A Pennsylvania jury has found that Starr Surplus Lines Insurance must uphold H.J. Heinz Co.'s $25 million policy covering damages related to baby cereal tainted with lead. H.J. Heinz Co. v. Starr Surplus Lines Ins. Co., No. 15-0631 (W.D. Penn., jury verdict entered December 16, 2015). Heinz sought a declaratory judgment that the insurance provider must cover business-interruption costs after China's food-control agency found lead in the company's high-protein dry baby cereal. Starr argued that Heinz had misrepresented the situation when the company applied for the policy because it failed to disclose previous contamination incidents. The jury concluded that although Starr did prove "that Heinz made a misrepresentation of fact(s) in its insurance application which was material," Starr "waived the right to assert a rescission claim" either because it sold the policy with knowledge of the misrepresentation or because it failed to rescind the policy after learning of the misrepresentation.…
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A California federal court has granted Foster Farms’ request for declaratory judgment finding that Lloyd’s of London must cover $14 million in costs related to a Salmonella outbreak linked to Foster Farms’ chicken processing facilities. Foster Poultry Farms Inc. v. Certain Underwriters at Lloyd’s London, No. 14-0446 (E.D. Cal., order entered October 9, 2015). Foster Farms’ policy with the insurer included coverage for “Accidental Contamination,” requiring the company to show (i) “an error in the production of its chicken product” and (ii) that consumption of the product “‘would ‘lead to’ bodily injury.” Lloyd’s challenged Foster Farms’ showing of the latter requirement, arguing the destroyed products were not actually contaminated with Salmonella. The court concluded the company had shown the products were contaminated because at the time the U.S. Department of Agriculture’s Food and Safety Inspection Service issued its Notice of Suspension, Foster Farms’ products had tested positive for Salmonella for…
Months after a Florida federal court rejected a motion to dismiss a putative class action alleging that Bodacious Foods falsely labeled its cookies as “all natural,” The Cincinnati Insurance Co. has filed a lawsuit seeking a declaration that the policy the food manufacturer holds with it does not cover costs stemming from the alleged false labeling. The Cincinnati Ins. Co. v. Bodacious Food Co., No. 14-81515 (S.D. Fla., filed December 4, 2014). The insurance company asserts that Bodacious’s policy excludes coverage for the allegations of the putative class action, including (i) “’bodily injury’ or ‘property damage’ which may reasonably be expected to result from the intentional acts of the insured”; (ii) “’personal or advertising injury’ caused by or at the direction of the insured with the knowledge that the act would violate the rights of another”; and (iii) “’personal and advertising injury’ arising out of oral or written publication of material,…
In a dispute over commercial liability insurance coverage, the Eighth Circuit Court of Appeals has ruled that a trial court erred in deciding, as a matter of law, that a recall of sausage breakfast sandwiches prompted by contamination with monosodium glutamate (MSG) was a covered incident. Hot Stuff Foods, LLC v. Houston Cas. Co., Nos. 14-1192, -1194 (8th Cir., decided November 17, 2014). When MSG is added to foods, it must be disclosed on the product label. Hot Stuff Foods makes sausage breakfast sandwiches with sausage that does not contain MSG and does not include it on package labels. The company also distributes sausage that contains MSG and learned in January 2011 that some of the MSG sausage was inadvertently used in the breakfast sandwiches. Because the product contained MSG not disclosed on the labels, it was misbranded under federal law. The company promptly reported the situation to Food and Drug…
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…
The company that makes Four Loko, a caffeinated malt liquor beverage allegedly responsible for the deaths of five consumers, has reached a settlement with two Liberty Mutual Insurance Co. units which had sought a declaration that a policy exclusion freed them from defending or indemnifying the beverage maker in the underlying lawsuits. The Netherlands Ins. Co. v. Phusion Projects, Inc., No. 12-7968 (N.D. Ill., stipulation of dismissal filed March 11, 2014). The settlement terms have not been disclosed. Details about a Seventh Circuit ruling on the insurance carriers’ duty to defend appear in Issue 508 of this Update. Issue 517
The Seventh Circuit Court of Appeals has determined that Phusion Projects’ commercial liability insurance carriers have no duty to defend the company in actions alleging that intoxication attributable to consumption of its Four Loko® alcoholic product caused death and personal injury. Netherlands Ins. Co. v. Phusion Projects, Inc., No. 12-1355 (7th Cir., decided December 16, 2013). Applying Illinois law, the court ruled that the liquor liability exclusions in the relevant insurance contracts unambiguously excluded coverage for bodily injury or property damage when the company “may be held liable by reason of: (1) causing or contributing to the intoxication of any person.” So ruling, the court affirmed the lower court’s grant of the insurance carriers’ motion for summary judgment. Issue 508
A federal court in Ohio has determined that, for the most part, an “all-risk” insurance policy excludes from coverage the losses sustained by a meat processor whose products were contaminated with Listeria during processing. HoneyBaked Foods, Inc. v. Affiliated FM Ins. Co., No. 08-01686 (N.D. Ohio, W. Div., decided December 2, 2010). Still, the court ordered the parties to prepare a question for certification to the Ohio Supreme Court as to whether, “notwithstanding the failure of the policy to cover the plaintiff’s loss, such loss might be covered” under a reasonable-expectations theory. According to the court, the meat processor was required to destroy about 1 million pounds of fully cooked ham and turkey products after it was discovered that the Listeria found in product samples matched sludge in a hollow roller that was part of the processing plant’s conveyor system. The company sought coverage for the disposed food products and additional losses…
Old Republic Insurance Co. has filed a lawsuit in a New York state court, seeking a declaration that it is entitled to reimbursement for the costs it has incurred defending a company that distributed diacetyl and has been sued with other companies for personal injuries allegedly sustained from exposure to the butter-flavored chemical. Old Republic Ins. Co. v. The Travelers Indemnity Co., No. 10103533 (N.Y. Sup. Ct., filed March 18, 2010). According to the complaint, some 21 active lawsuits are currently pending against Old Republic’s insured, Citrus & Allied Essence, Ltd. The carrier claims that it has successfully defended the company for three years at a cost of more than $1 million in cases where other carriers, including one that is now insolvent, share coverage and defense responsibilities.
ConAgra Foods, Inc. has reportedly filed a lawsuit against its umbrella insurer, seeking coverage for the claims that were filed by people who alleged injury from a Salmonella outbreak in 2007 linked to the company’s Sylvester, Georgia, peanut butter processing facility. ConAgra Foods, Inc. v. Lexington Ins. Co., No. 09C-02-170 (Del. Super Ct., New Castle Cty., filed February 19, 2009). The complaint alleges that Lexington Insurance Co. has failed to pay for any of the 2,400 claims settled or resolved to date. ConAgra reportedly anticipates an additional 20,000 cases from the outbreak. According to a news source, the company is seeking a declaratory judgment, compensatory and punitive damages, interest, and attorney’s fees. See Product Liability Law 360, February 24, 2009.
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