Falvey Cargo Updates

Product, Defect, Recall, and Contamination Coverage For Automotive Component Manufacturers and Suppliers

Posted: September 29, 2020 in:

Falvey Insurance Group was excited to recently debut our Product, Defect, Recall, and Contamination (PDRC) coverage. In the wake of that announcement, we’re publishing a series of in-depth blogs that explain how this coverage can protect a variety of businesses and products. This article in our series focuses on the automotive industry.

Designed to protect against the financial and reputational impacts often associated with product failures and recalls, PDRC helps automotive component manufacturers and suppliers in the event of design or manufacturing errors. 

Accidents happen. In fact, automotive recall claims are more common than you might expect. The National Highway Traffic Safety Administration (NHTSA) reported that 53 million vehicles were recalled in the U.S. in 2016—a record-high number.  

Examples of Major Automotive Component Recalls 

  • Airbags: The Takata airbag recall is one notable automotive recall that occurred in May 2013 at the Takata manufacturing plant in Mexico. Takata found that faulty inflator units inside the airbags could rupture and send debris flying inside its vehicles. Upon discovering the defect, Takata recalled more than 3.6 million cars, prompting other manufacturers to initiate similar recalls, which resulted in nearly 50 million recalled cars around the world. Takata filed for bankruptcy by 2017. Key Safety Assets later purchased the brand’s surviving assets. 
  • Stickers: Another devastating example of an automotive recall took place when a carmaker requested manufacturers to place stickers on its catalytic converters to ensure the devices were properly installed. However, the stickers were accidentally placed on the wrong side of the converters, leading to incorrect installations. Because the manufacturers did not detect this error for several days, the issue wound up affecting 200,000 cars and costing a whopping $10 million to replace all the faulty converters. 
  • Wax Pins: It’s clear that automotive recalls can have costly implications. In another case, a car manufacturer embedded wax pins into vehicles to help regulate the coolant release into the engines. But because of an improper heating process, the wax split instead of expanding, causing the engine to overheat and cut out. While the price was only $.50 per part, the error affected 15,000 vehicles and ended up costing the manufacturer over $2 million to remedy the situation.

Falvey’s PDRC Protection For Automotive Components

An unintentional manufacturing or design error could cause property damage, bodily harm, or guarantee issues. Not to mention devastating financial impacts of a recall and damaged reputations. If your product falls short, you need a plan in place. PDRC covers recall costs, third-party financial loss, and extra expenses. Other highlights of our coverage include:

  •     Can be purchased for whole-company turnover or specific contractual requirements
  •     Available to offer safety only or product guarantee triggers for all component parts
  •     Built-in policy trigger for regulatory forced recalls by NHTSA, DVSA, etc.
  •     Additional coverage available for customer financial loss
  •     Able to offer long-term policies to match the length of automotive contracts

Read more about our PDRC coverage for consumer durables, pharmaceutical & medical devices, and food & drink products.

Learn More 

Want more details about how PDRC coverage can help protect automotive component manufacturers and suppliers? Contact us. We can help. 


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