Are potato chips the new cigarettes?

How significant could future potential tobacco-style lawsuits be against the food and beverage industry for insurers if successful? You might want to put your soda down first.

Risk Management News


How significant could future potential tobacco-style lawsuits be against the food and beverage industry for insurers if successful? You might want to put your soda down first.

“The grim reality is that today’s children in North America are more obese than children from previous generations,” states a recent Swiss Re study conducted by Michael Clark, Carol Kreiling and Victoria Mace. “Whether through government intervention – via tax or ban – corporate initiatives or consumer activism, there are no easy solutions for this obesity epidemic. If the solution cannot be legislated, then we can be sure that it will be litigated. Underwriters must remain vigilantly informed of the risks against the food and beverage industries.”

The study reveals that the largest food and beverage companies tend to purchase a lot of umbrella/excess casualty insurance, “with total limits averaging $283.75 million in 2011,” according to AON. Many different insurance companies participate in these insurance towers and could therefore be affected by a single large loss.

“Further, most policies are written on an “occurrence” basis, covering bodily injury that takes place during the policy period,” states the study, “therefore, depending on the court’s interpretation of the specific policy language, it is possible that multiple policy years could be implicated. While insurance policies have excluded tobacco for many years, exclusions for non-toxic ingredients such as sugar are not typical.”

Approximately one-third of the world’s population are now classified as obese, with health issues related to the increased consumption of fats, sugars, oils and animal products.

The potential liability faced by the food and beverage industry is now being considered on a similar footing with the legal liability faced by cigarette manufacturers.

The effects of how sugar affects health and disease and questions whether the food industry has intentionally developed products that are addictive, raise liability concerns, states the study. (continued.)

Health advocates contend that beverage companies have increased the amount of sodium in their products so that consumers will be driven by thirst to consume more. These advocates also claim that the food and beverage industries have targeted children.

Yale’s Rudd Center for Food Policy and Obesity published a report concluding that beverage companies aggressively and disproportionately target black and Latino children for a variety of their products. The industry is also being criticized for deceptive advertising.

The Center for Science in the Public Interest (CSPI), a non-profit food health advocacy group, is the lead plaintiff in a class action lawsuit in U.S. District Court for the Eastern District of New York, claiming that Coca Cola’s ads for its sports drink Vitaminwater contain numerous deceptive and unsubstantiated claims.

The company’s motion to dismiss the case has been denied by Judge John Gleeson, who ruled that the company’s health claims may violate FDA regulations.

Just last year, U.S. Magistrate Judge Robert Levy ruled that the case could proceed as a class action and the case is still pending in the U.S. District Court in Brooklyn, N.Y.

But the Coca Cola case isn’t the first, as the first obesity lawsuit was filed more than 10 years ago.

In Pelman v. McDonald’s, plaintiffs argued the global fast-food franchise McDonald’s failed to warn consumers that its products were unhealthy and consumption could result in obesity. While the bodily injury allegations were dismissed within a year after filing, the suit did go forward on allegations that McDonald’s advertisements misled consumers.


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