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Home / Insurance / Revocation and Recovery: Georgia Court Denies Insurer's Early Motion to Avoid Claim Claims Arising from $ 51 Million Product Recall Disputes

Revocation and Recovery: Georgia Court Denies Insurer's Early Motion to Avoid Claim Claims Arising from $ 51 Million Product Recall Disputes



A federal judge has denied an insurance company's request to deny a claim from another insurance company claiming compensation and grants for the $ 15 million it paid to settle underlying claims arising from a product recall.

In May 2016, Grain Craft, an independent milk mill, voluntarily revoked certain flour orders that were contaminated with trace amounts of peanut protein. Grain Craft's customers claimed the company and its insurance companies and claimed compensation for 'property damage' caused by incorporating the contaminated flour into their products. The insurers covered customers' claims under two separate insurance towers, including several general liability, umbrella and surplus policies. A redundant insurance company, Travelers, paid $ 1

5 million to settle various revocation-related claims. Travelers then filed a complaint against the other insurers to recover their $ 15 million payment, claiming that the other insurance companies did not properly exhaust their insurance limits and were unfairly enriched by the travelers' payment. the two insurance towers, moved to dismiss Travelers' complaints for failure to state a claim. North River characterized Travelers' accusations that North River was "unfairly enriched" and that travelers had the right to reclaim their payment as "decisive statements without actual improvements" as "not entitled to the assumption of truth." More specifically, North River argued that the traveler's naked accusations were due to the fact that North River could not be held liable for fair contributions because it "sits on top of travelers" and therefore had no obligation to pay the revocation claims unless and until travelers had first exhausted their borders. [19659003] Following a virtual oral argument, the judge rejected North River's motion for dismissal and found that there could be a legal basis for the recovery claim. The judge ordered the parties to participate in mediation within the next 60 days and continue with the discovery. The judge reportedly expressed skepticism about the viability of Travelers' unfair enrichment claims, but concluded that the discovery would reveal each insurer's responsibility to distribute the current settlement payments.

Insurance coverage for product recall damages can come from various sources. Companies can purchase stand-alone recall policies, which usually cover the cost of shipping, storage and disposal of recalled products, the cost of damage caused by pollution, loss of profits due to the call and other types of rehabilitation and crisis-related expenses. However, revocation coverage can also come from "traditional" policies, such as commercial public liability and umbrella policies, which can be triggered by allegations of "bodily harm" or "property damage." For example, Grain Craft's customers triggered coverage under the company's liability policy by claiming property damage when customers incorporated contaminated four into their products.

In the Grain Craft dispute, insurers took appropriate action by first protecting the policyholder to settle the underlying claim and then pursuing various legal and fair claims with each other in an attempt to apportion a loss. North River's position that generic allegations of unfair enrichment and the right to recover insurance payments were insufficient to state a claim was remarkable, as it is often the policyholder who makes these arguments to challenge the insurance companies' recovery. The surplus in this case failed, at least until the discovery was completed. We will continue to monitor this interesting recall dispute for further development.


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