Two weeks ago in Foster Poultry Farms, Inc. v. Certain Underwriters at Lloyd’s, London, 2015 U.S. Dist. LEXIS 138609, 2015 WL 5920289 (E.D.Cal., Oct. 9, 2015), a California Court applying New York law found coverage under a product contamination insurance policy for a loss of poultry caused by salmonella. The Court allowed the recovery of decontamination expenses as “accidental contamination,” holding that the policyholder need only prove that there was a “reasonable probability” that consumption of its processed chicken would lead to bodily injury or sickness. In addition, the Court rejected the insurers’ arguments that the undefined term “recall” was only applicable if the loss involved the of destruction of product already in the hands of customers, and it thereby allowed recovery for a substantial amount of product still in the insured’s warehouse.
The insured was a poultry producer with a processing plant in Livingston. In October of 2013, the U.S. Department of Agriculture (USDA) notified the policyholder that it was considering suspending the assignment of inspectors to the plant and withholding marks of inspection for any chicken processed there, making it ineligible for sale. The reason was a high incidence of salmonella in the facility’s poultry products and the likelihood that they were linked to 15-state outbreak of salmonella illness. After several months during which the insured unsuccessfully attempted to rectify the problem, the USDA shut the plant down with a Notice of Suspension (NOS) on January 8, 2014. The policyholder ultimately destroyed 1.3 million pounds of chicken still in its possession, and the plant remained closed for two weeks for fumigation and implementation of a remediation program that was deemed acceptable by the government.
The insured made a $12 million claim under its product contamination insurance policy, contending that the monies expended to decontaminate its equipment were covered as “accidental contamination” and that the value of the destroyed poultry products was covered as “government recall.” The insurers denied the claim. Read more ›
The insured owned a seasonal cabin in Duck Creek that was not used during the winter months, and his practice was to leave both the water and the heat turned on. At some point during the early months of 2011, a valve under the sink in the basement wet bar failed. The consequences were discovered when the wife of one of his employees visited the building in April, 2011. According to the insurance adjuster’s report, there was “extensive mold damage throughout the house” and “[m]old upstairs on every wall and ceiling in [the] home.” Water district records showed that the policyholder’s water bill had jumped from $15 in January to $93.75 in March, but this went unnoticed because the bills were “automatically paid” by his office. 
The problematic portion of the old forms was the three-word phrase “where you reside.” The homeowners insuring agreement in the existing ISO program recited that coverage was afforded for “the dwelling on the ‘residence premises’ shown in the Declarations[.]” “Residence premises” was then defined as follows:
The insured owned a three-unit residence in Boston which was vacant in December of 2009. The heat was turned off at the time. On December 19th, records from the city’s Water and Sewer Commission showed that the rate of water usage at the property “increased dramatically” in the words of the opinion – it jumped seventeen-fold. The policyholder visited two days later on December 21st, but he did not go into any of the individual units and saw no damage. On December 28th, the Commission notified that insured of the spike in usage, and he returned to the property and found a leak under a sink in the third floor apartment and substantial water damage to the structure. 
For years, Florida courts have been seesawing between two different doctrines to determine whether there is coverage under a property policy when two perils – one excluded and one included — combine to cause a loss. Two districts of the state’s intermediate level appellate court have applied one test and a third has applied another, with the most recent decision being 
The policyholders owned a home in Alton, Illinois that was totally destroyed by “a mine subsidence event” on May 28, 2011. The contract of insurance – a Chubb Masterpiece Policy with “Deluxe House Coverage” – afforded $3,236,000 in dwelling coverage, but it excluded “any loss caused by earth movement, including volcanic eruptions, landslides, mud flows, and the sinking, rising, or shifting of land[.]” Illinois’ Mine Subsidence Act required that the insurer afford $750,000 in coverage for loss by that peril, however.
The insureds alleged that their home was damaged by sinkhole activity in March of 2011. The insurer denied, contending, inter alia, that while the contract of insurance did not expressly include or exclude sinkhole loss, it did bar coverage for damage caused by “the sinking, rising, shifting, expanding, or contracting, of earth or any other supporting, or surrounding, material.” The policyholders then brought suit. When the contract of insurance incepted, Tenn.Code Ann. § 56-7-130(b) recited that “[e]very insurer offering homeowner property insurance in this state shall make available coverage for insurable sinkhole losses on any dwelling.” It was undisputed that the carrier never informed the insureds that they could purchase sinkhole coverage, and their complaint asserted that that was a violation of the statute. 
The insured owned a commercial building in Boulder, a city which experienced unprecedented rainfall in September of 2013. On September 12th, “a violent flow of water, mud, rocks, trees, and other debris traveled down a nearby hillside [and this] knocked down a wall of the building, causing the building to partially collapse.”
In February, we reported on an Alabama federal court decision that barred an insured from recovering for employee theft where the only evidence of shortage was a comparison between computer records and a physical inventory conducted after the malefactor had been discharged. On August 6th, a unanimous panel of the Eleventh Circuit affirmed in 
The insured’s home was damaged by 2011’s massive Bastrop County Complex Fire. After disputes arose over the amount of loss, the insurer invoked the appraisal clause in the contract of insurance. The parties’ appraisers were unable to agree on an umpire, and the carrier then requested that the court appoint one. The district judge proceeded to do so, and, four months later for unspecified reasons, removed him and appointed a replacement umpire in his stead.