KANSAS CITY, Mo. – Food industry leaders appear unprepared to protect their organizations from a growing wave of food safety claims – even though they are showing confidence in their own business standards, according to “Report on Food Processing Trends, Outlook and Directions”, published today by a national law firm Lathrop GPM.
The survey interviewed 100 executives from US agribusinesses active in litigation and risk management. Almost two-thirds predict an increase in food safety claims over the next year, with 80% saying their organizations are prepared for the increase. However, less than half evaluate their business processes with outside advice, only 57% review their insurance policies annually, and only 43% have internal risk management teams to deal with insurance issues.
“We have known for a long time that many companies do not have the resources to maintain a risk management talent pool,” said Kim Winter, partner and practice group leader in collections and consulting at Lathrop GPM. . “In an environment where food safety claims are on the rise and change is happening rapidly and in virtually every direction, business leaders should consider investing in professionals dedicated to managing risk, or at a minimum, ensure that someone within the company is designated to know what coverage they have, when policies are renewed and what types of policies and notice requirements are in place. These seemingly mundane details could mean the difference between millions of dollars in coverage and zero coverage. “
Food safety claims rise, but preparation lags
The survey was carried out in the first quarter of 2021, almost a year after the official declaration of the COVID-19 pandemic. Looking back on the tumultuous year, 60% of respondents noted an increase in food safety claims since the start of the pandemic, and only 53% expect a return to pre-pandemic operational practices.
The report found that more than 90% of those surveyed believe that the risks of contaminants are important to their business, but only a third receive advice from an outside lawyer on these risks. Notably, regulatory, legal and public pressure has increased around per- and polyfluoroalkylated substances (PFAS), otherwise known as “chemicals forever”.
“It’s good to see that contaminants are a priority, especially given the increase in litigation related to PFASs, which have been used for decades in everything from non-stick cookware to stain-resistant fabrics,” says Mara Cohara, partner and leader of the environment and tort practice group at Lathrop GPM. “PFAS will be a major target for regulators this year – and as a result, there will likely be an increase in litigation. Business leaders should seek advice on contaminants before they find themselves defending their business against such claims. “
Executives lack advice from outside advisor on critical issues
Regarding external resources, 23% of respondents say they use insurance brokers rather than outside lawyers to challenge denials of coverage. Thirty-seven percent said they rely on outside lawyers for these matters, but most do not receive advice from lawyers on important issues, including the resolution of insurance claims, environmental practices and regulations, contaminant risks and food safety issues.
“An outside lawyer may not be crucial for every insurance claim, but there are certainly instances in food processing where obtaining coverage may be considered a fiduciary duty, such as with questions mass food security, ”said Nancy Sher Cohen, partner and leader. in the recovery and insurance advisory group of Lathrop GPM. “In these cases, processors need not only advice, but strong and competent advocacy as well – something they cannot get from their brokers. “
Other key findings:
- Thirty-three percent of respondents agreed, and 43% strongly agreed, that COVID-19 consistently has an impact on their company’s approach to worker safety.
- The most food safety risks of concern to respondents were changes in food production and technology (67%) and the threat of foodborne illness (59%).
- Seventy-one percent think they have adequate insurance coverage and know how to get the most out of the coverage to mitigate risk. But only 43% have internal teams to handle insurance claims.
- Forty-six percent have filed more than 10 insurance claims in the past year and 70% have filed at least one. But 36% did not dispute the denials.