Attorney: Insurers denying coverage on labelling class actions

By Jacob Bielanski | Mar 25, 2016

PHILADELPHIA - Defendants in class actions like a recent lawsuit against Tyson over its pet treats might first have to fight to have their insurance company to cover their legal costs, a Philadelphia attorney says.

Plaintiffs in a lawsuit filed in Sacramento, Calif., federal court sued Tyson over claims made on the labels of some of its products that say they were "Made in America." This claim, the plaintiffs say, is not true. 

The case, filed on Jan. 11, alleges that some of the ingredients in the company’s pet treats are actually sourced from outside of the U.S., particularly some amino acids and tapioca.

The company has vowed to fight the lawsuit. Of course, having the resources of its insurance company to pay its legal costs would be helpful to that cause.

Sandra Jones of Drinker Biddle & Reath LLP says insurance companies tend to argue that there is no “bodily injury” or “advertising injury” in truth-in-labeling claims, and deny legal coverage. If this proves to be the case for Tyson, she said, the company’s first step would be to sue the insurance provider for coverage

“So if their insurance company were to come forward and say ‘I’m sorry, this type of lawsuit is not contemplated by your insurance policy with us,’ they’re not going to provide any kind of legal counsel, or money for the settlement that might result,” Jones told the Pennsylvania Record.

“And so Tyson [would] then have to pay that out of their own pocket.”

Jones said such labeling suits are relatively new for the courts. With no law currently regulating what qualifies the term “Made in America,” it’s typically up to juries to determine whether the company caused damage as a result of its labelling.

Absent what she called “full blown” decisions in labelling cases, she said it was difficult to predict what might happen in cases such as Tyson’s.

“What that means is that companies like Tyson or whomever else can put that on their packaging because they’re not necessarily lying, absent any regulation,” Jones said.

“But that question will be left to the courts because consumers are feeling like they’re being misled.”

Currently, the FDA does not require dog treat manufacturers to disclose the source of its their ingredients.

Numerous pet food companies have faced similar legal scrutiny in recent years, after pets consuming treats made with China-sourced ingredients fell ill and, in some cases, died. Since then, the FDA has received as many as 5,000 complaints of animals getting ill after eating dog treats made in China, but sold under reputable U.S. names, such as Del Monte and Purina. This has created a market for treats that are made in the U.S.

Though consumers in the case are not alleging any harm to their pets as a result of eating the treats, damages could be awarded based on the premium paid to avoid treats made with Chinese ingredients, according to Jones.

“If people are consciously paying more for a product because they think it's safer, I think we have some kind of a problem there,” Jones said.

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