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Foster Farms Recalls Chicken, Sues Insurer for Rejecting Claim

Jan Lee
Jan Lee | Monday July 14th, 2014 | 17 Comments

Foster_Farms_chickenFoster Farms has a problem, a big problem.

No, it isn’t its long-standing battle with Salmonella Heidelberg infections in the chicken in its processing centers, or the ongoing investigations by the U.S. Department of Agriculture, whose enforcement arm announced a recall of Foster Farm chicken the day before the Fourth of July holiday.

Its looming problem is with its insurance carrier, which is refusing to accept a claim for the $14.2 million that the manufacturer says it has lost from tainted chicken.

According to Lloyds of London, which insured the poultry manufacturer, Foster Farms’ losses don’t fit the profile for a compensatable claim. But the interesting thing about this story is the wide spectrum of interpretations about just what has happened over the past 16 months and why Foster Farms is left holding the bag.

According to a letter from the USDA  to Foster Farms dated Oct. 7, 2013, the agency advised the company that it planned to “withhold the marks of inspection and suspend the assignment of inspectors at the three facilities in California unless the firm submitted plans to prevent the persistent recurrence of salmonella contamination.” In the letter, the FSIS warned Foster Farms of its responsibility to ensure that its product was not “adulterated.”  But it didn’t actually ever say that Foster Farms chicken was adulterated.

The U.S. Poultry Products Inspection Act, says the letter, “provides FSIS (Food Safety Inspection Service, the USDA’s enforcement arm) program personnel the authority to refuse to allow poultry or poultry food products and meat or meat food products to be labeled, marked, stamped, or the sanitary conditions of any such establishment are such that product is rendered adulterated, and provide definitions for the term ‘adulterated.”

It continues with this warning by saying that the Livingston, Calif. plant “has been implicated as a producer and supplier of poultry products associated with this ongoing Salmonella Heidelberg illness outbreak. As a result, on Sept. 9, 2013, FSIS initiated intensified salmonella verification testing of various poultry products at this establishment, as well as three other Foster Farms establishments (Establishment 6137 in Livingston, Calif.; Establishment 7632 in Fresno, Calif.; and Establishment 6164A in Kelso, Washington).”

The “intensified testing” confirmed that salmonella was found both in one or more of the processing plants as well as in the products.

Yet four days later, Daniel Engeljohn, USDA’s assistant administrator for FSIS field operations, went on record saying that the FSIS found no evidence of adulterated product, and therefore did not ask for a voluntary recall.

“[The FSIS’] decision was that we did not believe the product being produced in the marketplace was adulterated, which would be what we would have to conclude to have it removed from the marketplace,”  Engeljohn said in an interview with Meatingplace.com.

In the end, the USDA may not have done Foster Farms any favors by not ordering a recall, either when the salmonella was first detected, or in January 2014, when FSIS ordered the Livingston plant closed due to cockroaches. When the company attempted to file a claim with Lloyds, the insurance carrier rejected the claim because no recall had been initiated, even though the plant had been closed by FSIS due to infestation.

“We agree that ‘recall’ is not defined within our policy, however to attempt to expand the definition of this word beyond the common meaning is clearly misguided and we do not agree that any ambiguity exists,” said Jonathan Kelly, claims manager for Lloyds’ underwriter XL Group.

Foster Farms calls the decision an “exceedingly narrow definition of the word ‘recall,” and has launched a suit against Lloyd’s underwriters for $12.5 million.

One of the issues at the heart of this debacle is the USDA method of determining that a recall is necessary. In its letter, it painstakingly lays out the steps it took to determine that the antibiotic-resistant form of salmonella was in the product that consumers had bought.

“The majority of case-patients reported chicken consumption prior to illness onset; among those with brand information, 80 percent reported consumption of Foster Farms chicken during case-patients’ interviews,” notes the letter. “A high proportion of case-patients were hospitalized. Foster Farms has been implicated as the producer and supplier of poultry products associated with an ongoing Salmonella Heidelberg illness outbreak in several states.”

Yet determination that a recall was necessary did not come until the agency was able to definitively link the poisoning to the case of a 10-year-old child who had been hospitalized for food poisoning in June. The USDA then announced a Class I recall, which is done when the USDA feels “there is a reasonable probability that the use of the product will cause serious, adverse health consequences or death.”

Whether Foster Farms wins the suit against XL Group et al, it may still be in for more litigation. At least two different lawyers have announced that they are interested in speaking with consumers who were sickened from tainted Foster Farms meat.

For its part, the company says it has attempted to caution consumers of the importance of washing their hands and notes the apparent failure of many to do so when handling raw chicken. It sponsored  a study by a UC Davis expert that shows that many consumers can potentially contaminate their food by not washing their hands often enough.  Unfortunately, while the study reiterates some pretty important standards for safe handling of raw meats, its lessons may well fall on deaf ears. After 600 cases in 29 states and evidence of infection in more than one plant, consumers may be less worried about whether they should wash their hands than whether they can risk buying chicken from Foster Farms — at all.

And with the news that the USDA’s recall only extends to three days of production in March 2014, the agency may find that consumers’ growing loss of faith extends well beyond the company label on their supermarket shelves.

Image credit: Public Domain/Dnor


▼▼▼      17 Comments     ▼▼▼

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  • Nic

    so let me get this straight, the chicken company has plants that routinely distribute contaminated material, the USDA finds this, and tells them, but initially leaves it up to the company to determine whether they want to do a recall or not instead of forcing one (because, despite claims that we are over regulated, we clearly don’t have enough regulation in some areas), the company chooses not to do a recall, and now wants to sue their insurance agency for not compensating them.
    That sounds like negligence to me, and unless i’ve misunderstood something here, I really hope they loose that case and aren’t covered.

    • J_N_Lee

      Thanks for your comment, Nic. Yes; I think the company would summarize it differently, but it does make you wonder for several reasons why there was never a recall if the problem was bad enough for the company to try to file for having lost money due to salmonella.

      • itzsm00th

        They weren’t trying to file for having lost money due to salmonella, it says they were filing because their plant was shut down due to cockroach infestation. They filed a claim with their insurer which was rejected because there was no “recall”.

        • J_N_Lee

          Thanks for your comment itzsm00th. Yes, in the strict interpretation of the insurance underwriters, that’s true. But the company’s frustration with this matter was that it felt the insurance co’s decision reflected an “exceedingly narrow definition of the word ‘recall,” which means FF must have felt its shutdown and loses could be claimed as part of a “recall.” And they did note that the cost due to the salmonella was part of that tremendous loss they sustained. No doubt they incurred costs when Costco had to recall chicken in 2013.

  • Doug bananaboy

    animal foods are …… for dogs wolves cats etc ……they have the powerful stomach acid to kill off any bad bugs

  • Oklahoma Sam

    Ah yes, industrial meat. All of these giant meat companies are filthy. Do the world, and yourself a favor and don’t give these companies money. If you eat meat, spend the extra few bucks at a proper butcher or farmers market where you know a thing or two about where it’s coming from.

  • Mike M

    Who’s up for Buffalo Wild Wings tonight?

    • MOM

      I am

  • wtf0804hydroponics

    You would think the company would do a recall on it’s own if it knew chicken was contaminated, this falls under Foster Farms fault for not doing anything about it.
    You snooze you lose.

  • Chris Penoyer

    i eat foster farms chickien 2-3 times a week and never get sick. why? cause i COOK it.

  • nobocan

    In the County I live in there are over 100 Chicken Ranches raising some 500,000 chickens each month. Each Facility averages a half a dozen 300×50 air conditioned chicken houses. You cannot enter these Ranches without permission They all have signs up at the Gate stating that “This is a disease free facility. Visitors are NOT Welcome” and the proverbial “No Tresspassing” signs generously posted about their property. I have spoken with a few of these Ranchers at church and they are worried about all these animal diseases suddenly showing up around the Country except for those infecting Beef. Chickens and Pork appear to be a target and they have their suspicions, so they have Security Features about their Farms to warn about anyone tresspassing. Cameras and Silent Alarms and very bright Spot lights making the Ranches daylight bright at 0200 in the morning. They have workers who have had a background check and have Food handling Certifications and are required to step into a clean room and where Clean clothing and wash their feet in a chemical solution so nothing enters the area the chicken roam in. Though the “Animal people” dislike this method it keeps the chickens healthy and free of disease, so too bad fo them, but they are a big problem and if the Animal people got their way, there would be more diseases running rampant through these facilities and Ranches.. The Chickens are usually contracted to a bigger Company who supplies the Feed and the Vaccinations required by the Federal Government as well as having to follow all sorts of rules and regulations that forces some Ranchers to maintain a tight ship…Which nobody really complains about..So the quesiton is just how are these diseases reaching the Chickens? Via the Feed? The water? nobody is really sure. The Contracted company arrives and loads the chickens into cages and then unto a truck for a trip to the processing plant. Now between the Ranch and the Processing plant where is the Chicken picking up the Salmonella?? that is the big question. I know many of the processing plants encourage the illegal immigrant law breakers to come to this area and many of the plants do not have anyone in them who speaks english other than the Supervisors…If you know anything about the health habits south of the border one might suggest that the Salmonella problem originates from there and those who come from there since it a common disease down there. So I was wondering why the FDA does not turn over their Investigations to the FBI for there are a number of questions about what is going on in reality in the Chicken and Pork production businesses…

  • Phil

    All poultry can have contamination… it’s from the slaughter and processing. The USDA allows this unless there is a health outbreak as there was. That’s why the recall was voluntary. There is no perfect slaughter process.

    • J_N_Lee

      Maybe so, but do you think it could be improved?

  • 20pizzapies

    Slaughterhouses and processing plants are filthy , workers are pressured to be fast and faster , not to mention many are illegals with no knowledge or compunction to observe fiood safety rules . You get what you pay for people , and the only thing anyone who eats chickens or eggs can do is wash your hands after handling , do not place any other food on surfaces where raw chicken was present , cook chicken well and don’t eat undercooked eggs . Food safety will always take a back seat to profits , it’s the American Way .

    • J_N_Lee

      I see your point. But in this case, it looks like it didn’t turn out as would have been expected for the manufacturer under those “guidelines.” So maybe there is a way to bring about change.

      • 20pizzapies

        In the Nordic countries E-coli infections are rare .Cattle is slaughtered at about the rate of 7 per hour whereas here in the US , that figure is closer to 25 or more per hour . It is clear what the remedy is , just as it is clear what is causing E-coli contamination in the slaughter-process .As to processing beyond the slaughter , there is not nearly enough inspection to ensure that the filth that is commonly found in food processing plants will be eliminated . In this country we resent regulation , we abhor higher cost and lower bottom line .If you can think of a solution , keep in mind that our legislators and lawmakers , those who can facilitate such change will be lobbied [bribed] by the special interests to do little or nothing . There once was something called a “social contract ” that was taught in business schools , that has been replaced by greed and avarice . The back and forth between the Insurance Co. and the Operators is really irrelevant ,and the confusion over what should or shouldn’t be recalled is strictly political at its base . Although DEATH[S] usually speeds the process . The trick here being , making sure that the DEATH[S] does not involve You or I .

  • T Bailey

    I GOT SALMONELL FROM FOSTER FARMS CHICKEN ON JULY 4 2014!!!!! AND HAVE GOTTEN NOWHERE WITH THIS FOSTER FARMS COMPANY. MY HUSBAND AND I WERE SICK FOR 5 DAYS, AND NOW AM HIRING AN ATTONERY BECAUSE FOSTER FARMS KEEP GIVING US THE RUN AROUND. I WANT MY MEDICAL BILLS AND MEDICATION PAID FOR, THEY CAN’T TAKE BACK THE SICKNESS WHICH I THINK THEY OWE US FOR, SO KNOW I WILL LEAVE IT UP TO ATTONERIES TO TAKE CARE OF, SINCE THE IDOTS ON THE PHONES FOR FOSTER FARMS JUST KEEP BLOWING SMOKE AT US……I WILL TELL PEOPLE EVERYDAY NOT TO BUY FOSTER FARMS PRODUCTS AND MAYBE IF PEOPLE STOP BUYING THEIR POISION THEY MAY GET IT………..PLEASE DONT BUY FOSTER FARMS PRODUCTS!!!!!!!!!!!!!!!!!