Monthly Archives: February 2009

Does The Peanut Corporation of America Have Product Liability Insurance?

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The technical answer to the question, does the Peanut Corporation of America have product liability insurance?’ is “yes”; however, the real answer may be “no”.

Of course the Peanut Corporation of America has a product liability insurance policy, but it may not provide any coverage because of the “intentional acts exclusion” in the policy.

It appears that via email the company president, Stewart Parnell, was informed by the plant manager, Sammy Lightsey, of a positive Salmonella test and despite of that warning instructed the plant manager to ship the products.

Typically, a commercial general liability policy states that the policy does not cover “bodily injury” or “property damage” expected or intended from the standpoint of the insured.  It could be easily argued that Stewart Parnell and Sammy Lightsey could have reasonably expected consumers to get sick and possibly die because of the positive Salmonella test and chose to ignore the positive test and warnings for profit.

The Peanut Corporation of America’s insurance carrier, Hartford Casualty Insurance Company, will be within their rights, in my opinion, to deny the claim. However, based on an inside source at The Hartford, it is more likely The Hartford will pay the $10,000,000 in policy aggregate limits and wash their hands of the ugly mess.

From The Hartford’s viewpoint, even if they could successfully deny product liability coverage based on the “intentional acts exclusion”, they would still pay out the full $10,000,000 in policy limits sooner or later.  All the insurance carriers of the manufacturers such as Cliff Bar and Hershey that used Peanut Corporation of America’s products in their finished products and were sued, as a result, would sue The Hartford to recover their losses.

All You Need To Know About The 2008 Peanut Butter Recall

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  • 600 people sickened by peanut butter products from the Peanut Corporation of America;
  • 8 dead;
  • 1800 products recalled
  • When company president, Stewart Parnell, and manager of the plant, Sammy Lightsey, were asked by congress if they would eat any of their own products, they pleaded the 5th Amendment right so as not to incriminate themselves;
  • Employees of the company said they would not allow their children to eat any of products associated with the plant;
  • The Georgia Dept. of Agriculture, while stating their goal was 2 inspections per year, conducted no inspections of the plant in over a year;
  • Email by the plant manager to the company president informed the president of positive salmonella test;
  • After being informed of positive Salmonella test, company president, Stewart Parnell, instructed plant manager to ship the products.

Obviously, the saying “do unto others as you would have them do unto you” never crossed the company president’s or the plant manager’s mind.

Before the dust on this tragedy has settled the direct and indirect costs associated with this peanut butter products recall will reach into the billions of dollars.  I mention this because apparently, to the officers and employees of the Peanut Corporation of America, human life only has value if it is your’s or one of your immediate family members.

10 Ways A Non-Manufacturer Can Be Held Liable As The Manufacturer

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When can a retailer, assembler or distributor be viewed as the manufacturer in courts for product liability claims?

Most retailers, assemblers and distributors of products are not aware of real degree of liability for which they are responsible.  Below are 10 ways you may be ultimately responsible for a defective product even though another manufactured the product:

  1. You rebuild or remanufacture a product for resale;
  2. You exercise control over the manufacturer such as providing product specifications;
  3. You are the successor of a manufacture of an injury-causing product;
  4. You are an employer and you modified a product or manufactured a product that injured your employee;
  5. You represent yourself as the manufacture of the product to the public;
  6. You apply your name, tradename or trademark to the product;
  7. Your advertising leads the public to believe you are the manufacture;
  8. Your sales methods leads the public to believe you are the manufacture;
  9. The seller of the product is a subsidiary or agent of the manufacture and the manufacture exercises control over the seller;
  10. You are the importer and distributor of a foreign product.

It is important that if a manufacturer makes a product for you that you clearly identify the manufacturer on a label or other markings of the product and you distinguish yourself as a distributor by “distributed by” or “made for” wording on the label or product.

Exposing Foreign Manufactures That Sell Defective Products

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The million-dollar question for many is – will the new searchable database (Section 212) provided by the Consumer Product Safety Commission hold foreign manufacturers that ship defective products into the U.S. more accountable?

Now that the CPSC requires product and package markings that contains information such as source of the product, it should be easier to identify manufactures that sell defective products.

It is my belief that many U.S. manufacturers hope the searchable database (Section 212) provided by the Consumer Product Safety Commission that publishes the name of the product and the manufacturer will impose enough of an indirect cost such as loss of consumer confidence and company credibility that foreign manufacturers looking to do business in the U.S. will have to invest more in product research and safety and therefore, even the playing field for more U.S. manufacturers to compete with regards to product pricing. 

U.S. Importers could be one the biggest benefactors of the searchable database.  Since it is next to impossible to litigate product liability issues against foreign manufacturers, U.S. importers are typically held entirely accountable for the safety of foreign made products.  By having a searchable database that quickly identifies the names of problem foreign manufactures, U.S. importers will be in a better informed and less likely to bring inferior products into the U.S. that could result in costly product liability trials and product recalls.

While the overall goal of the CPSC is to protect the U.S. public from defective products, the changes could also help U.S. manufacturers by imposing some of the same costs on foreign manufacturers for testing and product safety that they must incur in order to do business in the U.S. and it could potentially help U.S. Importers by avoiding foreign manufacturers that have a poor history of safe products.