The widespread effects of massive product recalls are still being measured, as U.S. businesses increasingly rely on foreign producers for low-cost goods. This newly emerging exposure has many Hylant clients asking what steps should be taken to prevent losses felt by companies such as Mattel.

A business' first line of defense is its general liability insurance, which often covers product-related damage and lawsuits. While this is a good start, it leaves policyholders vulnerable to many other costs associated with recalls.

The largest expense is often the logistics of the actual recall. General liability policies offer little to no protection here. Instead, companies should consider separate product recall policies.

Product-recall insurance is a new concept in China, which Chinese insurance companies have not offered in the past and are now even more reluctant to do so. A handful of foreign carriers registered in China, such as AIG and Chubb, do offer these policies with significant limitations — typically $1 million per occurrence. But that likely won't last long.

Carriers in the United States, Europe and Bermuda traditionally have offered recall coverage, and most carriers still do for Chinese-made products. But the recent round of recalls has tighted their standards. Many underwriters now require proof of more stringent supply-chain testing and monitoring.

Recall policies cover the logistics of a recall, even if no injuries have been incurred from a product. They fill the voids left from general liability coverage and are available to most industries. They can even be structured to include help with public relations to minimize the damage.

Other specialty insurance, such as trade disruption coverage, protects companies from lost revenues, when newly imposed regulations restrict access from suppliers. Managing exposure from foreign operations should be consistent with U.S. practices. However, international customs and business practices need to be identified and managed appropriately.

Some issues to consider include product testing, supplier site inspections and audits, contractual indemnification requirements, subcontractor controls and insurance coverage requirements.

Insurance policies in many foreign jurisdictions are not as robust as those purchased in the United States. Questions to consider include: will the coverage respond to suits brought outside of the local jurisdiction? Are coverage and limits sufficient to protect your organization? Foreign policy limits often are woefully inadequate to address major product recalls.

The best line of defense is knowing your supplier. Before entering into a supply contract, insist that the supplier secure products liability and product recall coverage. Also, require access to those policies and claims histories to ensure proper coverage.

Insist on an agreement with their supplies stipulating that all disputes be resolved through international arbitration. Arbitration awards are generally easier to enforce in China than court judgments from a foreign nation.

If you or your suppliers have foreign operations and would like assistance with risk control or insurance options to minimize risk associated with overseas operations, contract your Hylant Group representative.

We offer a wide range of risk management solutions focused on each individual situation and conditions.

Contact Hylant Group at (419) 255-1020 for more information.

The April 2007 Supreme Court decision in Massachusetts v. EPA has lead to increased attention on climate change and its impact on directors and officers liability. The case has been hailed as one of the more impactful cases in environmental law and will likely set the stage for increased litigation and governmental regulation of greenhouse gas emissions.

With increased litigation and regulation will likely come greater liability for the directors and officers of companies who may fall prey to this heightened scrutiny. To better understand the impact of the Massachusetts decision, it is helpful to understand its background and holding as well as the potential liabilities that directors and officers may face in the future, as a result of climate change exposures.

Lastly, an analysis of these evolving risks would be incomplete without a review of preferred D&O policy language that may address some of the potential climate change liability risks faced by directors and officers.

The Massachusetts claim against the EPA was originally brought by a group of private organizations to compel the EPA to begin regulating the emissions of greenhouse gases, following the EPA's refusal to do so.

The claim was later joined by Massachusetts and other state and local governments. The court did not require the EPA to regulate greenhouse gas emissions, but rather held that the EPA is empowered to do so under the endangerment language codified in section 7521 (a) (1) of the Clean Air Act.

The court, on remand, held that the EPA must make its decision to take regulatory action on greenhouse gas emissions in light of the language in the Clean Air Act's endangerment language.

The full impact of the decision remains to be seen. What is certain is that litigation will continue in this area, as the EPA begins to apply the endangerment test articulated by the court. If the EPA does in fact find that global warming is tied to greenhouse gas emissions and that global warming does, in fact, represent a danger to the public health and welfare, then regulation of greenhouse gases by the EPA is required.

This regulation could have a huge impact on the liabilities of corporations and their directors and officers as any regulatory scheme will require increased disclosure, and with it, increased litigation and scrutiny.

The single greatest liability that corporations and their directors and officers face in the future is failure to adequately disclose the potential financial impact of greenhouse gas emissions prior to a significant climate-change related financial loss.

This failure to disclose can result from inadequate tracking of emissions, failure to comply with the SEC or other regulatory disclosure regime, FASB's failure to provide adequate guidance with regard to liability recognition and inconsistencies between information contained in SEC filings and other information disseminated by the company addressing greenhouse gas or other emissions.

Many corporations struggle with the question of whether or not the disclosure of greenhouse gas emissions is material, and therefore in need of disclosure at all. While it appears obvious that certain industries, including utilities, large fleet operators and heavy manufacturers, may have a greater GHG impact than other industries, the material impact for most remains to be seen.

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Hylant Group, the nation's seventh largest privately held commercial insurance brokerage, has named John W. Chaney (CPCU) as President of the Cleveland office, as well as Regional Vice President.

Chaney will be responsible for the overall management, direction and performance of the Cleveland office, while overseeing the Columbus and Cincinnati, Ohio, offices and the Nashville, Tenn., office. He will continue to serve as Large Account Practice Leader and be involved in all corporate business development activities as a member of the Office of the Chairman.

"John will be integral in helping us meet our aggressive growth goals over the next several years. With his wealth of executive experience and leadership skills, we expect his impact to be significant for the Cleveland office and for Hylant Group on a corporate level," said Hylant Group's Chairman and CEO, Patrick Hylant.

Prior to joining Hylant three years ago as Vice President of Business Development and member of the Office of the Chairman, Chaney was the Chief Executive Officer for Willis' Cleveland operation for six years.

Donna M. Ford has joined Hylant Group as a Client Executive serving the Pittsburgh region. With more than 28 years of industry experience gained mostly from brokerages, Ford will be responsible for expanding Hylant's risk management presence in the greater Pittsburgh area.