As we continue to monitor recall related data, we’ve taken note of the following key topics:

Foreign Supplier Verification
The Foreign Supplier Verification Programs (FSVP) rule is not a new obligation for the food industry. In fact, the final rule went into effect on January 26, 2016. But it remains a major issue.

According to Food Safety News, FSVP citations increased 51 percent in 2020, making it “the third year in a row that failure to develop an FSVP was the top-cited inspection violation.” That may in part be because compliance can be determined based on straight-forward document review – an oversight tactic that regulators relied on heavily during the pandemic because it could happen without an on-site inspection.

In summary, the rule requires food importers to develop and maintain FSVPs that help ensure that food is produced in an FDA compliant and safe manner. While large and established companies have strong practices in place already, the smaller, middle-market companies or spinoff entities are often at risk. This is particularly true for entities like flavor houses and ingredient suppliers.

Contamination and Prop 65
The ways that Proposition 65 can impact companies are (almost) endless. Even years after the law went into effect, when companies think they have their bases covered, the California Office of Environmental Health Hazard Assessment (OEHHA) proposed amendments to the format of the warning labels required for compliance.

While companies currently using the short form warning label in question likely have until 2022 to comply, it is critical that a thorough review of all products and labels is conducted sooner rather than later. While swapping a label may sound simple to some, it can be costly. Where the regulated chemical has not been listed on the warning, companies may need to investigate what chemicals must be named on the long form label.

On a parallel track, companies would be wise to re-evaluate their entire Prop 65 compliance plan to identify risks, exposures, and take appropriate mitigation measures, including putting financial backstops in the form of insurance to aid in the response to compliance concerns from a guidance and financial perspective.

This effort will be even more valuable if the Biden administration has any intention to legislate Prop 65 at a federal level. After all, there is a belief among some experts that if there was an Administration willing and able to make this happen, this would be it.

Whole Genome Sequencing
Whole genome sequencing is a topic that comes up in nearly every food safety conversation. With this surveillance technology, the ability to detect even small foodborne illness outbreaks is greatly enhanced – and the reliability and depth of product tracing continues to get stronger.

While the availability of this technology from an insurance perspective doesn’t change the risk profile, it does allow for better traceability back to a source, thereby mitigating risks and, in some cases, deferring costs in the event of a significant outbreak.

Recall Insurance Marketplace
Despite changes to regulatory oversight and steady recall activity, the recall insurance market has remained healthy and very competitive.  We have seen numerous new carriers enter this space, creating competition from not only a rate perspective, but also from a coverage and service perspective. 

Keep in mind that policy forms, and the subsequent coverages and exclusions vary drastically and should be built out specifically to the needs of your business.  With the continued government oversight and involvement in food safety and recalls, it is important to make sure the policy forms on your program are up-to-date and addressing new exposures that arise; often that is not the case.  From a service perspective, most policies have premium dollars allocated for services from food safety consultants, these funds are ‘use it or lose it’ in nature and generally fall in the ‘lose it’ category for most policy holders.  These can be used to strengthen your food safety programs, perform mock recalls and/or traceability studies or to train your team on how to handle a crisis and subsequent public relations – take advantage, you paid for it!

In Summary
Recall and Contamination risk continues to be a relevant concern for the food industry.  Changing regulations, increased complexity in disrupted supply chains and shifting views of an administration will continue to evolve the risk landscape.  Mitigation though processes and procedures are paramount, as is partnering with specialized consultants who have an in depth knowledge of your space regarding food safety, compliance and risk mitigation & response.  Please reach out to a Cottingham & Butler Food & Agribusiness team member for additional strategies and observations.

About Cottingham & Butler’s Food and Agribusiness Practice
Our dedicated food and ag team is comprised of industry specialists with a keen understanding of the risks that are associated with each segment of the food and agribusiness sector.  We are Risk Management professionals focused on mitigating risk, managing claims and efficiently building insurance programs to act as a financial backstop.  We have an industry leading suite of services  available to our clients including: Supply Chain and Contract Review, Food Safety Consulting, Supply Chain, Recall and Environmental Monitoring Diagnostic Tools and access to specialized food and ag insurance carriers paired with proprietary programs relating to recall and property.

If you are interested in learning more, or discussing ways our team can help, please feel free to fill out the below request form, or contact us at: FoodAgPractice@cottinghambutler.com