Insurance may not respond favourably in class action lawsuit

Commercial animal nutrition manufacturer Ridley Inc. (TSX:RCL) was recently named as a co-defendant in proposed class action lawsuits filed in four Canadian provinces (Qubec, Ontario, Alberta and Saskatchewan) and is examining its insurance position in respect of these lawsuits.
The lawsuits seek recovery of damages, including punitive damages, for losses allegedly incurred by Canadian cattle farmers as a result of the international bans on the importation of Canadian beef and cattle following the announcement on May 20, 2003 of the diagnosis of bovine spongiform encephalopathy (BSE) in a cow in Alberta.
All relevant insurers have been notified of the plaintiffs’ claims and while many of these insurers have reserved their position, others have adopted the position that their policies do not respond to the claims, including the legal costs currently being incurred.
Based on its analysis and investigations, Ridley believes there is little prospect of any of the insurers responding favourably under these policies.
Ridley will continue to fund the cost of its defense of the lawsuits from operating cash flow and may take action against the relevant insurers in the event of further developments in respect of these insurance policies and if the prospects of success appear reasonable.
The lawsuits additionally name the Government of Canada and Ridley Inc.’s majority shareholder, Ridley Corporation Limited of Sydney, Australia, as co-defendants.
These defendants are raising substantial preliminary legal arguments that are required to be resolved before any hearing that attempts to certify the lawsuits as class actions. Only after preliminary legal arguments have been resolved and certified as class actions, will the courts address the merits of any factual allegations raised by the plaintiffs.
The proceeding in Quebec has been stayed pending a decision in the Ontario hearing to dismiss the claims. The proceedings in Alberta and Saskatchewan are also currently in abeyance.