A company may choose to initiate a product recall, stock recovery, or product withdrawal, due to an identified problem that has the potential of causing property damage, bodily injury, or a non-safety, performance impairment to the product.

First party losses are incurred by the insured business and include expenses to recall the product (i.e. notification, shipping, and pulling stock back from customers). The policy will also cover the repairing, replacing or refunding of those products if they cannot be reused.

Third party losses are similar to first party losses but affect the insured’s customer and often include loss of profits.