For more than a year, chicken producer Foster Farms has been tied to a salmonella outbreak that has sickened hundreds of people, resulted in the shutdown of a Foster plant and the destruction of more than a million pounds of meat. But a loophole in USDA guidelines meant that that the company didn’t issue any recalls until just last week. Now it’s that same loophole that appears to be coming back to bite Foster in the derriere.

Meatingplace.com reports that Foster had an insurance policy with Lloyd’s of London to cover the company in case of losses from contaminated product.

But apparently Lloyd’s doesn’t want to pay up because there were no actual recalls of Foster products.

As we recently pointed out, the Poultry Products Inspection Act allows for the recall of “adulterated” meat, but defines adulterated as containing poisons, toxic pesticides, unsafe food additives, or contains any “deleterious substance which may render it injurious to health.”

But this doesn’t include salmonella, because salmonella is frequently found in poultry, but not to the point where it presents a hazard. And the act says a meat product shall not be considered as adulterated if “the quantity of such substance in or on such article does not ordinarily render it injurious to health.”

Thus, while the USDA could shut down Foster’s cockroach-infested plant, it felt it lacked authority to kick off a recall on the Foster products.

Now it appears that the lack of a recall is giving Lloyd’s cause to not pay out on Foster’s policy.

Foster, which claims losses of $14.2 million from the tainted chicken, is now suing Lloyd’s, alleging that the insurer breached its obligation under the policy.

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