NU Online News Service, Nov. 24, 3:35 p.m. EST

The recall of more than 2.1 million baby cribs by the U.S. Consumer Products Safety Commission should not have a serious impact on insurers, but might pique demand for recall coverage, experts suggest.

Yesterday, the Safety Commission, along with Canada's product safety department, Health Canada, announced a voluntary recall of more than 1.2 million cribs in the United States and 968,000 in Canada.

The drop-side cribs, manufactured in Canada, China and Indonesia, were produced by Stork Craft Manufacturing Inc. of British Columbia, Canada. The units were manufactured and distributed as far back as 1993 through October of this year.

The problem, the CPSC said, is with the hardware designed to keep the drop side of the crib in place. When it fails, or is installed incorrectly, the side can fall out of place, allowing a child to become wedged between the mattress and the side rail or to fall out of bed.

The CPSC said it, Canada and the manufacturer are aware of 110 incidents that resulted in the suffocation death of four infants.

While the recall will worry parents and probably result in a host of returns and inquiries to retailers who sold the beds, insurers will not be seriously impacted, knowledgeable sources said.

"Crib recalls are a perennial problem," said Robert Hartwig, president and chief economist of the Insurance Information Institute.

A former employee at the CPSC, Mr. Hartwig said crib makers are still not reaching the standards that were established decades ago, but the instances of actual injury turn out to be very small, adding that the injury or death of one child is still "one too many."

From the insurance side, however, the few incidences translate to very little exposure, because a recall in itself does not trigger coverage, only bodily injury does.

"The impact will be small," he said.

Bill Harrison, managing director of Aon crisis management practice, noted that in terms of actual beds recalled, many of the beds, going as far back as 1993, are probably in the dumpster and will never be returned.

A client could be impacted in two different areas, he pointed out–one, reputational loss, which would not be under a general liability plan, and the other from bodily injury, which may be covered under a GL policy.

Not knowing the extent of coverage, and considering that some of the manufacturing was probably done by different companies overseas, it will be a challenge dividing up responsibility, he noted.

Despite the number, and some of the insurance implications, he concluded that on balance he "did not expect this to be a gigantic loss to the insurance industry."

However, Patricia Roth, senior vice president for S.H. Smith & Co. Inc., a wholesaler in Hartford, Conn., believes this could create a firestorm in the industry as manufacturing clients begin to understand the implications of a recall and what it could do to their bottom line if they go without recall coverage.

It also illustrates to insurance agents that from an errors and omissions standpoint, discussion over these issues is important and this is an area producers should be addressing with their clients regularly, she added.

Special Reports /

Crib Recall Not Seen Serious For Insurers Despite The Numbers

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