![]() However, here, Blue Bell sought coverage for the shareholder suit under its commercial general liability policies, which traditionally do not respond to those kinds of demands. This is different because shareholder suits like those faced by Blue Bell usually implicate directors and officers (D&O) liability policies. For one, the decision centered around the interpretation of “occurrence” in commercial general liability policies. While product recalls often raise insurance issues, the Fifth Circuit decision is noteworthy. Rather, there were allegations that the officers “knowingly disregarded contamination risk and safety compliance” and “willfully failed to exercise their authority.” In addition, the complaint alleged facts “showing that the Listeria outbreak and the attendant financial harm could be reasonably anticipated.” Thus, the court affirmed the district court’s determination that there was no “occurrence.” The parties agreed that the duty to defend only applied where the “bodily injury” or “property damage” was caused by an “occurrence,” which was defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The Fifth Circuit stated that, “nder Texas law, a person’s act is not an accident ‘when he commits an intentional act that results in injuries that ordinarily follow from or could be reasonably anticipated from the intentional act.’” Here, the court noted that the complaint contained no allegations that the officers were acting involuntarily. Blue Bell appealed the decision and the Fifth Circuit recently affirmed the district court’s determination, agreeing that the shareholder lawsuit does not stem from an “occurrence.” ![]() The district court granted summary judgment in favor of the insurers based on three separate grounds. To recap, Blue Bell’s insurers asked a Texas federal court to determine whether they had a duty to defend or indemnify the ice cream company in the shareholder litigation. We previously reported on Blue Bell’s action against its insurers. Blue Bell sought coverage for the defense costs incurred from the lawsuit. ![]() According to the shareholder lawsuit, the officers’ actions “resulted in a Company-wide failure to maintain standards and controls necessary for the sanitary and safe production and distribution of the Company’s ice cream products.” That failure led to the contamination, the bodily injury, and, ultimately, the economic impact. In 2017, a shareholder filed a derivative action, alleging that the company’s executive officers breached their fiduciary duties. In 2015, a Listeria outbreak caused bodily injury to a number of Blue Bell’s customers, resulted in a nationwide recall of Blue Bell products, and triggered the share price of Blue Bell’s stock to drop. ![]() The decision underscores the importance of coordination of different coverages and policies across insurance programs, as well as the potential perils policyholders may face if forced to seek recovery for certain losses under non-traditional policies. The Fifth Circuit recently held that Blue Bell Creameries’ commercial general liability (CGL) insurers do not have a duty to defend the ice cream company in a shareholder lawsuit, which arose from a Listeria outbreak. ![]()
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