Hunton insurance attorneys Syed Ahmad and Geoffrey Fehling provide several updates on recent recall insurance disputes in the latest edition of the Recall Roundup, posted on the Hunton Retail Law Resource Blog.
The first such decision, addressing a Georgia court’s denial of an insurer’s motion to dismiss a reimbursement claim for $15 million paid in settlement of an underlying flour recall matter, was the subject of a prior post on this blog.
The second decision involves the fundamental insurance question of timely notice. Recall insurance—like other policies—often involves potential issues related to notice requirements. A threshold question in those disputes is what facts or circumstances trigger the obligation to provide notice in the first place. A recent court ruling clarifies the significance of the notice-trigger under a product contamination insurance policy.
The case was filed by George’s Inc. and affiliated companies that were all involved in producing ready-to-eat (RTE) meat and poultry products and had incurred more than $3 million in losses. To protect against risks related to salmonella contamination and product recalls, George’s purchased insurance. The policy required notice within 30 days upon “first discovery of [an] incident that may be covered under the terms of this Policy.”
The insurers argued that the 30-day deadline should have started when the United States Department of Agriculture (USDA) notified George’s of a single positive salmonella test resulting from the government’s routine product testing. George’s argued that the USDA notice was insufficient to start the clock because it had to evaluate if the various requirements for coverage were, in fact, satisfied. That process took some time, George’s contended, and so the 30-day window did not start upon receiving the USDA notice.
The court agreed with George’s. Applying governing Arkansas law, the court recognized that “an insured must strictly comply with an insurance policy notice provision” and that insurers were not required to show any prejudice because the notice provision was a condition precedent under the policy. However, the court rejected the insurers’ argument that George’s failed to state a claim due to late notice.
The court noted that, after the initial positive test, George’s “still needed to investigate further to determine whether an Insured Event had occurred” and had to evaluate the quantity of the product that was potentially impacted. As a result, the court found that George’s had “plausibly alleged that [it] did not ‘discover an Insured Event’” until six weeks after the initial test results and allowed the case to proceed.
Timely and adequate notice is of paramount importance in all insurance claims. Failure to comply with all notice requirements could derail a claim before it even starts. Recall insurance policies in particular can present nuanced notice issues, like the question of “discovery” of the relevant contamination event in George’s, which can vary widely based on policy variations or applicable state law and should be top of mind to maximize recovery in any recall claim.