When your client’s product ends up on a recall list, it’s not just a logistics problem — it’s a full-blown financial crisis.
That’s what happened to Crave Better Foods, the manufacturer of Chipwich ice cream sandwiches. In early 2024, their contract manufacturing facility was tied to a listeria contamination that triggered a massive recall. The result? Over $4.5 million in losses. The kicker? Their insurance didn’t cover it.
As their business grew from $800K to $24 million in sales, no one revisited whether their coverage still matched their risk. When a recall hit, the result was $4.5 million in out-of-pocket losses.
This is a case every attorney, CPA, and banker working with product-based businesses should be paying attention to.
Why? Because you’re often the first to know when a client is growing. You see the financials. You spot the operational shifts. And you have the trust to recommend resources that can protect what they’re building.
But unless someone brings it up, product recall coverage is almost always overlooked and that can cost your client everything.
What is Product Recall Insurance — and Why Isn’t It Automatically Included?
Most business owners assume that if they carry product liability insurance, they’re covered for any issue with their product.
Not true.
Product liability covers bodily injury or property damage caused by the product. It does not cover the cost of pulling it off shelves if it turns out to be unsafe — that’s where product recall coverage comes in.
- This coverage is a separate policy that helps pay for:
- Notifcation and shipping costs
- Dispostal or destruction of the recalled product
- PR or crisis management
- Lost income and contracts
- Third party expenses (retailers, distributors, etc)
For businesses in food, beverage, supplements, cosmetics, and health products, a single contamination or mislabeling issue can trigger a recall and the costs can spiral quickly.
The Real Problem: Growth Outpaces Risk Strategy
In the Chipwich case, Crave Better Foods initially passed on product recall insurance when their revenue was under $1 million. But as the company scaled into the tens of millions, their coverage never evolved to reflect the new level of risk — and the gap became painfully clear when a recall hit.
Growth brings new exposures. What isn’t critical at $800K might be non-negotiable at $8M. But unless the full advisory team- from CPAs to attorneys to lenders and insurance advisors is aligned and proactive, key protections can slip through the cracks.
Why This Matters to You as a Trusted Advisor
You already guide your clients through some of their biggest financial decisions from structuring entities to scaling their operations. But your value doesn’t stop at compliance or reporting.
You’re also a connector. And that means helping them find the right support before a crisis hits.
Here’s how you can lead:
- Ask better questions. If your client sells a physical product — especially something consumable — ask if they’ve reviewed their insurance recently, and whether they’ve discussed product recall coverage with their broker.
- Watch for growth milestones. If your client sells a physical product — especially something consumable ask if they’ve reviewed their insurance recently, and whether they’ve discussed product recall coverage with their broker.
- Recommend insurance specialists. Many generalist agents don’t understand product-based business models or the nuance of regulatory risk. That’s where a referral to an insurance advisor who specializes in manufacturing and recall exposure makes a huge difference.
A Final Word: This is About Brand Survival, Not Just Balance Sheets
In the digital age, product recalls don’t just stay in the supply chain — they hit headlines. A slow or sloppy recall response can destroy customer trust overnight.
Even if a client can absorb the financial hit, their brand may not survive the PR fallout.
Product recall coverage isn’t just about reimbursement — it’s about resilience.
So, the next time a client tells you they’re expanding, landing in more stores, or scaling their production, consider this your moment to ask the right questions and refer them to someone who knows how to protect the blind spots.
If you need that person in your corner, I’m here. Book a call with me today to see how we can better serve our clients, together.