Thursday, March 12, 2015

Celebrities Gone Wild

When you walk into a store today, it is almost impossible not to find a celebrity-endorsed product. This presents a challenge for these brands when their endorser suddenly shows up on ‘Page 6’ for all the wrong reasons: drugs, domestic violence, even an act of infidelity. This causes brands to enter recall mode and attempt to distance themselves from the endorser by terminating the contract, cancel the advertising, or pulling the endorsed product from the shelves.

Instead of leaving brands in the dust to take this costly and unanticipated expense, Lexington Insurance (the American International Group member offering the insurance) has introduced Celebrity Product RecallResponse, a new insurance product that protects customers when their celebrity endorser experiences a small or a worldwide “public fall from grace, scandal, or unexpected death”.[1]
“Celebrity Product RecallResponse covers certain costs incurred by companies to recall products bearing a celebrity endorser’s name and image”.[2] These costs include expenses associated with disposing of products and packaging, paying overtime wages to employees, and utilizing other personnel. The coverage also reimburses for the removal of marketing and advertising materials.
The so-called “scandal insurance” is triggered by significant news media coverage of an endorser’s distasteful conduct that results in (or has a high chance of resulting in) a negative public outlook on the individual and a significant adverse impact on a company’s product. For example, if a certain actress endorsing a fashion brand enters rehab for the fifth time, the policy would be triggered.  This would result in the removal of all the promotional and marketing materials for that product (i.e. billboards, TV commercials, etc.) associated with that actress.
Coverage is designed to provide protection for companies of many sizes. It is available with standalone policy limits up to $5 million or by endorsement with limits up to $1 million.
All products endorsed by a certain Lohan or Cyrus are sighing a breath of relief.

- Sarah Wobken, Staff Editor

[1] AIG Introduces Product Recall Insurance to Cover Risks from Celebrity Endorsements, BusinessWire, (Jan. 29, 2015, 1:00 PM),
[2] Id.

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