Insurance: Liability For Losses Caused By Foot And Mouth Outbreak

In a recent decision which is of interest to liability insurers,

the court struck out claims brought by farmers against the

operators of a research facility and DEFRA following escape of the

foot and mouth virus from the facility.

The first and second defendants ran a research facility at which

amongst other things, investigations were undertaken into foot and

mouth disease. The virus escaped from the compound and infected

livestock in the region. The third defendant, DEFRA, was

responsible for licensing and regulating the research site. The

claimants alleged that the defendants were liable for the escape of

the virus (in the case of the operators of the research facility)

or for failure to regulate properly (in the case of DEFRA).

Certain of the claimants owned livestock which had been culled,

either because they were infected or because it was suspected they

were infected. These claims were settled. The livestock of the

remaining claimants were not culled. There were however

restrictions imposed on transporting livestock to other land, to

market, to abattoirs etc. The remaining claimants claimed that they

had suffered loss as a result of the restrictions, and sought to

recover these amounts from the defendants. The defendants applied

to strike the claims out.

The court upheld the defendants' application to have the

claims struck out:

1. where the restrictions imposed caused the animals to pass the

   stage where they were in prime condition for sale (for example pigs

   which had become overweight), then there was a "real

   prospect" of the court concluding that this amounted to

   physical damage to those animals;

2. otherwise, the losses claimed were purely economic loss,

   since there was no physical damage to the livestock or the

   farmers' land;

3. in either case, there was no duty of care owed to the farmers

   to prevent the losses suffered; and

4. the remaining claims would therefore be struck out.

   The decision serves to re-emphasise the fact that the courts are

   prepared to impose limits on the duties owed by wrongdoers

   especially where the loss suffered is purely economic and

   especially where there is a real risk of an indeterminate liability

   (the "floodgates would be opened" if the claim was

   allowed). This is reassuring for liability insurers, and their

   insureds. It does, however, limit the ability farmers have to claim

   for pure economic losses arising out of foot and mouth outbreaks

   caused through fault on the part of a third party.

   Further reading...