insurance for ripple effect after food safety scare
By Sarah Hills, 14-Nov-2008
Source of Article: http://www.foodproductiondaily.com/Publications/Food-Beverage-Nutrition/FoodNavigatorUSA/Financial-Industry/Extra-insurance-for-ripple-effect-after-food-safety-scare
beverage manufacturers should consider covering the ‘cracks’ in standard food
safety insurance policies to protect themselves against the knock-on effect
of a contamination scare, according to an industry expert.
Food contamination and
product recalls make good headlines but often result in headaches for the
companies affected and their insurers, according to lawyer Jeffrey Weinstein,
a partner with Mound, Cotton, Wollan
& Greengrass of New York.
He said the insurance
coverage that is offered under basic contaminated products policies was
“limited to contamination of the insured's own product”.
However, even if
manufacturers’ products are not contaminated, they may suffer by association
and insurers are developing policies that could potentially cover these
Weinstein, who made
the comments ahead of a conference on the top ten insurance risks and
opportunities, added: “In a lot of these more media-driven frenzies that we
have had… the companies that are associated with these products lose
tremendous sums of money. But sometimes, the company’s product itself is not
part of the contamination.
“These policies have
specific provisions so that business interruption-type losses are only
payable if in fact your product suffered the contamination.
“So media driven or
other economic factors that potentially bear on your profitability as a
result of these incidents… are not covered under these policies.”
An example is the
outbreak of E. coli
in September 2006 that was traced back to packaged cut spinach
originating from California.
The outbreak killed three people and sickened more than 200 across the US.
“People altered their lifestyles and stopped purchasing spinach and
restaurants stopped serving it when in fact the actual spinach that was
recalled was of a very limited nature.”
policies were not meant to cover such situations. However, Weinstein said
that policyholders might soon be able to purchase an additional endorsement
that would expand the scope of the coverage.
Other issues related
to this include the definition of malice when products are deliberately
tampered with, which can differ between states, and the measure of harm
caused by the contamination.
Weinstein said these
issues were important because insurers and policyholders needed to understand
the risks being covered, as policies have limits.
Weinstein will be
speaking at The Insurance Industry's Top 10 Risks & Opportunities
Conference, which is to take place in Philadelphia
on December 8-9 and is organized by BVR Legal, an education and information
company serving attorneys and business experts in complex legal disputes.