Wednesday, February 25, 2009

Peanut Recall: What Role Did PCA’s Insurer Play?

Primary responsibility for the recall of contaminated peanuts and peanut products processed by the Peanut Corporation of America (PCA) lies with Stewart Parnell, owner of PCA. Mr. Parnell, who knowingly manufactured contaminated food products and distributed them to hundreds of food makers and distributors, has resisted FDA’s investigation, has refused to answer questions before a Congressional hearing, and did not even issue a general recall until a few days ago. (Click on the “Food” tag at lower right to read earlier posts to read more about what happened.)

Mr. Parnell’s criminal negligence was aided and abetted by the Food and Drug Administration, which lacks the enforcement power to shut down a company, or force a recall, even when the company and its products pose an immediate threat to the health and safety of the nation’s food supply. (Read more about the FDA’s role HERE.)

There’s a third player who had a moral and ethical responsibility to take action in this case. Who is it? Why, PCA’s business insurer, of course. This aspect of the story has not been reported, nor is it ever likely to be covered in the mainstream media.

I don’t have specific knowledge to share about how PCA's insurer might have been involved in this situation, but I can offer some conjectures based on my knowledge of the property-casualty insurance industry and how it selects and evaluates its customers. For nearly 15 years, I was head of research for the loss control division of a major property-casualty insurer, assisting safety engineers with technical and business research to support their work in evaluating, selecting, and safeguarding business customers. Technical research on topics like this was at the core of my work there.

Before insuring a large business like PCA, a property-casualty insurer will typically send safety professionals (called “loss control consultants”) to inspect the prospective customer’s facilities, looking for anything that would make the business an undesirable (i.e., risky) account for the insurer. This would be especially important for businesses that manufacture, package, distribute, and sell consumer products, particularly foods, medicines, and the like.

In the case of a food product company like PCA, the insurer’s loss control consultant would have asked a lot of questions to determine exactly what products were made; if and how they were monitored and tested for quality and safety; how they were packaged, stored and shipped; and — important! — how widely they were distributed. The insurer would use the information to determine the riskiness of the business, anticipate potential claims, and calculate the premium.

When a loss control inspection reveals unsafe work practices, shoddy facilities or equipment, or poor record-keeping — poor practices which increase risk, such as were found at PCA’s plants — the insurer will usually decline to insure the business, knowing that costly claims will probably have to be paid in the future. In some marginal cases, the insurer will agree to provide insurance coverage, on condition that the prospective customer brings the operation into compliance with safety and health regulations or the insurer’s own risk management standards. The insurer usually makes its safety professionals available to assist the client in improving conditions and coming into compliance with applicable regulations. Loss control professionals have deep expertise in technical standards and regulations that apply to our nation's industries and manufacturers.

If PCA’s insurer did indeed send its loss control professionals to inspect the facilities, the deplorable conditions — mold, vermin, filth, animal excrement — must have been evident. What obligation did the insurer have? In my opinion, it is unethical and immoral to provide insurance coverage (and take premium payments) for a business that is clearly 1) in violation of the law and 2) inherently dangerous to the general public. And if the insurer conducted an inspection and did not report the dangerous situation to the FDA or to state authorities so that the danger to the general public could be curtailed, well, what sort of business ethic does that represent?

I wonder if the loss control consultant(s) who might have visited PCA's plant tried to convince the insurer to decline PCA's business?

Two kinds of selfishness caused this public catastrophe: monetary greed and a self-centered disregard for human life.

PCA was greedy. Mr. Parnell chose not to make needed investments in facilities, product testing, and safety training; his emails tell us that he resented spending money to ensure product safety. With a supreme disregard for human life and health, he instructed employees to re-package products contaminated with salmonella and ship them to customers.

Our business community, which has pressured our elected officials and regulatory agencies to weaken safety and health regulations, was greedy. In allowing business owners to increase profits at the expense of safety and health, our elected officials have displayed a disregard for the very people they are supposed to protect.

PCA’s insurer was greedy if it accepted money from PCA. And if it conducted safety inspections, found life-threatening conditions and/or violations of federal regulations, and failed to report them, then it, too, chose profit over life.

Their collective greed and callousness have endangered us all.

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If you still haven’t checked your pantry for contaminated products, do it today!

If you’ve stopped eating peanut butter but are still eating granola bars, you’re in trouble!

Click HERE or HERE to learn what to do to protect yourself and your family.


Most major-brand peanut butter is OK!Most other peanut-containing foods are NOT OK!

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