On December 16, 2015, a Pennsylvania federal jury found that H.J. Heinz Co. lied in an insurance application to Starr Surplus Lines Insurance, but the jury said the insurer cannot rescind the $25 million policy because it knew about the misrepresentations and sold Heinz the policy anyway.
The decision ended a trial that centered on whether Starr could avoid covering Heinz under a product-contamination policy because of company lies about its recall history on the application, Law360 reports. The jury did not address Heinz’s claims that Starr breached its duty to defend Heinz.Heinz filed the lawsuit in May, claiming Starr must cover its business interruption costs, which it has estimated could reach $30 million, stemming from Chinese authorities’ discovery of lead in Heinz’s baby cereal.
Heinz is seeking a declaratory judgment that Starr breached its contract in the $25 million-per-occurrence policy by refusing to pay for damages after China’s food control agency found high levels of lead in high-protein dry baby cereal sold there, according to Law360. The contamination was traced back to soy powder supplied by Qingdao Longhi Food Co. Ltd., Heinz said. In a counterclaim for rescission, Starr told the court that Heinz had failed to mention previous contamination incidents on its insurance application— including Chinese baby food tainted with nitrate in 2014—thereby rendering the policy null. The court decided on the insurer’s claims first.
On Tuesday, December 15, in a motion for judgment as a matter of law, Starr asked the judge to dismiss Heinz Co.’s affirmative defense or specific parts of the defense. Among the elements Starr wanted dismissed were that Starr agreed to sell the $25 million product-contamination policy even though it knew about previous contamination incidents and that Starr continued to accept premiums after it knew it had grounds to void the policy. That motion has not yet been ruled on.
The case, H.J. Heinz Co. v. Starr Surplus Lines Insurance Co., case number 2:15-cv-00631, is being heard in the U.S. District Court for the Western District of Pennsylvania.