The Superior Court of New Jersey granted partial summary judgment in favor of franchisees of Taco Bell Restaurants against Underwriters of Lloyds, which sold Trade Name Restoration, Loss of Business Income, and Incident Response Insurance for Food Borne Illness (TNR) policies to the franchisees.
Invoking the policyholders’ reasonable expectations and noting that “any exclusion must be clear,” Hon. Judge Phillip Lewis Paley, JSC, found that an “aggregate supplier incident sublimit” cannot be used as a stealth exclusion to deny coverage for business income losses stemming from food contamination that was allegedly caused by lettuce that went into some Taco Bell menu items.
The opinion states that from 1999 through 2002, the Taco Bell franchisees purchased Food Borne Illness (FBI) insurance from the Lloyds Market. Beginning in 2003, when FBI coverage was discontinued, the franchisees instead bought TNR coverage from the Lloyds Market. The Court noted that the marketing for TNR insurance stated that “even the best restaurants can suddenly be trapped in an infectious health situation … due to a food borne illness or supplier mistake that ends up totally out of control.” At the same time, Lloyd’s asserted that the TNR policies contained an “Aggregate Supplier Incident Sublimit” not present in the FBI predecessor polices, indicating a dollar amount of $0. Full article.