Appeals Court: Insurance Doesn’t Have To Pay For 2008 Burrito Recall

(Martijn Venhuizen)

You might remember the Foster Farms Salmonella outbreak last year, which made hundreds of people sick. The company’s insurer, Lloyd’s of London refused to pay for their losses from the outbreak and following recall because the company waited a very long time before officially recalling any meat. The federal government was able to shut down poultry plants, but not recall the meat, since it wasn’t “contaminated” by any substances that you don’t normally find in chicken.

An appeals court has ruled in a similar case that also involves Lloyd’s and an American meat company. This situation dates all the way back to 2008, when 143 million pounds of beef were recalled from a plant that was found to be slaughtering cattle too sick to walk, or “downer” animals, moving them around using forklifts. Animals that are too sick to stand need to be checked out by a veterinarian and treated or euthanized, not butchered and sent to be served up in school lunches and frozen burritos.

The bad practices at this particular slaughterhouse were captured on a hidden camera by a mole working for the Humane Society of the United States, leading to the recall and a lot of consumers freaking out about mad cow disease. What Windsor Food Quality Company has been freaking out about since 2008 is their loss of $3 million when they had to recall Jose Ole burritos made with beef from the infamous Westland slaughterhouse. Windsor is now trapped in a similar trap to Windsor Farms: while meat that could have potentially come from downer cattle isn’t safe for human consumption, it’s not “accidental product contamination” or “malicious product tampering,” which is what the company’s policy covered. The burrito-maker and its insurance companies have been fighting this out since 2008.

A state appeals court in California ruled this week that Lloyd’s and QBE do not have to pay out, since while the product was contaminated and couldn’t be sold, the contamination didn’t fit the insurance policy. In its decision, the court noted:

Lloyds responds that Westland’s ground beef was not an ‘Insured Product’ under the policy and—even if the ground beef was an insured product—it was not ‘tampered with’ or the tampering was not ‘malicious.’

Lloyds Avoids Payout for Beef Recall Losses [Courthouse News]

by Laura Northrup via Consumerist