A Pennsylvania jury has found that Starr Surplus Lines Insurance must uphold H.J. Heinz Co.'s $25-million policy covering damages related to baby cereal tainted with lead. H.J. Heinz Co. v. Starr Surplus Lines Ins. Co., No. 15-0631 (W.D. Penn., jury verdict entered December 16, 2015).
Heinz sought a declaratory judgment that the insurance provider must cover business-interruption costs after China's food-control agency found lead in the company's high-protein dry baby cereal. Starr argued that Heinz had misrepresented the situation when the company applied for the policy because it failed to disclose previous contamination incidents. The jury concluded that although Starr did prove "that Heinz made a misrepresentation of fact(s) in its insurance application which was material," Starr "waived the right to assert a rescission claim" either because it sold the policy with knowledge of the misrepresentation or because it failed to rescind the policy after learning of the misrepresentation.