Complex claims process: recalls, third-party claims and CPI/CGL/STP crossover

When I think of complex claims, that Spider-Man meme comes to mind – the one where several Spider-Man are standing and pointing at each other.

Three different kinds of insurance, potentially three sets of consultants, and differing thoughts as to who pays what and when. There may be three coverage positions, or none at all yet, depending on the circumstances. Fortuitous or not? Prior knowledge, but who? Any contributing factors?

Product recalls or liability matters, depending on where an insured sits in the supply chain, can spiral into what seems like endless customer claims, legal correspondences, insurance companies asking for information, accountants seeking financial support, etc. Larger claims can require a significant investment of time, energy and money from all parties: the carriers, the insured and any consultants. Being aware of and prepared for how these claims can develop is critical to the claims process for all parties involved.

More often, we see multiple policies respond to the same event. For example:

An insured supplies a spice to its customer, which in turn incorporates the spice into its snack products. A recall is initiated, and the insured has to dispose of the contaminated spice currently in production, and may have finished spice in transit or in warehouses. The customer has its snacks in distribution centers and on shelves. They also need their equipment cleaned.

If an insured is carrying insurance policies that have overlapping coverages, any combination of policies might respond to the same recall, and at different speeds. Coverage may be determined right away, or coverage may be determined by one carrier while the other carrier waits for the outcome of a claim under the other policy.

As an industry, we all must be prepared to encounter claims like this and do what’s necessary to smooth out the process for everyone involved. What does that take? Here's some insight:

1. Speed: Send in adjusters and accountants as soon as possible to lay the groundwork for what will be needed throughout the claims process. Site visits and inventory counts are also starting up again post-COVID.
2. Using common consultants: We have been successful in the past working for the whole insurance tower, and where multiple carriers are involved in the same recall; we were hired jointly to conduct a single, independent review of the claim. In these instances, the insured only has to handle requests from one accounting firm.