Some Claims Dismissed in Dispute over Supply-Chain Insurance Coverage

A federal court in California has dismissed without prejudice some of the claims filed by a food supplier in a dispute over insurance coverage in food-contamination litigation. Nat’l Surety Corp. v. Pacific Int’l Vegetable Mktg., Inc., No. 09-4898 (N.D. Cal., decided March 5, 2010).

A fast food restaurant was sued for injuries purportedly linked to foodborne contamination, and it filed a third party complaint against the company that supplied the lettuce which allegedly caused the outbreak. The supplier turned to the lettuce grower’s insurer to defend it under a policy that was supposed to include the supplier as an additional insured pursuant to an agreement between the supplier and grower. The insurer refused to defend the claims, and the supplier sued the agent purportedly responsible for adding the supplier to the insurance policy for breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty and other tort duties (negligence, misrepresentation and breach of warranty).

The agent sought to dismiss the claims for misrepresentation, breach of fiduciary duty and breach of warranty. The court dismissed the claims for misrepresentation (including the breach-of-warranty claim) and the claim for fiduciary duty, finding that the former had been pleaded with insufficient specificity and the latter contained insufficient allegations of a fiduciary relationship between the supplier and agent. The supplier apparently indicated that it did not intend at this point to amend its complaint, so the court ordered the agent to respond to the complaint by March 23, 2010, noting that its ruling did not bar the supplier from subsequently seeking leave to reassert the dismissed claims.