Jenner & Block

Insurance Law Update: "Eighth Circuit Clarifies Level Of Public Health Risk Required To Trigger Coverage For Voluntary Food Product Recalls And Affirms Lost Gross Profits Damages"

Insurance coverage for loss arising from a voluntary food product recall is often contingent upon the extent to which the recalled product creates a public health risk.  In Hot Stuff Foods, LLC v. Houston Cas. Co., the U.S. Court of Appeals for the Eighth Circuit addressed the level of risk required to support coverage, holding that an Accidental Product Contamination policy required more than a possibility, but less than a probability, that the recalled mislabeled food product would cause physical symptoms of bodily injury, sickness, disease or death.  Policyholders should be aware that this standard may lead to a jury question, which may encourage settlement in coverage disputes but also may be a reason to reevaluate and clarify policy language.  The Eighth Circuit’s decision also provides helpful guidance to policyholders seeking to calculate and prove lost gross profits relating to a product recall.