For those of us who love Blue Bell, it’s a sad day to see the ice cream pulled and to hear of people being hurt simply as a result of consuming it. As respects food manufacturers, it’s a reminder of how severe products recall risk can be. A few quick takes from both an insurance and corporate governance perspective:
- Traditional insurance likely covers the claims and lawsuits that will no doubt come from those injured by consuming the ice cream
- The cost to recall the ice cream off the shelves coupled with the loss of revenue from the lack of sales (while expenses continue) is usually not covered by traditional insurance. Products recall insurance does address this problem but is not always purchased by food manufacturers
- The damage to the brand coupled with continuing expenses will test the balance sheet of Blue Bell. If their balance sheet is not secure, this could take them out of business permanently
- In reading their public disclosures, the company looks to have hit this head on and done so quickly which is important from a governance perspective. That’s critically important during a crisis. In addition, the additional production testing steps will help identify the problems and facilitate getting production back on line
- Retailers and distributors may also bring suit against Blue Bell alleging a disruption to their revenue. These claims may not be fully covered by traditional insurance either
Let’s hope no other lives are impacted and we can once again enjoy the company’s wonderful ice cream one day soon!
Roach Howard Smith & Barton