Insurance underwriters can help farmers manage the risk of microbial contamination in their fields.

Foodborne illness is a public health problem of pandemic proportions. The Centers for Disease Control and Prevention estimates that contaminated food sickens 48 million people each year in the United States, causing l28,000 hospitalizations and 3,000 deaths annually. Nowhere is this crisis more acute than in the fresh produce sector, where virulent microbial pathogens in growing fields and packing houses cause many of the nation’s largest and deadliest outbreaks.

Federal regulations developed in the past few years have established stringent new standards for improving food safety on farms. The U.S. Food and Drug Administration is responsible for implementing these regulations but lacks the inspection resources needed to oversee the more than 120,000 U.S. farms that cultivate fresh produce.

Significant help in filling this oversight gap could come from a surprising source: The insurance industry.

A recently published study documents the emerging efforts of insurers to monitor and enforce compliance with food safety standards on farms. These efforts, if successfully scaled up, could transform the U.S. food safety system, not just on farms but also across the food industry.

Insurance pools risk to shield policyholders from the potentially ruinous financial consequences of unexpected harms. One downside of insurance is that, by relieving policyholders of financial responsibility for accidents, insurance eliminates an important incentive for them to exercise care, which could increase the risk of accidents. Economists refer to this as the problem of moral hazard.

To address this problem, insurance providers frequently create new incentives for policyholders to reduce risk. Numerous case studies of insurance have described how insurers employ a variety of techniques to reduce risk. These techniques include premium discounts for policyholders who adopt precautions and loss control advice about how to avoid accidents that might give rise to claims.

In interviews that I conducted between 2013 and 2020, 35 insurance professionals — agents, brokers, underwriters, loss-control specialists, and adjusters — described how they use these and other techniques to reduce the risk of food safety failures on farms that grow fresh produce.

Farmers typically purchase some form of insurance that includes liability coverage for foodborne illness outbreaks. For small farms, this liability coverage is bundled into a farm insurance package, which includes some combination of coverage for a farm dwelling, household personal property, farm machinery and equipment, farm structures, and farm products and supplies — and may also include auto coverage. Larger farms, like other business entities, normally carry what is known as commercial general liability coverage, which may be sold separately or as part of a business operators policy.

Insurance professionals use various techniques to help farmers reduce the risk of contamination in their operations. For example, insurers use premiums to induce farmers to pay more attention to food safety issues. One underwriter explained that if insurers see an area where a farmer is falling short on safety, their underwriters will “apply pricing debits” until changes are made, and then they will “remove them to make the premium more attractive.”

In addition to offering price incentives, insurance professionals also give their insureds food safety management advice. According to a second underwriter, making recommendations to farmers about risk management strategies “helps us to not have losses but also helps them be the best that they can be in their business.”

As a compliance mechanism, insurance has an important advantage over government regulation. Resource constraints hamper insurance less than they do for publicly funded oversight. For a government agency, expanding inspections puts increasing strain on a limited budget. By contrast, as the market for insurance coverage grows, companies collect more premiums from which to fund inspections. For insurers, increasing demand for inspections provides new revenue to pay for them. Consequently, the capacity of insurance companies to oversee food safety on farms far exceeds that of government agencies.

Insurance also has an advantage over the most common form of privately funded oversight in the fresh produce sector — private third-party food safety audits paid for by growers. The conflict of interest that arises when growers pay for audits compromises the integrity of those audits and undermines confidence in them. Although growers also pay for underwriting inspections, insurance companies have a powerful incentive to ensure that these inspections are rigorous, because the insurer is liable for the costs of any food safety failure. This business model for insurance companies includes incentives for rigor and reliability that are absent from private third-party food safety audits paid for by growers.

Insurance as a tool for creating incentives for farmer compliance with food safety regulations is not yet widespread. Providing risk management advice to farmers requires an investment of time on the part of insurance professionals that most inexpensive farm policies cannot support. Consequently, the types of risk reduction strategies described here have been primarily associated with larger agribusiness policies with high premiums. They are not common among the insurers of medium and small farms, as the owners of these farms can only afford to purchase inexpensive insurance.

Additional research might explore ways to organize risk pools among small and medium size growers, or to provide them with government subsidies to purchase insurance, as is currently done with crop insurance. This approach might support higher premiums and the proliferation of insurers’ efforts to help manage food safety risks.

In time, food safety liability insurance coverage may yield a model for other sectors of the food industry.

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Governors around the country are attempting to restart the economy by easing restrictions put in place to prevent the spread of COVID-19. The prospect of returning to “normal” amid a pandemic has businesses lobbying Congress to grant them sweeping immunity from civil liability for failure to adequately protect workers and customers from infection.

Senate Majority Leader Mitch McConnell has warned of an “avalanche” of lawsuits that will stymie economic recovery efforts if Congress does not act quickly. He said he won’t let another coronavirus bailout pass the Senate unless it also shields companies from coronavirus-related liability.

My research on the role of civil lawsuits in reducing foodborne illness outbreaks suggests that fears of excessive litigation are unwarranted. What’s more, the modest liability exposure that does exist is important to ensuring businesses take reasonable coronavirus precautions as they reopen their doors.

How not to be careless
As a general matter, businesses are subject to civil liability for carelessness that causes injury to others. The law defines carelessness as a failure to exercise “reasonable care.”

In applying this standard, courts consider several factors:

• Did the business take available cost-effective precautions to prevent injury?
• Did the business comply with laws or regulations designed to protect public health and safety?
• Did the business conform to industry standards for health and safety?
• Did the business exercise common sense?

If the answer to one or more of the questions is no, then a court may conclude that the business was careless and is subject to liability for damages to customers who suffered harm.

In the context of the current pandemic, I believe that reasonable care sets a clear standard for business owners. Invest in cost-effective precautions like ensuring employees wear masks and gloves and keeping customers apart. Follow the guidance of health officials and all health and safety regulations. Keep up with what other similar businesses are doing to prevent infection. Use common sense.

Law abiding, thoughtful business owners – those who care about the safety of their employees and their patrons – are likely to exercise reasonable care to prevent COVID-19 transmission with or without the threat of a lawsuit.

For example, the owner of a nail salon in Georgia recently described her plans for reopening. The salon will accept patrons by appointment only, conduct pre-screening telephone interviews for signs of illness, limit the number of people in the salon at any one time, take temperatures before allowing people to enter, require hand-washing, equip employees and patrons with masks and gloves, and sanitize all work areas between appointments.

Conscientious business owners like this have no reason to fear a lawsuit alleging they failed to take reasonable precautions.

Predictions of “frivolous” lawsuits appear to be generating unnecessary anxiety among business groups. But they shouldn’t. Personal injury lawyers representing victims work on a contingency fee basis. This means that they only earn fees when they bring cases with a strong enough chance of winning to reach a favorable settlement or a judgment.

Lawyers have no incentive to bring sure losers, and they risk being disciplined for professional misconduct if they do so. For these reasons, frivolous lawsuits are rare and highly unlikely in the context of COVID-19 transmission claims against businesses.

Exaggerated fears
Even for business owners who fail to take reasonable precautions, the prospect of a lawsuit is still remote.

To successfully sue a business for COVID-19 transmission, a patron would have to prove that he or she contracted COVID-19 from the business and not from some other source. However, most people infected with COVID-19 currently have no reliable way of identifying the source of their infection. The gap of three to 11 days between infection and illness, the difficulty of recalling all of one’s contacts during that interval and limited testing for the virus present formidable obstacles to establishing causation.

Moreover, a business would not be liable to patrons who knowingly and voluntarily assumed the risk of infection. Patrons of crowded stores or businesses where many customers and employees are not wearing masks, for example, would not have viable legal claims even if they can prove carelessness and causation.

Sending a strong signal
Because of these considerable challenges, viable legal claims related to COVID-19 are likely to be extremely rare.

Yet even occasional lawsuits act as a nudge, encouraging the entire business community to adopt reasonable precautions. This is one of the lessons of civil litigation arising out of foodborne illness outbreaks.

As I document in my 2019 book, “Outbreak: Foodborne Illness and the Struggle for Food Safety,” a small handful of high-profile lawsuits against food companies have encouraged businesses at every link along the supply chain to improve their safety practices. That’s what happened after lawsuits against Jack in the Box over contaminated hamburgers in 1993 and Dole over E. coliin baby spinach in 2006.

Similarly, the prospect of liability for COVID-19 transmission is likely to encourage business owners to invest in cost-effective precautions, follow the advice of public health authorities, adopt industry safety standards and use common sense.

Shielding business owners from this liability is one kind of immunity that will not help end the current crisis.

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The FDA’s newly released 2020 Leafy Greens STEC Action Plan offers a well-worn list of produce safety agenda items. Like previous agency action plans, this latest plan pledges support for efforts to encourage good agricultural practices (known as “GAPs”), make inspections more reliable, and enhance outbreak investigations.

Since the first GAPS for fresh produce were developed by industry associations in California in the late 1990s, the central challenge in produce safety has been the lack of any scientific basis for specific, measurable, effective metrics for reducing the risk of microbial contamination via agricultural water, soil amendments, animal intrusion, and field sanitation.

Both growers and government regulators have known for more than two decades that these are likely sources of contamination, but there has been insufficient science to support quantitative thresholds for bacterial loads or testing protocols that will reduce foodborne illness. Consequently, the early GAPs in industry guidelines and FDA guidance were vague admonitions, for example, encouraging farmers to test for contaminants “on a periodic basis” and to make sure that irrigation water was “adequate” for its intended purpose.

In the wake of ongoing outbreaks associated with fresh produce — especially leafy greens — the FDA issued various plans to pledge support for more determinate and effective standards for produce safety. The 1998 Clinton Administration Food Safety Initiative and the 2004 Bush Administration Produce Safety Action Plan pledged to work with industry to develop specific, measurable, effective metrics for preventing the microbial contamination of fresh produce. During this time, the FDA pushed the industry to produce commodity-specific GAPs that would address the particular risks associated with leafy greens, tomatoes, or melons. The resulting commodity-specific GAPs suffered from the lack of detail as the initial GAPs.

Following the devastating 2006 Dole baby spinach outbreak, the California leafy greens industry created the Leafy Greens Marketing Agreement (LGMA) which imposed specific, measurable metrics and testing procedures. Since there was no new science to support the LGMA metrics, many of them were based on existing regulations from other areas. For example, the LGMA agricultural water quality standard was borrowed from the Environmental Protection Agency’s recreational water standard (on the theory that if water is clean enough to swim in, it must be clean enough to spray on crops).

The FDA incorporated these LGMA standards into its current Produce Safety Rule as part of the Food Safety Modernization Act. From 2007 to 2017, stakeholders in industry and government regulators insisted that these standards had reduced the risk of outbreaks. However, in the wake of large outbreaks in 2017 and 2018 associated with romaine lettuce from California and Arizona, governed by the LGMA standards, confidence in the reliability of these standards has faltered.

Predictably, in response, the FDA has issued a new commodity-specific action plan, which, like its predecessors, pledges that the agency will work with industry to develop specific, measurable, effective metrics and testing protocols to reduce the risk of microbial contamination and prevent foodborne illness outbreaks.

There is no harm to the agency’s latest pledge to, for example, “prioritize work with leafy green stakeholders” to develop better water quality standards and testing protocols, to increase inspections, and to improve outbreak investigations, but such pledges should not be mistaken for significant advances in addressing the long-running challenges of food safety in this area. Industry and academia are hard at work trying to learn more about the science of microbial contamination and its relation to human health risks. That work is painstaking and slow, and unlikely to yield quick answers.

About the author: Timothy D. Lytton is a Distinguished University Professor and Professor of Law at Georgia State University. He is the author of Outbreak: Foodborne Illness and the Struggle for Food Safety (University of Chicago Press 2019) and Kosher: Private Regulation in the Age of Industrial Food (Harvard University Press 2013).

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The Trump administration on June 21 unveiled an ambitious plan to consolidate federal food safety efforts within the U.S. Department of Agriculture.

Currently, 15 agencies throughout the federal government administer 35 different laws related to food safety under the oversight of nine congressional committees. The administration calls this system “illogical” and “fragmented.”

“While [the USDA’s Food Safety Inspection Service] has regulatory responsibility for the safety of liquid eggs, [the Food and Drug Administration in the Department of Health and Human Services] has regulatory responsibility for the safety of eggs while they are inside of their shells,” the document explains. “FDA regulates cheese pizza, but if there is pepperoni on top, it falls under the jurisdiction of FSIS; FDA regulates closed-faced meat sandwiches, while FSIS regulates open-faced meat sandwiches.”

Concern about this state of affairs has been fueling similar consolidation proposals for decades.

But my research for a forthcoming book on the U.S. food safety system suggests that the Trump administration plan faces a number of challenges that make a major reorganization of federal food safety regulation both impractical and undesirable.

Why food safety regulation is so complicated
The curious division of labor between the U.S. Department of Agriculture and the Food and Drug Administration dates back to the passage of two laws enacted in 1906.

The Meat Inspection Act mandated inspection of all beef carcasses. The Pure Food and Drug Act prohibited the sale of adulterated food in interstate commerce.

Initially, both laws were implemented by officials at the USDA. Its Bureau of Animal Industry placed inspectors trained in veterinary science at every meat plant. Meanwhile, its Bureau of Chemistry employed laboratory scientists to test foods for adulteration.

In 1940, Franklin Roosevelt moved the Bureau of Chemistry, by then renamed the Food and Drug Administration, out of the USDA and into the Federal Security Agency, which later became the Department of Health and Human Services. Today, the FDA is responsible for overseeing the production of most foods other than meat and poultry.

Separately, the Bureau of Animal Industry was renamed the Food Safety Inspection Service, which is still responsible for all meat and poultry inspections.

Concerns about regulatory fragmentation grew as Congress assigned new tasks related to food safety to a variety of other agencies.

For example, Congress instructed the Federal Trade Commission to regulate food advertising, the Environmental Protection Agency to set pesticide tolerances and the National Marine Fisheries Service to inspect seafood.

Efforts for reform
Proponents of putting food safety under the roof of a single agency have argued that the current system causes confusion because different agencies produce inconsistent standards.

They further allege that overlapping jurisdictions create inefficiencies and that inadequate coordination leaves gaps in coverage. They also worry that the involvement of so many different actors diffuses political accountability.

The first high-profile proposal to consolidate federal food safety regulation was made in 1949, during the Truman administration, when a presidential commission recommended transferring food safety oversight to the USDA, just as the Trump administration has.

In 1972, consumer activist Ralph Nader advocated creating a new consumer safety agency to oversee food safety. And a few years later, a Senate committee recommended moving the USDA’s food safety responsibilities to the FDA.

Those are just three examples of more than 20 such proposals from both sides of the political aisle, including one by President Barack Obama in 2015.

Why Trump’s proposal is likely to fail
None of these consolidation efforts succeeded for the same reasons the current one is unlikely to work now.

First of all, the many congressional committees that currently oversee agencies that regulate food safety are unlikely to support any reorganization that would reduce their power. Congressional oversight affords lawmakers who serve on committees opportunities to help interest groups and constituents in exchange for political support.

Similarly, industry associations are unlikely to support a reorganization that would disrupt their relationships with existing agencies. Consolidation threatens to reduce their access and influence over agency decisions.

In addition to the political obstacles to consolidation, there are practical problems. Merely merging the 5,000 food safety officials in the FDA and the 9,200 officials in the FSIS under the oversight of a single administrator would not eliminate the differences in jurisdiction, powers and expertise responsible for the current bureaucratic fragmentation. Meaningful consolidation would require a complete overhaul of federal food safety laws and regulations, a task of extraordinary legal and political complexity.

Moreover, consolidating food safety efforts in a single agency might create new forms of fragmentation. For example, transferring the FDA Center for Veterinary Medicine’s program for regulating drug residues in beef and poultry to the USDA would separate it from the FDA’s veterinary drug approval program.

And finally, reorganization is costly and would take years for the different agency teams newly working together to develop bonds of trust and cooperation. And these costs would have to be paid upfront, without a clear idea of whether the expected gains will ever pay off.

All or nothing?
Consolidation need not be all or nothing.

For example, some have proposed more modest consolidation of inspection services, policy planning and communications that would be less costly and not so difficult.

Nonetheless, Congress has shown little interest in considering any bureaucratic reorganization of federal food safety regulation, even a partial consolidation.

In other words, the Trump administration may have to settle for the less ambitious goal of better interagency coordination, which offers an alternative way to address concerns about duplication and coverage gaps. This more modest approach would not, however, address the persistent problem of fragmentation.

In food safety, as in other regulatory reform arenas, it may turn out that half a loaf is better than none. 

Disclosure statement: Timothy D. Lytton has recently been awarded a USDA-funded grant to study food safety among specialty crop producers.