), or penalties for failure to recall. The firm may also initiate a recall voluntarily, perhaps subject to the same regulations as if the recall were compulsory.
In the modern era with higher levels of regulatory compliance and increased emphasis on health and safety, there has been a continual and significant increase in the number of Recalls in every country within the EU. Now more than ever it is critical that companies protect their reputation and balance sheet against the impact that a product recall could have.