Private Seafood Company D&O Claim
Bioterrorism Example
Company “A,” a private company seafood importer/processor,
imports a container of shrimp from country “X.”
There are 1800 cartons of shrimp, all contaminated on the exterior with
anthrax placed there by a foreign extremist from the
Meanwhile, many pallets of the shrimp are
moved from the public warehouse to the company-owned process plant. The truck driver, the warehouse employees and
many process line employees handle the contaminated cartons. The shrimp is processed and returned to the
warehouse and mingled with the pallets of shrimp already contaminated, wherein
warehouse employees contaminate the processed shrimp cartons through handling.
The contaminated processed shrimp are removed from the
warehouse and transported to the warehouse of a large retail restaurant chain,
where more seafood products, other than the shrimp, are
contaminated through handling.
Numerous pallets of seafood are transported to the restaurant
chain sites in the region, where, through handling, other food is cross-contaminated, resulting in numerous cases of
inhalation and cutaneous anthrax among restaurant
workers and customers. Health officials
move in and close twenty restaurants in five states. Upon further investigation, anthrax is traced
back to Company “A”s
warehouse, process plant, the public trucker, and the public warehouse.
Overall, fifty people are infected with anthrax and five
die. Three truck drivers are ill. Twelve public warehouse employees,
twenty-five Company “A” employees, and ten restaurant
chain employees are also ill.
Eventually, three Company “A” employees and two
restaurant employees die.
Health officials quarantine the twenty restaurants, the
public warehouse, and Company “A” property.
After two months, Company “A” lays-off its workforce and files for
Chapter 11 Bankruptcy, the restaurant chain experiences a $50 million reduction
in sales and the public warehouse is next to insolvency.
The following suits are brought
against the D&Os of company “A” for a variety of
reasons, including breach of fiduciary duty, failing to act in the best
interests of the company, and derivative action.
Bioterrorism Claim:
· Employees for loss of jobs
and retirement benefits.
· Subrogation suit by public
trucker’s workers compensation carrier.
· Company “A” stockholders.
· Company “A” derivative action against the
company.
· Public warehouse for loss
of its business profits.
· Public warehouse employees.
· Restaurant chain for loss
of business profits.
· Restaurant chain workers
compensation carrier for employees receiving WC benefits.
· Banks providing credit
lines.
· Creditors holding
outstanding debt.
Let your
imagination run wild as to what the total value of claims and the cost to
defend each D&O will be. Here is
some food for thought.
The largest average payment to claimants is $7.2 million to
Shareholders, $5.7 million to Government or Other third parties, $2.1 million
to Competitors, $1.9 million to Employees, and $250 thousand to customers. Defense costs (attorney’s fees) run between
10% and 50%, depending on the nature of the law suit. It is not uncommon
to have a D & O suit brought where the settlement is $400,000 and the
defense costs are $250,000, for example.
Employee-related suits have been averaging $350,000 in settlement and
$100,000 for defense costs. Bear in mind
that all these values are being expressed at potential corporate
reimbursements, assuming that avenue is open to the director or officer
(reimbursement is not an option in a derivative action suit).
D & O
suits, right now, are largely uninsured.
The frequency is often enough and the loss potential is great enough to seriously deplete the life-long personal asset
accumulation of a director or an officer.
D&O
insurance is available and affordable. Contact
Capitol Risk Concepts,
Ltd. Tel: