A New Jersey court has ruled against an insurance company, siding with Taco Bell Restaurants in a case involving coverage for business losses as a result of food contamination in 2006.

The so-called “Taco Bell Outbreak” of E. coli, allegedly traced to lettuce delivered to some northeastern Taco Bell franchises, led Lloyds Market to assert that its $0 sublimit precludes insurance coverage for incidents stemming for any alleged involvement of a “supplier” and refused to cover the losses.

In the case, Quick Service Management Inc. vs. Underwriters of Lloyds, et al., the Superior Court of New Jersey granted a partial summary judgment, saying Taco Bell should be compensated for its business losses after allegedly contaminated lettuce was served in some menu items.

Lloyds attempted to deny coverage, but the court found that “any exclusion must be clear” in its Trade Name Restoration (TNR), Loss of Business Income (LBI) and Incident Response Insurance For Food Borne Illness (FBI) policies, according to Judge Phillip Lewis Paley’s ruling. Lloyds sold the policies to Taco Bell franchisees.

Beginning in 2003, when FBI coverage was discontinued, the franchisees instead bought TNR coverage from the Lloyds Market. The Court noted that the marketing for TNR insurance stated “even the best restaurants can suddenly be trapped in an infectious health situation…due to a food borne illness or supplier mistake that ends up totally out of control.”  At the same time, Lloyd’s asserted that the TNR policies contained an “Aggregate Supplier Incident Sublimit,” not present in the FBI predecessor polices, indicating a dollar amount of $0.

The court found that Lloyds failed to properly explain the sublimit, and that Taco Bell made reasonable assumptions.

The court rejected several of the insurance company’s interpretations of policy language, including their argument that the lettuce was a “product,” to which the sublimit would apply, as opposed to “an ‘ingredient,’ something used to produce or prepare ‘the Insured’s Products,’” according to the ruling.

The suit was filed on behalf of more than 1,300 Taco Bell restaurants operated by more than 70 franchisees, according to William G. Passannante, lead counsel and a lawyer at of Anderson Kill & Olick.