A federal court in Ohio has determined that, for the most part, an “all-risk” insurance policy excludes from coverage the losses sustained by a meat processor whose products were contaminated with Listeria during processing. HoneyBaked Foods, Inc. v. Affiliated FM Ins. Co., No. 08-01686 (U.S. Dist. Ct., N.D. Ohio, W. Div., decided December 2, 2010). Still, the court ordered the parties to prepare a question for certification to the Ohio Supreme Court as to whether, “notwithstanding the failure of the policy to cover the plaintiff’s loss, such loss might be covered” under a reasonable-expectations theory.
According to the court, the meat processor was required to destroy about 1 million pounds of fully cooked ham and turkey products after it was discovered that the Listeria found in product samples matched sludge in a hollow roller that was part of the processing plant’s conveyor system. The company sought coverage for the disposed food products and additional losses resulting from business interruptions for a total of about $8 million under its all-risk insurance policy. The court rejected most of the meat processor’s claims that the policy was ambiguous, except for an exclusion relating to manufacturing and processing operations. Given its ambiguity, the court determined that it must be resolved in favor of the insured. Accordingly, the court granted, in part, the defendant’s motion for summary judgment on the declaratory judgment and breach of contract claims.