Does the Peanut Corporation of America have Product Liability Insurance? The technical answer is “yes.” However, the real answer may be “no.”
Of course, the PCA has a Product Liability Insurance policy. But it may not provide any coverage because of its “intentional acts exclusion.”
It appears that the plant manager Sammy Lightsey informed the company president, Stewart Parnell, via email of a positive salmonella test. Despite that warning, Parnell instructed Lightsey to ship the products.
A commercial General Liability policy typically states that the policy doesn’t cover “bodily injury” or “property damage” expected or intended from the standpoint of the insured. It could be easily argued that Parnell and Lightsey could reasonably expect consumers to get sick or even die from the tainted product. They chose to ignore the test results so as not to see a decrease in profits.
PCA’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 Hartford, it’s more likely they’ll pay the $10 million in policy aggregate limits and wash their hands of the ugly mess.
From the carrier’s perspective, even if they could successfully deny Product Liability coverage based on the “intentional acts exclusion,” they would still pay out the full $10 million in policy limits sooner or later. Why? Consumers and retailers would sue any manufacturers using PCA products (ex. Cliff Bar and Hershey) in their finished products. Those manufacturer’s insurance carriers would in turn sue The Hartford to recover their losses.
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