Western Growers has sought a solution for several years, Nelson said.
“There have been some efforts by a few companies to broaden the coverage a bit, to add endorsements that will cover similar products,” he said. “We’ve really only seen one that seemed possible, but under further questioning we pointed out some issues and haven’t heard back from them yet.”
What makes broad coverage elusive so far is the challenge of underwriting it.
“If I’m the insurance carrier,” McInerny said, “how do I price it to the risk appropriately to gather enough premium dollars to cover my exposure and then, as they do in the reinsurance market, lay off some of the risk on others?
“If I’m underwriting for Lloyd’s and looking at the last five to 10 years of catastrophic outbreaks, and see it was $100 million here and $50 million there, how do we garner the premium dollars? You’ve got multiple handlers, multiple producers, multiple touch points.”
“How they work business interruption into a recall policy, I don’t know,” Garrett said. “I guess that’s why they (the Senate) are calling it a feasibility study.”
The United Fresh Produce Association, for one, welcomes the study. United Fresh members were briefed on recall insurance issues at the annual convention in May.
“We talked to that group as well,” McInerny said. “Multiple people are asking, ‘How do you a draw up a policy to guard against (third-party damage)?’ It’s hard to quantify your exposure and develop a program of the magnitude needed to address the problem.”
But until something better comes along, Nelson offers some guidelines.
“My recommendation is to take the insurance with a high deductible for catastrophic events,” he said. “We’ve sold almost no coverage at all because everybody is looking for that collateral damage. People who buy it at the low deductible, $5,000, are finding it pretty expensive. We recommend buying it with a $10,000 or $25,000 deductible, but each company has to decide.”