Business Insurance, Product Recall

SCORE! – A More Hostile Regulatory Environment for Food Executives

Authored by industry experts:

Joel Berrian, CPCU, ARM, AIC
Jberrian@big-ins.com
Mark Gray, Executive Director
mgray@big-ins.com

Food industry executives, are you feeling the heat? You should! With the Department of Justice criminally prosecuting corporate officers, managers, and employees; the enactment of FSMA regulations; and the creation of SCORE, your regulatory environment is growing more and more hostile.

Back in April of this year, without much fanfare or industry input, the FDA created a new team of senior leaders to be brought in on challenging cases. Known as SCORE, the acronym originally stood for “Strategic Coordinated Outbreak Response and Evaluation.” The original name sounded promising. A “coordinated” “response” and “evaluation.” The name evoked a connotation of cooperation, consideration, and analysis. However, after only six months in existence, the FDA changed the team’s name. SCORE now stands for “Strategic Coordinated Oversight of Recall Execution.” What happened to “evaluation”? The new name includes “Oversight of Recall Execution.” Sounds onerous and it is!

SCORE was created to parachute in the FDA’s heavyweights in support of field staff. In other words, Washington is taking control over the local effort. SCORE’s lineup includes executive leaders from the FDA’s compliance and enforcement hubs. SCORE’s team also extends to those in leadership roles in legal, field operations, communications, outbreak response, and policy. As SCORE’s principals have provided, compliance and litigation expertise are part of the team’s mandate.

While FDA district offices will still have direct dealings with companies, if red flags are raised during such interactions, SCORE will be brought in to expedite recall decisions. Such decisions can be based on mere circumstantial evidence. As expressly provided, SCORE will use a legal standard that does not require the government to demonstrate food is contaminated, only that it may have been contaminated. In other words, SCORE is able to expedite a recall decision merely based on circumstantial evidence. For food companies, these very low legal standards should be troubling, as even small recalls costs millions of dollars.

Moreover, SCORE is already highlighting the several enforcement actions it has already imposed in only its first six months. For example, SCORE suspended a company’s facility registration because food may have been contaminated. The facility remains closed until it can satisfy SCORE’s verification expectations. On another occasion, SCORE “made it clear” to a company that it would publicize a potential contamination issue if it did not implement a recall within 24 hours. In another case, SCORE “made clear” that it would issue a press release if a company did not initiate a recall within 24 hours based on a facility environmental contamination issue. SCORE’s enforcement tactics should concern food executives.

Are you ready for a visit with SCORE? As provided above, SCORE’s reason for existence is to expedite the FDA’s investigation and recall efforts. The C-Suite will have 24 hours to make a critical decision that will adversely impact brand and balance sheet. Food executives must determine if they are able to act under such pressure and in such a short time frame without preparation or assistance.

Product contamination insurance (PCI) can provide companies with the necessary protections from the regulatory, operational, and financial pressures and impacts of recalls. Unlike general liability and property policies, which do not cover or respond to product recalls, PCI policies are specifically designed to protect companies in the event of an FDA or FSIS investigation and recall. PCI policies provide a company with crisis consultants, the experts who are able to assist with your governmental regulatory, public relations, and recall recovery and investigation efforts. Importantly, the crisis consultants can assist your pre-crisis preparations. Moreover, PCI policies provide coverage for the millions in economic costs associated with recalls that are not covered under general liability or property policies.

Because of our unique experience and expertise, Leavitt Group is also the only PCI underwriter or broker:

  • To develop and offer unique PCI coverages for criminal strict liability, third party crisis costs, and expedited claims preparation.
  • Able to properly manuscript specialized PCI coverages specifically tailored to a company’s unique risks and exposures.
  • To develop a tiered-approach to solve companies’ vendor insurance requirement exposures.
  • To be granted authority to develop and offer a unique multi-disciplinary crisis policy specifically designed for hypermarkets and supermarkets. This distinctive policy expressly addresses the wide range of risks and exposures simple PCI policies are unable to address.
  • To create a specialized network specifically dedicated to the PCI Marketplace, which includes ReposiTrak, crisis consultants, forensic accountants, facility sanitation companies, banks, law firms, and insurers.
  • To include Mike Leavitt, former Secretary of Health & Human Services, as a member of our Board of Directors.
  • To be granted PCI/PRI underwriting authority of $50 million.

Leavitt Group is assisting its food industry clients to properly prepare for and respond when a recall crisis hits. Please contact us to discuss your unique risks and exposures before a crisis hits.

CA License # OE22557

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Joel Berrian is co-owner of Berrian Insurance Group and specializes in insurance for large risks with complex exposures such as mining and energy, product and professional liability, catastrophe exposed property, food and beverage, and global cargo and marine.

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