Measures to Protect Against Liability Relating to Foodborne Illness

By Jeff Gilles

The E. coli contamination of spinach this past September brought food-safety recalls back into our living rooms and kitchens. As Paul mentioned in his article, many farmers were forced by the FDA to “voluntarily” recall their product. What does it mean to “voluntarily” recall your product? Is there such a thing as an “involuntary” recall?

Statutes in the Code of Federal Regulations define recalls and what occurs when a company fails to issue a recall on its own. (Title 21, Part 7, Subpart C.)

Last year’s nationwide outbreak of E. coli in fresh spinach presents a prime example to members of the agriculture industry of the importance of protecting one’s business interests before catastrophe occurs. There are several common steps that agricultural businesses can take in the effort to avoid liability when a consumer gets sick:

• Follow the voluntary guidelines the FDA has promulgated;
• Have Insurance;
• Have facilities tested by a certifying laboratory;
• Check your contracts for language that contains indemnification provisions, which impose liability down the chain of production from store to distributor to shipper to grower.

By taking these basic but necessary measures, most businesses believe they have done everything possible to protect themselves. However, these steps will not fully protect against liability. In the past, involvement in litigation and liability for food-borne illness was generally limited to the restaurant or store, which had actual contact with the consumer. Many times, it was simply not possible to determine where the product was grown. Now, with faster and more reliable testing methods to trace food-borne illnesses to their source, growers will face more and more lawsuits when an outbreak occurs.

Furthermore, many supply contracts are nothing more than price sheets, which do not contain even minimal indemnification provisions. Even where parties have more comprehensive contracts, it may be the case that even the most carefully drafted indemnity provision is financially impossible and impractical to enforce. In order to ensure the most protection and the best defense possible, businesses should go beyond the basic paperwork. In this article, we discuss what preventive measures should be taken to protect against liability relating to food-borne illness.

Insurance

Many business people do not realize that they can negotiate with their insurance carrier regarding how the insurance company will handle a claim. This is particularly important in food-borne illness cases, which generally have multiple plaintiffs with issues such as the scope of coverage, the right of the client to consent to any settlement and coordination of lawsuits. Selection of legal counsel should be negotiated with the insurance carrier prior to entering into any policy.

To the extent possible, the grower and the grower’s customers should have different insurance carriers. This will take consideration early in the contracting process before litigation is even a possibility, but will guard against a conflict of interest on the part of the insurance company should litigation arise. If a lawsuit is filed, it is very likely that the grower, handler and retail outlet will all be named as defendant. An insurance company that insures more than one defendant in a lawsuit will treat the case as if the different clients are one defendant. This does not serve the defendants well, as their interests regarding litigation strategy and settlement possibilities may be very different.

Selection of counsel is also very important due to the specialized nature of agriculture. Although most insurance defense firms are skilled at handling auto accident claims or even general products liability, such a firm may have no experience dealing with the unique circumstances under which agribusiness operates. And when imported produce is involved, at the very least these issues will include agricultural law, international law, and products liability law relating to damages and tracing the product to its source. Each of these specialties will be equally important in such a case. Most insurance defense firms simply do not have the necessary expertise.

Unfortunately, an insurance company will generally not agree to pay more than it its customary rate to an insurance defense firm. Also, for the insurer the most important consideration is getting out of that particular case with the least cost, and often times that means making a settlement deal. This may engender a conflict between the insurance company and the grower because the grower wants to stay in business and knows that a finding of liability, or even paying a settlement that implies liability, may be a fatal blow to the company. To ensure the counsel of choice, the client may need to pay the difference between its lawyer and what the insurance company pays. It is also possible for the attorneys to work together, with the insurance attorney handling the more routine aspects of the case. Although there may be additional expense, this is justified by the increased likelihood of a positive outcome for the grower.

Finally, it is unfortunate but true that many times settling a lawsuit is interpreted in the marketplace as an admission of responsibility. Entering into an ill-considered settlement agreement can be as damaging as an actual finding of guilt. Therefore, the ability of an grower or shipper to consent to any settlement entered into by the insurance company is very important. Most insurance contracts do not give the defendant any voice in the consideration of a settlement, let alone the right to consent. Any grower or shipper should require its consent to any settlement as part of its insurance contract.

Public Relations

In the event of an outbreak, it is also important and perhaps essential to the continued business of the grower that the public receive accurate information regarding the disease and the grower’s product. Of course, the most important consideration is the health of the consumer. People should receive the best guidance regarding how to protect against food-borne illness, and how the produce industry strives to keep the public safe. However, the consumer is also entitled to a complete understanding of where the danger may have come from.

In the event of a serious outbreak, agencies such as the FDA may make blanket statements regarding a certain product, company, or growing region in the effort to protect as many consumers as possible. Unfortunately, while this effort may be well intentioned, it is not always in the best interest of the consumer, the grower or the produce industry as a whole.

To guard against a public “rush to judgement” against a particular company or product, companies must understand the publicity that will surround an outbreak. This can be accomplished in a number of ways. For example, on a larger scale, the various state and federal agencies promote programs to educate the public on the nutritional value of produce and steps that consumers can take to protect themselves.

Companies can, and should take extra steps to promote dissemination of accurate information. A personal relationship with the relevant agency is a plus. It may also be worthwhile for a company to have a public and media relations specialist either on staff, as a consultant, or through a trade association.

By maintaining a relationship between the company and agency, regional and local investigators and other representatives are more likely to provide information regarding compliance issues or the progress of investigations or recalls. Perhaps more importantly, a grower or other company with such a relationship may have more input on the release of information regarding an outbreak. Further, if the grower or other company has a reputation of following safety standards within the agency, it is less likely that the agency will make rash announcements regarding that company’s culpability in an outbreak without a thorough investigation.

Strict Liability

So, you may ask, why go through the trouble and expense involved with these suggestions? Again, the first reason is public safety. However, the legal reason is just as important to the survival of a company. In food-borne illness cases, the law may impose strict liability on anyone and everyone involved in the chain of production of the product at issue. This means that, for example, if a plaintiff can prove that an grower actually caused food to become contaminated, that grower will be liable for all resulting injuries no matter what safety measures the grower practices.

In the event of an outbreak, there is no standard of care that will suffice to protect against liability.

Why, then, should a grower do anything? Even in a strict liability case, the plaintiff must prove that a particular defendant either caused the contamination or should have prevented it from spreading. Most cases will include multiple parties, and a judge or jury is likely to lay blame on the defendants with lax sanitary standards and practices. And, with new testing methods that make it easier to trace product, it is increasingly likely that contaminated food will be traced to the grower. Therefore, the ugly truth is that the only certain way to protect a business against liability is to make sure that no contaminated food reaches the consumer. With increasingly large damage awards, the stakes are high, and just one such lawsuit can be the death knell for any company. The preventive measures described above will help reduce the possibility of food contamination and increase the likelihood that your company will not be implicated in an outbreak. This can be the difference in the success or failure of your business.

This article first appeared in Volume 1-4 of L+G’s Food Safety Newsletter, in December 2007.

< Return to Articles

Categories: Preparation