Insurer Says Coverage for HVP Recall "Limited or Precluded"
Employers Fire Insurance Company has brought a declaratory relief action against Basic Food Flavors, Inc. in the United States District Court for the District of Nevada. Employers Fire says in its complaint that its policy "contain[s] certain terms, provisions, limits, conditions, exclusions and endorsements that limit or preclude coverage to Basic Food with respect to losses, costs or expenses incurred as result of the HVP Recall." The HVP recall referenced is the many food product recalls issued nationally as the result of hydrolyzed vegetable protein ("HVP") potentially contaminated with Salmonella Tennessee.
Click on the image of the complaint below to read it:
Neither a copy of the policy nor Employer's Fire rationale for "limits or preclusion" of coverage is yet available. However, this action should serve as a reminder for all food companies to review with their broker and insurance coverage teams their recall coverage. The HVP recall (like the PCA recall and other recent recalls) illustrates how big a financial impact a food recall can have. With the recall insurance market evolving rapidly (and with more options than existed a year or two ago), insureds should keep their brokers working hard to find appropriate (and afordable) coverage.
The Great HVP Recall of 2010: A Review of Lessons Already Taught
As Ken noted last week, there has been a widespread recall of products containing hydrolized vegetable protein (HVP), a flavor enhancer, after salmonella Tennessee was discovered in product manufactured by Basic Food Flavors of North Las Vegas, Nevada. Consumers, who may have been unaware of the existence of HVP, are starting to learn how pervasive an ingredient it is in packaged and processed foods. The FDA has a handy list of products so far affected by the recall. There's a widget, too.
So far, no one has been reported to have been made sick or died as a result of this outbreak.
The FDA warns consumers "Remember to follow cooking instructions on all foods", except that many of the foods that contain HVP are not ones consumers cook. Included are salad dressings, ready to eat meal products, sauce and marinade mixes and snacks. I don't think there's a way for a consumer to cook a pretzel.
This outbreak is a good excuse to reiterate some of our advice from prior outbreaks, like the 2008 tomato outbreak and the 2009 peanut and pistachio outbreaks.
- Have a crisis management plan in place.
- Know what you will do when the investigators knock.
- Double check the language in your insurance policy to ensure that it covers the particular facts of a recall. In 2008, Ken blogged about this issue after the tomato outbreak and in 2009 after the peanut recall.
- If you know your products are not affected by the outbreak, publicize this appropriately and ask your trade organization to help with that as well.
- If your products are involved, consider getting criminal law advice as well as advice about civil law responsibilities.
- Reconsider how you choose your suppliers, and what you do to qualify them.
- Publicize whatever is happening on your web page; consumers who hear about your product being recalled may check your web page and don't want to see a sales pitch for the very product subject to recall.
- Review your supply contracts to ensure that you have recourse against someone selling you tainted product, but remember that such entities are unlikely to have adequate resources to make you whole; that is what insurance is for, and also what prevention is for.
- Consider how to publicize the situation to consumers who use different languages.
As Professor Moody would say, "Constant vigilance."
