In its recent decision in Republic Underwriters Ins. Co. v. Moore, 2012 U.S. App. LEXIS 14907 (10th Cir.), the United States Court of Appeals for the Tenth Circuit, applying Oklahoma law, had occasion to consider whether numerous incidents of food poisoning was the result of a single occurrence or multiple occurrences.

The coverage dispute related to a ten-day period in 2008 during which the insured, The Country Cottage Restaurant, prepared and served E. coli-contaminated food, causing 341 persons becoming sickened, one of which resulted in a fatality.  Notably, The Country Cottage prepared and served a portion of this food  away from its restaurant at a church function.  This event resulted in 21 persons becoming infected.  All other affected individuals were sickened as a result of having eaten food prepared at Country Cottage’s restaurant.

The Country Cottage had primary coverage through Republic Underwriters, with limits of liability of $1 million per occurrence and $2 million in the aggregate, with a separate $2 million aggregate limit applicable to products/completed operations.  The Country Cottage also had an excess policy through Southern Insurance Company with limits of liability of $2 million per occurrence and in the aggregate.   The insurers filed an interpleader action and argued that the various bodily injuries all happened out of a single event; namely, “Country Cottage’s preparation, handling or storage of food that purportedly became contaminated with E. coli.”  Thus, insurers, argued, all injuries arose out of a single occurrence, and as such, only $3 million in total insurance proceeds were available for the losses ($1 million per occurrence limit under the Republic Underwriters’ policy and $2 million under the Southern policy).  The individual claimants argued on the other hand that the E. coli outbreak could have resulted from a number of factors, such as contamination by the food handlers and cross-contamination from various sources.  Given these uncertainties, they argued, the court must find multiple occurrences based on the number of possible causes.  Certain claimants also argued that each individual sale of contaminated food constituted a separate occurrence.  

The lower court concluded that there were two occurrences in light of the “geographical distinction” between the two places of food preparation: the restaurant and the church.  Citing to its decision in Business Interiors, Inc. v. Aetna Casualty & Surety Co., 751 F.2d 361 (10th Cir. 1984), however, the Tenth Circuit disagreed.  In Business Interiors, the court considered a situation in which a dishonest employee forged or altered forty separate checks.  The Tenth Circuit concluded that cause of the insured’s loss was the “continued dishonesty” of a single employee and could not be considered multiple, independent acts.  The court found this reasoning applicable to Country Cottage’s food preparation:  

Here, all the injuries were proximately caused by the restaurant’s ongoing preparation of contaminated food.  Hence, there was but one occurrence.  It does not matter that the food was served with other food items prepared at another location because the contamination originated at the restaurant.  Nor does it matter that the precise underlying cause of the contamination is unknown because the fact remains that the contamination originated at the restaurant.    

Thus, finding that all injuries were caused by Country Cottage’s “ongoing preparation of contaminated food,” the court concluded that the number of locations at which the food was prepared or served was not a relevant consideration.  Instead, the injuries arose out of a single occurrence, thus triggering only a single occurrence limit under the Republic policy.