Many companies that purchase contamination products insurance policies believe that all of their product recall woes are covered. They could not be more wrong. These policies have been narrowly interpreted and often do not provide insurance coverage for product recalls.Windsor Food Quality Company, Ltd. v. The Underwriters of Lloyds of London, 234 Cal. App. 4th 1178 (Cal. Ct. App. 2015), pet. rev. den’d (May 20, 2015), highlights the pitfalls facing companies that make claims under contamination products policies.
Windsor Food Quality Company, Ltd. produced frozen beef products, such as burritos. It bought its beef from Westland/Hallmark Meat Company. The U.S. Department of Agriculture announced a voluntary Class II recall of Westland’s beef, and Windsor recalled its products that contained Westland beef. Windsor suffered about $3 million in recall costs. Windsor thought that it had protected itself by presciently purchasing contamination products insurance from Lloyds in the amount of $4 million. The court disabused Windsor of this notion and easily disposed of the case in Lloyd’s favor, but not for the most obvious reasons.