Hunton Retail Law Resource

On July 26, 2017, an amusement ride named “Fire Ball” at the Ohio State Fair broke apart, killing one passenger and injuring seven others. This deadly incident may trigger a CPSC investigation into the matter.

Prior to 1981, the CPSC exercised jurisdiction over all amusement rides. But after several high-profile cases challenged the CPSC’s jurisdiction over amusement rides with mixed results, an amusement parks trade group successfully lobbied Congress to exempt stationary amusement rides from the CPSC’s jurisdiction. In 1981, Congress passed the Consumer Product Safety Amendments, which amended the definition of “consumer product” to explicitly exempt stationary amusement rides.

Thus, the CPSC’s jurisdiction over an amusement ride now turns on its mobility. Rides that are transported from location to location are “mobile” and are subject to CPSC jurisdiction, but those that are permanently fixed to their location are “stationary” and exempt from CPSC jurisdiction. This peculiar jurisdictional line raises tough questions. Take, for example, a Ferris wheel. Does it make sense for the CPSC to have jurisdiction over a Ferris wheel temporarily parked on a foldable iron platform at a state fair but not over a Ferris wheel permanently bolted to concrete slabs at a theme park, even if the same manufacturer built both Ferris wheels Regardless of the soundness of this jurisdictional line, it is the law that governs the CPSC’s power over amusement rides today. And, because last week’s Ohio State Fair amusement ride was mobile, the CPSC has jurisdiction over it and may launch an investigation. In 2016 alone, the CPSC estimates that emergency rooms saw over 30,000 injuries linked to amusement attractions and rides.

Turning to recalls, July was a relatively quiet month with only 16 recalls. For months now, the CPSC has focused its regulatory efforts on outdoor recreational vehicles, such as ATVs, ROVs and snowmobiles. In fact, there have been 17 total recalls for outdoor recreational vehicles so far in 2017 and, just last month, a manufacturer agreed to pay a $5.2 million civil penalty for defective ROVs. This trend continued in July with four more recalls for outdoor recreational vehicles.

Two additional pieces of news are noteworthy. First, a few months ago Commissioner Ann Marie Buerkle—a Republican—became acting chair of the CPSC. It should come as no surprise that President Trump recently announced plans to nominate Buerkle to become the CPSC’s chair for a seven-year term, solidifying her leadership at the agency for the foreseeable future. Second, after news reports surfaced about children choking from the small parts of fidget spinners, we have been watching to see if a manufacturer recalls the summer’s hottest toy. So far, no recalls for fidget spinners have occurred but the CPSC did recently tweet a safety message about them: "#FidgetSpinners have small parts that can be a choking hazard. Don't put spinners in your mouth #FridayFeeling." Clearly fidget spinners have caught the attention of the CPSC.

Attorneys from Hunton & Williams LLP’s Insurance Coverage practice group weigh in regarding a few noteworthy decisions on insurance coverage for product recalls in July:

The frozen pea forum battle continues between National Frozen Foods Corporation ("National") and its insurer, Berkley Assurance Company. As you may recall from prior posts in March and June, National is seeking coverage for recall costs after frozen peas tested positive for listeria. Berkley had denied coverage based on purported omissions and misrepresentations in National’s insurance application. National sued for coverage in Washington state, despite a forum selection clause which required disputes to be litigated in New York. National argues that the forum selection clause is void because, among other reasons, Washington state law bars foreign forum selection clauses for policies issued in the state. Berkley has sought to transfer venue and, simultaneously, filed suit in New York. The ongoing dispute over proper venue for the litigation promises to delay substantive argument for some time.

Also, in February, we reported on Starr Surplus Lines Insurance Company’s ("Starr's") suit against CRF Frozen Foods, LLC, to rescind coverage based on the allegation that CRF was aware of circumstances likely to give rise to its 2016 recall of frozen vegetables. Since then, Starr moved to bifurcate the preliminary issue of whether CRF made material misrepresentations or omissions in its insurance application and, if so, whether Starr relied on those misrepresentations or omissions in deciding to insure CRF. On July 26, 2017, the court granted Starr’s motion, ordering the parties to proceed with discovery through the end of this year with respect to those limited issues only. Bifurcation can be a cost-saving measure for parties to litigation where there is a preliminary dispositive issue which, if resolved in either party’s favor, will substantially limit the relevant issues before the court or otherwise end the case. However, it may create certain strategic challenges that can leave one or more of the parties at a disadvantage. In this case, time will tell…but not for some time; the case schedule suggests that we will not see substantive motions practice in this case until the spring.

Finally, for recent discussion of recall-related issues, see our July publications:

• Now You See It (Now You Don’t?) – Recent Insurer Efforts to Void Coverage Based on New York Rescission Law, FC&S Legal, July 18, 2017
• Fear of the Unknown Cause of Contamination, Food Safety Magazine, July 6, 2017

Total Recalls: 16

Hazards: Fire/Burn/Shock (5); Fall (2); Crash (2); Laceration (2); Violation of Flammability Standards (2); Choke (1); Impact (1); Injury (1)

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