Hunton Retail Law Resource

The CPSC this month issued notices to multiple consumer product companies explaining that the CPSC “recently discovered that nonpublic manufacturer information identifying your company by name along with product model name and/or model number was released in error to the public without following the procedures of 15 U.S.C. § 2055,” which provides procedures for and restrictions on the Commission’s public disclosure of manufacturer and product-specific information. The notice offers few details about the unauthorized disclosure’s nature or scope, raising questions about whether the released data comes from inspections, product safety investigations, recalls, consumer safety complaints or other possibly confidential or commercially sensitive information. This kind of disclosure may have a chilling effect going forward on the candor encouraged between the CPSC and regulated companies by Section 6(b) of the Consumer Product Safety Act.

Lawyers from Hunton Andrews Kurth LLP’s insurance coverage practice report on a recent recall insurance dispute:

Nebraska’s highest court recently issued a holding, in Meyer Nat. Foods LLC v. Greater Omaha Packing Co., 302 Neb. 509 (2019), that highlights the importance of obtaining adequate insurance, or requiring that another party in the supply chain obtain proper insurance, which spells out coverage for all potential recall risks. In the case, Meyer Natural Foods LLC and Greater Omaha Packing Company, Inc. (GOP) entered into a processing agreement, under which GOP agreed to slaughter Meyer’s cattle and process the beef. Under the terms of the agreement, GOP agreed to test the processed beef for the presence of E. coli. Additionally, GOP agreed that it would “maintain property insurance on Meyer Natural Angus Property in its possession, with a total value of $1,800,000.”

After processing and shipping a batch of Myer’s beef, GOP obtained test results indicating 17.5% of the shipment was contaminated with E. coli. Myer recalled the trucks of beef and filed suit against GOP, asserting various claims, including breach of contract based on allegations that GOP failed to obtain and maintain property insurance on the value of Myer’s property as required by the processing agreement. Specifically, Myer complained that GOP’s insurance policy contained an exclusion of coverage for damage resulting from E. coli. Myer argued that the processing agreement’s insurance requirements were not satisfied because the agreement did not permit the exclusion of insurance for E. coli risks.

The trial court granted summary judgment in favor of GOP, holding that GOP carried the required property insurance because the agreement did not require GOP to carry E. coli contamination coverage. In March 2019, the Supreme Court of Nebraska affirmed summary judgment in favor of GOP based on its finding that the policy language was “void of any requirements regarding the inclusion of E. coli coverage or the prohibition of exclusions contained within the insurance policy.” As noted by the Nebraska Supreme Court, courts will not “rewrite a contact to reflect the court’s view of a fair bargain,” which is something parties should keep in mind when requiring insurance for recall risks.

Total Recalls: 27

Hazards: Fire/Burn/Shock (9); Injury (5); Violation of Federal Standard (4); Choke (3); Fall (2); Death (2); Carbon Monoxide (1); Crash (1)