Finsbury Foods is disputing recovery costs after its Memory Lane cakes were recalled from supermarket shelves during the egg dioxin scare.

It said the fact that there was no public health risk had led its insurer to challenge recovery of any associated withdrawal costs. “We are currently in discussions with the insurer, retailers and the egg supplier to resolve the issue.”

Rebecca Tinham, head of dispute resolution at Vertex Law, which specialises in providing legal services to the food industry, said someone ultimately had to bear the cost of withdrawing products. “Whether or not insurers pick up the bill will depend on the specific policy terms regulating the relationship between insurer and insured.”

She added: “It is not uncommon for suppliers that have sustained a loss in similar circumstances to weigh up the costs, risks and likely success of a claim for reimbursement from insurers or those that supplied the goods.”

Finsbury admitted to having a “challenging start” to the second half of its financial year, ended 1 January. The manufacturer’s larger cake division was up 3.2% on the first half but needed more support to remain competitive and deliver growth.

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