The law requires that goods sold by a company be free from safety defects. Food poisoning generally falls under the category of defective product liability, because a client (the restaurant) sold a defective product (food) that injured a diner.

Food poisoning and allergic reactions are a major source of food-related risks for restaurants. For example, in 1977, one of the largest botulism outbreaks in U.S. history occurred in Michigan, when 58 customers of Mexican restaurant Trini & Carmen's suffered food poisoning caused by hot sauce that was made from improperly home canned jalapeño peppers.

In another case, an outbreak of hepatitis A at a Pennsylvania restaurant caused the death of three people. The outbreak was due to contaminated green onions used by the restaurant.

It is because of incidents like these that restaurants need comprehensive insurance coverage that includes product liability to protect them against claims of personal injury caused by the products they sell. What happens when the food or beverage a restaurant supplies does cause harm? It falls on claims adjusters to handle the claims process.

To be fully effective in this area, we must understand the unique risks of businesses operating within the restaurant sector, and fulfil the promise made by the insurer at the time the policy was sold. However, we must also protect the assets of the insurer so that only the claims owed are paid.

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An adjuster must do a thorough investigation of a restaurant claim to capture any critical details before they are lost or forgotten. (Photo: Shutterstock)

The claims process

It is the adjuster's responsibility to respond to the claimant and conduct an investigation of the claim as soon as possible. Any delay on the adjuster's part, however minor, could have an impact on the ability to obtain necessary evidence and properly adjudicate the claim.

It is important to never take anything for granted. However conversant an adjuster may be with the client's policy, the particulars of the case and the claims adjustment process, it is best to approach a case as if we know nothing. Take the time to learn and understand the scope and type of the insured's business; the product itself (in this case the food the client serves); the anticipated reasonable use of the product and the issues involved in the incident.

Here are six key steps to approaching these types of claims:

1. Become familiar with the details.

Start by closely examining the loss notice, which is the report the insured submits giving notice to the insurer. From this it is possible to identify key details like the type of injury being claimed, when and where it occurred, who the claimant is, the particulars of the insured restaurant and the nature of the coverage it holds.

It also identifies who to contact, whether there is anything that requires special attention (such as hospitalization), as well as the details of any independent witnesses.

2. Read the policy.

Next, review the client's policy. The set of facts in each case may show some nuances that affect coverage. There may be language, terminology or provisions in the policy which raise a different interpretation in light of the circumstances of each case. Once we understand how the policy applies to a case, it is time to meet the parties involved.

3. Meeting the insured and claimant.

Personal, prompt contact is important in the claims process and should be prioritized, so call or visit as soon as is practicable. Try to establish a rapport with the people involved, since this helps smooth the communication and investigation process. It takes time, but try to find common ground with the people you will be interviewing as this will make it easier for them to trust you and be more open.

Begin by explaining who you are, your role in getting their claim settled and how important their cooperation will be to the investigation. Their cooperation is a requirement of their policy, but it is good to remember that the client and insurer may need to present a joint defense to a claimant's suit.

It is also good to meet with the claimant to obtain his or her side of the story on what happened. If the claimant is represented by an attorney, only communicate with the attorney, since it would be a violation of the attorney/client relationship to speak to the claimant without the attorney present.

Witnesses, such as restaurant employees or other restaurant patrons who might have observed relevant facts, can provide valuable information. For example, did the claimant inform his or her server that she was allergic to a particular food when ordering? A food-related product liability claim may also require testing the food in question and interviewing those who know the food product, so speak with them as well.

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Talk to the claimants, the policyholder and any witnesses as part of the investigation. (Photo: Shutterstock)

4. Obtain statements and documents.

Get a detailed statement from the different parties. It is preferable to record the claimant's statement in order to get more detail and clarity. Don't forget to obtain copies of all relevant documents such doctor's reports relating to the injury to the claimant.

5. Write the captioned report.

After meeting with the parties, write the captioned report to explain what has been discovered so decision-makers can make necessary choices. Reports should include an explanation of the extent and nature of the injuries and damages identified by the claimant, as well as an estimate of the loss.

Information like medical reports and other documents can be used to support the estimate. If an adjuster believes the claim is not justified, or has uncovered any information that indicates it could be a fraudulent claim, make sure to include this in the report with supporting documentation.

6. Resolve the claim.

Some claims are easier to resolve than others. When a claim is not resolved after a first report, continue to provide monthly supplemental reports that detail the progress of the claim until it is resolved.

With food product liability claims, it is best to settle where it makes sense, since the costs of defense are extensive and often exceed the cost of indemnity. If the investigation establishes that the liability of the insured is reasonably clear, it is best to resolve the claim by settlement – that way the client can go back to business as quickly as possible.

Frank Medina (frank@frankmedina insurance.com) has worked as a claims adjuster on both personal and commercial claims for nationally recognized insurance carriers, and is the principal of Frank Medina Insurance.

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