Creamery in Listeria Outbreak Argues Potential Coverage Triggers Duty to Defend

Remember that listeria outbreak at Blue Bell Creameries Inc. a few years ago? The 2015 outbreak resulted in three deaths, 10 hospitalizations, and $17.25 million in damages. Well, Blue Bell is now urging the Fifth Circuit to overturn a Texas district court’s finding that its carriers had no duty to defend the ice cream maker in a shareholder suit following the outbreak.

Blue Bell argues the lower court failed to focus on the lawsuit’s core factual allegations, but instead improperly focused on the shareholder’s legal theories. Blue Bell also claims the lower court incorrectly found that the named directors and officers didn’t qualify as insureds under the commercial general liability policies, and that the claims of breach of fiduciary were not “because of” bodily injury. Although the suit alleges intentional conduct, Blue Bell argues that the district court ignored the policies’ definition of “occurrence” and included “repeated exposure to…harmful conditions.” Blue Bell argues there are different types of breach of fiduciary duties—breaches resulting from an executive acting in self-interest versus one who breaches his fiduciary duty while making a business decision. Because all the acts or omissions were part of performing ongoing operations, Blue Bell urges these are at least potentially covered, thus triggering the duty to defend. Moreover, the ice cream maker underscores that the underlying lawsuit does not make sufficient allegations that the listeria outbreak was an expected consequence of the executives’ alleged actions. Further, the claims of breach of fiduciary duty are still “because of” bodily injury, even though the suit does not seek damages directly from a bodily injury claim.

So, who will prevail in this icy coverage battle? Stay tuned—the Fifth Circuit will have the scoop.   

Discover Prop. & Cas. Co. v. Blue Bell Creameries USA, Inc., No. 1:21-CV-487-RP, 2022 U.S. Dist. LEXIS 176821, | __ F.Supp.3d __ (W.D. Tex. Aug. 22, 2022)