A food-borne illness outbreak usually results in a large number of claimants and, depending on the scope of distribution of the contaminated product, it can spawn claims in a multitude of jurisdictions. For insurance adjusters and their insureds, a critical question is how to determine the “number of occurrences” in a food contamination claim that results in multiple injuries. Most insurance policies have a “per occurrence” limit, capping an insurer’s exposure arising from a single event. Some insurance policies contain “per occurrence” deductibles, where insureds are responsible for a limited amount of dollar-one coverage for each event. So when an insured places contaminated food in the stream of commerce and hundreds, or potentially thousands of people are injured, the insurer’s and insured’s respective responsibilities can often turn on whether those claims constitute one or multiple occurrences within the meaning of the insurance policy.
A recent decision out of the Northern District of Ohio grapples with these issues. Travelers Prop. Cas. Co. v. RSUI Indem. Co., 2012 U.S. Dist. LEXIS 13847, No. 11-c-0173 (N.D. Ill. Feb. 3, 2012). The coverage dispute arose out of a series of underlying personal injury suits against Valley Meats, Inc. by individuals who became sick after eating ground beef contaminated with the E. coli bacteria, and those who became sick through a secondary infection.
The primary GL insurer, Travelers, acknowledged coverage for the claims and agreed to pay an additional $500,000 above its per occurrence limit, subject to its right to recoup that amount from the excess insurer, RSUI. Travelers filed a declaratory judgment action seeking a declaration that RSUI must reimburse it for the additional $500,000 because the claims involving primary infection claimants and secondary infection claimants constituted a single occurrence such that Travelers had exhausted the primary limit. RSUI argued that its excess policy was not triggered because the incidents arose from two occurrence and Travelers did not properly exhaust per occurrence policy limits.
The court sided with Travelers. Illinois courts follow the “cause” test to determine the number of occurrences, meaning that courts look to the cause of the insured’s liability, and not the resulting injuries. RSUI argued that a time and space element is applicable to the cause test, and the primary and secondary infection claims where not so close in time as to be the result of a single occurrence. The court rejected RSUI’s argument, stating that the time and space considerations are only applicable to ongoing omissions such as an ongoing dangerous condition on a property. In contrast, the court found that this case resulted from discrete negligence, i.e. “the production of a single batch of tainted meat,” so the time and space element was inapplicable. In conclusion, the court stated:
Because the damages for which coverage is sought result from the manufacture and sale of a defective product, the loss emanates from a single cause and there is but one occurrence.
Id. at *10 (internal quotations and citations omitted). Accordingly, Travelers satisfied its per occurrence limit and RSUI was ordered to cover Travelers’ $500,000 excess payment.
What’s the take away from this decision? Specifically, under Illinois law, the manufacture and sale of contaminated food that results in injuries to multiple claimants constitutes a single occurrence. Generally, this decision serves as an example of the importance and complexities involved in determining the number of occurrences. The number of occurrences analysis is both fact specific and jurisdiction specific (not every jurisdiction employs a cause test) so a case-by-case analysis is necessary to determine this critical issue.