(CN) - For insurers to cover a sandwich recall, jurors must find that tiny amounts of mistakenly added MSG could have made someone sick, the 8th Circuit ruled.
Hot Stuff Foods makes sausage breakfast sandwiches at its facility in Shakopee, Minn., using sausage that does not contain monosodium glutamate (MSG).
It also distributes an MSG-filled sausage from a Sioux Falls, S.D., facility.
In January 2011, Hot Stuff discovered that it had accidentally used Sioux Falls sausage in making its breakfast sandwiches, but the labels did not disclose that the sandwiches contained MSG.
The company immediately reported the error to the Food and Drug Administration, and voluntarily recalled 193,507 cases of the mislabeled sandwiches.
It then sought indemnification from its insurer, Houston Casualty Co., for accidental product contamination, but the insurance company denied coverage.
A Sioux Falls federal judge found that the recall was covered under the policy, and a damages trial ended with a jury awarding the sandwich maker $755,000 for recall expenses, plus $200,000 for lost profit.
The 8th Circuit ruled Monday, however, that the court improperly granted summary judgment on whether 0.06 to 0.13 grams of undisclosed MSG in Hot Stuff's sandwiches "resulted, or may likely result in" physical symptoms of injury of illness.
While the FDA classified MSG as a "safe" ingredient in 1959, many scientific studies have found that some people have negative reactions to MSG, including headache, nausea, chest pain and hives.
Hot Stuff's expert testified that some people have reactions to levels of MSG as low as 0.5 grams, but HCC's expert said that the mislabeled sandwiches were not likely to make anyone sick.
Consumers wolfed down 150,000 cases of the mislabeled sandwiches before the recall, with no reported incidents of illness.
"Unless the District Court determines on remand that summary judgment is appropriate based on the full trial record, the coverage question must be submitted to a jury," Judge James Loken wrote for a three-judge panel.
The St. Louis-based federal appeals did uphold the jury's finding on lost profits, fining the issue "distinct and separable" from the question of coverage.
"Hot Stuff presented evidence that the recall crisis forced employees to delay the introduction of new products and frustrated critical marketing efforts. If believed, that was evidence of a 'direct' causal connection," - and the jury did believe it, Loken said.
Hot Stuff's request for attorneys' fees was also properly denied, the court found.
"At the end of a hard-fought damage trial, HCC argued to the jury that only fifty-five percent of the claimed recall expenses were reasonable and necessary, and none of the claimed lost gross profits should be awarded," Loken wrote. "We agree with the district court this did not turn HCC's failure to offer to pay the 'uncontested' amount into a vexatious 'refus[al] to pay the full amount of such loss.'"
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