There has been a dramatic increase in recent years in the number of lawsuits against restaurants and hotels claiming that illnesses were caused by food served by those businesses. Monetary judgments and settlements in these suits are also increasing, with a number of claimants receiving more than $10 million each. When these incidents have happened, the number of claimants has almost always ranged from several dozen to several hundred people.
In many of these cases, the causative agent has been identified as present in ingredients when they arrived at the restaurant--salmonella in tomatoes, melons, or fruit juice; E. coli in spinach, lettuce, sprouts, parsley, or meat; or hepatitis A in green onions. In other cases, food became hazardous because of improper storage or handling. Some examples include undercooked eggs or poultry, cut fresh watermelon cross-contaminated by raw meat, prepared foods contaminated by employees who were not ill but who did not properly wash their hands. In still other cases, patrons contracted a communicable disease such as hepatitis A or Norovirus from eating foodstuffs handled by an employee who was ill with, or carrying, the disease.
A food service establishment will, of course, want to do everything possible to avoid serving food that is less than safe. The challenge is heightened at this time when many of the food items purchased by such businesses are imported from outside the U.S. and when (critics say) the FDA and USDA are underfunded and understaffed. In addition to practices aimed at obtaining reliably safe products and then handling them safely, businesses should also consider the practical and legal aspects of dealing with claims of foodborne illness.
Know your suppliers
If claims are made against your business, you will probably want to know the identity of each entity in the chain of supply, from growers to packers to shippers to distributors. You may want to bring third-party claims against those entities and their ability to pay such claims could become important. Technology vendors have recently announced high-tech traceback systems that will identify, for example, the specific ranch and field in which produce was grown and the date on which it was picked. Congress and state legislatures are considering additional laws and regulations to improve the traceability of food items. It would be prudent to become familiar with the mechanisms for tracing back in the supply chain.
The recent trend for restaurants to buy locally produced ingredients may mean producers are more readily known, but it also may mean smaller scale producers that lack the assets or insurance to cover claims.
Seek indemnity agreements
It might be possible, depending on your bargaining position, the amenability of your suppliers and the law of the relevant jurisdiction, to have indemnity agreements in place in which suppliers agree to bear the costs of defense of such suits and to satisfy any resulting judgments.
Review insurance coverage
You should confirm that your liability policy does not exclude claims based on foodborne illnesses. You cannot necessarily take comfort in having a high dollar amount of liability insurance coverage measured per "occurrence." Depending on a variety of factors that include which court interprets the policy, an incident where dozens of people claim illness from a given pathogen on a given day could be found to be one occurrence or dozens of occurrences. Thus, the policy amount might be applied to all claimants collectively or to each claimant individually. Such an incident could also trigger one deductible or multiple deductibles depending on the wording of the policy. Having your business named as an additional insured under policies covering your suppliers could provide additional resources in the event your business must defend against this kind of claim. You should also make sure your policy has appropriate business interruption coverage.
Review employment practices
In one class action lawsuit based on a Norovirus outbreak, the jury assessed over $25 million in punitive damages against a hotel, reportedly because the jurors concluded that the absence of paid sick leave resulted in employees coming to work when they were ill. Hospitality industry employers should have employment practices that reflect a commitment to food safety.
Be prepared to manage publicity
In response to news stories about claims against them, food service establishments often announce immediately that they will pay all medical bills for ill customers. Such announcements can be good public relations but should be carefully worded to avoid unintentionally conceding liability. After an event of this sort, a business might consider a public relations campaign emphasizing changes that have been made to minimize the chance of another occurrence. After recent news coverage of a waiter with hepatitis A, one restaurant offered coupons for future meals to all persons who had eaten at the restaurant during the several weeks the waiter had worked, in exchange for those patrons signing agreements releasing the restaurant from liability. Discussions on a call-in radio show suggested that many people viewed the restaurant's public relations strategy unfavorably.