The recall ripple effect: How a single supplier can trigger a nationwide crisis

This week the FDA moved Utz's potato chip recall to Class I, its most serious designation

The recall covered an estimated 650,000 bags of Zapp's and Dirty brand chips linked to a possible salmonella contamination in a seasoning ingredient. Utz says no illnesses have been reported and that it acted out of caution after its ingredient supplier issued its own recall.

Whether or not a single consumer ever gets sick, the company is now living through a situation every food and beverage manufacturer dreads: a supplier problem becomes a public recall, a public recall becomes a regulatory event, and a regulatory event becomes a test of how well the business protected itself long before the first bag ever hit the shelves.
 

Product recalls may never be completely preventable, but they can be manageable

Preparation begins well before a recall occurs. All food and beverage operations should be asking these simple questions when it comes to preparedness and risk financing tools for both recall and liability coverage. Are we prepared with the right quality assurance programs, supplier controls, product traceability capabilities? And when it comes to insurance implications, do we understand what is covered we have and what isn’t? How will our current coverage respond should an incident occur? Too many organizations still treat preparedness and insurance as two boxes to check separately, rather than one coordinated response plan that must work together when a crisis hits.

Two policies, two very different jobs

It's a common misconception that product liability insurance already covers a recall. It typically does not. The easiest way to think about the difference: third-party coverage pays when someone else comes after you (a customer who got sick, a vendor injured on your premises), while first-party coverage pays for your own costs of fixing the problem before it gets to that point, or in parallel. Product liability is third-party protection: it responds when someone is injured or harmed by a product and brings a claim against you. Product recall coverage is first-party protection: it responds to your own cost of getting a product off shelves and out of pantries before anyone is harmed at all, covering things like transportation, storage, destruction, loss of sales, and the advertising and rehabilitation spend needed to rebuild consumer confidence afterward.

"Too often we see companies simply relying on Product Liability coverage, treating it like a Cyber policy which often has 1st party coverage for business interruption or reputational coverage in addition to 3rd party coverage, but the product does not function the same and requires a separate product recall policy for broader terms and conditions and greater balance sheet protection."

— Matt Replogle, Food & Beverage Practice Leader, Howden US

The Utz chip recall is a useful illustration of why the line matters, and why the classification itself carries financial weight. As of publication, Utz has reported zero illnesses. This is, in insurance terms, a pure recall event: a precautionary action driven by an ingredient-level contamination risk, not a liability claim. But Class I status alone can move markets. One event study of meat and poultry recalls found that Class I recalls wiped out roughly $109 million in shareholder wealth within five trading days,² well before any liability claim is ever filed. A business that has only bought liability cover, on the assumption that it “covers recalls too,” could find itself funding the entire withdrawal, destruction, and reputational recovery effort out of its own balance sheet, at the exact moment the market is already pricing in the damage. That is a gap that shows up at the worst possible moment, in the middle of a live crisis, when finance and legal teams are already stretched thin.

The supply chain is the exposure now

Utz didn't fail its own quality control based on the facts known today. Its recall was triggered by a third-party ingredient supplier's dry milk powder. That is increasingly the pattern in food and beverage recalls: the point of failure sits one or two steps removed from the brand whose name is on the bag. In fact, one analysis of food recalls across the US, UK, and Ireland found that 56% stemmed from operational mistakes, many of them upstream of the finished product rather than on the recalling company's own line.³ A seasoning blend, a packaging component, a co-packer's line, any of these can pull a well-run operator into a recall it didn't cause but absolutely has to manage. Coverage needs to be built with that ripple effect in mind, including contingent recall exposure tied to suppliers and co-manufacturers, not just the operator's own production line.

The Utz chip recall raises several important considerations of its own. Given that the contaminant is an ingredient that may have been incorporated into a wide range of finished products, the potential impact could extend far beyond the chip products cited in this article. Howden's London team has worked with clients who have experienced a number of these cases over the years, and in the most severe instances, companies have been forced to cease trading, unable to meet the financial demands of customers and other stakeholders following a major event.
 

"The product recall marketplace has grown considerably in recent years, leading to increased appetite towards new products and broader coverage options offered across most industries. As recalls continue to occur with increasing frequency, organizations are proactively seeking protection against the financial and reputational consequences of these events in what remains a competitive buyer's market. With extensive experience supporting businesses ranging from SMEs to multinational corporations and leading global brands, our team is well placed to assist clients by arming them with the protection they need to recover from a crisis, rather than succumbing to it."

— Robert Marshall, Divisional Director, Product Recall, Howden London

The liability side needs the same rigor. Placing recall coverage well is only part of the equation. The underlying Product Liability and Umbrella or Excess Liability program has to be built with just as much care, since gaps or ambiguity there surface at the same moment a recall does.

“Contract certainty is also critical on the Product Liability and Umbrella or Excess Liability policies as well. Such key considerations as the definition of an occurrence, how any deductibles or retentions apply, treatment of defense costs, any manuscripted ‘batch’ language, and relevant exclusions must be thoughtfully negotiated before policy inception. In addition, we recommend making sure carrier counsel and our client's counsel are aligned from the beginning. These are the best practices to ensure a more successful coverage outcome when it is most needed.”

— Carol Murphy, Head of Global Casualty, Howden US
 

Now is an opportune time for companies to evaluate their recall preparedness

If you're a food and beverage operator, a finance executive, or in-house legal counsel, the moment to review your recall and liability coverage is not after a supplier calls to say there's a problem. It's now, while there's still time to close gaps, confirm what’s covered, and make sure the people who need to move fast in a crisis know exactly what to do.

In addition to London and Bermuda, the U.S. product recall marketplace remains highly competitive, providing attractive options for both new and existing policyholders. Increased market capacity and the entrance of new MGAs have driven greater pricing competition, while established carriers have responded with enhanced coverage offerings, expanded crisis management services, and broader risk mitigation resources. As recall frequency and severity continue to rise across the food and beverage industry, now is an opportune time for companies to evaluate their recall preparedness and secure coverage designed to protect their balance sheet, brand reputation, and customer relationships. 
 

Our expertise, built in the London markets, expanded to U.S.

This is where Howden's Product Recall Specialists come in. Our team operates as one of the leading independent producers into the London and Bermuda markets, with expertise spanning automotive components, consumer goods, pharmaceuticals, medical devices, and food and beverage risks, including restaurant contamination exposures. We have expanded into U.S. markets to secure optimal terms and conditions while maintaining competitive rates.

Our involvement extends beyond policy placement. We remain engaged throughout the program lifecycle, providing clarity on coverage when claims arise and direct access to crisis consultants and claims specialists who help navigate the regulatory, supplier, and customer pressures of a live recall. 
Our U.S. Global Casualty team works closely with our food and beverage specialists to guide clients through this evolving marketplace and craft tailored coverage solutions for this increasingly important exposure.

The Utz chip recall may end without a single reported illness. The next one might not, and history shows how far the damage can spread when it doesn't: the 2009 Peanut Corporation of America salmonella outbreak, driven by one supplier, is estimated to have cost the broader peanut industry roughly $1 billion,⁴ most of it borne by companies that did nothing wrong. Either way, the businesses that come out the other side intact will be the ones that did the work before the recall notice ever landed.
 

To talk through your Product Recall and Product Liability program, reach out to Howden's Food & Beverage Practice.
 

<sub>1. Food Marketing Institute Grocery Manufacturers Association average recall cost estimate as reported in “More than money: What a recall truly costs,” Food Dive
1a. Additional context and 2025 cost range ($7–$15M+), “How Much Does a Food Recall Really Cost?” Quality Assurance & Food Safety
2. Event-study finding on Class I meat and poultry recalls and shareholder wealth impact, “The Real Cost of Unsafe Food,” Spectacular Labs
3. Queen's University analysis of US/UK/Ireland food recalls, cited in “Food manufacturing and the true cost of product recalls,”Trace One
4. Peanut Corporation of America recall industry cost estimate, “More than money: What a recall truly costs,” Food Dive
5. FDA Class I recall designation and Utz Zapp's/Dirty potato chip recall details: Richard Luscombe, “FDA issues most serious recall alert for potato chip brands over salmonella risk,” The Guardian, July 2, 2026.</sub>