Finsbury in insurance spat over dioxin recall costs

By Elaine Watson

- Last updated on GMT

Related tags Insurance Finsbury

Duffy: Insurance spat
Duffy: Insurance spat
Finsbury Food Group has become embroiled in a spat with insurers over who will cover the cost of recalling products caught up in the egg dioxin scare.

The baker, which posted a 6% rise in sales in the six months to Jan 1, recently received a batch of liquid egg containing a small percentage of eggs from a farm in Germany that were potentially affected by the dioxin contaminated feed incident.

The egg was used by Finsbury’s Memory Lane Cakes facility to produce short shelf-life cakes, which were deemed safe to eat but were nevertheless removed from supermarkets as a precautionary measure.

On January 7, Finsbury said it did not believe there would be any significant or lasting impact on the company given the limited volume of products involved and the fact that recall costs were covered by insurance.

However, chief executive John Duffy (pictured) today revealed that Finsbury's insurer was challenging recovery of the associated costs.

“The fact that there was no public health risk has led our insurer to challenge recovery of any associated withdrawal costs. We are currently in discussions with the insurer, retailers and the egg supplier to resolve the issue.”

Cautionary tale?

Kevin Smith, food and drink practice leader at insurance broker Jardine Lloyd Thompson (JLT), said he could not comment on Finsbury’s particular circumstances, as Finsbury was not a business that JLT curently advises, but said that such disputes were not unusual.

“This is an area of insurance that is often misunderstood, and as with everything insurance-wise, it is critical that firms read the small print.”

He added: “Standard product liability policies only apply where there is injury or damage, and if no one is injured or damaged, it doesn’t trigger the policy.”

He added: "Even where a company has purchased an additional product recall policy, standard wordings always exclude carcinogens such as dioxins, and require the cause of the recall to result in death, illness or disease manifesting within a year of consumption.

"With many food recalls the trace levels of contamination involved would not trigger such a policy. Specialist advice is required in structuring a product risk insurance programme to respond to potential liabilities and also to recover your own retained financial losses arising out of food recalls and customer withdrawal claims."

Strong growth in gluten-free

Strong sales in its bread and free-from division (up 14.5%) accounted for the majority of Finsbury’s growth, with good performances from the Genius brand in fresh gluten free and the Vogel’s brand in speciality bread.

Sales in the larger cake division were up 3.2% compared with the first half of last year, added the firm.

“UK market and export sales have both shown growth although the former has required increased promotional support levels to remain competitive and deliver growth in the current marketplace.”

Meanwhile, the combination of soaring input costs and fragile consumer confidence made for a very challenging operating environment, it added.

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