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Case Study: Litigation Support

EHA was contacted by the legal department of a large commercial insurance carrier and asked to review a liability claim incident report and settlement recommended by the adjuster. The report stated that a manufacturer of emulsion-based specialty ingredients had formulated a master batch of dairy-based, liquid beverage ingredient and then packaged sub-quantities of same in large, spouted “bag-in-box” single use totes. Material from one of the totes was used by a customer in a ready-to-drink beverage formulation. Sensory analysis of finished beverage samples indicated a sensory non-conformance determined to be caused by spoilage of the liquid specialty component. Eventually, the beverage manufacturer discarded finished product and filed a damage claim for goods, time and related costs. The specialty ingredient manufacturer performed a post-incident root cause analysis and concluded, with agreement from the adjuster, that a faulty seal on the tote spout was responsible for premature spoilage of the specialty component.

EHA reviewed the adjusters report and performed a subsequent manufacturer’s site visit. The visit included an information intake with management, demonstration of the packaging processes, QC analysis and an in depth evaluation of materials, equipment and processes and ingredient chain of custody from manufacturer to end user.

EHA reviewed the adjusters report and performed a subsequent manufacturer’s site visit. The visit included an information intake with management, demonstration of the packaging processes, QC analysis and an in depth evaluation of materials, equipment and processes and ingredient chain of custody from manufacturer to end user.

EHA uncovered important facts impacting liability and responsibility:

• The tote bags and sealing apparatus were not manufactured to be compatible with one another.
• The bag converter had not provided the ingredient manufacturer with documents certifying the sterility of each bag in each lot, nor was there a statistically-relevant analysis sampling which would suggest with a 95% degree of confidence that all bags in all lots were likely to be sterile.
• The direct customer for the bag-in-box specialty ingredient was not the end user beverage company, but, rather, a third party supplier who ordered the ingredient, took possession of the tote, relabeled and then shipped it to the end user without performing any testing to assess the quality of the goods in the tote.

There was no independent confirmation exactly where the seal integrity of the totes was breached. EHA determined that the 3rd party supplier had not provided the end user with any test methods or specifications to evaluate ingredient sensory quality prior to use, nor did the user know the name of the actual specialty ingredient manufacturer.

EHA’s diligence, investigative experience and knowledge of food packaging and ingredient manufacturing provided the insurance carrier with knowledge and mitigating facts which it would not have otherwise been able to obtain, ultimately impacting the settlement terms for the insurer, as well as revealing client risk profile aspects not previously considered by the underwriter.

Contact EHA Consulting Group today for more information about how we can assist your company.