Foster Farms Sues Insurers over Definition of “Recall”

Poultry manufacturer Foster Farms has filed an amended complaint in its lawsuit against its Lloyd’s of London insurers, which had rejected its $14.2 million claim for economic losses resulting from a government-mandated shutdown of one of its facilities. Foster Poultry Farms Inc. v. Certain Underwriters at Lloyd’s, London, No. 14–953 (E.D. Cal., amended complaint filed July 3, 2014). Foster Farms had paid almost $600,000 for a yearlong product contamination policy to three insurers operating on the Lloyd’s of London insurance market, and the company later filed a claim to cover losses from the forced closure, including costs from the 1.3 million pounds of product it destroyed. The insurers rejected the claim because Foster Farms did not initiate the recall of its chicken, arguing instead that the policy covered economic losses associated with a voluntary recall from customers rather than losses from the destruction of products still in its warehouse. In a letter, one insurer reportedly accused Foster Farms of attempting to expand the definition of “recall” beyond the common meaning and dismissed the argument that the term is ambiguous. See Reuters, July 9, 2014.

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