Food industry conviction game changer and the ongoing four-pronged threat

October 29, 2015

On September 21, 2015, a federal judge sentenced Stewart Parnell, former CEO of the now-defunct Peanut Corporation of America (PCA), to a 28-year prison sentence for selling tainted peanut butter that killed nine people and sickened 714 others across 46 states. The charges stem from a 2008 salmonella outbreak that was traced back to peanut butter paste manufactured by PCA. It was the deadliest salmonella outbreak in recent years, prompting one of the largest food recalls in American history.

This case has been a serious wake-up call for the food industry.

The PCA case was the first in history to see a corporate executive convicted of felony charges in relation to food poisoning, and it highlights one of four growing threats to the bottom line of every food industry business:

1.     Food recalls are on the rise. In September, 9,000 cases of frozen corn were recalled due to a listeria scare. Days later, a salmonella outbreak in cucumbers imported from Mexico caused one death and sickened hundreds of consumers. FDA statistics on recalls, market withdrawals, and safety alerts are shocking, with some type of action being implemented against a food-related business almost daily.

2.     Courts are cracking down. As evidenced by the PCA case, courts are getting tough on deadly outbreaks, sending a strong signal to the industry that executives at the highest levels will be held accountable.

3.     Regulations are getting tougher. The Food Safety Modernization Act (FSMA) was passed in 2011, giving the Food and Drug Administration (FDA) greater leverage in preventing and battling food outbreaks, including the authority to shut down businesses that don’t comply with FSMA regulations.

4.     Science and technology are changing the game. Advances in DNA mapping have made it easier to pinpoint where contamination occurs, something that was nearly impossible to determine before. That means every player in the supply chain is exposed to potential losses and lawsuits.

What’s your action plan in case of an outbreak or recall?

With this four-pronged threat exposing you to greater risks every day, you need a solid plan in place. Follow these tips to minimize the risks to your bottom line in the event of an outbreak or recall:

  • Appoint a recall coordinator or recall committee to make vital decisions on behalf of the company.
  • Instruct all employees in the company and any partners in the supply chain on what actions to take.
  • Be prepared to alert the public whether through traditional media, social media, websites, call centers, or customer contact lists, and have a system in place for notifying regulators, insurers, and legal people.
  • Make sure your website, servers, and phone system are capable of handling increasing call volume and traffic.
  • Stay on top of labeling, recordkeeping, and tracking so you can inform consumers, vendors, and regulators what products are affected and where they are.
  • Regularly test your plan with a variety of what-if scenarios.
  • Learn from mistakes by conducting a thorough debriefing process after a recall event.

Insurance coverage for these risks is no longer optional – it’s a matter of survival.

If you get wrapped up in an outbreak or recall, costs can quickly spiral out of control – and tragically, few companies have the brand loyalty or the balance sheet to survive a serious recall event. But it’s clear the risks are greater and the stakes are higher than ever, so no matter what role you play in the food network, you need protection.

With our team of experts specializing in risk management and business insurance for food manufacturers, growers, packers, and distributors, Heffernan Insurance has the expertise to make sure you’re protected.