Insurance Law

Food Companies and Their Insurers Fight Over Recall Coverage

In Food Companies and Their Insurers Fight Over Recall Coverage, by Robert D. Chesler, Kathleen F. Donovan and Cathleen Kelly Rebar, the authors report on several developments over the past three years that have transformed a scattering of insurance coverage cases involving the food industry into a separate discipline within the category of insurance coverage litigation. First, the enactment of the Food Safety and Modernization Act (“FSMA”) in 2011 broadly increased the powers of the Food and Drug Administration, particularly in the area of recalls of food products that either are or may be contaminated. The commentary details the sweeping new significant enforcement rights and oversight for the FDA brought by the FSMA. Second, the commentary reviews the recent outbreaks of major food contaminations in both the United States and Europe. Third, there is a new consciousness of the perils of food both within the food industry and with the public at large. The commentary observes that the plaintiffs’ bar has targeted the food industry as contaminated foods can cause many serious injuries, and the growing awareness by the public of this risk can lead to high jury awards.

The commentary surveys the several different types of insurance policies that can respond to food contamination claims. Key court cases involving the general liability policy’s coverage for bodily injury and product disparagement are closely analyzed. Likewise, cases involving the contamination exclusion in first-party property insurance policies are examined. The commentary notes that even without significant property damage or bodily injury, food recalls can be very expensive.  Food recalls can involve numerous parties, from the food grower to different levels of distributors to the supermarket – from the farm to the fork.  Not only is each of these a target for the plaintiff’s bar, each will incur substantial economic costs as the result of a recall. Consequently, all companies in the food distribution chain are considering a product contamination policy. The commentary details what such policies cover and exclude. Next, litigation involving coverage issues under these policies are discussed in detail. The discussion encompasses issues such as additional insureds and number of occurrences. The commentary concludes with remarks as to the importance of wording within crucial insurance provisions and the potential liability of insurance brokers and other professionals for negligently worded policies.

About the Authors:

   Robert D. Chesler is a shareholder in Anderson Kill & Olick, P.C.’s Newark office. Mr. Chesler represents policyholders in a broad variety of coverage claims against their insurers and advises companies with respect to their insurance programs. A leading participant in the birth of modern insurance law in the early 1980s, Mr. Chesler has earned the reputation as "The Insurance Guru" for exceptional insurance coverage knowledge, and has emerged as a leader in such new areas of insurance coverage as cyber-insurance, D&O, IP, privacy and "green" insurance.

Kathleen F. Donovan is an attorney with the Dallas office of Geary, Porter & Donovan, P.C.  Ms. Donovan’s practice concentrates in commercial litigation, including insurance coverage litigation, and property tax litigation.  Ms. Donovan graduated Notre Dame Law School, where she served as Executive Editor and Articles Solicitation Editor of the Notre Dame Journal of Law, Ethics & Public Policy.  She received her bachelor of business administration from the University of Texas at Austin.

   Cathleen Kelly Rebar is a founding partner and shareholder in the law firm of Stewart Bernstiel & Rebar.  Cathleen has been advising and counseling clients in complex litigation matters for over a decade.  Cathleen is a former state and local prosecutor and a sitting Magisterial District Judge in Pennsylvania.  Cathleen is licensed in New York, New Jersey and Pennsylvania and actively represents several major companies and insurance carriers in national venues.  Her aggressive yet efficient approach to litigation has made her a valuable asset to her clients.  She has obtained defense verdicts in some of the worst jurisdictions and has extensive trial experience.  She often lectures and writes on professional and food liability matters.

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