CPSIA - Recall Insurance Update

One of my eagle-eyed friends noticed an article (or ad masquerading as an article) offering a new recall insurance product in Earnshaws in its most recent issue on page 36. The subject of recall insurance has been on everyone's mind since passage of the CPSIA. The new law considerably increases the risk and expense exposure from recalls in a multiplicity of industries. Earnshaws caters to the apparel industry, but the issues are the same elsewhere in the children's products marketplace. The insurance broker here is HUB International. For those of you in the toy business, you may be familiar with them from messages sent under the auspices of the TIA. HUB International is endorsed insurance broker to the TIA.

The Earnshaws "article" touches on some important points:

• ". . . with thousands - or in some cases millions - of units with an untold number of components and coatings, it's not unreasonable to imagine that even the most careful company could inadvertently end up shipping goods that don't comply [with the CPSIA]. The consequences of such an error would be costly and possibly catastrophic."
• "HUB has developed the Children's Apparel Recall Expense (C.A.R.E.) program to cover well-meaning wholesales, importers and distributors of children's apparel and footwear. . . ."
• One happy customer noted: "We do not want to accept the risks of the threats we cannot control . . . ." [Emphasis added]

I particularly appreciate the tone of doom and regulatory randomness in this "article". Of course we should all mortgage our houses to buy this insurance. As HUB notes, the consequences of an "inadvertent" error is "possibly catastrophic". This point is not lost on their customer either, who notes that the risk cannot be controlled. Even "well-meaning" companies will be subject to this capricious fate. At least they can get insurance . . . . Ouch.

Hmmm, I wonder why the HUB customer thinks that CPSIA risks cannot be controlled. Could it be that Target was whacked with a $600,000 penalty for using reasonable QC procedures and meeting its standard of care, but nonetheless somehow failing to find a lead-in-paint violation in time. [Of course, they had passing test reports and turned themselves in as soon as they found the problem, but they're very nice in Minnesota. Nice, but $600K lighter now.] Could it be that Mattel paid for a massive recall, settled with California, settled with Arizona and 38 other states, paid a $2.3 million fine to the CPSC . . . AND still had to process and pay an extortionate class action settlement with plaintiffs attorneys to the tune of tens of millions of dollars - all for a violation that resulted in NO deaths and NO injuries? Nah, must be something else. . . .

So the ways to waste money on the awful CPSIA expands now to include Recall Insurance. Yet another reason for businesses to hang it up. And then, consumer advocates rejoice!, there will be fewer and fewer children's product recalls to worry about - because there will be fewer and fewer children's products available for purchase. What-a-country!