Common Exclusions & What’s Not Covered

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A practical UK guide for food and beverage manufacturers: the exclusions that regularly catch businesses out - and how to reduce gaps in cover.

Insurance is designed to protect your business from sudden, unexpected events - but every policy has exclusions and conditions. In food and beverage manufacturing, exclusions matter even more because incidents can involve contamination, labelling, temperature control, supply chains, machinery breakdown and contractual obligations. This page explains the exclusions we commonly see, what they mean in practice, and how to structure your programme to avoid surprises at claim time.

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UNDERSTAND YOUR EXCLUSIONS BEFORE YOU NEED TO CLAIM

Why Exclusions Matter in Food & Beverage Manufacturing

When you buy insurance, it’s tempting to focus on the headline covers and limits. But in food manufacturing, the difference between a smooth claim and a painful dispute often comes down to the policy wording - especially exclusions, conditions and definitions.

For example, a product liability policy may cover injury or illness claims, but not the first-party costs of withdrawing products from retailers. A property policy may cover fire damage, but not spoilage caused by a slow temperature rise where alarms were not maintained. A business interruption policy may pay for lost gross profit after insured property damage, but not after a cyber outage unless cyber BI is included.

This guide is designed to help you ask better questions, identify common gaps, and build an insurance programme that matches your operation. If you want tailored advice for your products, processes and contracts, call Insure24 on 0330 127 2333.

Important Note

Exclusions vary by insurer, product and policy wording. This page summarises common exclusions seen in UK commercial insurance for food and beverage manufacturers, but it is not a substitute for reading your own policy schedule and wording. If you’re unsure about a specific scenario, speak to an adviser and get clarity in writing.

In particular, specialist covers (such as product recall, contamination, machinery breakdown, deterioration of stock and cyber) can have very different triggers and conditions between insurers. We can help you compare wordings and select the most appropriate option.

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1) Product Liability: Common Exclusions & Grey Areas

Product liability is designed to cover claims alleging injury or illness caused by your products (plus legal defence). For food manufacturers, this is essential - but it’s important to understand what it typically does not cover.

The most common misunderstanding is assuming product liability automatically pays for “recall costs”. In reality, product liability is primarily a third-party claims policy. Recall, withdrawal, contamination response and crisis management costs often require specialist extensions or separate policies.

Typical Product Liability Exclusions

  • Product recall / withdrawal costs (unless specifically added by endorsement or separate policy)
  • Known defects or continuing to supply after discovering a problem
  • Contractual liability beyond what you’d be liable for in law (varies by wording)
  • Deliberate or fraudulent acts
  • Fines and penalties (often excluded or limited; insurability depends on law and wording)
  • Guarantees, warranties and performance promises (unless linked to injury/property damage)
  • Product efficacy / lack of performance where there is no injury/illness

Where Disputes Often Happen

  • “Impairment” vs “injury” - product is unfit but hasn’t caused illness yet
  • Allergen mislabelling - especially if discovered early and withdrawn proactively
  • Ingredient supply chain - downstream losses for customers using your ingredients
  • Private label contracts - retailer chargebacks and admin fees may sit outside core liability cover
  • USA/Canada exports - territorial exclusions or separate requirements

Practical tip: if you supply major retailers, food service contracts, or export markets, ask specifically about: territorial limits, contractual liability, ingredients liability, and whether recall/contamination costs can be added. The structure matters just as much as the headline limit.

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2) Product Recall & Contamination: Key Exclusions to Watch

Product recall and contamination wordings are specialist and often tightly defined. The most important concept is the trigger: what must happen before the policy responds? Some wordings require actual contamination; others respond to a reasonable suspicion or impairment that makes the product unsafe or unfit.

It’s also common for policies to exclude certain contamination types, certain products, or events linked to known issues, poor controls, or intentional acts. Understanding these restrictions before you buy the policy is critical.

Common Recall/Contamination Exclusions

  • Known issues / prior circumstances - anything you were aware of before inception
  • Failure to maintain HACCP / quality controls (varies; often framed as conditions)
  • Deliberate contamination / malicious acts (sometimes insurable by separate extension)
  • Product guarantee / quality disputes (no safety impairment)
  • Inherent defects - predictable spoilage, normal shelf-life expiry, poor rotation
  • Supplier-only failures where you cannot evidence your controls (depends on wording)
  • Contractual penalties and chargebacks (often limited or excluded)

Definitions That Can Change Everything

  • “Contamination” - what counts (microbiological, chemical, allergen, foreign body, etc.)
  • “Impairment” - does “unfit” include labelling errors?
  • “Recall” vs “Withdrawal” - do voluntary withdrawals qualify?
  • “Government authority” requirement - does the policy need regulator instruction?
  • “Reasonable belief” trigger - can you act before proof?
  • Costs covered - transport, storage, disposal, testing, PR, replacement, BI

Practical tip: if allergen risk is material to your operation, ask specifically how the policy treats: allergen mislabelling, cross-contact, and whether “impairment” includes “incorrect label” triggers. Not all insurers treat allergen scenarios the same way.

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3) Property Insurance: The Exclusions That Most Often Surprise Manufacturers

Property insurance protects buildings, contents, plant and stock against insured events such as fire, flood, storm, theft and (sometimes) accidental damage. But property policies also contain key exclusions. In manufacturing, the most common pain points relate to maintenance, wear and tear, and gradual deterioration.

A simple example: if a pipe slowly leaks over weeks and causes damage, the insurer may argue it wasn’t “sudden and unforeseen.” Or if a piece of machinery fails due to wear and tear, the standard property policy may not respond - which is why engineering and machinery breakdown cover exists.

Common Property Exclusions

  • Wear and tear / gradual deterioration
  • Defective workmanship or poor maintenance (often excluded; resulting damage may be debated)
  • Mechanical or electrical breakdown (usually requires separate machinery breakdown cover)
  • Pollution / contamination (unless a covered peril causes sudden pollution)
  • Unoccupied premises conditions (cover restrictions after a set period)
  • Flood exclusions or higher excesses in high-risk areas
  • Subsidence exclusions or limits (varies by wording)

Conditions That Can Limit Claims

  • Protections warranties - alarms, sprinklers, fire doors, housekeeping
  • Hot works controls - permits, fire watch, contractor management
  • Security requirements - intruder alarms, locks, CCTV, keyholder response
  • Average (underinsurance) - claim reductions if sums insured are too low
  • Stock declarations - seasonal peaks must be declared if required
  • Minimum standards - maintenance logs and compliance evidence

Practical tip: review your declared values (buildings, plant and stock) annually and consider peak stock clauses. Underinsurance is one of the fastest ways to reduce claim payouts.

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4) Machinery Breakdown & Engineering: What’s Often Not Covered

Machinery breakdown (engineering) insurance is designed to cover sudden and unforeseen failure of machinery, including electrical and mechanical breakdown. It’s essential for manufacturers relying on compressors, boilers, refrigeration, conveyors, packing lines and controls. But engineering policies still have exclusions, and they can be technical.

A frequent misunderstanding is expecting engineering cover to pay for routine servicing, gradual wear, or predictable component replacement. Engineering cover is typically for sudden failure - not maintenance.

Common Engineering Exclusions

  • Wear and tear and maintenance-related costs
  • Consumable parts (filters, belts, blades) unless damage is consequential
  • Gradual deterioration and corrosion
  • Faulty design (sometimes limited; may cover resultant damage)
  • Pre-existing defects or known faults
  • Operator error (varies; sometimes covered if accidental)

Practical Manufacturing Considerations

  • Make sure key machinery is declared and valued correctly
  • Confirm whether cover includes expediting expenses (rush parts, overtime)
  • Consider BI linked to machinery breakdown (where available)
  • Keep maintenance logs: they help claims and underwriting
  • Review coverage for refrigeration and controls specifically
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5) Deterioration of Stock: The Most Common Conditions & Exclusions

Deterioration of stock (DoS) covers spoilage of refrigerated/frozen stock due to insured causes such as refrigeration breakdown or power failure (depending on wording). In food manufacturing, this can be one of the highest-frequency loss types - and also one of the most condition-heavy covers.

Claims can be challenged if alarms were not maintained, temperature logs are missing, or the stock wasn’t properly stored. Insurers often require specific protections and evidence of monitoring to ensure the loss was sudden, unavoidable and properly managed.

Common DoS Exclusions / Restrictions

  • Gradual temperature rise without a defined breakdown event
  • Failure to maintain alarms and monitoring systems
  • Doors left open or operational negligence (wording dependent)
  • Stock exceeding declared limits or not stored as required
  • Power failure exclusions unless specifically included
  • Excesses that are higher than standard property claims

What Helps Claims Succeed

  • Documented temperature logs and alarm call-out records
  • Maintenance schedules for refrigeration plant and controls
  • Clear stock valuation and batch records
  • Evidence of immediate mitigation (moving stock, hiring temporary cold storage)
  • A defined incident timeline and engineer reports
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6) Business Interruption: The Hidden Gaps

Business interruption (BI) is one of the most valuable covers for manufacturers - but also one of the easiest to misunderstand. Traditional BI is usually triggered by insured damage to property (e.g., fire or flood at your premises). If your interruption is caused by something else - cyber outage, supplier disruption, utilities failure, machinery breakdown - it may not be covered unless you have the correct extensions.

BI also involves technical calculations (gross profit, trends clauses, indemnity periods) and can be affected by underinsurance or poor records. Understanding the exclusions and limitations can help you avoid the classic “we assumed it was covered” scenario.

Common BI Exclusions / Limitations

  • No property damage trigger - interruption without insured damage may not be covered
  • Short indemnity period - cover ends before you fully recover
  • Waiting periods for certain extensions (e.g., utilities)
  • Underinsurance - incorrect gross profit sum insured can reduce payouts
  • Supplier/customer extensions may be limited or absent
  • Notifiable diseases wording changes (if relevant to operations)

Extensions Manufacturers Often Need

  • Machinery breakdown BI (if available and relevant)
  • Utilities failure (electricity, water, gas) – check triggers and waiting periods
  • Denial of access (limited, scenario-specific)
  • Cyber business interruption (separate cyber policy or extension)
  • Supplier / dependent property BI (policy dependent)

Practical tip: choose an indemnity period that reflects reality. If a major fire destroyed your packing line, how long would it take to replace machinery, reinstall, test, and regain customer approvals? In manufacturing, “full recovery” can take longer than expected.

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7) Cyber & Data: Common Exclusions and Underwriting Conditions

Cyber policies are powerful because they combine incident response services with financial cover - but they also have exclusions and strict requirements. Some exclusions are “standard” (war/terror style clauses, criminal acts, deliberate wrongdoing), while others relate to security standards and maintaining reasonable controls.

The most important cyber “exclusion” in practice is failing to meet a policy condition - for example, claiming to use multi-factor authentication (MFA) and then discovering it wasn’t enabled for remote access or key accounts. Insurers increasingly underwrite cyber with detailed questionnaires, and claims can be affected if information is incorrect or security controls are not maintained.

Common Cyber Exclusions / Limitations

  • Prior known incidents or existing malware before inception
  • Failure to maintain minimum security standards (wording dependent)
  • Unencrypted portable devices (varies by policy)
  • Deliberate acts / fraud by senior management
  • Contractual penalties may be limited
  • OT / SCADA coverage nuances (depends on policy and definition of “computer system”)

Controls That Affect Premium & Claims

  • MFA for email, remote access and privileged accounts
  • Offline/immutable backups and tested restore procedures
  • Patch management and endpoint security
  • Network segmentation between IT and production/OT systems
  • Vendor remote access governance and monitoring
  • Payment verification procedures to reduce invoice fraud
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8) Contractual Penalties, Chargebacks & “Pure Financial Loss”

In food manufacturing, many losses are driven by contracts: retailer chargebacks, late delivery penalties, service level failures, rework requirements, and admin fees. These are often described as pure financial loss - losses not directly caused by property damage or third-party injury.

Standard liability and property policies often exclude pure financial loss or contractual penalties unless specifically agreed. Some specialist policies can address parts of this exposure (e.g., certain third-party recall costs), but coverage is not automatic.

Common “Not Covered” Items

  • Contractual penalties for late delivery
  • Chargebacks, listing fees and retailer admin costs (unless specifically covered)
  • Loss of future contracts and reputation damage (indirect losses)
  • Routine rework and quality disputes with no safety impairment
  • Cost of improving your processes after an incident

How We Help Reduce This Gap

  • Review contracts to understand what customers can recover
  • Align recall/contamination policies to cover key cost categories
  • Consider higher BI limits/indemnity periods where downtime drives penalties
  • Ensure product liability includes your trading territories and distribution model
  • Make sure policy “definitions” match your real-world recall process

Practical tip: if your customers have strong “chargeback” rights, don’t assume insurance will pay them. Ask whether your specialist wording covers third-party recall costs or contractual liabilities, and what sub-limits apply.

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The biggest learning for us was that “having insurance” isn’t the same as “having the right wording.” Understanding exclusions and triggers made a huge difference.

Technical Director, UK Food Manufacturer

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  • We compare policy wordings - not just premiums
  • We identify the exclusions most relevant to your operation
  • We check triggers for recall/contamination and BI cover
  • We help you set correct sums insured and stock values
  • We explain conditions and how to comply with them

BUILD A STRONGER RISK PROGRAMME

  • Tailored solutions for product liability, recall and contamination
  • Engineering and stock deterioration structures that reflect reality
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  • Expert support from quote to renewal to claim
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FREQUENTLY ASKED QUESTIONS

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Why do insurers exclude “wear and tear” and gradual deterioration?

Insurance is designed for sudden, unforeseen events rather than predictable maintenance costs. Wear and tear is generally considered a normal cost of doing business. If you need cover for sudden machinery failure, that’s typically handled through machinery breakdown (engineering) cover, subject to its own wording and exclusions.

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Does product liability insurance pay for product recall costs?

Not usually. Product liability is mainly designed to cover third-party injury/illness claims and legal defence costs. Product recall and contamination costs (withdrawal, disposal, testing, crisis management) often require specialist recall/contamination cover or endorsements.

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What’s the most common exclusion that affects deterioration of stock claims?

Missing or non-compliant alarm and temperature monitoring requirements are a frequent issue. Many policies require working alarms, call-out arrangements, and evidence of temperature monitoring. The policy may also require that spoilage results from a defined breakdown event rather than gradual warming.

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Will business interruption cover losses from a cyber attack?

Traditional business interruption usually requires insured property damage as the trigger. Cyber attacks often require a separate cyber policy that includes cyber business interruption. We can help you structure the right combination depending on your systems and reliance on digital operations.

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Are contractual penalties and retailer chargebacks covered by insurance?

Often not under standard liability and property policies. These can be treated as “pure financial loss” or contractual liabilities and may be excluded unless specifically covered. Some specialist recall/contamination wordings can cover certain third-party recall costs, but limits and sub-limits often apply.

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How can I reduce gaps caused by exclusions?

Start with a clear map of your risks: product liability, recall/contamination, property, machinery breakdown, stock deterioration, BI and cyber. Then review triggers, exclusions and conditions for each policy. Keeping accurate values, maintaining protections, documenting controls (HACCP, testing, traceability) and aligning cover with contracts are the fastest ways to reduce uninsured exposures.

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