In Republic Underwriters Ins. Co. v. Moore, 2012 WL 2948177 (10th Cir. (Okla.) July 20, 2012), the U.S. Court of Appeals for the 10th Circuit, applying Oklahoma law, sided with a restaurant’s insurers and held that multiple food poisoning claims arose out a single occurrence.

The insurance dispute concerned coverage for an E. coli outbreak that killed one person and infected 341 others.  Country Cottage Restaurant prepared and served the suspect E. coli-contaminated food at its restaurant location and at a catered church event. 

Country Cottage had primary commercial general liability coverage with Republic Underwriters, with limits of $1 million per occurrence and $2 million in the aggregate and a separate $2 million aggregate limit applicable to products/completed operations.  Country Cottage also had an excess policy with Southern Insurance Company with limits of $2 million per occurrence and in the aggregate.  Both insurers filed an interpleader action and argued that all of the injuries arose out of a single occurrence  and, as such, only $3 million in insurance proceeds were available for the losses (i.e., per occurrence limits of $1 million under Republic’s policy and $2 million under Southern’s policy).  Both policies defined an “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

On cross-motions for summary judgment, the insurers argued that there was only a single occurrence because Country Cottage’s preparation, handling or storage of contaminated food caused the E. coli outbreak during a discrete time period.  The individual claimants, on the other hand, asserted that because multiple persons were injured while consuming different food prepared by different food handlers at different times and at two different locations, there were multiple occurrences.

The district court agreed with the claimants and found that there were two occurrences stemming from the two separate locations where the food was prepared and served. Therefore, the district court held that the policies’ aggregate limits applied rather than the per occurrence limits, and granted summary judgment for the insurers and against the claimants. 

The 10th Circuit, however, reversed, finding that there was only one occurrence.  The court cited to its decision in Business Interiors, Inc. v. Aetna Casualty & Surety Co., 751 F.2d 361 (10th Cir. 1984), which held that “an occurrence is determined by the cause or causes of the resulting injury.”  In Business Interiors, a dishonest employee forged and altered 40 separate checks.  The 10th Circuit concluded that the single employee’s “continued dishonesty” caused the insured’s loss and did not amount to multiple independent acts.  Applying the same reasoning, the court concluded that Country Cottage’s “ongoing preparation of contaminated food” caused all of the injuries and thus constituted a single occurrence.  The court found it irrelevant that the food was prepared and served at multiple locations because all the injuries traced back to the ongoing preparation, handling and storage of contaminated food.  Accordingly, the court reversed the summary judgment for the insurers and remanded the case to the district court with instructions that summary judgment be entered for the claimants.