Reed Smith Client Alerts

Authors: Ann V. Kramer Brian T. Himmel Evan T. Knott

Type: Client Alerts

On December 19, the U.S. Centers for Disease Control and Prevention (CDC) recommended that U.S. consumers not eat any commercially produced, prepackaged caramel apples and that retailers not sell or serve them as they continue to investigate an outbreak of listeria monocytogenes which has infected at least 28 people from 10 states. The CDC has yet to identify the producer of the contaminated apples. Accordingly, the number of market players in the supply chain who will be affected by this recommendation – from farms through supermarkets – remains unknown.

Despite continuous improvement in food safety standards, food-borne illnesses pose some of the largest known risks to the food industry. The caramel apple contamination follows a number of other high-profile outbreaks of food-borne illnesses such as listeria and other pathogens in the past few years. For example, in 2011 a widespread outbreak of listeria across 28 U.S. states that resulted from contaminated cantaloupes was traced back to a farm in Holly, Colorado. The fallout from the 2011 outbreak was not limited to the farm itself, however, as claims were brought against an extended network of parties, including the seller of the processing equipment used by the farm, the retailers who sold the contaminated cantaloupe, and food safety auditors hired by the farm.

The costs of responding to a food contamination event – particularly if it results in a recall – can be substantial. In addition to defense costs and potential liability for alleged bodily injuries resulting from the contamination, a company may be required to incur the costs to investigate the contamination, notify the public, repair or clean up facilities, replace lost inventory, and even pay customers for the costs they incur as a result of the recall. All of these activities may result in business interruption and loss of use of property.

Commercial general liability insurance may provide a business affected by a food contamination event with coverage for bodily injury and property damage claims. However, insurers are likely to assert that their CGL policy does not provide coverage for many of the additional costs associated with a food contamination event. These direct economic losses may be covered under certain specialty line policies, such as a food contamination and recall policy. The scope of coverage available under these types of policies varies widely, however. It is important, therefore, to understand what coverage is available under your existing insurance program as well any specialty policies that you consider adding to that program.

Reed Smith’s Insurance Recovery Team has negotiated and litigated food contamination and recalled disputes across the country, advised businesses regarding their insurance coverage related to food contamination risks, reviewed existing coverage for gaps, and negotiated coverage enhancements where required.

If you believe your business may be affected by the recent listeria outbreak, time may be of the essence under your applicable policies for reporting your accrued and expected losses to your insurer. Reed Smith LLP can help you evaluate your coverage and report your claims as soon as possible. Please contact the authors of this Alert; the Reed Smith Insurance Recovery Group’s Global Practice Group Leader, Douglas E. Cameron; or any Reed Smith coverage attorney with whom you routinely work for assistance or with questions.

For the second year in a row, U.S. News-Best Lawyers “Best Law Firms” named Reed Smith its “National Law Firm of the Year” in Insurance Law (2014-2015). In addition, the group is named among the best policyholder coverage practices by Chambers USA, Chambers UK, Legal 500 US and Legal 500 UK. American Lawyer Media’s Legal Intelligencer named Reed Smith’s Insurance Recovery Group one of Pennsylvania’s “Litigation Departments of the Year” for 2014 - the only policyholder-focused firm recognized in the Pennsylvania-based publication - and The National Law Journal named the Chicago Insurance Recovery team the 2014 “Chicago Litigation Department of the Year: Insurance.”

 

Client Alert 2014-341