Eversheds comment: Horsemeat scandal costs grow for retailers, processors and suppliers

• United Kingdom

08-02-2013

The discovery of horsemeat now extends across many meat products in UK retailers. Following the UK Food Standards Agency's call for all companies to test their beef products, Richard Matthews, head of product liability at global law firm Eversheds and a member of its International Food and Drink Sector Group, comments:

"The law in the European Union is common on food safety, although how it is enforced is a matter for Member States. It is unlawful to sell or offer for sale food which is not safe. This is broadly defined as being injurious to health or unfit for consumption. That would cover the scenario where the meat was discovered to contain (for example) a veterinary drug banned from the human food chain. It is also unlawful to sell or offer for sale food which is "not of the nature or substance or quality demanded" by consumers. This covers the scenario where the food is not unsafe, but we have sensitivities about its condition - for example, a little mould on a slice of bread. Or, indeed, horsemeat that was sold as beef.

"As the scale of the horsemeat scandal continues to grow, so do the costs associated with the recalls of additional products and the number of companies whose brands will be affected.

"Once the full facts become known and the publicity subsides, the affected retailers and brand owners will draw breath and turn their attention to calculating their losses and passing the financial costs on to their suppliers. They will not need to prove any negligence on their direct supplier's part. To establish liability, it is sufficient that the product supplied did not conform to the agreed specification or meet its description.

"Further up the supply chain, meat processors and meat suppliers will be anxiously considering the potential overall financial impact. So will their insurers. Typically, product liability policies will not respond to contractual claims, unless the insured company has supplied a product which has caused physical injury or damage to property. Where it can be established that a "contaminated supply" was mixed with unaffected sources of beef which contaminated the entirety of the intermingled product at a meat processing plant, then there may be scope for argument over the insurance position. Lawyers on different sides may point to apparently conflicting previous decisions in the context of litigation around the benzene in fizzy drinks recalls and carcasses supplied in breach of the regulations introduced in the wake of the BSE crisis.

"Some food businesses may have purchased Contaminated Products Insurance policies. These potentially cover a wider range of losses including recall costs, rehabilitation expenditure and lost profits in the aftermath of the recalls. Whether these policies are triggered might depend upon whether phenylbutazone ("bute") is found in the horsemeat or some other evidence of risk of injury from consumption of the affected products is found."

For more information on visit Eversheds' product liabiilty and product recall pages or Eversheds' pages on the food and drink sector.

• Richard Matthews
• Partner
• +44 113 200 4372
• +44 113 200 4372

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