California Court Reverses $12-Million Verdict , Rules Spinach Contamination Not Insured

A California court of appeal has determined that a trial court erred in allowing
a spinach seller to recover $12 million under the accidental contamination
portion of its insurance policy. Fresh Express Inc. v. Beazley Syndicate
2623/623 at Lloyd’s, No. H035246 (Cal. Ct. App., decided September 8, 2011)
(unpublished). According to the court, the produce company’s product was
not the source of the E. coli outbreak linked to spinach in 2006 and led to a
nationwide recall, although when it filed its insurance claim, the company
had made several sourcing errors that led it to believe it could have been
implicated in the outbreak. Those errors would have brought it under the
terms of the insurance agreement, if the company had been the source of the
E. coli contamination. Because it was not, the appeals court concluded that
“the policy’s plain language refutes the trial court’s finding that ‘the E. coli
outbreak’ was an ‘Insured Event’ under the policy.”