A recently proclaimed First Circuit government underlines that a well-negotiated insurance policy can cover claims for which state law has no cure. I Starr Surplus Lines Ins. Co. v. Mountaire Farms Inc. Starr Surplus Lines Insurance Company insured AdvancePierre Foods Inc., a manufacturer of ready-made lunches and sandwiches. In 2015, a number of salmonella outbreaks were linked to chicken in AdvancePierre's products, which led AdvancePierre to recall more than 1.7 million pounds of chicken. The recall cost AdvancePierre over $ 10 million, which Starr is subject to AdvancePierre's Product Pollution Policy.
Due to its subrogation rights, Starr AdvancePierre's chicken supplier, Mountaire Farms Inc., sued for warranty and strict product liability in the Maine State Court. After Mountaire removed the case and moved to dismiss, the District Court dismissed Starr's complaint and claimed that Starr failed to substantively claim that the current raw chicken was "defective" according to Maine's law.
Upon appeal, First Circuit confirmed. The court ruled that, according to Maine's law, Starr's breach of warranty and product liability claimed that the recalled chicken was "defective". Referring to the Maine law, the court acknowledged that "raw chicken containing salmonella that can be eliminated by proper cooking cannot be considered defective." Some special reasons why proper cooking would not have eliminated the string, the first circuit held that the chicken was not defective. As a result, Starr could not enter a claim and could not recover in subrogation for the amounts paid under the insurance policy. Decisions have an important reminder for policyholders: Trade policy can and should normally cover claims, even when they are allegedly finding no protection in state law. gives rise to an action that can be invoked by law or in equity. In the negotiation policy, the insured should strive to achieve the greatest possible coverage. And when confronted with a loss, policyholders should be guided by the terms of their coverage and not by the outlines of the state law, which can often be narrower or contain more rigorous evidence.