Incidents of food-borne illness impact a number of parties, from sick consumers to various commercial entities in the chain of distribution. Many general liability insurance policies cap policy limits on a per occurrence basis. For example, a policy may provide $2 million in aggregate limits but only $1 million in per occurrence limits. The relevant question – and one that is frequently litigated – is whether the per occurrence limit applies when an insured is facing numerous claims arising out of an outbreak. The analysis generally is specific to the policy language and the facts of an individual case.
The Tenth Circuit recently addressed this issue in Republic Underwriters Insurance Co. v. Kenneth Moore et al.., No.11-5075 (10th Cir. July 20, 2012). The lawsuit concerned the amount of insurance coverage available to Country Cottage Restaurant for claims originating from a 2008 E. Coli outbreak. The restaurant prepared and served the contaminated food over a 10-day period in August 2008. The E. coli-contaminated food sickened 341 people and resulted in one fatality and, at the time, was believed to be one of the largest such incidents in the country. Most of the victims consumed the food at the restaurant, but 21 were also sickened at a restaurant-catered church gathering.
When the restaurant sought liability coverage, its insurers took the position that the contamination incident constituted a single occurrence. The insurers argued that the number of occurrences is determined by the cause of the bodily injuries, which, in this case, was the ongoing preparation, handling and storage of the contaminated food during that ten-day time period. The restaurant disagreed with the insurers’ position because officials from the Oklahoma Department of Health identified a number of factors as contributing to the spread of E. coli and were unable to identify a single cause of the outbreak.
The insurers initiated a declaratory judgment action and sought to interplead the per occurrence limits. The parties consented to the jurisdiction of the Magistrate Judge. In its summary judgment brief, the claimants argued that various acts of negligence related to the restaurant’s food safety techniques constituted separate occurrences, while other claimants argued that each sale of contaminated food was a separate occurrence. The Court rejected both arguments but still found multiple occurrences. The Court held that, because the food was prepared and served in two different locations, the outbreak constituted two occurrences. The insurers appealed the decision to the Court of Appeals of the Tenth Circuit.
The 10th Circuit reversed the magistrate’s opinion and ruled that, under the “cause test,” all injuries resulting from the restaurant’s ongoing preparation of contaminated food constituted only one occurrence. The Court relied on Business Interiors Inc. v. Aetna, 751 F.2d 361 (10th Cir. 1984), a case in which the court held that forty separate checks falsified or altered by an employee on separate occasions constituted a single occurrence because the act was caused by an employee’s “singularly dishonest intent.” According to the Court “an occurrence is determined by the cause or causes of the resulting injury,” and ”as long as injuries stem from one proximate cause[,] there is a single occurrence.” Here, the preparation and storage of the contaminated food at the restaurant qualified as one occurrence because all contaminated food originated at the restaurant, regardless of whether it was subsequently served at different locations.
Republic Underwriters perfectly illustrates why it is extremely difficult to apply a hard and fast rule to determining the number of occurrences, even when the law of a jurisdiction is settled on an analytical framework, such as the cause test. Here, different sets of claimants presented two different arguments, the magistrate developed yet a third solution, and the Tenth Circuit ultimately reached another conclusion altogether. Accordingly, it is extremely important to be familiar with case law from each jurisdiction when performing a number of occurrences analysis.
* Special thanks to Delia Solomon for her assistance with this post.