Insurer not liable in legal action over fat fed to pigs

By Aerin Einstein-Curtis contact

- Last updated on GMT

© GettyImages/ozgurdonmaz
© GettyImages/ozgurdonmaz

Related tags: Fat, Feed ingredient, lawsuit, Lasalocid, swine

A pollution exclusion in an insurance policy for Minnesota based fat recycling firm, Restaurant Recycling, protects the insurer from having to defend the feed ingredient producer in a lawsuit brought by a local pork producer over tainted feed, rules a US appeals court.

Restaurant Recycling purchases various fats, including soyoil and uses fryer grease from restaurants, which it then process, filter, and blends; it resells the recycled fats to feed mills where they are ultimately mixed with other feed ingredients and then fed to livestock.

New Fashion Pork, located in Jackson, Minnesota, sued Restaurant Recycling for providing a "defective"​ fat product, which it used in its swine feed. These fats, delivered to the pork company between August and October 2014, were allegedly contaminated with two substances, Lasalocid and the industrial waste product Lascadoil.

Lascadoil is a byproduct produced in the manufacture of the medication Lasalocid, and it is not approved for consumption in humans or in animals and is not generally recognized as safe, as stated in the court documents. Lascadoil’s only approved use is as a biofuel. Lasalocid is an ionophore agent typically used as medication in chicken and turkey feeds, a Type A medication regulated by the FDA, and it is not approved for use in swine under federal regulations, as documented in the court filings.

In a lawsuit against Restaurant Recyling, the pork producer sought refund of the payment for fat product and damages for the health issues the tainted feed reportedly caused to its pigs, according to the court documents.  

Restaurant Recycling, in turn, sued its insurer, Employer Mutual Casualty Company (EMC) in the US District Court of Minnesota, seeking a judgment that the insurer had a duty to defend and indemnify it. EMC moved for judgment on the pleadings, citing a total pollution exclusion in its policy that limited coverage in the case.

The district court found for the insurer:

“Because the underlying litigation arises out of an alleged dispersal of a pollutant, the pollution exclusion provision applies. As a result, EMC has no duty to defend or indemnify Restaurant Recycling under the insurance policy.”

The fats recycling company then appealed that ruling in the Eight US Circuit Court of Appeals.  

On April 29 this year, the federal court concluded that the total pollution exclusion applied and it affirmed the judgment of the lower court.  

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Commenting on the case, Brandon Schwartz, lawyer for Restaurant Recycling, told FeedNavigator: “This situation seemed the perfect fit for insurance coverage. If it does not cover incidents such as this, what is the point of insurance?”

One way to address a similar situation in the future could be greater severity in the penalties issued for labeling violations, he said.

“Restaurant Recycling was in receipt of the product at issue because a supplier had changed the label on the product,”​ he said of the underlying case regarding the contaminated oil ingredient. “Given the resulting harm to the animals in this situation and the harm to the businesses further down the supply chain, we were hopeful that the applicable attorneys general or relevant state departments would have stepped in – they did not.”

EMC Insurance did not respond to a request for comment by press time.

Background: Underlying case involving contaminated feed

In July 2014, a supplier used by Restaurant Recycling, Superior Feed Ingredients LLC, bought a load of soy oil with the intention of selling it for use as a feed ingredient, according to court documents.

Restaurant Recycling, unaware that the soy oil contained lasalocid, blended the soy oil with recycled restaurant grease.

Superior Feed had bought the soyoil via Glycerin Traders LLC, which purchased it from Shur-Green Farms LLC. Shur-Green reportedly bought the oil from Heritage Environmental Services LLC, which originally had taken delivery of the soyoil from Zoetis Inc, as per court filings.

Restaurant Recycling delivered the blended ingredients to New Fashion Pork several times between August and October 2014, according to court documents.

In October 2014, Restaurant Recycling issued a voluntary recall in conjunction with the Michigan Department of Agriculture and the US Food and Drug Administration (FDA).

Restaurant Recycling allegedly tested the products delivered to New Fashion and found that the product did not contain lasalocid, according to court documents.

In October 2014, Shur-Green issued a nationwide recall of soyoil containing lasalocid due to “improper labeling”​ and stating that it “may cause animal death”​ and that soyoil containing lasalocid is “only permitted for biofuels.”

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