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Publisher’s Platform: Secrecy in Settlements

I took the time today to read again the Seattle Times article by Maureen O’Hagan, “Seattle lawyer turns into healthy food crusader,” and I was struck by a discussion I had with the reporter:

Marler, … says he and his firm, Marler Clark, have pried $500 million in settlements out of companies that have sickened customers. The vast majority of the firm’s cases settle. “We have a lot of big cases, $7 (million) to $10 million cases,” Marler said. “People don’t just give you that kind of money unless you have your foot on their throat.”

I won’t say that she did not believe we have reached over $500 million in settlements in the last 10 years, but she was skeptical. And, who could blame her? I mean, no matter how hard you look, you will find only one verdict (Finley E. coli O157:H7 Outbreak $4.75 million) and only a few settlements — Jack in the Box’s $15.6 million settlement with Brianne Kiner, Odwalla’s $12 million – $15 million E. coli O157:H7 settlement, and an $11 million E. coli O157:H7 settlement with BJ’s.

Those settlement amounts became public, in part, only because of mistakes — the defense lawyer failed to seal the BJ’s court file and it appears that Odwalla leaked the settlement, even though the parents of the injured children wanted the settlements to be confidential. The Kiner settlement was different; both sides, the Kiners and Jack in the Box, wanted the settlement to be public.

So, no wonder that Ms. O’Hagan questioned the settlement total. All three settlements that were revealed — Kiner, Odwalla and BJ’s — were the exception to the general rule of confidentiality.

The bottom line is that defendants (aka, companies that poison customers) and their insurers want confidentiality. Why? What food company really wants to admit it paid money for poisoning someone? And, what insurance company wants to admit it paid any money at all to anyone at any time?

As for victims, many agree to the defendant’s desire for confidentiality to get money that is rightfully theirs as compensation for injuries, while others simply feel the public does not need to know the amount of the settlement — in essence, they have a right to privacy.

The reality is that nearly all settlement agreements today contain a provision like:

Confidentiality. In further consideration of the payment to be made by Releasee, Releasors and their attorneys, including all individuals employed by or with the Releasors and/or their attorneys agree and represent that the existence of this Agreement, the Agreement itself, the terms of the Agreement, and the allegations of the complaint, are and shall remain confidential. Except as permitted below, Releasors and their attorneys agree that they will not disclose and have not in the past disclosed this Agreement or the contents thereof to any person, organization and/or entity, and will use their best efforts to insure that any such person who is permitted knowledge of the terms of this Agreement, will not violate the letter or spirit of this Agreement and the confidentiality provisions contained herein.

As I said, injured plaintiffs may desire privacy and therefore find the confidentiality of settlements — especially for their children — beneficial. Defendants and insurers clearly benefit from secret settlements by keeping both if they paid and how much they paid confidential.

However, does the public as a whole suffer from these confidential settlements?

What if a food company repeatedly causes harm and then covers up, not only the amount of the settlement but also the cause of the outbreak, through a confidential settlement? And how does the public benefit from allowing settlements by insurance companies to be secret — especially given that taxpayers have bailed out several of these companies?

What if each settlement amount was transparent? What if the media reported on the settlement? What if the public knew about the number of settlements and the amounts? Would it change legislative behavior? Would it change regulatory behavior? Would it change consumer-purchasing behavior? Would it change a company’s investment in food safety?

I fear that as long as settlements are confidential we will never know. Perhaps it is time for transparency?

© Food Safety News
  • Karen and Larry Andrew

    Bill…you are absolutely right! Shine a spotlight on the details, including the amounts of the settlements. Would have a huge positive impact on companies willingness to spend more for food safety improvements in their processes.
    Keep a list of how many products Walmart or Costco sell that result in food poisoning. Publish a tally of settlements by each company.

  • Bill, I concur that question before the dash in your combination question and your rhetorical assertion–“And how does the public benefit from allowing settlements by insurance companies to be secret — especially given that taxpayers have bailed out several of these companies?” is important and merits a lively public debate.
    However, I am surprised by your assertion that “taxpayers have bailed out several of these companies.”
    Really? I can’t come up with a one.
    So, I ask that you enlighten me with the names for us “several” insurance companies that have made settlements in foodborne illness cases that “taxpayers have bailed out.”

  • Julie Jordan

    While I agree that transparency is for the greater good, and most people would agree, look at this from the standpoint of the plaintiff.
    That person, or that family, has suffered some sort of loss, be it a few days missed at work, or a few days in the hospital, all the way to the death of a loved one.
    Their world has been turned upside down, they’ve had to endure the stress of a trial with the results unknown right up to the end.
    Now, they’ve won a settlement.
    If the amount becomes common knowledge, a whole new phase in their lives will begin – the onslaught of financial planners (legit or otherwise) and previously unknown ‘relatives’ who need some financial help.
    Maybe there is room for compromise. Make the offending companies the bad guys but don’t reveal enough information about the plaintiff to identify them (and make the unscrupulous folks job easier).
    Just sayin’

  • Bill, I concur that question before the dash in your combination question and your rhetorical assertion–“And how does the public benefit from allowing settlements by insurance companies to be secret — especially given that taxpayers have bailed out several of these companies?” is important and merits a lively public debate.
    However, I am surprised by your assertion that “taxpayers have bailed out several of these companies.”
    Really? I can’t come up with a one.
    So, I ask that you enlighten me with the names for us “several” insurance companies that have made settlements in foodborne illness cases that “taxpayers have bailed out.”

  • Harry – AIG to name one that hit over $100,000,000.
    Julie – I tend to feel the same way you do.

  • You’re wrong, Bill.
    I asked you for the names of “insurance companies that have made settlements in foodborne illness cases.” The AIG has NEVER made such a settlement.
    “AIG” is the acronym for “American International Group” (http://www.aigcorporate.com/index.html). It is financial services holding company NOT an insurance company.
    Subsidiary liability insurance companies owned by AIG may very well have paid claims but NONE of them received any money in the US government bailout. The AIG’s website emphasizes this as follows:
    “It is important to reiterate that throughout the crisis, AIG’s insurance businesses were—and continue to be—healthy and well capitalized. The losses that occurred as a result of [AIG Financial Products Corporation’s] actions have no direct impact on AIG policyholders. AIG’s insurance companies are closely regulated, and their reserves are protected with adequate assets to meet policyholder obligations.” [http://www.aigcorporate.com/aboutaig/pre_september_2008.html]
    Furthermore, Bill, had one of AIG’s property-liability insurance subsidiaries needed “bailing out,” it would have been taken over by the appropriate state insurance department, liquidated and any outstanding claims paid out of the various state property-liability insurance guaranty funds. All State guaranty funds are financed by an insurance premium tax on all admitted property-liability insurance companies operating in that state.
    In fact, the AIG’s property-liability insurance company subsidiaries were and continue to be major money makers. It is their profits which are being used to pay back the US government bailout of other AIG subsidiaries.
    AIG collapsed because it allowed a subsidiary operating OUTSIDE of the US to issue financial derivatives (e.g., credit default swaps), primarily to foreign international back, which federal banking regulators had ruled were NOT insurance (over the objection of State insurance departments led by NY). This expansive interpretation of banking authority was made by Democrat Bill Clinton’s administration as part of its strong support for revocation of the Glass-Steagall Act of 1933 via the Financial Modernization Act of 1999 (aka Gramm-Leach-Bliley Act). These foolish rulings were ratified by Congress in its Commodities Futures Modernization Act of 2000 (http://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000) for the express purpose of stopping the efforts of State insurance regulators to curb the expansive interpretations of Federal banking regulators. The arguments for these “modernization” acts were quite similar to those of supporters of the FDA Food Safety MODERNIZATION Act (my emphasis). Once again, Congress foolishly ratified of the expansive interpretation by a Federal regulator (this time, the FDA) of its authority by characterizing it as “modernization.”
    AIG’s bailout was entirely about propping up international commercial and investment banks. It had NOTHING to do with the liability insurers which pay foodborne illness claims. It was caused by expansive interpretations of foolish Federal regulators for the benefit of special interest groups under the guise of “modernization” and helping the American public.
    That said, Bill, you wrote “taxpayers have bailed out SEVERAL of these companies” (my emphasis). You haven’t named a one, much less several. We, the readers of Food Safety News, are still waiting for you to document your assertion.

  • You’re wrong, Bill.
    I asked you for the names of “insurance companies that have made settlements in foodborne illness cases.” The AIG has NEVER made such a settlement.
    “AIG” is the acronym for “American International Group” (http://www.aigcorporate.com/index.html). It is financial services holding company NOT an insurance company.
    Subsidiary liability insurance companies owned by AIG may very well have paid claims but NONE of them received any money in the US government bailout. The AIG’s website emphasizes this as follows:
    “It is important to reiterate that throughout the crisis, AIG’s insurance businesses were—and continue to be—healthy and well capitalized. The losses that occurred as a result of [AIG Financial Products Corporation’s] actions have no direct impact on AIG policyholders. AIG’s insurance companies are closely regulated, and their reserves are protected with adequate assets to meet policyholder obligations.” [http://www.aigcorporate.com/aboutaig/pre_september_2008.html]
    Furthermore, Bill, had one of AIG’s property-liability insurance subsidiaries needed “bailing out,” it would have been taken over by the appropriate state insurance department, liquidated and any outstanding claims paid out of the various state property-liability insurance guaranty funds. All State guaranty funds are financed by an insurance premium tax on all admitted property-liability insurance companies operating in that state.
    In fact, the AIG’s property-liability insurance company subsidiaries were and continue to be major money makers. It is their profits which are being used to pay back the US government bailout of other AIG subsidiaries.
    AIG collapsed because it allowed a subsidiary operating OUTSIDE of the US to issue financial derivatives (e.g., credit default swaps), primarily to foreign international back, which federal banking regulators had ruled were NOT insurance (over the objection of State insurance departments led by NY). This expansive interpretation of banking authority was made by Democrat Bill Clinton’s administration as part of its strong support for revocation of the Glass-Steagall Act of 1933 via the Financial Modernization Act of 1999 (aka Gramm-Leach-Bliley Act). These foolish rulings were ratified by Congress in its Commodities Futures Modernization Act of 2000 (http://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000) for the express purpose of stopping the efforts of State insurance regulators to curb the expansive interpretations of Federal banking regulators. The arguments for these “modernization” acts were quite similar to those of supporters of the FDA Food Safety MODERNIZATION Act (my emphasis). Once again, Congress foolishly ratified of the expansive interpretation by a Federal regulator (this time, the FDA) of its authority by characterizing it as “modernization.”
    AIG’s bailout was entirely about propping up international commercial and investment banks. It had NOTHING to do with the liability insurers which pay foodborne illness claims. It was caused by expansive interpretations of foolish Federal regulators for the benefit of special interest groups under the guise of “modernization” and helping the American public.
    That said, Bill, you wrote “taxpayers have bailed out SEVERAL of these companies” (my emphasis). You haven’t named a one, much less several. We, the readers of Food Safety News, are still waiting for you to document your assertion.

  • Bill,
    You’ve now had 6 more days for you and your staff to find the several examples needed to document your assertion.
    If you can’t, then I suggest you retract it.

  • Harry, you are correct – I should not have said “several” in this sentence:
    What if a food company repeatedly causes harm and then covers up, not only the amount of the settlement but also the cause of the outbreak, through a confidential settlement? And how does the public benefit from allowing settlements by insurance companies to be secret — especially given that taxpayers have bailed out several of these companies?
    I suppose given that AIG has paid over $100M in settlements for companies it insured that poisoned people, I got a bit carried away. Thanks for the catch.

  • Bill,
    You’ve now had 6 more days for you and your staff to find the several examples needed to document your assertion.
    If you can’t, then I suggest you retract it.

  • Bill, removing the word “several” does NOT make your assertion correct.
    As I wrote, in detail, on 4-11-11, one or more of AIG’s non-US financial services subsidiaries was bailed out NOT its property-liability insurance subsidiaries that have made settlements in food-borne illness claims. And, as I pointed out, property-liability insurance guaranty funds handle the problems of insolvent insurance companies. They are not bailed out by any government.
    Even without the word, “several,” your assertion was clearly wrong from the start.
    Now on to a significantly more important assertion you made in the first part of the sentence we’ve focused upon.
    Your assertion that insurance companies are “allowed” to keep claim settlements secret clearly implies that these settlements are inherently public information. Really? What makes them public, Bill? I suggest that you reconsider the 9th and 10th amendments of the US Constitution. A settlement agreement is a private agreement that both parties can agree to keep confidential. How many times have you recommended that one of your clients refuse to agree?
    Also, how does the confidentiality clause quoted above cover up the cause of an outbreak? How does it block a person from answering the questions of regulators involved? How does it negate all of the FDA, FSIS and other food regulators’ authority to ascertain the cause of an outbreak? Of course, it doesn’t!
    Bill, as I wrote in my first comment, the question of whether or not confidentiality of settlements serves the public good merits a lively debate.
    I find it difficult to have such a debate with you because of your continued use of rhetorical devices like the one I just cited. They may aid your clients but they get in the way of our having a genuine discussion as I have to refute them individually because some of those reading this may have been misled by them. As I make my living producing, distributing and retailing local, healthy food, I don’t have the time to expand in debates that don’t progress.
    You may have the last word.

  • Bill, removing the word “several” does NOT make your assertion correct.
    As I wrote, in detail, on 4-11-11, one or more of AIG’s non-US financial services subsidiaries was bailed out NOT its property-liability insurance subsidiaries that have made settlements in food-borne illness claims. And, as I pointed out, property-liability insurance guaranty funds handle the problems of insolvent insurance companies. They are not bailed out by any government.
    Even without the word, “several,” your assertion was clearly wrong from the start.
    Now on to a significantly more important assertion you made in the first part of the sentence we’ve focused upon.
    Your assertion that insurance companies are “allowed” to keep claim settlements secret clearly implies that these settlements are inherently public information. Really? What makes them public, Bill? I suggest that you reconsider the 9th and 10th amendments of the US Constitution. A settlement agreement is a private agreement that both parties can agree to keep confidential. How many times have you recommended that one of your clients refuse to agree?
    Also, how does the confidentiality clause quoted above cover up the cause of an outbreak? How does it block a person from answering the questions of regulators involved? How does it negate all of the FDA, FSIS and other food regulators’ authority to ascertain the cause of an outbreak? Of course, it doesn’t!
    Bill, as I wrote in my first comment, the question of whether or not confidentiality of settlements serves the public good merits a lively debate.
    I find it difficult to have such a debate with you because of your continued use of rhetorical devices like the one I just cited. They may aid your clients but they get in the way of our having a genuine discussion as I have to refute them individually because some of those reading this may have been misled by them. As I make my living producing, distributing and retailing local, healthy food, I don’t have the time to expand in debates that don’t progress.
    You may have the last word.