More on Reducing the Risk of Failure - Focus on Shifting Liability For Consumer Claims
Food Safety Magazine ran an interesting piece by Aaron Krauss titled “Reducing the Risk of Failure.” The article was part of the magazine’s focus on limiting liability for food companies. Mr. Krauss includes a good discussion of the pros and cons of indemnities and disclaimers of warranty and liability as ways to shift or reduce liability for claims within the supply chain. Yet, the article does not discuss how to shift liability for claims from outside the supply chain, i.e., consumer claims.
For example, Mr. Krauss advocates that if members of the supply chain limited liability between themselves to the purchase price of the product, this might reduce or eliminate litigation. Mr. Krauss points out that “if everyone in the ‘peanut butter food chain’ had limited their liability, a store might not bother suing, since it could only recover its purchase price.”
Limitation of liability clauses, while effective to reduce exposure between members of the supply chain, will have no limiting effect on consumer claims. Unless a food seller can invoke a “passive retailer” defense, each member of the supply chain will be strictly liable for injuries to consumers caused by the food product.
The only ways for a food seller to shift consumer liability is through either supplier indemnity or insurance. Mr. Krauss is correct that indemnities by suppliers may be hard to secure and harder to enforce. And, claims defended by the seller’s own carrier will invariably result in higher premiums.
Because insureds will generally be penalized through premiums for invoking their own insurance, the best insurance is somebody else’s insurance. Even a food seller that might not have the leverage with its supplier to receive indemnification may be able to secure “additional insurance.” Naming a vendor as an additional insured frequently costs the supplier nothing in added premiums. If seller specifies that this insurance is to be “primary and noncontributory,” the supplier’s insurance may be the first line of defense for claims involving the supplier’s products.
If a supplier will provide additional insurance, follow-through is essential. The seller needs to (1) verify that the supplier has, in fact, named the seller as an additional insured and (2) review the operative language of the additional insured endorsement and/or policy language to ensure that it does not include unacceptable conditions or exclusions.
Are Organic Foods Safer? Will Consumers Continue to Favor Organics?
Nobody disputes that consumers have a favorable view of organic certification in foods. Consumers generally believe that organic foods are healthier, and many believe they taste better. Yet, among food scientists, uncertainty prevails as to whether organics are safer, especially raw fruits and vegetables.
Absence of synthetic fertilizers is a primary distinction between organic and non-organic foods. And, from a safety standpoint, the absence of pesticides is the only provable claim that organic foods are healthier. But does the absence of one hazard imply the existence of another?
The prevailing pesticide substitute for organic foods is manure or composted manure. Dangerous pathogens such as E. coli O157 reside in manure. Some guidelines exist for composting manure. Unfortunately, as I learned recently in a presentation by Dr. Francisco Diez-Gonzalez at the University of Minnesota Food Science Department, these guidelines were written a decade ago, before science began to understand the prevalence of E. coli in the environment.
Science now understands that E. coli O157, for example, can persist for years in soil, let alone a more rich environment like manure. In some cases, it may be virtually impossible to rid of an environment of E. coli O157, short of treatment with non-organic substances such as tear gas or asphalt.
Outside of the 2006 spinach outbreak, there have been few food-borne illness outbreaks associated with organic fruits or vegetables. As organic farming continues to grow and detection of food-borne illness increases, the only question is how long it will be until another well-publicized outbreak. When it happens, will consumers continue to believe organic foods are safer? Will the industry be ready with evidence that proves the benefits of organic farming outweigh its risks?
