After Second Try, House Passes Food Safety Enhancement Act of 2009 (HR 2749)
U.S. House of Representatives approved HR 2749 moments ago. This action followed some confusion yesterday where it was brought to the floor needing a 2/3 vote and failed. Here’s a link to a report by the Rules Committee including the language of the bill as approved today by the House. Changes to the bill from what was proposed by the Energy and Commerce Committee include amendments aimed at concerns by smaller farmers of the $500 “facility registration fee,” performance standards and record keeping.
The legislation has been the subject of heavy debate inside and outside the beltway. Here’s a link to the Editorial in the New York Times in support of the bill. The Grocery Manufacturer’s Association (GMA) also has expressed support in a June press release for the bill as marked-up by the Energy and Commerce Committee. From some opposed to the bill, here’s a link with an impassioned argument from yesterday.
Note that the registration requirements in the bill as currently written “does not include farms; private residences of individuals, restaurants, other retail food establishments; nonprofit food establishments in which food is prepared for or served directly to the consumer.”
The bill further exempts from registration farms that sell food primarily at farmers markets. Also exempts farms that “manufacturer grains or other feed stuffs” grown on those farms and distributed to other farms for “consumption as food by humans or animals on such farm.”
Also note that traceability provisions remain. Section 107(c)(2) recognizes that work remains on the regulatory level for FDA to collect information, and develop technology and systems, and establish pilot programs before traceability becomes a reality.
NY Senator to Propose Director of Food Safety Oversight
Senator Charles Schumer (D-NY) is expected to introduce legislation today to strengthen U.S. food safety. Newsday.com is reporting that Sen. Schumer’s bill will call for a director of food safety oversight who would be a senior-level director at the Department of Commerce. The proposed director would focus exclusively on food safety.
PCA Recall - Insurance Lessons for Food Sellers
Bill Marler posted on his blog recently a complaint for declaratory relief filed by an insurer for Peanut Corporation of America (“PCA”). Mr. Marler comments, “Frankly, I read this suit several times and still do not see what the fight is about.” For those who represent commercial insureds in pursuing coverage from their insurers, the suit is no surprise. The suit is likely a function of the fairly limited insurance limits available to PCA, PCA’s tender of both bodily injury and recall expense related claims, possible exclusion for organic pathogens and/or allegations of intentional acts by PCA.
The complaint filed by PCA’s carrier, Hartford Casualty Insurance Company, alleges that PCA had at the time of the outbreak a $1 million primary liability insurance policy and $10 million umbrella insurance policy. Given the high number of probable personal injury claims (some of which will involve wrongful death) and the broad scope of products affected by the recall, claims will far exceed limits available to PCA under the Hartford policies. This outbreak demonstrates why any food manufacturer or seller should carefully consider whether its insurance limits are sufficient. A $10 million policy might have seemed to PCA like a great deal of coverage prior to the outbreak; today, the prevailing perception is that it is totally inadequate.
The complaint also alleges that the Hartford policies included “terms, conditions, exclusions, and limitations including but not limited to those pertaining to . . . coverage for claims arising out of the presence, suspected presence, or exposure to, among other things, bacteria.” The policies are not attached to the complaint. However, the allegation suggests that the Hartford policy might have included an organic pathogens exclusion. If the policy includes such an exclusion, PCA may be without coverage for any claims related to the Salmonella outbreak. The organic pathogens exclusion may exclude any claim for bacterial contamination of food products. As we’ve discussed previously on this blog, every food manufacturer should review its coverage to ensure that its policy does not include an organic pathogens exclusion.
Finally, the quick filing of a declaratory relief complaint by Hartford illustrates why a food seller needs to engage an experienced insurance coverage counsel immediately. Coverage counsel can assist in developing a strategy to pursue and preserve available insurance. Also, in situations such as PCA’s, all communications with insurers should be managed by coverage counsel. From the outset, communications with insurers are critical because they are likely to become relevant to the inevitable coverage disputes with the carriers.
