Authored by industry thought leader and expert, Joe Bermudez
Perhaps a silly question until two federal courts rendered legal decisions this year, which may significantly change the risk landscape. While diving further into the implications of the Mountaire Farms subrogation decision, significant, fundamental product contamination insurance (PCI) coverage issues were raised. We questioned commonly held assumptions to raise imperative PCI wording and claim issues.
From Birth to Slaughter and Beyond – Salmonella is Natural in Raw Eggs, Poultry, and Beef
Some chicks are born with Salmonella, others may be infected while at the farm before they reach processing, as the Washington Post related in a story on the subject:
[T]housands of newborn chicks in a West Virginia chicken house huddle together for warmth. . . .
Over the next two months, these chicks pecked at the dirt, nibbled on pellets, grew up. They were packed into crates, trucked to a slaughterhouse, cut into parts and sent to a distribution center for shipment to supermarkets and restaurants.
At every step along the way, some of those chickens were infected with salmonella. . . . Invisible, tasteless and odorless, it doesn’t make the chickens sick. But transferred to humans, it can lead to salmonellosis. (emphasis added)
In other words, Salmonella is naturally found in some chickens at the start of life (and, Salmonella is also found in eggs as it is passed through the reproductive system.), before the processing stage. As discussed below, Salmonella is natural to eggs, poultry – chickens and turkey, and beef and, more importantly from a PCI perspective, is an expected element of such products by regulators, courts, and commercial and individual consumers.
Is Salmonella an Adulterant Under USDA Regulations?
As the court in Craten v. Foster Poultry Farms Inc., 305 F.Supp.3d 1051, 1058 (D. Ariz. 2018) found in early 2018,
Indeed, the Court is aware of no case finding that Salmonella on raw meat or poultry renders the products adulterated within the meaning of the PPIA or FMIA.
In other words, the products are not rendered defective by the mere presence of Salmonella. The court’s finding is significant for PCI stakeholders. The infamous Foster Farms PCI-related decision does not refute the court’s critical finding. (An issue we will further address in a future blog.). In fact, as the Craten court noted, Foster Farms expressly argued this point,
Foster Farms argues that poultry processors are authorized to sell chicken containing Salmonella because Salmonella is not an adulterant within the meaning of PPIA.
However, and importantly for our discussion, the Craten court did not end all speculation on the issue, rather it colored the discussion with a little gray. Citing Supreme Beef Processors, Inc. v. U.S.D.A, 275 F.3d 432, the Craten court advised,
Salmonella, present in a substantial portion of meat and poultry products, is not an adulterant per se, meaning its presence does not require the USDA to refuse to stamp such meat “inspected and passed.” This is because normal cooking practices for meat and poultry destroy the Salmonella organism, and therefore the presence of Salmonella in meat products does not render them “injurious to health” for purposes of § 601(m)(1). Salmonella-infected beef is thus routinely labeled “inspected and passed” by USDA inspectors and is legal to sell to the consumer.
The court raises two essential concerns. First, by utilizing the term “adulterant per se”, the Craten court and other courts, including the Mountaire Farms court, have found that the United States Department of Agriculture (USDA) will determine Salmonella is an adulterant under certain circumstances.
The USDA specifically addressed when Salmonella may be considered an adulterant in its December 2012 HACCP Plan Reassessment for Not-Ready-To-Eat (NRTE) Comminuted Poultry Products,
When NRTE poultry products are associated with an illness outbreak and contain pathogens that are not considered adulterants, FSIS likely will consider the product linked to the illness outbreak to be adulterated . . . because the product is “unsound, unhealthful, unwholesome, or otherwise unfit for human food.” In such cases, the Agency would request that the establishment recall the product if it is still in commerce.
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FSIS would not be likely, however, to consider product of the same type adulterated though it is found to have the pathogen associated with the illness outbreak, provided it was produced in other establishments that have no relationship to product involved in the illness outbreak. A determination of adulteration would be specific to the product linked to the illness outbreak and to the conditions in the establishment where that product was produced.
Both the Poultry Products Inspection Act (PPIA) and the Federal Meat Inspection Act (FMIA), prohibit the selling of adulterated poultry and meat. Both acts define the term “adulterated” in a number of ways.
The other essential concern raised is Salmonella on raw poultry and meat is expected by processors and consumers, as the court in American Public Health Assoc. v. Butz, 511 F.2d 331 (5th Cir. 1975) found nearly 50 years ago,
[T]he American consumer knows that raw meat and poultry are not sterile and, if handled improperly, perhaps could cause illness. In other words, American housewives and cooks normally are not ignorant or stupid and their methods of preparing and cooking of food do not ordinarily result in salmonellosis.
Further, as the Mountaire Farms court determined, which was fatal to Starr’s subrogation efforts,
[T]he reasonable expectations of AP can be determined as a matter of law because, as recognized by numerous courts, it is commonly known that Salmonella occurs naturally in chicken and that raw chicken can only be safely consumed after it is cooked at high temperatures.
The Impact on Accidental Contamination, Governmental Recall, and Adverse Publicity Wording and Coverages
If eggs and chicks contain Salmonella before they reach the processing stage;
If Salmonella is easily spread in farms, before processing; in slaughterhouses and production facilities during processing; and in the supply chain during distribution to the final consumer (commercial and individuals);
If the USDA and courts agree that Salmonella is natural to raw poultry and beef products, which means they are not adulterated or defective; and
If commercial and individual consumers are understood and legally recognized to have “common knowledge” of raw eggs, poultry, and beef containing Salmonella;
Under which set of circumstances is the presence of Salmonella on raw eggs, poultry, and beef, covered under Accidental Contamination, Governmental Recall, or Adverse Publicity?
The question raises a host of complex wording and claim issues for brokers, underwriters, and claim professionals.
Because of the complexity of the issues raised and to keep this blog within a shorter and digestible length, we will return to this topic shortly to further the industry’s discussion.
If you would like to discuss any of the issues raised or to be raised in future blogs, please text, email, message, or call at your convenience. Thank you for your time and consideration.
STEWART | SMITH
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