Insurers sue ice cream maker over coverage for listeria cases

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Insurers sue ice cream maker over coverage for listeria cases

The case stems from allegations that company officers “knowingly disregarded contamination risk and safety compliance” regulation.

Insurers have sued Blue Bell Creameries USA and other defendants in Texas Western District Court alleging that their policies do not provide coverage for a Listeria outbreak involving the ice cream products.

Alleging that their client’s policies do not provide coverage for a listeria outbreak, Travelers and Discover Property & Casualty Insurance have sued Blue Bell Creameries USA and other defendants in Texas Western District Court.

According to the complaint, over three years after a shareholder sued the officers and directors of Blue Bell for the financial ruin that befell Blue Bell in the wake of a widespread 2015 listeria outbreak, which prompted a recall, the Blue Bell Entities tendered the suit, wrongfully claiming that it was a suit for bodily injury that triggered coverage under its commercial general liability policies.

The original shareholder complaint alleges that the officers “knowingly disregarded contamination risk and safety compliance and continued the company’s production and distribution of ice cream,” despite positive test results for listeria. It also alleges that the board of directors “willfully failed to exercise [their] fundamental authority to govern management and institute a system of controls for legal compliance and safe operations of the company.”

The complaint argues that there can be no coverage under the policies because the shareholder suit is not a suit for damages because of “bodily injury,” and instead it is a suit for equitable and other relief resulting from a breach of fiduciary duty. The insurers also argue that there can be no coverage under the policies because the shareholder suit does not seek to hold any insured under the policies legally liable for damages. The allegations are that the officers and directors, in breach of their fiduciary duties, engaged in knowing and willful misconduct, which caused Blue Bell and its shareholders to suffer financial harm.

Furthermore, the complaint notes, in the event that Blue Bell could establish that the underlying suit is for “damages because of bodily injury” there would still be no coverage because any alleged bodily injury was not caused by a covered occurrence. The suit instead alleges intentional, non-accidental conduct on the part of the officers and directors.

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