The Hartford Asks Court To
Clarify Liability In Peanut Salmonella Cases
Source of Article: http://www.courant.com/business/hc-peanut0206.artfeb06,0,2325987.story
February 6, 2009
processor at the center of the nation's deadly salmonella outbreak could be
in an even stickier mess because its insurer — The Hartford — has rushed to
court to limit what it might have to pay on lawsuits.
Hartford Casualty Insurance Co., part of The Hartford Financial Services Group, is
asking a federal court in Virginia
to determine what its responsibility is on three years of policies it issued
to Peanut Corp. of America.
The Lynchburg, Va.-based peanut processor makes
peanut butter and peanut paste, which is used in baked goods and other foods.
The salmonella bacteria outbreak has sickened about 575 people nationwide,
and at least eight have died. Connecticut's
Department of Public Health said nine cases of illness here may be associated
with Peanut Corp. products.
The Hartford could be on the hook for up to $31
million in claims under the liability insurance policies at issue if it gets
only unfavorable court rulings. It might cost the insurer millions more in
legal costs, depending on how the policies were written.
Rather than wait to be sued by its customer, Peanut Corp., The Hartford asked
U.S. District Court for western Virginia
this week for a declaratory judgment on the policy dispute.
Peanut Corp. could face hundreds of millions of dollars in claims of various
kinds, said Bill Marler, a Seattle trial lawyer specializing in
food-borne illness lawsuits. Only three suits had been filed by Thursday
afternoon on behalf of salmonella victims — two of them by Marler — but more are expected. The peanut company will
also face massive claims from businesses for the cost of food recalls and
lost profits, he said.
With the company facing all that and a federal criminal investigation,
"it does seem a bit like The Hartford is kicking their insured under the
bus at a time when they probably need a little support," Marler said.
Insurance coverage disputes between businesses and their liability insurers
often surface in court, especially in big cases such as asbestos injury
claims. But Marler said insurance disputes in
contaminated food cases are usually fought "behind closed doors."
wouldn't discuss details of the peanut dispute or legal strategy. Company
spokesman David Snowden would only say, "We are seeking a declaratory
judgment from the court to determine the extent of our obligation to the
Peanut Corp. of America
under our policies of insurance. We believe this will help clarify the claims
The Hartford's court filing says, "An actual controversy exists between
Hartford and PCA as to whether one or more of the terms, conditions,
exclusions and limitations limit, exclude or nullify coverage under the
policies for one or more of the salmonella claims."
A Peanut Corp. spokesperson did not return calls for comment Thursday.
The Hartford may have moved quickly into court
to determine whether it will have to pay to defend Peanut Corp. against
suits, said Peter Kochenburger, executive director
of the University of Connecticut's Insurance Law
Center. The costs of
defense, which can be huge in such a case, are typically in addition to what
a general liability policy promises to pay on claims, he said.
Liability policies may promise to pay a certain amount overall, but might
have sublimits on certain kinds of claims, so The
Hartford might want the court to iron out such issues, Kochenburger
Marler speculated that The Hartford may try to
avoid some claims if its policies excluded intentional bad acts, though he
said such exclusions are more common in professional liability policies than
in general commercial liability insurance. Previous news reports have said
products that initially tested positive for salmonella were shipped by Peanut
Corp. after they were retested and got a negative result.
By Thursday, companies had recalled 1,313 products containing peanut
products, making it one of the largest U.S. food recalls ever, The
Associated Press reported. The ever-growing list of companies recalling products
Hershey, Nestle, Kellogg, Walgreens, Sarah Lee and Stop & Shop. The Stew Leonard's
food store chain said Thursday it recalled five trail mixes.Peanut
Corp. expanded its recall Jan. 28 to all peanut products produced at its
Blakely, Ga., plant since Jan. 1, 2007.