Food, Insurance, War on Terror

Produce Giant Told 'You Can't Accidentally Hire a Terrorist'

You run a major produce company and you look at your books and realize, "Oops, I've accidentally funneled millions of dollars to terrorist groups." What can you do when you get sued? Don't turn to your insurance carrier....

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It’s a classic story: you run a major produce company and you look at your books and realize, “Oops, I’ve accidentally funneled millions of dollars to terrorist groups.” And then those groups commit some of the “terrorist acts” that form their wheelhouse and their victims and their families look to your company for recompense.

I mean, that would be bananas. B-A-N-A-N-A-S.

What can you do?

According to an Ohio appellate court, you can’t ask your insurance carrier to bail you out….

Earlier this month, the First Appellate District of Ohio rejected Chiquita Brands International’s argument that its insurers owed a duty to cover the produce giant in claims arising from terrorist actions in South America. The court held that the insurers owed no duty to cover intentional torts allegedly committed by Chiquita related to the admitted decision, made in Chiquita’s Cincinnati corporate offices, to provide money to a gaggle of terrorist groups.

Wait, the court wasn’t buying Chiquita’s argument that the harm caused by these groups using Chiquita’s money was accidental or negligent? I’m incredulous.

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Our review of the record shows that although the underlying complaints set forth some causes of action sounding in negligence, those causes of action were all based on Chiquita’s alleged intentional conduct. The complaints alleged that Chiquita was both directly and vicariously liable for the deaths and injuries of numerous people through murder, torture, kidnapping and other atrocities. They claimed that Chiquita aided and abetted, conspired with, and particiated in a joint criminal enterprise with the terrorists. The complaints did not allege conduct that could be reasonably construed as negligent or accidental. Therefore the conduct alleged in the complaints for which Chiquita sought coverage and defense did not constitute “occurrences” within the meaning of the policy language.

The court also determined that the actual “occurrence” under the policy took place in South America, and the policy only imposed a duty on the insurer for occurrences within the United States.

Putting aside the insurance issues, Chiquita maintains that it paid Colombian terrorist groups out of necessity as part of a protection racket run by the terrorists. Dealing with violent paramilitary groups may have been part of doing business in Colombia at the time (Chiquita has since sold its Colombian operations), but most companies addressed this through funding private security forces to defend their operations rather than directly adding to the coffers of terrorists. Paying the terrorists basically says, “We will protect our operations at the expense of everyone else’s safety.”

That sounds potentially troublesome. Maybe Chiquita should have sought some legal counsel before authorizing these payments to see if they would sign off. Chiquita’s outside counsel, a national law firm unnamed in Department of Justice releases, repeatedly advised Chiquita:

“Must stop payments.”
“Bottom Line: CANNOT MAKE THE PAYMENT”
“Advised NOT TO MAKE ALTERNATIVE PAYMENT through CONVIVIR”
“General Rule: Cannot do indirectly what you cannot do directly”
Concluded with: “CANNOT MAKE THE PAYMENT”
“You voluntarily put yourself in this position. Duress defense can wear out through repetition. Buz [business] decision to stay in harm’s way. Chiquita should leave Colombia.”
“[T]he company should not continue to make the Santa Marta payments, given the AUC’s designation as a foreign terrorist organization[.]”
“[T]he company should not make the payment.”

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If outside counsel was going to be that wishy-washy about it, no wonder Chiquita kept making the payments.

Full text of the Chiquita v National Union opinion below.

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