Legal Roundup: Smoke Tainted Grapes, Alligator Supply Chains, Yahoo Emails and More

A look at recent court decisions and how their rulings have an impact on risk management and the insurance industry.
By: | June 4, 2019

Smoke-Tainted Grapes From Wildfire Lead to Winery Lawsuit

The Case: Sometimes, a smoky flavor can make a wine delightful. But after repeated wildfires in California, many producers say “smoke taint” has made their grapes are unusable.

Levensohn Vineyards of Napa Valley argued that wildfire smoke damaged its grapes and led to $1.14 million in losses that should be covered by their insurance company Nationwide Agribusiness Insurance.



After the insurer failed to pay the compensation, Levensohn sued in U.S. District Court in Northern California.

The Score: The suit has just been filed but the case should be watched closely by an industry that’s seen smoky skies become the norm.

The Takeaway: Is smoke-taint a legitimate loss that should be covered by insurers? It’s certainly led to wineries losing business and destroying once-usable grapes. Still, some argue that the testing process is flawed, previous years have been just as smokey, and the extent of the damage is dependent on thickness and variety of grapes. 

Amazon Not Liable For Selling Defective Product

The Case: Erie Insurance Co. sued Amazon claiming that a defective lamp sold on the online marketplace caused a house fire and more than $300,000 in damage.

Erie argued that Amazon controlled so much of the transaction that it became the de facto seller. Amazon claimed that title for the lamp passed directly from the seller, a company called Dream Light, to the buyer — meaning Amazon couldn’t be held liable as the seller.

Scorecard: The Fourth Circuit in Maryland agreed with Amazon. It ruled “that at no point in the chain of events that brought the allegedly defective lamp into the Maryland home of an Erie policyholder did Inc. hold title to it. Therefore, under Maryland law, the online retail giant was no more liable than the company that delivered the package, the panel said,” according to Law360.

Takeaway: It’s a big win for Amazon and all other online marketplaces.

Prada Sues Over Alligator Skins

The Case: Prada is suing Florida alligator skin wholesaler Caporicci USA Corp. for $3.2 million worth of product used to make designer handbags and other accessories.

The Fashion Law explains that when Caporicci “refused to refund Prada more than $600,000 after failing to provide thousands of alligator hatchlings, Prada took the matter before an arbitrator in Milan.”

The National and International Arbitration Court of Milan found that Caporicci had “breached its agreement with Prada and ordered it to repay $633,213 for the hatchlings it failed to obtain and to deliver to Prada 3,761 hatchlings,” according to The Fashion Law. Caporicci fired back with its own breach of contract suit alleging that Prada’s actions led to $2 million in losses by Caporicci.

Scorecard: That case is still ongoing.

Takeaway: This acts as a reminder that supply chains are crucial to any business. Know who you are in business with and who you are relying on.

Yahoo vs. AIG Over Email Scanning Class-Action Coverage Denial

The Case: Yahoo accused AIG subsidiary National Union Fire Insurance Co. of failing to cover the tech giant’s cost to defend itself against a class-action lawsuit. The suit was brought by people who claimed Yahoo unlawfully scanned their emails.



Scorecard: The result was mixed. Law360 explains: “The federal jury found that the tech giant is entitled to recover the $618,380 in attorney fees it expended in the current suit to establish that the insurer breached its policy. The jury did, however, reject Yahoo’s request for a bad faith award equal to the full $7 million it spent defending and settling the underlying action. It also spurned the company’s bid for punitive damages after concluding that National Union didn’t act with “malice, oppression, or fraud.”

Takeaway: When the covenant of good faith is broken, business dealings get messy. &

Jared Shelly is a journalist based in Philadelphia. He can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]