Metropolitan News-Enterprise


Monday, February 9, 2015


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Insurance Policy Didn’t Cover Losses From Recall Based on Contaminated Ingredient—C.A.


By a MetNews Staff Writer


The Court of Appeal ruled Friday that a policy insuring a food manufacturer against losses from “contamination” did not cover losses incurred as a result of recalling its products because they contained possibly contaminated beef purchased from a third party.

The unpublished opinion affirms a summary judgment in favor of the Underwriters Of Lloyds Of London and against the insured, Windsor Food Quality Company, Ltd., manufacturer of Jose Ole frozen food products.

Windsor incorporated in some of its frozen dishes beef purchased from Westland/Hallmark Meat Company. The meat was recalled in 2008 by the United States Department of Agriculture for fear that the cattle had mad cow disease.

In response, Windsor recalled its products containing Westland beef, sustaining a loss of about $3 million.

When Lloyds of London refused to pay under the contamination policy, Windsor brought suit in San Bernardino Superior Court.

At issue was the how the definition in the policy of “Insured Products” was to be construed. The definition was: “all products including their ingredients and components once incorporated therein of the Insured that are in production or have been manufactured, packaged or distributed by or to the order of the Insured.”

Justice Carol D. Codrington of the Fourth District Div. Two summed up the controversy:

“To use frozen burritos as an example, Windsor would propose that a frozen burrito made with adulterated ground beef is an insured product. Lloyd would counter that a frozen burrito is only an insured product if it is adulterated during or after its preparation by Windsor. Lloyds disagrees that ‘In-sired Product’ includes ingredients used to make Windsor’s products.”

She declared:

“[W]e hold the policy’s definition of what constitutes an insured product clearly does not encompass an ingredient obtained from a supplier, like the ground beef supplied by Westland. Lloyds’s policy provides coverage for insured products and an insured event. An insured event involves product contamination or tampering….Windsor must show there was contamination or tampering with its product during or after manufacture, not before Windsor began the process. In order for a frozen burrito to qualify as an insured product, there must have been contamination or tampering during production, manufacture, packaging, or distribution—not because one of its ingredients supplied by a third party was adulterated.”

Justice Art McKinster joined in Codington’s opinion.

Dissenting, Justice Jeffrey King said:

“I do not believe the majority is properly construing the policy. In my mind, the policy does not clearly and explicitly state what the majority says it does. Within the context of the present matter, the more reasonable reading of the policy is that the product, and all of its ingredients, are insured for adulteration regardless of when the adulteration occurs. Thus to the extent there are two reasonable interpretations, the policy is ambiguous and should be construed against the insurer; the summary judgment should be denied.”

The case is Windsor Food Quality Co. v. The Underwriters of Lloyds of London, E058324.


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