The CDC estimates that 1 in 6 Americans get sick from contaminated foods or beverage each year, and that 3,000 people die, resulting in total food-borne illness costs of more than $15.6 billion dollars each year. Those numbers are not surprising when food recalls seem to be an almost weekly occurrence, with salmonella-tainted foods prominently featured in multiple large-scale outbreaks in 2018. Although food contamination seems to be on the rise, experts suggest that frequency is up – not due to an actual increase in outbreaks – but, instead because we are better equipped to identify and track outbreaks. Thanks to genome sequencing, we can look at food’s DNA fingerprint to better identify its source. Even so, it is still difficult to identify precisely where in the food supply chain the contamination began. As a result, every entity in the supply chain can be, and often is, affected when contamination is discovered.
This reality can present numerous insurance coverage challenges, and all companies ranging from ingredient suppliers to processors and retailers should consider what coverage best fits their needs based on their most likely exposure given their position in the food supply chain. In reviewing coverage options, it is important to realize that not all product recall and/or contamination coverage is the same (and some policies may be triggered only by contamination, while others are triggered only by a mandatory recall).
Further, it bears noting that general liability coverage is still a relevant potential source of coverage. Bodily injury claims are the classic case for invoking a general liability policy, but even certain third-party property damage in a contamination/recall situation may also enjoy coverage under a traditional general liability policy. See, e.g., Neth. Ins. Co. v. Main St. Ingredients, Ltd. Liab. Co., 745 F.3d 909, 911 (8th Cir. 2014) (insurer had duty to defend and indemnify insured that inadvertently sold salmonella-contaminated dried milk to Malt-O-Meal, which then incorporated the milk into its instant oatmeal products).
For more information about recovering insurance in the event of a recall, continue reading here.