Launching your food brand can feel like a dream come true. It took hard work to get to this point, and there’s more to do, but seeing your product on shelves and in customers’ hands makes it all worth it. But beneath this excitement lie hidden risks that threaten to turn this dream into a costly nightmare. From labeling errors to recalls, it’s easy to be caught off guard by these pitfalls and derail your brand’s success.
Let’s uncover the biggest risks that might have flown under the radar for your food brand (which we’ll explore more in-depth in upcoming posts) and take a closer look at how insurance helps protect you from financial fallout.
1. Mislabeled Allergens
Mislabeled or unlabeled allergens are quite common in the food manufacturing space. Sometimes, brands fail to disclose an allergen, but in other cases, there may have been a packaging error at the processing plant.
This happened to the brand Van’s in 2023, when a packaging mix-up led to their waffles containing wheat being shipped out in cartons that claimed the products were gluten-free.
A 2025 report from the International Food Information Council (IFIC) revealed that 53% of Americans either have or know someone with a food allergy. This means it’s highly likely that one packaging or processing mistake can lead to a medical crisis for a customer (and an expensive lawsuit for you).
Coverage Needed: Product Liability Insurance
If your food or beverage product causes physical harm to someone, such as an allergic reaction, product liability insurance can cover some or all of the resulting expenses. This includes:
- The customer’s medical bills
- Your attorney’s fees to defend yourself in court
- Settlements
- Judgments
It Pays to Be Protected
The Situation: Alicia owns an organic granola brand. While none of her granola recipes include peanuts, they are all processed at a facility that also packages peanuts for a different company. Eventually, a customer with a peanut allergy has a severe allergic reaction to her granola and sues her for failing to disclose this allergen.
The Claim: $ 500,000*
How Insurance Helped: Thanks to Alicia’s product liability insurance policy, she doesn’t have to pay her attorney’s fees out of pocket — her policy takes care of that cost. It also helps cover the settlement she reaches with the defendant, turning what could’ve been a six-figure burden into a manageable inconvenience.
*Claim amounts mentioned in this article are based on internal knowledge and research from Food Liability Insurance Program (FLIP) and AI estimates. All insurance policies have conditions, limitations, and exclusions. Please refer to your policy for exact verbiage.
2. Packaging Defects
Even when you work diligently to maintain strict quality control standards, some defects can still slip by and have unintended negative consequences for your business.
Defective packaging can be responsible for food spoilage and bodily injury — both of which can lead to a product recall or even a lawsuit.
In 2023, Kraft Heinz announced a voluntary recall of over 83,000 cases of Kraft Singles cheese slices. They discovered a packaging error that left a strip of thin plastic on the cheese after it had been unwrapped. Concerned that someone may not notice the plastic and accidentally eat it, they exercised caution and recalled potentially affected products.
Product recalls are expensive for companies of any size, with many costing businesses millions of dollars to manage and resolve.
Coverage Needed: Product Recall Insurance
Most small- to mid-sized food brands are not financially prepared for what it takes to handle a product recall, from investigating the product or packaging defect to disposing of the recalled products.
That’s what makes product recall insurance so essential for your food brand. It’s designed to cover costs including:
- Revenue you lost due to a recall
- Costs exceeding your typical business expenses to resolve an issue with your product and restore sales
- Legal expenses from handling a claim made against you
It Pays to Be Protected
The Situation: Jorge owns a company that makes yogurt in single-serving containers. Within the span of a week, his company receives several calls from angry customers reporting that the foil safety seal wasn’t properly attached to the cup, leaving the yogurt exposed to contamination.
An investigation reveals that the machine used to secure the foil wasn’t warming to a high enough temperature to seal each cup. Jorge decides to recall 5,000 units produced by that machine.
The Claim: $ 42,500
How Insurance Helped: Jorge’s product recall insurance helped cover the cost of handling this recall, from collecting the defective products to restoring the revenue he lost during this time. This saved his business tens of thousands of dollars in unexpected costs.
3. Intellectual Property (IP) Infringement
Food brands like yours can be hit with an intellectual property (IP) infringement lawsuit. This can happen if the way you advertise your product violates someone’s copyright, packaging design, or slogan.
In 2023, Chipotle Mexican Grill sued Sweetgreen, a competing fast-casual restaurant chain, for trademark infringement after the latter launched its Chipotle Chicken Burrito Bowl. The lawsuit claimed the use of “chipotle” in the product name and the font used in marketing materials was too similar to the burrito chain.
Coverage Needed: Personal and Advertising Injury Insurance
If you’re hit with a claim over how you advertise your products, personal and advertising injury insurance is the best way to shield yourself from those costs.
Unlike a bodily injury, advertising injury doesn’t involve any physical harm. Instead, it refers to a situation where the way you advertise your product or business harms someone else (or their business). This could lead to lost revenue for that other business or damage to their reputation.
If you are accused of violating someone’s IP in your advertising, personal and advertising injury insurance can cover some or all of the legal costs.
It Pays to Be Protected
The Situation: When Jisoo came up with the logo for her bagel brand, she didn’t realize the design and colors were strikingly similar to an existing bakery that also sells bagels. This company sued her for infringement, claiming her brand violated their trademark.
The Claim: $ 40,000
How Insurance Helped: Jisoo’s personal and advertising injury insurance paid for her attorney and covered the cost of the settlement.
4. Marketing Claims
Making false claims about a competitor in your marketing, even if you don’t realize they’re false, can earn you an expensive lawsuit.
Take the dispute between Smucker’s and Chubby Snacks, for example. In 2024, Smucker’s filed suit against the up-and-coming competitor brand because it alleged that Chubby Snacks’ product (similar to Smucker’s popular Uncrustables® sandwiches) was guilty of libel in its advertising.
Chubby Snacks marketed their pre-packaged sandwiches as the “healthier” option and referred to Uncrustables as “junk,” which Smucker’s asserted were false claims.
Coverage Needed: Personal and Advertising Injury Insurance
If a competitor claims you’re guilty of libel against them (which includes defamation and slander), personal and advertising injury insurance can shield you from the financial hit.
You already know how it protects you from advertising injuries, but the other half of this coverage applies to personal injuries. A personal injury is something that violates or weakens the rights of a person or business, without causing physical harm. This defames them through false written statements (libel) or verbal disparagement (slander).
Insurance can cover the legal costs you face from a personal injury lawsuit.
It Pays to Be Protected
The Situation: Richard’s hot sauce company runs an ad campaign where they refer to their hot sauce as being the spiciest 100% organic option on the market. Another company sues them for libel, claiming that their all-organic hot sauce is spicier according to the Scoville Scale.
The Claim: $ 500,000
The Result: Because Richard has personal and advertising injury insurance, his insurance company covers the cost of hiring a defense lawyer. When the judge orders Richard to pay $ 350,000 in damages to the other company, his insurance covers that as well.
5. Data Breach
A data breach is any event where an unauthorized party, like a hacker, accesses your business’ confidential or sensitive information. This might include:
- Customer payment information
- Your business’ bank account information
- IP or trade secrets (like the secret recipe for your chocolate cupcakes)
Bob’s Red Mill Natural Foods, Inc. was the victim of a data breach in 2022, which compromised some of its customers’ credit card numbers and other online payment information. The company was unaware of the issue before customers began contacting them about fraudulent charges on their credit cards.
As long as you store sensitive information digitally, it doesn’t matter how big or small your business is — there is always a risk of experiencing a data breach. In fact, 46% of all cyber attacks target businesses with fewer than 1,000 employees.
Coverage Needed: Cyber Liability Insurance
Cyber liability insurance is designed to cover costs resulting from a data breach, including expenses like:
- Restoring or replacing lost or stolen data
- Legal costs if a customer, vendor, or supplier sues you because their data was compromised
- Ransomware payments
According to a recent IBM report, small businesses in the U.S. could face anywhere between $ 120,000 to $ 1.24 million to handle a data breach. Cyber liability insurance can take the weight of that risk off your shoulders and financially shield you if the worst-case scenario happens.
It Pays to Be Protected
The Situation: Derrick’s candy company has an online storefront. Hackers gain access to the payment processor he uses and steal credit card information from customers making online purchases. Several customers file a lawsuit against Derrick’s company over fraudulent charges and their compromised sensitive data.
The Claim: $ 500,000
How Insurance Helped: Thankfully, Derrick had a cyber liability insurance policy for his candy company. When customers filed suit, Derrick’s insurance paid for his legal defense, as well as the judgment he was ordered to pay.
Safeguard Your Brand’s Success With FLIP
Nobody likes thinking about what could go wrong, but knowing the risks your brand faces is the first step towards protecting it.
The next step? Getting insured with FLIP, the most trusted name in food and beverage business insurance. With over 40,000 businesses insured, entrepreneurs across the U.S. choose us because of our affordable policies and 100% online application.
Our general liability policy for food manufacturers includes product liability and personal and advertising injury insurance to protect your brand from some of the biggest risks it faces. You can customize your policy with add-on coverages like cyber liability and tools and equipment (inland marine).
Plus, RangeMe Premium and Pro members can get an exclusive, one-time discount of $ 25 off FLIP’s annual food manufacturer policy! That means you could get a year’s worth of coverage for as low as $ 274 when you use code “rangeme” at checkout.
Don’t leave your food brand high and dry. Protect it with food manufacturers insurance from FLIP and enjoy the security of knowing your policy has your back if the worst happens.
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