Blue Bell listeria: Insurance doesn’t have to cover losses

NEW ORLEANS — A federal court has sided with an insurance company in a lawsuit by Blue Bell shareholders over economic losses tied to the company’s listeria outbreak of 2015, saying insurance does not have to cover the losses.

The U.S. Court of Appeals for the Fifth Circuit, a three-judge panel in New Orleans, issued the opinion Tuesday.

Their ruling affirmed an earlier ruling from the U.S. District Court for the Western District of Texas.

The ruling concluded that Discover Property & Casualty Insurance Co. and Travelers Indemnity Co. of Connecticut do not have to cover Blue Bell’s claims over economic losses 

The insurance policy covered damages due to “bodily injury” – three people died and 10 people were hospitalized – but the judges ruled that coverage does not extend to economic losses incurred by Blue Bell investors.

The Fifth Circuit judges wrote that “there is no colorable argument that the shareholder lawsuit seeks damages ‘for care, loss of services or death’ because it only seeks compensation for breach of fiduciary duties. Even the Blue Bell Defendants do not argue that there are any such damages at issue. As the Sixth Circuit observed, the inclusion of damages ‘for care, loss of services or death’ was meant to include claims ‘like loss of consortium claims by family members, and subrogation claims.'” 

Blue Bell’s 2015 listeria outbreak brought production and sales to a halt for several months, and the company had to recall ice cream that had been contaminated by the bacteria.

The outbreak caused 10 illnesses and three deaths in Arizona, Oklahoma, Kansas and Texas.

As the weeks passed, Blue Bell would lay off 1,450 workers and furlough 1,400 others (from a total workforce of 3,900). According to both the Houston Press and The Wall Street Journal, the crisis sent Blue Bell’s annual revenue plummeting from $680 million in 2014 to a projected $500 million this year – or a loss of $180 million.