Wade Clark Mulcahy LLP

In J.M. Smucker Co. v. Ace Am. Ins. Co., No. 5:23-cv-00607, 2024 WL 1282662 (N.D. Ohio Mar. 26, 2024), the District Court for the Northern District of Ohio was presented with an insurance dispute arising from a potential salmonella outbreak affecting a “substantial quantity” of Jif brand peanut butter produced by J.M. Smucker (“Smucker”). Smucker recalled a total of 225 lots of potentially affected peanut butter but, nevertheless, thousands of claims for bodily injury were made against Smucker.

During the time of the contamination, recall, and alleged injuries, Smucker was insured under two policies of general liability insurance issued by Ace American Insurance Company (“ACE”). The insurance dispute focused on ACE’s obligation to defend and indemnify Smucker against the thousands of lawsuits brought by individuals who consumed product from the 225 recalled lots prior to the recall. The ACE policies in question were subject to a deductible or “retained limit” of $250,000 per occurrence. The insurance coverage dispute before the court was whether “occurrence” for the purposes of this retained limit referred to the contamination as a whole or to each individual lot that was contaminated. Under the argument set forth by Smucker, a single $250,000 deductible would apply before insurance coverage kicked in; under the argument set forth by ACE, a total deductible in excess of $56 million would apply before Smucker would be entitled to insurance coverage.

The court granted Smucker’s motion for summary judgment and held that only one “retained limit” (also known as a self-insured retention) applied to the claim because, under Ohio law, the so-called “cause test” provides that the number of occurrences is based on “the cause or causes of the damage or injury, rather than by looking at the number of individual claims.” The peanut butter contamination at issue before the court involved only one singular alleged salmonella outbreak, and thus the court held that one deductible or “retained limit” applied. The District Court directed ACE to reimburse Smucker for all defense costs incurred to date, as well as to defend and indemnify Smucker for the remaining active claims. As a practical matter, the court noted that a finding that each lot was a different “occurrence” and subject to a separate “retained limit” would, in effect, eliminate Smucker’s insurance coverage entirely.

Although the dispute between Smucker and ACE involved commercial general liability policies with a per-occurrence retained limit, the practical rationale for the court’s decision is likely applicable for other types of insurance. For example, if Smucker filed a claim under a product recall insurance policy, the logic set forth by the Northern District of Ohio would result in a finding that the policy’s per-insured-event retention would apply to the contamination as a whole and not to each individual affected lot of product.