Manufacturers & Food Safety: New Law Causes
Spike in Product Recall Submissions
peanut recall alone affected 2,000 companies
that used salmonella-contaminated peanuts
from a single processing plant in Georgia.
Before FSMA was enacted, the vast
majority of food processors did not purchase
BY DAVE LENCKUS
ANY COMPANY involved in food pro- duction saw its Product Recall risk greatly magnified last year with the
enactment of the U.S. Food Safety Modernization Act (FSMA), says Louis Lubrano,
New York-based senior vice president
of global crisis management for Liberty
International Underwriters (LIU).
Under FSMA, the federal
government for the first time is
empowered to order recalls of food
products even when authorities only
suspect a problem with a product but
have no hard evidence, Lubrano says.
“That’s a game-changer,” he observes.
“The issue is still evolving on what could
trigger a recall,” Lubrano says, but for now,
“it’s what the government believes” rather
than what it knows is a risk.
The law stems, in part, from a series of
recalls of various products since the mid-
2000s. Some of the recalls involved eggs,
peanuts, milk and dog food. The 2009
for those developments to order a recall.
Insurers have responded by offering an
endorsement, for additional premium, that
will cover the cost of FSMA recalls, he says.
As a result, Lubrano says, the number
of submissions for Product Recall
coverage at LIU “has been spiking ever
since [this law] was passed.”
LIU can offer up to $15 million
of limits on a primary or excess
basis, and Lubrano says he has seen
buyers build programs with up to
$70 million of limits.
Exclusions vary by industry and
client, but every policy contains an
absolute lead exclusion, he says.
Despite buyers’ growing interest
in the coverage, “there are still a lot of
companies that don’t buy this but need to
and should,” adds Lubrano. He notes that
while the largest brokers produce most
of LIU’s Product Recall business, between
70 and 80 smaller producers each have
brought LIU one or two policyholders. NU
The number of submissions
for Product Recall coverage at
Liberty International Underwriters
“has been spiking ever since
[this law] was passed.”
Louis Lubrano, Senior Vice President of
Global Crisis Management, LIU
Product Recall coverage, Lubrano notes.
For many companies with tight insurance
budgets, the coverage was too pricey.
In addition, the coverage responded only
when the contaminated food product either
had already made a consumer ill or evidence
showed that its consumption likely would
cause illness. Under FSMA, the U.S. Food and
Drug Administration does not have to wait
3 Tips for Controlling Workers’ Comp Medical Costs
BY DAVE LENCKUS
THE NATIONAL Council on Compen- sation Insurance Inc. (NCCI) reports that medical services now represent
60 percent of Workers’ Comp claim costs.
In the past, indemnity costs made up the
biggest part of the Workers’ Comp claim.
From provider networks to prescription
plans to medical audits, there are a number
of measures available to help companies
contain medical costs.
But the economy will drive many employers
to turn to additional measures, brokers and
insurers say. Here are three strategies that work.
1 WORKPLACE SAFETY
One elemental but critical step in any plan
to keep medical costs down is concentrating
efforts on workplace safety.
With large employers retaining big chunks
of their Workers’ Comp obligations under
large deductible plans, they have to redouble
their efforts on preventing losses in the first
place, observes Mike Stankard, a Detroit-
based managing director and the industrial-
materials practice leader at Aon Risk Solutions.
2 BOGUS CLAIMS
While establishing a culture of safety is
essential to prevent workplace injuries,
employers also should be guarding against
bogus claims, Stankard says.
In recent years as the economy soured,
employers have faced spikes in Workers’
Comp claims—not all of them legitimate—
when some workers who feared layoffs or
knew they were pending filed claims to
secure income after their jobs were lost.
Establishing ongoing testing of various job-related physical functions, such as hearing,
gives employers a baseline measure they can
track and respond to quickly at the first sign
of a problem—rather than after a worker has
filed a claim, according to Stankard.
3 THE RIGHT HIRES
Some manufacturers are seeing an uptick in orders and are rehiring, which
brings up a third important element in
controlling Workers’ Comp costs: avoiding
hiring workers who pose high claim risks.
“Data analysis tells a story of hot spots
around an organization,” says Stankard. In
many cases, the analysis takes employers
back to the point of hire and their ability,
or lack thereof, to match hires to a job.
One step that can help: making sure the
job description adequately characterizes the
demands of the job.
Filling jobs with the workers who are best
suited psychologically for those positions
will help prevent injuries; it will also help
prevent myriad indirect costs associated
with a Workers’ Comp claim, according
to Scott Higgins, president of commercial
accounts at Travelers, which offers clients
psychological profiles of job candidates. NU
