(CN) - Fresh Express salads cannot keep a $12 million award from its insurers to compensate for lost business caused by a 2006 E. coli outbreak, a California appeals court ruled, ironically because the produce company did not unleash the virus.
Bagged spinach vanished from grocery store shelves all over United States after the Food and Drug Administration issued a no-consumption advisory after one person died amid 50 reports cases of life-threatening E. coli virus in September 2006.
After two weeks, the FDA announced that Fresh Express was not a source of the outbreak.
After Beazley Syndicate denied an insurance claim Fresh Express submitted, the produce company took Beazley to court and won a $12 million award.
A Monterey County judge ruled that the E.coli outbreak was an insured event that triggered Beazley's liability under the policy.
On appeal, Beazley argued that its policy covered an accidental contamination of Fresh Express' product, which did not happen. It claimed the E. coli outbreak was not covered under the insurance policy.
The San Jose-based Sixth Appellate District agreed Tuesday.
"Only three insured events are covered by the policy, and the only insured event at issue here is accidental contamination," Justice Nathan Mihara wrote for the court.
"The policy also explicitly excludes from recoverable losses any expenses incurred by Fresh Express or any loss of gross profit for any reason other than as a direct result of an insured event," the 29-page decision states. "Hence, the only recoverable losses are those which are the direct result of an error by Fresh Express."
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