Insurance hard to obtain for this food processor

Product liability and recall insurance is expensive and hard to place, a large chicken processing firm reported Thursday.

Sanderson Farms Inc. said its business carries several risks, including product liability claims, product recalls, property damage and injuries to people.

“The insurance we maintain with respect to certain of these risks, including product liability and recall insurance, property insurance, workers compensation insurance and general liability insurance, is expensive and difficult to obtain,” Laurel, Miss.-based Sanderson said in its annual report for the year ending Oct. 31, which it released Dec. 20.

During the year ending Oct. 31, Sanderson reported revenue of US$3.2 billion. Sanderson processed about 606 million chickens. The company sells chill-packed, ice-packed, bulk-packed and frozen chicken to retailers, distritutors and restaurants.

It has several food processing plants in Texas, Mississippi, Georgia and North Carolina.

Risks include contamination from organisms that cause diseases – such as Listeria, Salmonella and E. coli. – as well as foreign material, such as metal and plastic, Sanderson said in the annual report.

Sanderson did not say it actually experienced any of these problems. It is standard practice for publicly-traded companies to outline in their securities filing any possible risks that could affect their financial performance.

“Pathogens or foreign material can also be introduced as a result of improper handling by our customers, consumers or third parties after we have shipped the products,” Sanderson said in its annual report. “We control these risks through careful processing and testing of our finished product, but we cannot entirely eliminate them. We have little, if any, control over proper handling once the product has been shipped. Nevertheless, contamination that results from improper handling by our customers, consumers or third parties, or tampering with our products by those persons, may be blamed on us.”

Product recall insurance covers the money a food manufacturer or seller spends as a result recalling products because they either caused, or are likely to cause, bodily injury or property damage, Lloyd’s reports.

For example, Everest Re Group Ltd. says its product recall insurance covers several costs. In addition to the cost of shipping, Everest says it also covers newspaper, radio and television announcements, renting storage space and accommodation and transportation costs of employees who are searching for those recalled products. It also covers additional pay, such as overtime pay for employees and pay for additional temporary staff and consultants, says Everest, a Bermuda commercial specialty insurer.