"When Elephants Dance, the Grass Gets Trampled"

Insurance battle being waged over 2004 salmonella case

Published in CSP Daily News

ALTOONA, Pa. -- Sheetz Inc. has settled all but a few customer lawsuits spawned by salmonella-tainted tomatoes sold at its convenience stores two years ago, said the Associated Press. But legal battles involving Sheetz, insurance companies and food suppliers must now settle this question: Who gets stuck with the multimillion-dollar tab?

"We stepped up to the plate and took care of our customers. Now we have to take care of the harm that's been done to us," said Michael Cortez, general counsel for Altoona, Pa.-based Sheetz.

So [image-nocss] far, most of the money paid to Sheetz customers has come from U.S. Fire Insurance Co. The company insured now-defunct Coronet Foods Inc., Wheeling, W.Va., which sold the tomatoes to Sheetz.

What remains to be seen is whether U.S. Fire will be reimbursed by Coronet's suppliers and their insurance companies. Sheetz officials and Coronet's former owner are also seeking damages for the harm done to the businesses, said Sheetz's San Diego-based attorney, Fred Gordon.

"I have uncovered zero evidence to suggest that Sheetz did anything wrong other than being a conduit for tainted tomatoes," Gordon said. "If Coronet is a conduit and Sheetz is a conduit, then you take the next step and determine who the upstream suppliers are. That's where the battle is now."

As reported in CSP Daily News, government investigators said at least 400 people got sick in early July 2004 from salmonella-tainted tomatoes they bought in sandwiches at Sheetz stores in Pennsylvania, Ohio, West Virginia and six other states. Federal investigators traced the tomatoes to a Florida packing house, but said nothing was done wrong there to taint them.

The feds also absolved Sheetz and Coronet. But under Pennsylvania's strict liability laws, both could still be sued because they sold the tomatoes, as can the companies and farms in Coronet's supply chain.

Coronet folded in October 2004 and filed for bankruptcy once customers started suing, but its former owner, Harold Long, has purchased the right to seek any damages Coronet suffered, Gordon said.

Sheetz, citing confidentiality agreements, will not say how much was paid to settle hundreds of customer claims. While insurance paid most of them, Sheetz covered the $500,000 deductible by paying some customers, Gordon said.

Bill Marler, the Seattle-based food liability attorney who represented 139 customers, said Coronet's $11 million worth of insurance coverage "was not depleted" by customer claims, but would not give other settlement details.

Sheetz attorneys said fewer than 20 customer lawsuits remain to be settled, including just one Marler client, Max Anslinger of Altoona. Anslinger, a married father of twins, is still suffering from food-related gastrointestinal and arthritis symptoms. Marler said he wants more money for Anslinger than U.S. Fire is willing to pay. Anslinger's case, however, has broader impact, said AP. Through the process of discoverythe pretrial exchange of documents, depositions and other evidenceSheetz and Coronet are using the Anslinger case to try to pinpoint the source of the salmonella, Gordon said.

Sheetz and Coronet say the first link in the supply chain is Procacci Brothers, a Philadelphia-based food distributor.

Meanwhile, U.S. Fire is suing Discover Re, Sheetz's insurer, saying it should reimburse it for at least some of the customer settlements.

Marler, a food litigation veteran, said the real battle will feature large insurance companies that represent any companies linked to the tomatoes. "When elephants dance, the grass gets trampled," Marler said. "And in this case, the grass was Sheetz and its customers."