By now, most people are likely aware of the recall of peanut products produced by Peanut Corporation of America (PCA). Even those unaware of the recall have likely been affected by it in some way. Given the ubiquitous place of peanut butter and other peanut products in the American diet, this recall is shaping up to be one of the largest in U.S. history.
The problems began to come to light in early September 2008, when the first illnesses were reported, according to the Centers for Disease Control and Prevention (CDC). On November 25, 2008, the CDC, working with state and local partners, began an assessment of salmonella reports from 12 states. The first confirmed death – of a resident of a nursing home in Brainerd, Minnesota – occurred just before Christmas.
Signs soon began to point to peanut products produced by PCA as the source of the outbreak and on January 8, 2009 the Food and Drug Administration (FDA) visited an Ohio Distributor for the company. The following day the FDA and the Georgia Department of Agriculture began an environmental investigation of the PCA plant in Blakely, Georgia. PCA voluntarily stopped production at the plant that same day.
On January 10, the Minnesota Department of Agriculture confirmed a link between salmonella bacteria found in a container of King Nut brand peanut butter and the bacteria associated with nearly 400 illnesses around the country. That same day, King Nut announced a recall of all peanut butter manufactured by PCA and distributed under the King Nut label.
Several days later, PCA voluntarily recalled peanut butter produced at its Blakely plant after July 1, 2008 because of possible salmonella contamination. As the investigation continued, the recall expanded and by the end of January included all peanuts and peanut products produced at PCA’s Blakely plant in the past two years.
At the end of January, the government announced a criminal investigation of PCA and on February 9, the FBI raided the Blakely plant. The following day, the Plainview Peanut Company, a PCA processing facility in Texas, announced that it too was voluntarily suspending operations. On February 13, PCA filed for Chapter 7 bankruptcy.
The salmonella outbreak associated with PCA’s products has caused over 600 illnesses and at least 9 deaths. More than 2,300 peanut products have been removed from store shelves as a result of the recall. The scope of the situation raises legal concerns for companies at all levels of the distribution chain.
At least half a dozen lawsuits have been filed thus far against PCA. Kellogg has also been named in several of the suits. More lawsuits (including class actions), and more defendants, are sure to follow. Claims would likely fall into two categories: negligence and strict liability. The former would require proof of a breach of the appropriate standard of care to establish liability; the latter would hold every one in the chain of distribution liable for sale of an unreasonably dangerous product. Under a strict liability theory, manufacturers, suppliers, distributors, retail stores, restaurants, nursing homes, schools, and anyone else who played a role in the distribution of PCA products could be named as defendants and face liability.
This raises the question of how companies can protect themselves. Recall-related insurance coverage is becoming more common. Both product-recall and product-contamination policies are available; the latter tends to offer broader coverage, but the coverage under either type can vary widely. Major companies may have comprehensive coverage for such occurrences, but for smaller organizations, the cost may be prohibitive. Many companies may presume that their comprehensive general liability (CGL) policies will provide liability coverage. Although claims for illnesses caused by contaminated food may normally be covered under such policies, the amount of coverage may prove to be inadequate in any case of widespread contamination. Moreover, insurers have begun to include “organic pathogens exclusions" in CGL policies. Such exclusions take different forms, but typically exclude coverage for losses caused by bacteria, fungi, and other pathogens. Companies at risk of liability exposure due to food-borne illnesses should regularly review their insurance policies for such exclusions. Failure to do so can leave companies unprotected and unaware of the potential liability.