Canadian Underwriter

The Next Big “Tail” Liability?

March 1, 2004   by Allison Murray

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Do we really know what we are eating? While attention has been focused in recent post-Walkerton years on pollution caused by run-off from commercial swine farming operations and the pollution of ground water caused by the overuse of pesticides, few media reports have focused on another concerning aspect of food production and agricultural pollution: bodily injury arising from the consumption of contaminated or chemically-altered food products.

The food-manufacturing sector in Canada accounts for approximately 2% of gross domestic product (GDP), generates more than $67 billion in revenues in total, and employs approximately 250,000 Canadians. The food-manufacturing sector is also a major exporter, accounting for $17 billion in exports in 2002 with the vast majority ($12 billion) being exported to the U.S. On a gross basis, approximately 18% of the total revenue from food production comes from sales to the U.S.

Translated into terms the insurance industry understands, the food-manufacturing sector generates approximately $25 million in commercial liability premiums for the property and casualty insurance industry in Canada. It has an earned loss ratio for the five years ending 2001 of approximately 40%, making it a profitable class. Many Canadian general insurers write food-processing risks with a fair degree of flexibility and routinely accept the exposure arising from export sales to the U.S. Now, take a look at Canada’s “Food Guide” and ponder some of the decades-old practices in food production that are of concern.


Food Guide: Meat and Alternatives: 2 – 3 servings per day.

Animal feed contains many interesting things, ranging from antibiotics, PCB’s and arsenic to malformed “prion” proteins that cause mad cow disease. Whether we ingest these substances as part of a meal, inhale contaminated air or drink polluted water, our health – and our children’s health – may be affected. In the past, insurers were concerned about the damage that additives in animal feed could do to the livestock.

Now it seems we should be concerned about the damage these additives can do to the humans further up the food chain:

Antibiotics. These are used in a wide range of animal and fish feeds. The World Health Organization (WHO) recommended in August 2003 that all nations phase out the widespread use of antibiotics in animal feed because the practice threatens the efficacy of antibiotics in medicine. According to a Washington Post report published in August 2003, “half of the antibiotics used by livestock growers are low-dose promoters, the type that public health experts say are most likely to promote the growth of bacteria that are resistant to antibiotics”.

Arsenic. Since the 1970s, an arsenic-based chemical, “Roxarsone”, has been a commonly used poultry feed additive used to control intestinal parasites. In 1985 Canadian researchers found that arsenic from poultry feed showed up in the meat, and a recent study by the U.S. Department of Agriculture indicates that the concentration of arsenic in young chicken is approximately three times higher than previously recognized. The article goes on to state that the “concentrations of arsenic in chicken combined with the increasing levels of chicken consumption may indicate a need to review assumptions regarding overall ingested arsenic intake”. Until now, concern about the effects of Roxarsone have largely centered on the contamination of groundwater and pollution of air due to the spreading of arsenic-laced chicken manure on fields. However, Roxarsone has known carcinogenic effects and the recent USDA study should cause underwriters of poultry processing facilities to sit up and take note.

Animal Protein. Animal feed containing prion proteins from infected cattle is the suspected source of Bovine Spongiform Encephalopathy (BSE) otherwise known as Mad Cow Disease. The practice of feeding protein-enhanced feed to cattle has been going on for decades, transforming cattle from herbivores to carnivores, but until recently the commonly held belief was that the BSE exposure to humans was limited because both Agriculture Canada and the U.S. Food and Drug Administration have banned the feeding of animal protein from ruminants (sheep, cattle, etc.) to other ruminants since 1997. However, recent research has indicated that, despite the ban, BSE may still be transmissible to humans via a food-chain loop that should probably be closed if we want to be able to sleep at night. The loop exists because protein from ruminants such as cattle and sheep is still used in feed mixtures for pigs, fish and poultry and it is permissible to feed pig, fish and feather meal to cattle, creating an unbroken chain of contamination. In the U.K., this practice has been banned since the 1980s.

PCB’s, Dioxins and Dyes. A recent report by a team of researchers from the University of Albany indicated that levels of PCB’s, dioxins and other carcinogenic chemicals in farmed salmon were significantly higher than in wild salmon. Their recommendation: to limit consumption of farmed salmon to no more than once every four weeks. In parts of Europe, notably around the North Sea and the U.K., the recommendation was just one serving every four months. Needless to say the aquaculture industry protested loudly when the report was released. Farmed salmon accounts for 90% of all salmon sold in Canada and the U.S. To maximize efficiency, farmed salmon are kept in close pens and fed a concentrated feed mixture made of “trash fish”, also known as forage fish. Forage fish are themselves contaminated by the polluted waters of the oceans and the toxins “bio-accumulate” as they move up the food chain. Wild salmon feed on krill, herring and shrimp that are less contaminated than forage fish and have the added benefit of making the flesh of wild salmon naturally pink. Farmed salmon are a dull gray color if left alone, so dyes (as well as antibiotics) are added to the feed.


Food Guide: Grain Products: 5 – 12 servings per day and Vegetables and Fruit: 5 – 10 servings per day.

The Canadian Food Inspection Agency (CFIA) shares responsibility with Health Canada for the regulation of products derived from biotechnology. These include genetically modified plants (GMPs), animal feeds and animal feed ingredients. The CFIA admitted at trial (Monsanto vs. Schmeiser, 2001) that they had done no testing of genetically altered food. Instead, they relied on data supplied by Monsanto, the world’s largest producer of genetically modified seed. Moreover, Monsanto, begging the question of conflict of interest, funded much of their research.

A Monsanto spokesman publicly stated that Monsanto would not vouchsafe the safety of biotech food and that their interest is in selling as much of it as possible. He went on to say that assuring the safety of genetically modified food is the FDA’s job.

Pesticides. Have been of concern for many years but most attention has been focused on bodily injury or disease in agricultural workers exposed to these chemicals. Typical reactions to chronic exposure include tremors, brain damage, cancers of various kinds, eye and breathing problems, miscarriages, birth defects, behavioral problems and reduced intellectual capacity.

The jury is still out on the question of whether there is an increased health hazard risk from consuming pesticide residue on fruits and vegetables so it is probably wise to remember what your mother taught you: “wash your fruits and vegetables before you eat them.” However, what should disturb underwriters is the manufacturers’ apparent lack of acceptance of responsibility for the safety of their products. Incidentally, Monsanto is also the world’s sixth largest producer of pesticides.


Food Guide: Milk Products: 2 – 4 servings per day.

A genetically engineered growth hormone used to stimulate milk production has been approved for use as a veterinary drug since 1994 in the U.S. Today, “recombinant bovine somatotropin” (RBST) is used in one-third of all dairy herds in the U.S. As such, consumer groups in the U.S. are con
cerned that this hormone could impact the health of milk drinkers, particularly children, producing bone deformities, accelerated puberty and increased cancer risk although there are no scientific studies available yet that either prove or disprove this theory.

It is interesting, however, to note that in January 1999 Health Canada announced that after nine years of study it would not approve the use of RBST. While it did not find any health impacts on humans, it did find that cows injected with RBST suffered an increased risk of mastitis of up to 25%, of infertility by 18%, and of lameness by up to 50%.


Clearly, there is a need for balance in assessing the ultimate risk from food-chain contamination. There is also always a danger of over-reacting to media reports but just as dangerous is the risk of under-reaction. Unfortunately, history has shown that products approved for sale and consumption sometimes result in injuries that were neither expected nor intended by their manufacturers.

Insurers need to address these concerns in a thoughtful way, ask the right questions, and examining the issues carefully. What can underwriters do to protect themselves and the long-term health of their business? The following should hopefully provide some guidance:

Dig deeper when reviewing risks. Fully understand the processes used and do not assume anything;

Audit portfolios to determine the number and type of food-related accounts that are on the books currently;

Examine old files to determine the extent of prior products liability;

Examine alternatives for limiting exposure through reinsurance, coverage or deductibles; and

Educate underwriting and broking staff.