Restaurants and others in the food supply chain have an obvious desire to minimize financial losses stemming from Salmonella, E. coli or a related outbreak. Commercial insurance policies frequently provide coverage that can help curtail the risk a company will collapse in the face of monstrous jury verdicts and settlements from such food contamination catastrophes.
Still, the laws across the nation aren't uniform when it comes to food contamination cases. "Most policies require that injury or damage be caused by an 'occurrence'", a term that is heavily litigated, observes Chicago-based attorney Jean Golden.
Before dozing off, consider that most commercial general liability policies have limits based on the number of occurrences, explains Golden, a partner with the Midwest law firm of Cassiday Schade LLP. The dispute between the insurance company and insured often turns on whether a number of injuries involve one or multiple occurrences. At stake: the payment of more deductibles or potentially hundreds of thousands of dollars or millions in damages that the insured — i.e. the food supplier — might have to pay out of its own pocket.
"Cause Test" is Majority View
The results are not always predictable and the analysis varies depending on the jurisdiction. The majority of states have adopted a test in which the court seeks to determine the cause of the injuries in deciding the number of occurrences, Golden explains. In Mason v. Home Ins. Co., a case that was decided 14 years ago, the dispute focused on the amount of coverage available under the insured's policies after numerous restaurant customers fell ill from eating patty melt sandwiches that contained onions.
The relevant insurance policy defined an occurrence as "either an accident or happening or event or a continuous repeated exposure to conditions which unexpectedly and unintentionally causes injury to persons or tangible property during the policy period."
The trial court apparently found "the cause of the injuries was the improper preparation of the onions". The Appellate Court of Illinois concurred the number of occurrences is tied to the cause (rather than the number of) injuries but disagreed with the trial court's ultimate conclusion. The Appellate Court found multiple occurrences, reasoning there were multiple sales to customers over a three-day period resulting in exposure to liability.
"No plaintiff was subjected to either a continuous or repeated exposure to conditions causing injury," the court wrote. "These circumstances did not present one uninterrupted and continuing cause, but several distinct acts — individual sales to separate patrons over a three-day period — each of which resulted in exposure to liability."
Consider the more recent case of Travelers Prop. Cas. Co. of Am. v. RSUI Indem. Co. In that matter, John Strike fell ill and was hospitalized after eating ground beef contaminated with E. coli. His granddaughter, Abigail Fenstermaker, hadn't eaten the meat but was found to have contracted E. coli through contact with her grandfather, explains Golden, who represented the primary insurer in the litigation. Fenstermaker suffered a stroke and died. In language that resembled the insurance policy lingo in Mason, an occurrence was defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
But unlike the appeals decision in Mason, the federal district court found one rather than multiple occurrences under the cause test.
"There were no intervening acts of negligence by Valley Meats that occurred between the time Strike and Fenstermaker became ill," wrote U.S. District Judge Robert W. Gettleman. "Because the damages for which coverage is sought result from the manufacture and sale of a defective product, 'the loss emanates from a single cause and there is but one occurrence.'"
If you are struggling to understand the divergent decisions reached in the two cases above when the same test was applied, you're probably not alone.
"Some of the decisions are what we call result-oriented," Golden observes. "The court is perhaps trying to reach what it deems to be the right result or the equitable result. That is a theory that is posited by lawyers in this area because sometimes it's difficult to reconcile the holdings."
Indeed, Judge Gettleman acknowledged "application of the cause theory to a particular factual situation has proved to be difficult, requiring further refinement."
Other Tests Applied
The cause theory isn't the only test courts apply in determining the number of occurrences. There is what's known as the "effects test." In this test, the court looks to the number of injuries sustained, notes Margaret Shiptalo, an associate attorney with Cassiday Schade. The court in Mason indicated this is the minority view.
New York courts also have applied a separate "unfortunate events" test. In 2007, the Supreme Court of New York, Appellate Division, applied this test stemming from a class action lawsuit by 30 current and former employees of Gilster-Mary Lee Corp. The employees complained they suffered lung impairment and other respiratory injuries from butter flavoring in microwave popcorn.
At issue in the appeals case: whether the workers' personal injuries should be considered a single occurrence. In reaching its decision, the court looked to "whether there is a close temporal and spatial relationship between the incidents giving rise to injury or loss, and whether the incidents can be viewed as part of the same causal continuum, without intervening agents or factors."
The Appellate Division affirmed a lower court decision that each of the personal injury claims constituted a separate occurrence.
"Here, 30 victims were continuously and repeatedly exposed to diacetyl," the court observed. "In the absence of policy language making it clear that any and all personal injury resulting from such exposure is to be regarded as a single occurrence, the exposure of the individual claimants to diacetyl on different occasions, extending over different periods of time, supports the finding that these are 30 discrete occurrences."
Advice for Insured: Retain Good Broker
In view of the continuing litigation over what constitutes an occurrence, why don't the insurance companies make more explicit what they mean by that term? If the language was plain and absolutely clear, wouldn't the parties have a better understanding of their coverage and wouldn't there be fewer disputes in the courts?
"It's difficult to carve out language to address each type of situation that might arise," Golden says.
Still, she cites "the need for companies involved in production of consumable products to have good insurance brokers representing them because there are certainly endorsements that can be crafted to address the kinds of issues that arise in this arena and there are certainly discussions that can be had between the broker, the insured and the carriers so they all have a pretty good working knowledge of how they are going to address a catastrophic situation."
Concludes Golden: "Certainly you can think outside the box and try to anticipate issues and address them with the carrier and figure out what best suits the insured's needs."
