Contents


    Executive Summary

    A Genetically Modified Organism (GMO) or a Genetically Engineered Organism (GEO) is an organism whose genetic material has been altered using Genetic Engineering (GE) techniques. GE is a process in which genetic information is selectively modified by transferring known genetic material from one organism to another, thereby transferring new characteristics to the recipient organism. Experts believe that GE has unlimited potential applications, including research, industrial, agriculture, medical products and pharmaceuticals. Corporate investment in GE products has been significant and the potential for liability is great, meaning that both the companies that make agricultural products and their insurers are monitoring legislative responses to food safety and environmental risks.

    Background

    GE is a seminal technology that could revolutionize modern agriculture by significantly increasing crop yield. Further, GE enhances the nutritional value of many crops, reduces the need for agricultural chemicals such as pesticides, and demands less work from farmers. Commercially sold crops that are affected using GE are usually strengthened to tolerate herbicides.

    Agricultural use of GE crops has increased quickly over the past few decades. In 2000, 1-2% of all corn planted in most states was of GE variety. In 2019, GE variety is about 90-95% of all corn planted in most states. In similar trends, GE variety percentage of upland cotton planted is about 98% in most states, and GE variety percentage of soybeans planted is near 95% in most states.

    Also, GE is expected to lead to breakthrough advances in medical cures and treatments. The marketing of GE medical or agricultural products does not come without risk or potential downsides, however, which are exacerbated by the fact that hundreds of companies, ranging from small research boutiques to Fortune 500 chemical and pharmaceutical giants, are investing billions of dollars in GE applications.
    GE is a seminal technology that many believe will revolutionize modern agriculture by significantly increasing crop yield while enhancing the crop’s nutritional value and reducing the need for agricultural chemicals. Also, GE is expected to lead to breakthrough advances in medical cures and treatments. The marketing of GE medical or agricultural products does not come without risk or potential downsides, however, which are exacerbated by the fact that hundreds of companies, ranging from small research boutiques to Fortune 500 chemical and pharmaceutical giants, are investing billions of dollars in GE applications.

    Injuries and Damages

    The risk of injuries and damages associated with GE products generally involve food safety and environmental risks. Specific concerns include:
    • an increased antibiotic resistance in pathogenic bacteria that could become increasingly immune to treatment;
    • an increase in allergic reactions, as well as the development of new allergens;
    • threats to biodiversity;
    • damage to ecosystem balance;
    • the unintentional transfer of genes to plants which could become “superweeds”;
    • the unintentional crop contamination by patented seeds or pollen through drift caused by winds; and
    • the production of toxins and pathogens.

    The unintentional contamination of crops through “genetic drift” becomes an issue when a farmer’s non-GMO crop is contaminated by someone else’s GE crop. For example, if a non-GMO crop is planted downwind of a GMO crop, the possibility of contamination may be unavoidable. Contamination also takes place when GE seeds from an earlier year’s crop sprouts (“volunteers”) in non-GMO fields, or a farmer does not sign a technology agreement with the seed company but uses the GMO seeds anyway. In California, some farmers were sued by biotech patent holders such as Monsanto due to genetic drift.

    In 2000, an incident involving adverse reactions occurred involving a GE product called StarLink corn. StarLink corn was a GE product that the FDA had approved only for animal consumption, but that accidentally made its way into the human food chain. For example, a trace amount showed up in certain taco shells. Given widespread public safety concerns over GE products, the StarLink incident received considerable media attention, although few cases of allergic reactions were reported. The incident set off a costly string of events that included product recalls, expensive cleanup operations, loss of overseas trade, and lawsuits.

    Legislation and Regulation

    GMOs in the U.S. are regulated under environmental, health and safety laws which govern conventional products, rather than under comprehensive federal legislation. Further, regulatory agencies for GMOs can include the Food and Drug Administration (for pharmaceutical uses), the Environmental Protection Agency (for insecticide uses) and the United States Department of Agriculture (for food crop uses). The regulatory focus is on the products themselves instead of how they were produced.

    Food and Drug Administration regulations

    GMOs in biological products, food and drugs are regulated by the Food and Drug Administration (FDA) under the Federal Food, Drug, and Cosmetic Act (FFDCA) and the Public Health Service Act. With respect to crops used in products to be consumed by humans or animals, the FDA stated in the early 1990s that it considered most GM crops to be “substantially equivalent” to crops that had not been genetically modified, meaning that the crops usually did not require pre-market approval, and were designated “Generally Recognized as Safe” under the guidelines of the FFDCA.

    An exception to this, however, applied if the insertion of a transgene into a food crop caused the expression of foreign proteins that were significantly different in function, structure or quality from natural plant proteins and possibly harmful to human health. Under these circumstances, the FDA could exercise its authority to apply the stricter provisions of FFDCA, requiring the pre-market approval of food additives regardless of whether they were the products of biotechnology.

    The FDA has also engaged in a voluntary consultation process with GM crop developers during which the determination of “substantial equivalence” is reviewed before the crop is marketed, including an assessment of the allergenicity or toxicity of the gene product and the actual plant. If the food-safety data is acceptable, the FDA clears the developer to market the crop. Some have questioned whether the voluntary consultation process allows for adequate assurance that GM crops are safe, because the use of food crops, such as corn in the production of pharmaceuticals and non-food products, falls under the FDA’s authority only if the gene product contaminates a food crop; if so, it must be recalled as an adulterated product. This situation has caused critics to claim that under these circumstances the FDA may not actually perform adequate oversight until the damage is already done.

    U.S. Department of Agriculture regulations

    The U.S. Department of Agriculture regulates plant GMOs through its Animal and Plant Health Inspection Service as provided for by the Plant Protection Act. The type of GMO involved determines the form of regulation. Under the Plant Protection Act, a regulated GM plant must receive approval from the Animal and Plant Health Inspection Service before being introduced.

    Environmental Protection Agency regulations

    The Environmental Protection Agency (EPA) governs pesticides and microorganisms pursuant to the Federal Insecticide, Fungicide and Rodenticide Act and the Toxic Substances Control Act. Plants modified with short sequences of genes from Bacillus thuringiensis (Bt), a soil-dwelling bacterium commonly used as a biological pesticide, can produce toxins in their systems to protect themselves from non-beneficial insects. In situations where a crop has been genetically engineered to carry a gene for a Bt toxin, the EPA demands that the developer carry out both an analysis of food safety to ensure that the foreign protein is not allergenic, and verify the environmental safety of the toxin. Before registering a new pesticide, the EPA must approve that using the pesticide “will not generally cause unreasonable adverse effects on the environment.”

    Liability and Insurance

    The categories of potential defendants in GE lawsuits depend on the injury alleged. For example, litigation that includes allegations of food contamination could include farmers, grain elevator operators, grain traders, millers, food manufacturers and processors of food, distributors and food retailers.

    Applicable insurance coverage for GE-related occurrences can cut across several insurance product lines. General liability and product liability insurance products might protect against exposure to property damage claims arising from accidental commingling during farming, harvesting, storage, transport or processing, or from contamination of non-GE crops and food with GE counterparts via gene transfer by cross pollination. However, losses due to GMO cross-pollination are usually excluded from coverage due to the “incalculability of associated risks” according to experts.

    A shipment of grain exceeding the maximum allowable level of GE content could be rejected by foreign importers and trigger a claim based on commingling. General or product liability claims could also arise from bodily injury due to the ingestion of GE food that allegedly causes antibiotic resistance, allergic reactions or exposure to toxins or pathogens. Other claims could arise in relation to product recall, environmental liability, director’s and officers’ liability and Seedmen’s error and omissions liability policies, which are designed to cover an insured's liability for claims such as failure to germinate, errors in germination tests, and mislabeling.

    Litigation

    The spectrum of issues that have litigation potential is broad because the impact of genetically engineered products will likely be widespread. Unforeseen negative effects could involve delayed-manifestation issues like those arising in asbestos, environmental and other emerging latent exposure cases.

    Coverage issues in litigation could include: expected or intended, known risk, known loss, trigger of coverage, bodily injury definition (emotional distress/mental anguish), property damage definitions, pollution exclusions, and product exclusions. An important consideration could be how coverage is provided under claims-made liability policies versus occurrence-based policies.

    Unique allocation issues, settlements, and court decisions will probably become part of the legal landscape and could vary significantly by jurisdiction. Experts predict that the result of the coupling of significant legal wrangling with cutting-edge scientific technology will be protracted discovery and expensive litigation.

    Within the food industry, some companies are involved in litigation issues related to mislabeling of products. For example, in September 2019, Chipotle agreed to a $6.5 million settlement due to allegations that its food was mislabeled as “non-GMO,” when in fact the dairy and meat products had been sourced from animals fed GMO products.

    Future Outlook

    Industry-watchers believe that GE organisms are here to stay because Fortune 500 chemical and pharmaceutical giants have invested billions in GE technology. It has been proclaimed to be the technology that will revolutionize modern agriculture by significantly increasing crop yield, enhancing nutritional value, reducing the need for agricultural chemicals, and likely leading to breakthrough medical advances. In the future, GMO farmers may need to complete Environmental Impact studies to get approval from USDA. While the possibilities of unanticipated societal benefits and immense corporate profits from GE are huge, the cost of its occasional failures are likely to be correspondingly expensive from an insurance standpoint.

    In the News

    2017

    • Kansas Jury Awards $218M to Farmers in Syngenta GMO Suit - The Associated Press, The New York Times (06/23/2017)
      A Kansas federal jury awarded nearly $218 million on Friday to farmers who sued Swiss agribusiness giant Syngenta over its introduction of a genetically engineered corn seed variety.

    2016

    • Bill passed by Congress to require GMO labels on food falls shorts, critics say - Mary Pols, Portland Press Herald (07/14/2016)

      Despite being opposed by Maine’s entire congressional delegation, a bill to create a national labeling policy for foods containing genetically modified ingredients is headed to President Obama’s desk after a decisive 306-117 vote Thursday in the House of Representatives. The White House has said Obama will sign it.

    Additional Items

    GMO CompassInformation on genetically modified organisms.

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