Blue Bell Says Insurers Must Defend Shareholders in Listeria Lawsuit

Blue Bell Creameries Insurance Lawsuit Overview:

• Who: Blue Bell Creameries says insurers must cover the company in lawsuit with shareholders.
• What: The ice cream makers say the Travelers units must defend executives as damages stem from injuries to customers, which are covered in its insurance policies.
• Where: The lawsuit is pending in Texas federal court.

Two Travelers units breached their obligations under their insurance policies by refusing to defend Blue Bell Creameries’ executives in a lawsuit stemming from a listeria outbreak, the ice cream maker has argued.

Discover Property & Casualty Insurance Co. and Travelers Indemnity Co. of Connecticut must defend the company in the class action lawsuit filed by shareholders as the investor losses are due to bodily injuries to customers, which are covered by the policies, Blue Bell Creameries told a Texas federal court.

“Without the bodily injury to consumers, the financial injury to [shareholders] would not have happened. These allegations are sufficient to trigger the duty to defend,” Blue Bell argued.

In June, the Travelers units filed a declaratory action to avoid covering Blue Bell in the 2017 shareholder suit. The companies argued they are not liable to cover the lawsuit as the shareholders claim the company executives breached their fiduciary duties by failing to adequately oversee operations or investigate potential hazards, adding that the shareholders allege the leadership knew about issues and did nothing after samples tested positive for listeria as far back as 2013, Law360 reports.

However, Blue Bell argued that Texas courts have “long held that even intentional acts may constitute an occurrence that results in covered bodily injury or property damage when the damage itself is not intended or expected by the actor.”

Blue Bell Claims Insurers Breached Their Contract, Should Be Liable For Damages

Blue Bell also argued that because the insurers breached their earlier policies, they were also liable for an unspecified amount of damages.

“Because the undisputed facts show a potential for coverage and also that at least some of the claims in the underlying suit fall outside of the named exclusions, plaintiffs are obligated to defend the entire suit,” Blue Bell argues. “They have refused to do so, they have also breached their contract and are liable to Defendants for damages and other relief.”

The 2015 listeria outbreak, which caused three deaths, spurred mass product recalls from the U.S. Food and Drug Administration and Centers for Disease Control and Prevention.

Last year, Blue Bell paid $17.25 million in criminal penalties after it pled guilty to two misdemeanor counts of distributing adulterated ice cream products — the largest ever criminal penalty following a food safety conviction, Law360 reports.

This month, cold meats company Alexander & Hornung had to recall 234,391 pounds of its fully cooked ham and pepperoni that was shipped nationwide due to fears of listeria contamination.

In a recall notice posted by the U.S. Department of Agriculture’s Food Safety and Inspection Service (FSIS), the Michigan-based company and business unit of Perdue Premium Meat Company, Inc. says so far there have been no confirmed reports of illness due the possible listeria contamination, which was discovered in product sampling.

Are you a Blue Bell ice cream customer? Let us know if you remember the company’s listeria outbreak in the comments section below!

Discover and Travelers Indemnity are represented by Amanda Laviage Goldstein, J. Stephen Barrick, James R. Old and Courtney E. Ervin of Hicks Thomas LLP.

Blue Bell is represented by Douglas A. Daniels of Daniels & Tredennick LLP, and Jesse J. Bair and Timothy W. Burns of Burns Bowen Bair LLP.

The Blue Bell Creameries Insurance Lawsuit is Discover Property & Casualty Insurance Co. and Travelers Indemnity Co. of Connecticut v. Blue Bell Creameries USA Inc. et al., Case No. 1:21-cv-00487, in the U.S. District Court for the Western District of Texas. 

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