Proof of contamination is not a prerequisite for coverage purusant to an accidental product contamination clause in a CGL.
Successful application by the insured for a determination of whether the policy covered losses for product recall.
Premium Brands Operating Limited Partnership v. Lloyd’s Underwriters  B.C.J. No. 2061, November 1, 2011, British Columbia Supreme Court, P.M. Willcock J. (In Chambers)
Application by the insured to determine whether it had insurance coverage for a loss arising out of a recall and destruction of sandwich products.
The insured was a processor and marketer of food products. The Canadian Food Inspection Agency (“CFIA”) found that some of the insured’s meat slicers tested positive for Listeria monocytogenes. The CFIA issued a health hazard alert warning that the product “may be contaminated with Listeria monocytogenes”. The alert stated that food contaminated with this bacteria “may cause listeriosis, a foodborne illness”. As a result, the insured voluntarily removed sandwich products from the market. Subsequent testing of the undistributed samples was negative for the presence of Listeria monocytogenes.
The policy covered “Accidental Product Contamination” which was defined in the policy to include:
… unintentional contamination, impairment, or mislabelling … during the manufacture, blending, mixing, compounding, packaging, labeling, preparation, production or processing of the Named Insured’s PRODUCTS.
The definition of “Accidental Product Contamination” also included the following proviso:
… provided always that the consumption or use of the Named Insured’s CONTAMINATED PRODUCT(S) has, within 120 days of such consumption or use, either resulted, or may likely result, in: (1) physical symptoms of bodily injury, sickness or disease or death of any person(s) …
The insured argued the policy did not require proof of contamination by introduction of unwholesome or undesirable elements, but afforded coverage where there has been impairment of a product during its manufacturing. Further, the insured argued that impairment must be something other than contamination and a product may be said to be impaired if it becomes inedible as a result of an accident in the manufacturing process.
The insured argued that in order to determine whether a loss falls within coverage, it is necessary to examine the circumstances at the time the loss occurred. At the time the insured withdrew its products from the market it had not yet received results of sample testing. However, the insured knew its meat processing facility was contaminated and there was a likelihood of injury to consumers.
The insurer argued that “contamination” meant actual contamination requiring the presence of a foreign substance. In relation to the above proviso, the insurer argued that there was no coverage because the consumption of the insured’s products did not in fact result in physical symptoms of bodily injury, sickness or disease or death and there was no evidence that injury, sickness or disease or death was likely or probable if the product had not been recalled or destroyed.
The Court noted that the insurer covered product impairment that “may likely” cause sickness. The Court found the wording of the policy created significant ambiguity and thus, covered possible sickness as follows:
The wording may have been intended to cover impairment that can possibly lead to sickness. The use of the additional modifier “may” to the word “likely” is ambiguous. The phrase “may likely” may be equivalent to “possibly”. If it is susceptible of that broad reading, it should be so read. If so, coverage is afforded to losses due to contamination, impairment or mislabelling, “that has caused or can possibly cause sickness within 120 days of consumption of the product”.
The Court noted that the policy did not state when the likelihood of impairment must be assessed. If the likelihood was assessed at the time of the loss (the time of the recall order), there was coverage for impairment that was considered to be a possible cause of sickness at the time of recall.
In the result, the Court concluded the insured suffered a loss as a result of its voluntary withdrawal of product and such loss resulted from accidental impairment of its products which could cause sickness within 120 days of consumption of the product.