Commercial general liability policies typically provide coverage to insureds for losses resulting from property damage caused by an “occurrence,” usually defined in the policy as “an accident, including continuous or repeated exposure to substantially the same harmful conditions.” In the context of food recalls, however, the exact cause of the food damage, whether contamination, spoilage or something else, may be unknown. This creates uncertainty, and in turn, a coverage dispute, over whether the cause of damage was indeed accidental, and thus a covered “occurrence.” In a recent article for Food Safety Magazine, Syed Ahmad and I analyze three recent cases involving coverage for food industry insureds where the courts found the cause of loss to constitute an “occurrence,” triggering the policy’s coverage.  The full article is available here.

Hunton and Williams LLP has published its 2016 Retail Industry Year in Review.  The Review discusses the key legal and regulatory developments that affected the retail industry last year.  In the Review, Hunton insurance coverage attorneys Syed Ahmad, Mike Levine and Jenn White discuss the lessons learned from insurance coverage cases that promise to have a lasting impact on retail cyber security and product contamination insurance.  As they explain, “Last year’s decisions are critical reminders that having the right insurance is key, and even unintentional missteps can jeopardize coverage.”  Read their commentary here.

As discussed in a February 1, 2016 posting, the court in Foster Poultry Farms v. Certain Underwriters at Lloyd’s, London, No. 14-cv-953, 2015 WL 5920289 (E.D. Cal. Oct. 9, 2015) held that losses associated with alleged noncompliance with federal sanitation regulations were covered by the “accidental contamination” and “government recall” provisions of a food contamination insurance policy. After a four-day bench trial, the court issued a decision awarding the insured, Foster Poultry Farms, $2.7 million for lost profits related to destroyed chicken, the loss of business from certain supermarket relationships, the cost associated with public relations work necessitated by the recall as well as other recall-related expenses and the loss of Foster’s customers. The court found, however, that loss associated with Foster’s voluntary shutdown, which occurred independent of the government-mandated shutdown, was not within the scope of coverage.

Insureds Find Place to Roost in Foster Poultry Contamination Case, Westlaw Journal Insurance Coverage
January 15, 2016

Article discussing the insurance implications of food contamination events, including product recalls, government investigations and litigation. Large-scale food safety issues have been hard to miss in the news lately. Chipotle’s multi-state E. Coli outbreak and listeria monocytogenes found in samples of Blue Bell Creamery ice cream products are some of the recent examples. After a recall, retailers and other companies involved must focus resources on finding out what went wrong, remedying the problem and rectifying the company image. There are insurance products on the market that can help manage some of these exposures. It is important for policyholders to be aware of the types of policies available and common coverage issues.