USDA (FSIS) Becoming More Aggressive
At the recent Nebraska Governor’s Conference on Ensuring Food Safety, Dan Engeljohn from FSIS (USDA) announced a number of significant policy changes. FSIS’s changes in part are consistent with those previously announced under the last administration and in part represent the Obama administration’s new priorities. Those include (among other things):
1. Supermarket Enforcement – FSIS has not emphasized retail (i.e., supermarket) surveillance and enforcement since the early 1990s. FSIS perceives an increase in beef processing (e.g., grinding) at the retail level. As discussed previously on this blog, FSIS also perceives a failure by many retailers to maintain proper production logs. Supermarkets should expect the following:
A. Unannounced FSIS inspectors will be directed to pull samples on the spot if an inspector walks into a supermarket without good recordkeeping or with unsanitary conditions.
B. New regulations will be aimed specifically at retailers.
2. Non-O157 STECS to Become Adulterants – FSIS appears to be moving aggressively toward declaring at least certain non-E. coli O157 Shiga Toxin E. coli (STECs) as adulterants. FSIS is targeting strains known as E. coli O26, 103, 111, 121, 45, and 145. These strains account for 82% of non-O157 strains detected by PulseNet. Dr. Engeljohn explained that FSIS is looking carefully at these strains and is heading toward their regulation. But he commented that so far information collected about those infected with non-O157 STECs shows that these strains may be less virulent than O157.
3. Attention to Primal Cuts – At least two factors are driving FSIS to develop stricter regulation of primal cuts. First, FSIS learned in the last couple of years that needle-tenderizing injections of steaks are now commonplace in the industry. Second, FSIS is concerned about bench trim.
4. More Aggressive Release of Information to the Public – Dr. Engeljohn also indicated that FSIS will be more aggressive in releasing outbreak information sooner. No longer will FSIS await the kind of confirmation it previously required before requesting recalls or going public with outbreak information.
While the Obama administration has yet to announce an appointment for the FSIS’s Under Secretary of the Office of Food Safety, Dr. Engeljohn indicated that these initiatives are only the beginning. FSIS will be more aggressive on perceived issues of 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.
