My retailer or co-packing agreement requires insurance — what do I actually need?
A retailer's vendor agreement and a co-packing contract each carry an insurance section. They ask for liability limits, add-ons that name the other company, and often a clause on who pays for a recall. Read that section against your policy before you sign, and ask your attorney about any promise to pay the other side's costs.
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- Read the insurance exhibit together with the clause where you promise to pay the other company's costs. The promise is separate from your insurance and may be larger than your limits.
- An exhibit that lists liability limits may say nothing about recall. A recall clause is something to read for, not assume.
- A co-packing contract has to answer one question: who pays to pull, test and destroy product if a batch goes wrong.
What does the insurance section of my agreement ask for?
Buyer exhibits commonly ask for liability coverage at stated limits, add-ons that name the buyer, a minimum grade for your insurer, and a certificate in a set form. A co-packing contract adds questions about recall costs, allergens and stock kept at the other plant. The table reads each line in plain words.
A co-packer is a business that makes or packs food for other brands. The co-packer rows describe what these contracts commonly contain, and the agreement you hold is the authority. Exhibits can also hold lines you may not expect: defense costs paid on top of your limit, cover that applies worldwide, an add-on promising notice of cancellation, or a cyber limit. Published buyer exhibits include them.
| The agreement says | In plain words | What to check |
|---|---|---|
| Retailer: vendor carries liability at the exhibit's limits | The most your policy pays for one claim, and for the year | Both numbers on the summary page of your policy |
| Retailer: buyer is named additional insured | Your policy also protects the buyer for claims over your product | A written add-on, not only a certificate |
| Retailer: primary and non-contributory, with waiver of subrogation | Your policy pays first, and your insurer gives up recovery from the buyer | The add-on wording for each |
| Retailer: insurer holds a minimum rating | Your insurer needs a financial-strength grade from a rating firm | Your insurer's current grade |
| Retailer: claims-made policies need a tail | Cover has to keep running for claims that arrive after the policy ends | Whether yours is occurrence or claims-made |
| Retailer: vendor indemnifies and holds the buyer harmless | You promise to pay the buyer's costs if your product leads to a claim | Whether it exceeds your limits; ask your attorney |
| Co-packer: each side names the other additional insured | The other company is covered on your policy, and you on theirs | That you see their add-on, not only a certificate |
| Co-packer: recall costs fall on the party at fault | Whoever the contract blames pays to pull, test and destroy product | Who decides fault, and whether your recall coverage reaches what you owe |
| Co-packer: allergen controls on shared lines | A shared line can carry an allergen into another brand's food | Which controls are required, and who pays if one fails |
| Co-packer: your stock stays at their plant | Your goods sit in a building you do not control | Whether your property coverage reaches that address |
What do the insurance words in my agreement mean?
Several of the words are the same ones a lease uses. Three are new here: the promise to pay the other side's costs, the two ways a liability policy can be triggered, and the rating of your insurer.
- Same words. Additional insuredAdditional Insured Another person or business covered under your liability policy for claims tied to your work or property, such as a landlord or general contractor. Insurers call them an additional insured. more →, waiver of subrogation, primary and non-contributory and certificate of insurance mean here what they mean in a lease; our guide to plant leases defines them. Here they name the buyer or the co-packer instead of the landlord.
- The promise to pay. An indemnity clause, also called hold harmless, is your promise to pay the other company's costs if your product causes a claim against it. It sits in the agreement, not in your policy. Exhibits often say the insurance minimums do not limit it, so it can exceed your limits. Ask your agent whether your policy responds to promises made by contract, and your attorney what the clause means.
- Two ways a policy is triggered. An occurrence policy covers harm that happened while it was active. A claims-made policy covers claims reported while it is active, which is why a buyer may ask for it to keep running afterward. The two are known as occurrence versus claims-madeOccurrence vs. Claims-Made An occurrence policy covers harm that happened while the policy was active; a claims-made policy covers claims reported while it is active. Insurers use these two names for the two triggers. more →.
- Insurer rating. A rating firm grades an insurer's financial strength with a letter. An exhibit may set a minimum letter, and your agent can tell you where yours stands.
A buyer's exhibit may also say that your umbrella, which is extra liability coverage on top of your policy, can count toward the limits. Look for that in words. Our explainer on when you need an umbrella covers the choice.
Who pays if a recall happens?
The agreement decides what the other company can ask you to pay. Your policy decides what it will pay. The two can differ, so show the recall clause to your agent before you sign.
A recall is the cost to pull, test and destroy bad product. It has its own coverage line, and the cover for another company's costs is a further add-on to a liability policy. Our guide to recall and contamination insurance explains each. Ask your agent which costs yours pays, and whether the contract moves costs to you that it does not.
Allergens are one reason a co-packing contract needs this clause. The Food and Drug Administration lists nine major food allergens and sets no threshold amount for them. (Source: FDA) A trace that crosses a shared line can start a recall even if no one is hurt. Check what controls the contract requires and who pays if one fails. Our guide to co-packer contracts goes further.
Picture a sauce maker who signs a co-packing contract saying the party at fault pays for any recall. A batch is pulled over an allergen that was not on the label, and the two companies disagree about whose line and whose labels caused it. While they argue, the product sits on hold and her own recall costs build. Her recall coverage may be written for her own costs, not the costs the contract moved to her. She finds out when the bill arrives.
What should I do before I sign?
Give your agent and your attorney the insurance section, the exhibit and the indemnity clause before you sign. A mismatch is cheaper to fix on paper than after a claim.
- Put your policy beside the exhibit. Match every limit and named add-on to the summary page of your policy. Your product liability coverage and general liability are the lines most exhibits read.
- Ask for the add-ons in writing. A certificate alone does not show them.
- Find the recall line. If the exhibit is silent and the contract moves recall costs to you, tell your agent.
- Ask about the gap. If a clause asks for more than your policy gives, you may be in breach on day one. Ask your attorney before you sign, and see our list of insurance mistakes food makers make.
What do I send back, and when?
Send the certificate, in the form the exhibit sets, with copies of the written add-ons, before the first order ships or the first production run starts.
- The certificate. Exhibits often set its wording and where to send it. Follow them.
- The add-ons. Copies of the ones naming the other company, putting your policy first and waiving recovery.
- From a co-packer: their certificate and add-ons naming you, before your first run.
Frequently asked questions about contract insurance
A certificate generally reports that coverage exists. The protection for the other company usually comes from the written add-ons on your policy. Check your policy wording, and ask your agent to show you where each one is written.
A buyer can generally ask for whatever minimum it likes; whether you accept it is a business and legal decision. You can ask your agent what higher limits would take, or whether an umbrella can count toward them, before you decide whether to sign.
Treat that as a reason to pause. Ask for the certificate and the add-ons naming you before you ship any ingredients or packaging, and take the question to your attorney if they refuse.
Send your agreement's insurance section with your quote request
Include the insurance section and exhibit with your quote request.