Finding no clear state precedent, a federal court in Ohio has certified to the state supreme court a question arising in a case involving insurance coverage for Listeria-contaminated meats that led to the destruction of 1 million pounds of meat products in 2006. HoneyBaked Foods, Inc. v. Affiliated FM Ins. Co., No. 08-1686 (U.S. Dist. Ct., N.D. Ohio, W. Div., order entered March 3, 2011). The question certified is as follows:

In light of the Supreme Court of Ohio’s opinion in Anderson v. Highland House Co., 93 Ohio St. 3d 547 (2001), does the reasonable-expectations doctrine apply to a commercial general liability “all-risk” insurance policy, so that coverage, which otherwise would be excluded under the terms and conditions of the policy, is afforded, provided the trier of fact determines that the insured reasonably expected, when purchasing the policy, that the policy would cover the loss at issue.

HoneyBaked Foods claimed a loss of approximately $8 million under its insurance policy with the defendant, after discovering that several production runs of its ham and turkey products were contaminated. The defendant had visited the company’s facility before issuing the policy and prepared a risk report which noted that “[t]he most significant and common hazards exposing the food industry are centered on the susceptibility of food products to spoilage and contamination.” The company purchased the all-risk policy “mindful of this assessment.”

The contamination was traced to a hollow roller in HoneyBaked’s conveyor system that was removed, cleaned and further sampled. The company was forced to suspend operations twice, recalled nearly 50,000 pounds of its products and ultimately disposed of almost 1 million pounds. HoneyBaked submitted a claim of loss to its insurer seeking to be reimbursed for the value of the discarded products and losses resulting from business interruption. The insurer denied the claim on the ground that the policy excluded the product loss, and “because ‘there is no covered physical loss or damage, any business interruption associated with the Listeria contamination is also not covered.’”

The federal court found that the policy expressly excludes a product loss caused by Listeria contamination, but also determined that a jury could find that HoneyBaked had a reasonable expectation of coverage for losses due to contamination. The court also observed that a jury could find that the risk of such loss motivated the company’s purchase of the policy at issue and that the insurer “knew of HoneyBaked’s desire and need for coverage against losses from contamination.” According to the court, “[t]he availability of coverage, notwithstanding the exclusion, turns on the question of whether Ohio law incorporates the reasonable-expectations doctrine and applies such doctrine to this case.”

The court stayed consideration of defendant’s motion for summary judgment pending final action by the Ohio Supreme Court in response to the order of certification.