Albany -- Washington County Fair's insurance company could end up paying millions of dollars in claims over an E. coli outbreak despite its contention that the fair's policy won't cover lawsuits, legal experts say.
The issue of coverage is critical because it could affect fairs throughout the state, possibly driving up costs and forcing organizers to rethink holding the festivals. In fact, the future of the Washington County Fair may rest on whether the policy covers the claims.
So far, about a dozen lawsuits claiming up to $3 million in damages each have been filed against the fair by several of the hundreds of people sickened at the August event, and many more civil suits are expected. In a letter sent to the Washington County Fair board president, TIG Insurance Company said it would probably not pay any damages related to the outbreak. It stated that the fair's policy does not cover "bodily injury'' or "death'' that may have resulted from the outbreak because of the contract's "pollution'' exemption clause.
"The insurance company is not going to prevail,'' said Thomas F. Gleason, an adjunct professor of insurance law at Albany Law School. Several legal analysts agreed, saying the insurer's argument that the policy doesn't cover E. coli won't stand up to legal scrutiny.
William Marler, a Seattle attorney recognized as the leading expert on E. coli, said TIG's position was "absurd'' and that the company was looking for ways out from under what could potentially be hundreds of millions of dollars worth of damages. "They don't want to pay,'' he said. "Insurance companies don't make money paying claims.'' Since the fair ended Aug. 29, the outbreak has claimed two lives, sent 65 to the hospital and sickened about 1,050.
Marler said TIG paid a total of $20 million to settle several E. coli cases he handled for poisonings at the Jack-in-the-Box hamburger chain. TIG officials in New York City declined to comment. If the insurer's interpretation of the contract stands up to a likely legal challenge, the fair will be forced to shoulder any damage awards -- and could be forced into bankruptcy.
Also, fair organizers around the country will likely need to consider added insurance. Legal authorities say that so-called pollution clauses are standard, but that the provision may not be the test a court would use to determine if the insurer must cover the claims. For example, Gleason said, TIG's definition of pollution "does not clearly include bacteria'' and the event that may have caused injury "is not necessarily the pollution of the well, but rather not realizing that contaminated water was being served to patrons.'' State health officials have said the outbreak was caused when an unchlorinated well at the fairgrounds became contaminated following a rainstorm.
The well was near a dairy barn and was used by vendors to make beverages and prepare food during the fair. A second question raised by the TIG letter is a claim that, if the insurer turns out to be liable, the policy's liability limit would be $1 million for all E. coli-related claims. Legal experts disagreed as to whether that argument would stand up.
Some said that regardless of the number of people injured, if the fair's policy is a single-limit policy, it stops at $1 million. Others said the poisoning starts at distribution and each time a vendor sold a contaminated drink or item of food at the fair, it could cost the insurer up to $1 million.