Hunton Insurance Lawyers Comment on Recent Recall Decisions
Time 4 Minute Read

Hunton & Williams' Insurance Coverage lawyers Syed Ahmad, Andrea DeField and Jennifer White were featured in the Firm’s Recall Roundup, where they discuss recent noteworthy decisions on insurance coverage for product recalls:

In The Hanover Insurance Group, Inc. v. Raw Seafoods, Inc., 91 Mass. App. Ct. 401 (2017), a Massachusetts appellate court reversed a lower court’s grant of summary judgment for the insurer where the insured seafood processor did not know the cause of a spoiled scallop shipment that led to a judgment against it for negligence for approximately $600,000 plus interest. In the coverage action, the appellate court found that while the exact cause of damage to the scallops was unknown, the undisputed facts demonstrated that the damage occurred at Raw Seafoods’ facility and that all evidence supported a finding that the damage was unintentional, thus constituting an accidental occurrence as required by the policy. In part because such damage had never occurred before and had never occurred since, the appellate court found that the damage constituted an occurrence, reversed the trial court’s grant of summary judgment to the insurer and remanded for the trial court to consider Raw Seafoods’ counterclaims against the insurer for breach and violations of statute.

In The Travelers Property Casualty Co. of America v. USA Container Co., Inc., No. 14-3685 (3d. Cir. April 18, 2017), the Third Circuit Court of Appeals affirmed summary judgment for the insured, a transporter of damaged corn syrup that had been sued by a corn syrup distributor after the syrup was overheated, forcing the distributor to sell it at a reduced rate. Travelers relied on two exclusions for precautionary recalls and faulty workmanship. Similar to the Raw Seafoods case, the court here found that the underlying claims constituted an occurrence and that neither exclusion applied to preclude coverage where the damaged corn syrup was not recalled, repaired or replaced, but was instead simply sold for a lower price.

In Cheer Pack North America, LLC, v. Valley Forge Insurance Company and Continental Casualty Co., Case No. 15-14135-FDS (D. Mass. April 28, 2017), the U.S. District Court for the District of Massachusetts granted summary judgment for Cheer Pack, finding that both insurers owed Cheer Pack a duty to defend in lawsuits seeking damages for a voluntary recall concerning baby food contamination allegedly caused by the failure of packaging manufactured by Cheer Pack. The parties cross-moved for partial summary judgment on the insurers’ duty to defend, with the insurers arguing that their policies contained an exclusion for bodily injury or property damage arising out of “microbe” exposure. Those exclusions, however, contained an exception that Cheer Pack argued applied for insureds whose business is “food processing.” The Court found the phrase “food processing” to be ambiguous, and thus construed the exception in favor of coverage for Cheer Pack.

Finally, while not a court decision yet, a recent complaint filed by Houston Casualty Company demonstrates how coverage disputes for product recalls may extend to disputes between insurers. In Houston Casualty Co., the insurer of Steven-Robert Originals, LLC (“SRO”), a company that provides desserts to food service and retail in-store bakeries such as Pizza Hut, filed an equitable subrogation action against another of SRO’s insurers, Valley Forge Insurance Co., after Houston Casualty had paid over $800,000 to SRO under its Product Contamination Policy for losses sustained when Pizza Hut customers discovered metal blades and rubber gaskets in their brownies. Arguing that the Valley Forge Policy also provided coverage for the loss making the insurers mutually responsible, Houston Casualty filed the equitable subrogation and unjust enrichment action in the Southern District of New York. The suit is Houston Casualty Company v. Valley Forge Insurance Company.

Hunton & Williams’ Insurance Coverage lawyers represent and advise policyholders on a wide-variety of insurance-related issues, including claim disputes, policy renewals, scope of coverage questions, manuscripted policy forms and more.

  • Partner

    Mike is a Legal 500 and Chambers USA-ranked lawyer with more than 25 years of experience litigating insurance disputes and advising clients on insurance coverage matters.

    Mike Levine is a partner in the firm’s Washington, DC ...

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