Insurers prepare for claims related to tomato contamination

Insurers globally are preparing for business interruption claims related to the recent salmonella outbreak that has affected at least 228 people in the United States.
As a result of a warning issued by the U.S. Food and Drug Administration (FDA), a number of fast food chains including McDonald’s, Burger King and Taco Bell have stopped serving raw plum, round or Roma red tomatoes.
“The delay in finding the source has meant significant business disruption for U.S. tomato growers and distributors, and, to some extent, their counterparts in Canada and Mexico, whose products are consumed in the United States,” A.M. Best notes in its June 16 edition of BestWeek.
“Insurance claims from this event are expected to be widespread throughout North America Also, the length of time the government restriction on tomato consumption remains might impact the severity of the claims.”
Lloyd’s of London’s web site notes that its insurers such as Catlin, which is working together with Aon Crisis Management on this issue have created insurance products that respond to hygiene issues within the restaurant itself, as well as to the contamination of supplied produce.
“Typically, Lloyd’s insurers can provide capacity of up to [US]$50 million, though a major chain could be seeking [US]$100 million in excess of [US]$50 million, such is the scale of the possible impact,” says David Palmer, a product recall director in the crisis management team at Lloyd’s broker Aon Ltd.
One blog on the subject, by Stoel Rives LLP, notes one tricky aspect of the situation has to do with how insurers’ “recall insurance” is triggered.
“Although the FDA has not issued a ‘recall,’ claims will be made by suppliers, growers and retailers holding so-called ‘recall insurance,'” Kenneth Odza writes on the blog. “Policy language varies.”
Strictly speaking, Odza observes, the FDA issued a warning rather than a recall, because tomatoes have a longer shelf life than some foods, and therefore they can still be sold once the source of the contamination is pinpointed.