Many of the claims included costs for expenses related to the recall of the impacted products such as storage and handling and internal labour. To determine the nature of the costs incurred, MDD discussed these expenses with claimants. Upon reviewing their documentation and conducting further discussions, we determined that the loss measurements should consider expenses such as destruction, storage and handling expenses. However, since other claimed expenses such as internal labour were not incremental, we designated these as normal operating expenses the claimant would recover through sales.
Value of Recalled Products
Some claimants sent the manufactured products to their customers and, as a result, had to have their customers dispose of the product or send it back to the claimants’ facilities. The claimants refunded the customers for the products. Because they could not re-supply the product, they claimed the recalled products at the selling price. We reviewed the claimants’ sales and confirmed that the replacement product had not shipped, and the claimant did lose the resulting sale. As such, we agreed with the valuation of recalled products for certain claimants at the selling price.
With other claimants, however, our review of the claimant’s weekly sales indicated that sales were subsequently recovered for a sample of larger customers and the claimant’s overall sales were not impacted. As a result of this analysis, the loss of product destroyed for those other claimants was valued at the cost versus selling price.
Non-Recalled Sales Streams
A claim for other revenue streams that did not contain recalled products was also submitted. Those claims included items such as beverage vending machines, service and catering, and cafeteria sales. We reviewed the various sales streams and determined a minimal decline in sales, and the decline that did occur was not related to the product recall. As a result of our analysis, the claimed sales losses from non-impacted sales streams were removed from the claim, in agreement with the Insured.