Labeling and duty-to-warn cases continue to emerge as a key area of risk for food and beverage companies. In light of this trend, food and beverage companies should make certain that they understand the nature of these potential claims, the extent to which their insurance policies may cover these claims, and the steps they may need to take to secure coverage should a claim arise.
Food and beverage companies have faced an array of labeling and duty-to-warn cases in recent years.
One of the fastest growing risks in this area stems from cases alleging violations of California’s Safe Drinking Water and Toxic Enforcement Act of 1986—better known as Proposition 65 or Prop 65. Prop 65 requires that companies provide a warning, often on the label, for any product sold in California that “knowingly and intentionally” exposes consumers to chemicals that are known carcinogens or reproductive toxins. The Prop 65 list contains over 800 chemicals, many of which occur naturally in the environment or are otherwise difficult or impossible to avoid in a product. While Prop 65 has exemptions for “naturally occurring” chemicals and a minimal level safe harbor provision, these exceptions are narrow and often not enough to help companies avoid lawsuits.
Moreover, Prop 65 empowers private parties to bring a lawsuit under certain circumstances, and a handful of law firms and public interest groups have begun to specialize in Prop 65 lawsuits. Thus, while its purpose may be laudable, Prop 65 creates a real risk that even the most responsible companies, and even ones that ultimately will be proven not to have violated the law, may need to spend significant amounts to defend against Prop 65 lawsuits.
In addition to Prop 65 claims, companies are facing a significant uptick in actions alleging their advertising or labeling is misleading or erroneous. These cases often arise in the context of claims asserting that products contain ingredients that plaintiffs contend are not properly characterized as “all natural”—such as high fructose corn syrup or processed food ingredients. Other cases allege products do not deliver promised benefits, and in particular promised health benefits.
For these reasons, food and beverage companies should look closely at their insurance policies to determine whether they have coverage should they face lawsuits or liabilities from Prop 65, labeling, or duty-to-warn cases.