With Acting Chairman Ann Marie Buerkle’s earlier announcement that she will leave the CPSC this fall, this month the commissioners elected Commissioner Robert Adler as the new acting chairman. Adler has been affiliated with the CPSC for more than 40 years. He has served as a commissioner since 2009 and previously served as the acting chairman from December 2013 through July 2014.

The CPSC is currently made up of three Republican appointees and two Democratic appointees. Adler is a Democratic appointee by President Obama. Explaining her vote, Republican-appointed Buerkle said that it was important for the next agency leader to “be the most experienced, most senior commissioner who has previously served in this role …. Consumer protection is not political.” The two other Republican commissioners were appointed only one year ago. After Buerkle departs the CPSC at the end of October, only four commissioners will remain—two Democrats and two Republicans—and Adler will be leading the agency. President Trump can still nominate someone to fill the vacancy and could put forward that nominee or one of the other Republican-appointed commissioners as the permanent chairman to be confirmed by the U.S. Senate.

With summer over, the CPSC recently issued pool safety statistics for 2019. The results were grim, with at least 150 children drowning in swimming pools or spas this summer. In 2017, 163 children drowned in swimming pools or spas. In 2018, that number dropped to 148 children. With a slight uptick in drownings this year, the CPSC is expected to continue its Pool Safety public education campaign to raise awareness and combat this tragic and preventable problem. Indeed, this month the CPSC also awarded $1.1 million under its Pool Safety Grant Program to five state and local governments to help prevent pool drownings and drain entrapments. Drownings remain the leading cause of unintentional death for children ages 1 to 4.

Lawyers from Hunton Andrews Kurth LLP’s insurance coverage practice provide updates on several recent recall insurance disputes:

There are two updates in the Pharmavite insurance coverage litigation arising from recalled dietary supplements. We previously reported on the lawsuit Pharmavite filed against Crum & Forster, which challenged the insurer’s denial of coverage for loss incurred in connection with the withdrawal, destruction and disposal of tainted products following a 2016 FDA recall. Crum & Forster later filed a spoliation motion asking that the case be dismissed due to Pharmavite’s alleged destruction of the allegedly contaminated product without notice or opportunity to perform independent testing. The motion was fully submitted, but in what the court described as “an incredible turn of events,” the parties recently informed the court that Pharmavite was still in control of a small quantity of recalled product. Due to the changed circumstances, the spoliation motion was denied with leave to renew.

In a separate order, the trial court also denied Crum & Forster’s motion to reconsider its prior determination that numerous documents withheld from production on privilege grounds were not, in fact, protected and must be disclosed. The parties had disagreed whether 13 documents in the Crum & Forster privilege log were discoverable. The insurer argued that the documents were protected by attorney-client privilege and attorney work product because they concern communications and materials from counsel. After an in camera review, the court issued a brief decision during a status conference directing Crum & Forster to disclose all documents because they were not privileged or to move to reargue.

Crum & Forster moved to reargue, asserting that the court overlooked the legal nature of the communications and misapprehended the law regarding the attorney-client privilege between an insurance company and its outside counsel. The court denied the motion for reargument. In justifying its prior ruling, the court explained at length the difference between an attorney’s work to provide legal advice and work for business or personal advice or to do the work of a nonlawyer. In the insurance industry, because “the payment or rejection of claims is a part of the regular business of an insurance company,” documents prepared by an attorney in the ordinary course of the insurer’s investigation to evaluate a claim are not privileged.

The court relied on this distinction in finding that the memoranda prepared by Crum & Forster’s outside counsel “consisting of facts concerning the recall with notes about the policy terms” were related to the insurer’s investigation, did not provide legal advice and were discoverable. An investigative report does not become privileged, the court explained, merely because it was sent to or prepared by an attorney. Crum & Forster failed to meet its burden of demonstrating a right to protection because nothing in the memoranda were “primarily or predominantly a communication of a legal character.”

The court similarly held that the other challenged documents were not privileged because: (i) outside counsel was not involved in the communication; (ii) the communications contained no legal advice or attorney recommendations; (iii) the communications were sent in connection with the insurer’s coverage investigation or were prepared in the ordinary course of business; or (iv) indicated that outside counsel was “primarily engaged in claims handling.” The court also rejected the insurer’s reliance on its internal labeling of certain documents as “Privileged and Confidential Attorney Work Product,” noting that a party’s own labels are “obviously” not determinative of work product. Privilege and work product determinations are inherently fact-specific, and the Otsuka ruling serves as a reminder to carefully analyze an insurer’s privilege determinations to assess whether documents involving outside counsel were truly legal in nature or whether they are serving more of a “claims handling” or investigative role as part of the insurer’s ordinary course of business.

In a recently filed recall insurance coverage dispute, produce distributor Del Monte has sued its supplier and insurer in Florida federal court for losses incurred in a voluntary recall of pre-packaged vegetable trays from stores in 2018 due to concerns over possible contamination. In connection with the reported contamination, Del Monte was presented with several filed and unfiled complaints by consumers alleging that they suffered foodborne illness as a result of consuming produce within the vegetable trays.

In Del Monte Fresh Produce, N.A. v. AMCO Insurance Company, Del Monte alleges that the Midwest Best Produce Co. supplied some of the vegetable trays at issue and, pursuant to its contract with Del Monte, agreed to provide indemnification and to purchase insurance coverage for claims arising from the condition of the produce it supplied. Midwest obtained general liability and umbrella policies from AMCO Insurance Company, which Del Monte alleges provide coverage for the bodily injury claims asserted by the consumers of the contaminated produce. When Del Monte tendered the claims to Midwest and AMCO, however, AMCO reserved rights under five exclusions and only offered to “participate in reimbursing” its proportionate share of costs incurred in defending against the claims. When Del Monte attempted to mediate the dispute, AMCO allegedly refused to participate and refused to consent to resolution or settlement of any underlying claims.

Del Monte alleges that AMCO’s reservation of rights letter failed to explain the basis for any of the exclusions—identified as “repackaging,” “express warranty claims,” “inspection,” “physical change to a produce” and “relabeling” exclusions—and took the position that it was only obligated to reimburse 20% of costs incurred in defense of the underlying suits. Del Monte seeks a declaratory judgment that the AMCO policies must provide defense and indemnity coverage for all current and future consumer lawsuits related to the produce contamination.

Total Recalls: 18

Hazards: Injury (5); Violation of Federal Standard (3); Crash (3); Fire/Burn/Shock (2); Laceration (1); Mold (1); Entanglement (1); Tip-Over (1); Fall (1)

Product Type Hazard Remedy Injuries/ Incidents
Knit Dolls Injury Refund 1
Utility Vehicles Crash Repair 9
Essential Oils Violation of Federal Standard Replace 0
Grooming Mowers Entanglement Repair 0
Recreational Off-Highway Vehicles Crash Repair 0
Mowing Heads Injury Refund 28
Steering Wheel Adapters Crash Refund 1
Children’s Bunk Beds Fall Replace 2
Children’s Loungewear Violation of Federal Standard Refund 0
Air Rifles Injury Repair 1
Essential Oils Violation of Federal Standard Replace 0
Computer Workstations Injury Repair 52
Pendant Lights Fire Replace 84
Safety Goggles Laceration Replace 2
Collectible Helmets Mold Refund 0
Three-Drawer Chests Tip-Over Refund or Repair 0
Dishwashers Fire Repair 53
Utility Bars Injury Refund 56