contaminated products insurance (cpi) / recall

Contaminated Products Insurance (CPI) / Recall

Risk Appetite

Preferred:-

1. Food, beverage and nutraceutical manufacturers, processors, contract manufacturers (co-packers), wholesale and retail companies

2. Restaurant trade

3. White, brown goods, consumer goods, non-safety critical auto and other non-industrial equipment (on a case by case basis)

We decline to quote:-

1. Toy and children’s equipment manufacturers or distributors

2. Pharmaceutical

3. Safety Critical Auto

What does the Policy cover?

1. Accidental Product Contamination

2. Malicious Product Tampering (MPT)

3. Product Extortion Demand (Annual Aggregate Limit Applies)


“Accidental Product Contamination” shall mean:-

(a) Any unintentional error other than an error in design or specification made by the Insured; or

(b) The introduction of an ingredient or component supplied by a third party that is contaminated;

which occurs during manufacture, blending, mixing, compounding, packaging, labelling including the instructions for use, storage or distribution of any Insured Product whilst in the care or custody of the Insured, provided that in the event of its consumption or use as intended it would lead to or has led to Bodily Injury within 366 days of its consumption or use, or would lead to or has led to physical property damage to tangible property (other than the Insured Product itself) owned by a third party.

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“Bodily Injury” shall mean:-

clearly identifiable internal and/or external physical symptoms of sickness, disease or death sustained by any person, animal or Livestock resulting from any of the foregoing at any time. Bodily Injury does not extend to include mental anguish or emotional distress.

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Contamination Classifications – Class I, II, III

Classification Definition Example

Class I

This type of recall involves a health hazard where a reasonable probability exists that eating the food would cause serious, adverse health consequences or death.

[Meat contaminated with L. monocytogenes in a ready-to-eat food product; E. coli O157:H7 in raw beef; allergens such as peanuts or eggs (not listed on the label).]

Class II

This type of recall indicates a potential health hazard where a remote probability of adverse health consequences from eating the food exists, or if the resulting condition is temporary or medically reversible.

[Presence of FD&C Yellow #5 dye in candy; presence of dry milk, a Class II allergen, as an ingredient in sausage without mention of the dry milk on the label.]

Class III

This type of recall involves situations in which eating the food will not or is not likely to cause adverse health consequences.

[A package containing fewer or lower weight products than shown on the package label or improperly labelled processed meat in which added water is not listed on the label as required by federal regulations.]

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Recall – Legal

Canadian Food Inspection Agency Act

14.2.8 Issuance of a Mandatory Recall Order

Where is the authority to issue a mandatory recall order?

The CFIA Act states:19. (1) Where the Minister believes on reasonable grounds that a product regulated under an Act or provision that the Agency enforces or administers by virtue of section 11 poses a risk to public, animal or plant health, the Minister may, by notice served on any person selling, marketing or distributing the product, order that the product be recalled or sent to a place designated by the Minister.

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Recall – Legal

When is a mandatory recall order issued?

The Minister issues a mandatory recall order when the Minister believes on reasonable grounds that a product poses a risk to public, animal or plant health. The reasonable grounds are generally based upon information received from the CFIA Office of Food Safety and Recall.

The CFIA Office of Food Safety and Recall recommends a mandatory recall to the Minister when they are notified by the Area Recall Coordinator (ARC) that an operator refuses to voluntarily recall a product (regulated under an Act that the Agency enforces or administers) that poses a risk to public, animal or plant health.Inspectors notify the ARC when a product is in distribution that poses a risk to public, animal or plant health. In the event of a mandatory or voluntary recall the inspector completes the verification task(s) related to the cause of the recall and references the recall in the CFIA/ACIA 5472 Inspection Report - Corrective Action Request (CAR) issued to the operator.

For additional recall information, refer to the Food Emergency Response Manual available by contacting the CFIA's Office of Food Safety and Recall.

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Recall – Legal Changes

Safe Food for Canadians Act: An Overview

Legislative modernization was one of the commitments under that plan. In 2009, the Report of the Independent Investigator into the 2008 Listeriosis Outbreak (the Weatherill Report) recommended that the Government “modernize and simplify federal legislation and regulations that significantly affect food safety.” The commitment to update legislation was reconfirmed in the 2010 Speech from the Throne and this intent was reiterated in the report "Action on Weatherill Recommendations to Strengthen the Food Safety System: Final Report to Canadians". The tabling of this bill builds on action taken to address these commitments.

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What the proposed legislation will do

The proposed legislation will consolidate food provisions now administered and enforced by the Canadian Food Inspection Agency under four statutes into the Safe Food for Canadians Act to strengthen oversight of food commodities being traded inter-provincially or internationally. The Food and Drugs Act will continue to exist separately, providing overarching protection for consumers from any foods that are unsuitable for consumption, including those marketed exclusively within provinces.The proposed Act focuses on three important areas:

1.Improved food safety oversight to better protect consumers, 2.Streamlined and strengthened legislative authorities, and 3.Enhanced international market opportunities for Canadian industry.

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The need for change

Food in Canada is currently regulated under a suite of different statutes;

•Food and Drugs Act•Fish Inspection Act, Meat Inspection Act•Canada Agricultural Products Act•Consumer Packaging and Labelling Act

These Acts were created at various times over several decades, and have been updated at differing frequencies. While these food statutes have served Canadians well, the time has come to create new tools to manage today’s risks to food safety, while ensuring that Canadian industry has continued opportunities in international trading markets.

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Safe Food for Canadians Act:

An adjunct to the Safe Food for Canadians Act is the Improved Inspection Food Model being proposed under the proviso of Inspection Modernization for the Canadian Food Inspection Agency (CFIA) that is currently out for comment. Under this new model, CFIA food inspection would be based on risk and the following five components.

1. Licensing/registration2. CFIA oversight3. Inspection4. Compliance and enforcement5. System performance

(Brodsky Consultants)

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Safe Food for Canadians Act: Conclusion •The Canadian food industry will benefit by having a single inspection system applicable to all food products and segments of food processing and distribution.

•Although there will be a common set of rules, there is sufficient flexibility to address individual concerns.

•The onus of the requirement to develop preventative control plans as a preamble for licensing/registration may create challenges for some companies.

(Brodsky Consultants)

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Safe Food for Canadians Act: Preventative Control MeasuresThe preventative control plan would need to address the following eight elements, as appropriate:

•physical structure and maintenance

•equipment design and maintenance

•employee hygiene and training

•sanitation and pest control

•product/process control

•transportation and storage

•traceability and recall

•company verification processes

Pre-Recall & Recall Costs Covered

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Costs to Establish

Cause of Loss

• Identify cause

• Analysis

• Laboratories/Testing

• Crisis Consultants

Recall Costs

• Media costs

• Transport costs

• Storage costs

• Replacement costs

• Redistribution costs

• Staff overtime

• Additional staff costs

• Slotting fees

• Destruction costs

Post Recall Costs

• Loss of Gross Income

• Cleaning costs

• Repair costs

• Staff costs (not working)

• Additional cost of working

• Rehabilitation costs

Confusion – Insurance Terminology

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“Malicious Product Tampering” shall mean the actual or threatened intentional, malicious and wrongful alteration or adulteration of the Insured Product, or the creation of Adverse Publicity implying such, whether in conjunction with a Product Extortion Demand or not so as to give the Insured or consumers reasonable cause to consider the Insured Product unfit or dangerous for their intended use or to create such impression to consumers and public alike.

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“Product Extortion Demand” shall mean any threat or connected series of threats received by the Insured to commit Malicious Product Tampering for the purpose of soliciting Product Extortion Monies. Underwriters will reimburse the Insured, subject to the Limit of Liability as specified in the Schedule, for Product Extortion Costs.

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Main Suspects for MPT and Extortion

Suspects for MPT

• Employees

• Aggrieved employees

• People with mental health issues

• Aggrieved customer

• Single issue groups (animal rights)

Suspects for Extortion

• People in debt

• Aggrieved at “mis-treatment” by company

• People with mental health issues

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Events Not Covered

Competitor’s Product(s)

Any Accidental Product Contamination, Malicious Product Tampering or Product Extortion Demand of a competitor’s product(s) which is similar to an Insured Product of the Insured, creating Adverse Publicity, or loss of public and/or governmental confidence and/or change of regulation relating to any Insured Product or any substance or material used in or similar to any Insured Product;

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A Final Point to Note

IMPORTANT!

Confidentiality

The Insured shall not disclose the existence of this Policy, its terms, conditions, limitations or exclusions, unless agreed by Underwriters or required to do so by law.

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Main Causes of Contamination

Types of Contamination

1.Microbiological2.Cross-Contamination (microbiological, allergen)3.Physical / Foreign Body (metal, glass, stones, etc.)4.Chemical5.Allergens (milk, eggs, peanuts, tree nuts, fish, shellfish, soya, wheat)

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MicrobiologicalClostridium Botulinum a bacteria producing a toxin in food responsible for botulism, the deadly paralytic nerve illness

Shigella is the most common food that these bacteria can contaminate include: salads (potato, chicken, seafood, vegetable), raw vegetables, milk and other dairy products, and meat products especially poultry

Staphylococcus Aureus can be found in custard or cream-filled baked goods, ham, poultry, eggs, potato salad, cream sauces, sandwich fillings

Vibrio Vulnificus is a free-living ocean bacteria that can cause food borne illnesses from contaminated seafood. Especially dangerous in the warm weather months when eating shellfish that are undercooked or raw

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Main causes of contamination

Microbiological

Campylobacter – the most common cause of food related fever, diarrhea, abdominal cramp, found in intestines of healthy birds, undercooked meats/cross contamination with raw/cooked food

Salmonella causes fever, diarrhea, abdominal cramp – can KILL - found in intestines of birds, reptiles, mammals and spreads via a variety of different foods

Escherichia coli (E. coli O157:H7) causes severe bloody diarrhea, painful abdominal pains - can KILL - found in reservoir of cattle microscopic amounts of cow feces found in food/water (fecal E-coli)

Calicivirus (Norovirus and Norwalk-like viruses) causes acute gastrointestinal illness, vomiting, diarrhea and is transferred from person to person, infected kitchen workers, found in salads, sandwiches, etc.

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Campylobacter Salmonella

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E. coli O157/H7 Calicivirus


Microbiological

Listeria (bacteria) – 6 species – Killer Pathogen

1.L grayi2.L innocua3.L ivanovii4.L monocytogenes5.L seeligeri6.L welshimeri

-responsible for listeriosis – lethal food-borne illness-fatality rate of 25%-hibernate when frozen and able to grow at fridge temp.-spreads through the nervous system and can cause meningitis-found in soil, stream water, sewage, plants

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Listeria Monocytogenes

Underwriting Considerations / Risk Assessment

Sales turnover• Consider number of plants

• Consider number of production lines

• What capacity does the plant(s) run at?

Product Exposure• Diversification on brands

• Highly diversified

• Branded

• Own label

Quality Assurance• QA in place?

• Dedicated personnel

• Formal QA specifications – ISO 22000, HACCP

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Product Packaging• Is product tamper evident?

• If not consider type of business, such as meat production for food service (boxed and bagged)

Product Testing• Visual – in line to end line

• X ray, Metal Detection

• Micro-biological

• Testing Laboratory (In House or 3rd Party)

• Raw / In Coming materials tested

• Suppliers’ quality standards monitored

Audits• Audits performed – in house and by 3rd party food safety auditors

• Frequency

• Recommendations

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Plans• Recall Plan (no recall plan for food and beverage risks = no cover)

• Crisis Management Plan (a company that produces branded product should have a CMP)

• Are plans regularly updated and tested?

• Batch coding and traceability?

History• Health warning letter?

• Health authority press release?

• Class III recalls (no adverse health consequences)

• Class II recalls (probable health hazard)

• Class I recalls (reasonable health hazard)

– Every Element Carries a Rate + Underwriting Judgement

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Food Safety

Hazard Analysis Critical Control Point

(HACCP) 1959 First works, NASA wanted to produce safe food for

astronauts

1963 World Health Organisation issue principles (Codex Alimentarius – 150 country membership)• Conduct hazard analysis

• Determine critical control points (CCP)

• Establish critical limits

• Establish a system to monitor control of CCPs

• Establish corrective action plan to CCP found not to be under control

• Establish procedures for verification to confirm HACCP is working

• Establish documentation concerning all procedures and records

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Product Batch & Traceability

• Traceability is now a recognised feature within international food safety

• USA authorities demand that product be traced within 4 hours, but generally completed within 2 hours

• Batch quantities and values essential to understanding Insured operation(s)

• Number of facilities, production lines and geographic spread of operations are a guide to how extensive the result of a recall can be

• Fresh produce batching – beware of the pitfalls of where a contamination might occur (Policy does not cover crop)

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Crisis Management

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IncidentOccurs

Analyse Facts By Mgmt

CMT Required?

Call CMT

Yes

Continue to Monitor Situation

– if necessaryNo

No

Incident Finished

Quick Review Of CRM/PRP – confirm R&Rs Review HACCP Plan – Review Information on Product and manufacturing process

Yes

Accidental Product Contamination

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Maple Leaf

2008 – Listeria Monocytogenes found in cooked deli meats Maple Leaf foods announced a massive recall of 243 types of

ready to eat meat products supplied to stores, restaurants and cafeterias.

Estimated loss CAD 75m (uninsured)

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XL Foods Recall

• 2012 – E.Coli 0157:H7• A number of illnesses recorded in Canada and USA • Over 1,500 products being recalled with many products

processed for 3rd parties (Own Brands)• Since the beginning of the recall XL Foods has refused to

give interviews to the press – lack of crisis awareness and a communication strategy

• Estimated loss yet to be determined. Largest meat recall of any Canadian food company to date

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Peanut Corporation of America Filed Chapter 7 Bankruptcy

• 2008 – Salmonella Typhimurium in peanut butter & peanut butter paste

• 714 documented illnesses in 46 states (USA)• 9 deaths• Peanut products an ingredient in many products processed by 3rd

parties• One of the largest recalls in USA history• Management of PCA allegedly knew product unsafe, but still

shipped• Estimated loss yet to be determined. Estimated at USD 1.5bn

combined

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Cadbury Salmonella Recall

• The 250g Dairy Milk Turkish• Dairy Milk Caramel• Dairy Milk Mint bars• Dairy Milk 8 chunk and the 1kg Dairy Milk bar• Dairy Milk Buttons Easter Egg• Freddo bar

• Leaking waste pipe at Cadbury's Marlbrook chocolate crumb plant• Leak was sourced in January 2006. Authorities informed in June 2006 • Estimated loss excess of GBP 55m


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Tomato Recall / Jalapeno Peppers

•2008 – Salmonella Saintpaul found in salsa•1,017 cases in 41 states (USA), of which 384 cases in Texas alone•Largest USA salmonellosis outbreak since 1985•FDA put pressure on food industry to recall tomatoes, resulting in destruction of that year’s Florida tomato industry•Two weeks later identified as jalapeno peppers from Mexico•Estimated loss unknown, but USD millions

? or

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MPT Threat

Lucozade owned by GlaxoSmithKline Animal Liberation Front (ALF) – single issue group Threat to contaminate Lucozade with urine 5m bottles in UK recalled No urine found Lucozade Sport – rehabilitated brand Introduction of tamper evident seals Estimated loss of GBP 10m


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Is this a dangerous lunch?

1. What is dangerous about this lunch to an asthma sufferer?

2. Is there anything, other than the knife, that poses a health threat?

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Is this event covered by CPI?

In February 1990 the company was forced to recall all 160 million bottles on store shelves around the world after significant amounts of the carcinogen benzene were discovered in its water

The dirty filter that caused the problem was replaced but consumers outside France were without the product for about 10 weeks, which is “forever” by marketing standards.

The company president called it ''a brutal crisis'' and the disaster gave Evian a foothold in the lucrative US bottled-water market

Estimated loss unknown Loss to brand – massive – never recovered market share

Presentation Name 45

contaminated products insurance (cpi) / recall

Documents

food product

insured product

class iiithis type of

class iithis type of

policy cover

mandatory recall orderwhere

package label

potential health hazard