I.I.I.: Mad Cow Raises Tort Issues
NU Online News Service, Jan. 2, 12:15 p.m. EST?The discovery of a Holstein infected with mad cow disease last month could have "far-reaching insurance ramifications" and tort-related exposures for the U.S. property-casualty insurers, the Insurance Information Institute forecast.[@@]
The New York-based Institute in a statement predicted that legal actions would "undoubtedly ensue" if the mad cow-infected meat is found to have entered the food supply. But the Institute noted that personal-injury cases would not be an immediate cause for concern, since nobody has yet become ill and the latency period for Creutzfeldt-Jakob Disease?the human form of this illness?can be lengthy.
Plaintiffs still could argue, however, that they have suffered emotional distress from consuming tainted meat.
But the more likely and immediately obvious avenue for a tort case would be negligence, according to the Institute. "The argument could be made, if the tainted meat reaches the food supply, that the farmer, meat packer, processors, feedstock supplier, retailer/restaurant etc., were all negligent and caused?or suffered?economic damage."
In such cases, there would be lawsuits filed by these parties against each other and against outside parties.
The products-liability issue right now probably is most relevant to the feedstock supplier, since cows usually are infected by consuming tainted feedstock containing ground-up organs of other cattle. "Litigation could be expected to erupt over this," the Institute forecast.
Other potential types of insurance coverage include animal-mortality and product-recall insurance, but these are unlikely to have significant impact, the Institute predicted.
For animal-mortality coverage, insurance would cover the market value of cattle in government-enforced slaughter. But such coverage usually is taken out only on special livestock of particularly high value, such as prize stud bulls, so penetration is low relative to the population of cattle.
Additionally, product-recall coverage rarely is purchased, even though costs of a recall can be considerable. The Institute observed that there was some interest in this coverage following the European outbreaks of mad cow disease, but that interest has declined in recent years.
The Institute also noted there would be no exposure under business interruption, since this coverage requires physical loss or damage to insured premises as a result of a covered peril.
"The fact that a grocery store, meat packer, butcher shop or restaurant would have to close or might lose business as the result of the mad cow outbreak does not fit the definition of physical loss or damage," the Institute said. Even forced closure by government authority doesn't apply, since there still needs to be a covered peril to trigger the closure and mad cow infection does not count as covered peril.
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