However, that wasn’t the case with a 2011 listeria outbreak traced to cantaloupe. The FDA was able to track that illness outbreak back to a cantaloupe distributor that was using contaminated water to wash produce. In the end, the outbreak led to 147 illnesses and 43 deaths. Ultimately, the company settled with the victims and later filed for bankruptcy while the company’s owners were convicted of criminal charges.³

Future food outbreaks are likely to look more like the 2011 listeria outbreak in which the source of the contamination is traced back to the original supplier. The Food and Drug Administration (FDA) recently rolled out its new traceability rules requiring farmers and food distributors to track Key Data Elements (KDE) and Critical Tracking Events (CTE) across their products' distribution and supply chain, enabling the FDA to better track outbreaks back to their source. This could lead to increased risk for farmers and other food producers as any outbreak is more likely to be traced directly back to their product. Fortunately, product recall insurance provides farmers, ranchers, and other food producers with financial protection against the risk of a product recall.

WHAT ARE THE FDA’S NEW TRACEABILITY RULES?

The FDA’s new traceability rules originated with the Food Safety Modernization Act (FSMA) of 2011. The FSMA was originally passed to strengthen the FDA’s authority to oversee and enforce regulations throughout the food supply chain. The FSMA focuses on seven core areas:

• Preventive Controls for Human Food
• Preventive Controls for Animal Food
• Produce Safety
• Foreign Supplier Verification Third-party Certification
• Food Defense
• Sanitary Transportation⁴

The FDA’s amended traceability rules may have come out more than a decade after the FSMA passed, but they are part of enforcing preventive controls for human food. Under the new rules, food producers must keep records around seven Critical Tracking Events (CTEs) defined in the new regulations, including:

1. Harvesting
2. Cooling
3. Initial Packing
4. First Land-based Reception (for seafood products)
5. Shipping
6. Receiving
7. Transformation⁵

Food producers are expected to document data from every step in the supply process. If food is contaminated, the FDA has the right to request the company’s CTE records. Farms and other food suppliers must provide those records within 24 hours of the request. The FDA can then utilize that data to track the food back to the contamination point.

The risk for farmers and other food suppliers is obvious. Previously, it was difficult for the FDA to trace contamination all the way back to the farm or ranch. Now, the FDA will not only be able to track a contaminating event back to the farm but all the way down to the exact grid area of the farm where the produce or livestock originated. While there are some recall incidents where the contamination is caused by negligence, that often isn’t the case. Contamination can happen for many reasons. Regardless, the farm or ranch could still be held responsible for the contamination.

The risk for farmers and other food suppliers is obvious. Previously, it was difficult for the FDA to trace contamination all the way back to the farm or ranch. Now, the FDA will not only be able to track a contaminating event back to the farm but all the way down to the exact grid area of the farm where the produce or livestock originated. While there are some recall incidents where the contamination is caused by negligence, that often isn’t the case. Contamination can happen for many reasons. Regardless, the farm or ranch could still be held responsible for the contamination.

HOW CAN RECALL INSURANCE PROTECT FARMS FROM RECALL COSTS?

U.S. product recalls hit a 10-year high in 2022 with more than 900 million total products recalled in 1Q alone.⁶ In 2023, recalls are even more of a risk for any farm or food producer. The expanded traceability rules will allow the FDA to identify the source of contamination back to the farm, which could lead to lost revenue, lost products, and even liability for damages to customers. The recall could threaten industry relationships and future business with supply chain partners. Damages could even be substantial enough to put the farm, ranch, or food producer out of business.

Fortunately, farms and other food producers have insurance options available to help mitigate their exposure. Product recall coverage can help protect them from the financial fallout of a recall. The coverage available can vary by policy, but generally recall insurance covers:

• Recalling the Product
• Replacing the Product
• Loss of Profit
• Crisis Consultation

Replacement costs and loss of profit can be huge balance sheet issues for a company, making crisis response coverage one of the most beneficial components of a recall/contamination policy. Carriers typically contract with a crisis response firm and that firm’s response services are part of the insurance policy. Once an incident has occurred, a crisis consultant can help the food producer navigate the FDA’s process, which can be complicated. In that scenario, the FDA will demand records, inspect the farm, and interview staff. A consultant can help guide the farm through that process to reach the best possible outcome.

However, a farm doesn’t need a recall to occur to take advantage of a recall crisis consultant. Many carriers will allow some of the insurance premium dollars to be spent on what they call “pre-incident consulting work.” This can include form reviews, pre-incident training for employees, running scenarios designed to test plans. Consultants can also work to help the farm implement best practices, promote accurate record-keeping, and ensure FDA compliance to minimize the odds of a recall. Because these consulting services are often part of the coverage, the food producer doesn’t have to pay anything extra to take advantage of consulting services.

BOTTOM LINE

The FDA’s new traceability rules represent a significant risk change for farmers and food producers because the FDA now has a more direct path to trace contaminated food back to the origination point, which could increase the frequency and severity of recalls. However, farms, ranches, and other food producers can protect themselves with recall insurance that often covers loss of revenue or product and damage to customers and business partners. Protect your agriculture clients today by discussing the importance of product recall coverage. Reach out to your local CRC Group producer to learn more.

CONTRIBUTORS

• Jonathan O’Malley is an Associate Broker with CRC Group's Minneapolis office, where he specializes in Product Recall exposures.
• Chris Martin is a Casualty Broker and the President of CRC Group’s Minneapolis office.

END NOTES

1. Largest of three romaine-related outbreaks sickened 167 people in 27 states, Food Safety News, January 16, 2020. https://www.foodsafetynews.com/2020/01/largest-of-three-romaine-related-outbreaks-sickened-167-people-in-27-states/
2. Don’t eat romaine lettuce, CDC urges amid E. coli concerns, CNN, November 21, 2018. https://www.cnn.com/2018/11/20/health/romaine-lettuce-e-coli-cdc/index.html
3. Settlement Reached for 66 Victims of 2011 Cantaloupe Listeria Outbreak, Food Safety News, February 11, 2015 https://www.foodsafetynews.com/2015/02/settlement-reached-in-2011-cantaloupe-linked-listeria-outbreak/
4. The Food Safety Modernization Act in a Nutshell, Manufacturing Innovation Blog, October 17, 2019. https://www.nist.gov/blogs/manufacturing-innovation-blog/food-safety-modernization-act-nutshell
5. FSMA Final Rule on Requirements for Additional Traceability Records for Certain Foods, U.S. Food & Drug Administration, January 25, 2023. https://www.fda.gov/food/food-safety-modernization-act-fsma/fsma-final-rule-requirements-additional-traceability-records-certain-foods
6. U.S. Product Recalls Hits a 10-Year High, According to Sedgewick, Quality Assurance Magazine, June 17, 2022. https://www.qualityassurancemag.com/news/us-product-recalls-hits-a-10-year-high-according-to-sedgwick/#:~:text=The%20number%20 of%20consumer%20product,to%20over%201.3%20million%20units