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Insurers not liable for shareholder claim for listeria outbreak (US)


A creamery was sued by shareholders who allege that the company’s share price declined because the executives breached their fiduciary duty by continuing to allow the company to produce and distribute ice cream when knowing that some products tested positive for listeria.  The policy did not cover a shareholder lawsuit claiming financial harm but only claims for physical injury.  The argument of the company and executives that the basis of the claim was harm to customers was rejected.

The leaders of the company knew they were breaking their fiduciary duty in mishandling the outbreak.  The acts of the executive were not in their official duties during their outbreak.  The alleged acts could not constitute the execution of the defendant’s ordinary obligations in managing the company.  Coverage was denied.

It is a strange argument that a breach of fiduciary duties by executives did not amount to acts of the company.  It is correct that the intentional acts of the defendants in failing to deal with the listeria outbreak would not be covered under an insurance policy.

Discover Property & Casualty Insurance Company v Blue Bell Creameries USA Inc. case no. 1:21-cv-00487 in the US district court for the Western district of Texas


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