On July 1, 2016, a new food labeling requirement for products made with genetically modified organisms (GMOs) will go into effect in Vermont. It’s the first law of its kind in the country.

Vermont’s Act 120 titled “An act relating to the labeling of food produced with genetic engineering,” will require revelatory labels to be placed on food products made with GMOs if they are to be sold within the state.

The law will specifically require “labeling of food produced with genetic engineering” for all “food offered for sale by a retailer,” that has been “produced entirely or in part from genetic engineering if it is a product … offered for retail sale in Vermont and entirely or partially produced with genetic engineering.” Non-compliance will result in a fine of $1,000 per day.

In addition to the labeling requirements, Act 120 will also prohibit the use of the term “natural,” both on product packaging and in advertising, to describe foods made with GMOs.

The Act has faced fervid opposition. Secretary of Agriculture Tom Vilsack, for example, noted that “when we require a label on something, we’re either warning there’s a potential safety problem or we’re giving nutritional information. GMO labeling doesn’t fit. There’s no safety issue, and it doesn’t affect nutrition.”

The Wall Street Journal commented that “the Vermont scheme is more expensive than pasting a sticker on a box of crackers. Ingredients would need to be segregated from the grain elevator to the grocery store. No brand could label only what sells in Vermont, lest an illicit bag of Cheetos cross the New Hampshire border and incur the $1,000 a day fine. Companies may opt for noting that products ‘may’ be produced by genetic engineering, which is acceptable under the law.”

Taking the fight a step further, the Grocery Manufacturers Association, Snack Food Association, International Dairy Foods Association, National Association of Manufacturers, and others filed a federal lawsuit contending that Act 120 is both illegal and unconstitutional (case no. 5:15-cv-117-cr (D. Vt.)). The lawsuit alleged that the legislation violates the First Amendment, the Fifth Amendment, and the Commerce Clause of the Constitution, and is preempted by federal law. The plaintiffs specifically asserted that the labeling requirements force the manufacturers to make statements that they do not want to make, prohibit them from making statements that they do want to make, are not rational, are vague, discriminate against out-of-state manufacturers and interfere with the federal food-labeling regime. These parties sought and were denied a preliminary injunction to stop the law from going into effect while the original complaint was pending.

More recently, Kansas Senator Pat Roberts, backed by food industry lobbyists, pushed for a federal law that would establish a voluntary federal program for labeling GMOs that would preempt Act 120. The bill stalled on the senate floor and did not pass.

For now, Vermont is winning the battle against the food industry. What could this mean for insurers? Come July, when the law takes effect, statutory fines may be levied against manufacturers that either purposefully or negligently permit improperly labeled products to hit the shelves of stores in Vermont.

Will manufacturers turn to their liability insurers for coverage of the statutory fines levied when there was negligence involved, as they might with a routine negligence claim? Further, will insurers cover the cost of recalling products with nonconforming labels?