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Insurance company claims it has no duty to defend Jimmy John's in lawsuit over alfalfa sprouts

By Jonathan Bilyk | Feb 26, 2014

One of the country’s fastest growing chains of sandwich shops will have to fight a class action lawsuit over alfalfa sprouts by itself if an insurance company gets what it ordered from Chicago's federal court.

New York-based Utica Mutual Insurance Co. on Feb. 21 filed a complaint for declaratory judgment, asking the court to find that it has no duty to defend Jimmy John's in the suit Heather Starks brought against the sandwich chain last year in California.

Starks, a California resident, alleges that Jimmy John's violated California’s False Advertising Act by allowing its menu boards to say some of its sandwiches contain alfalfa sprouts even though they don't and haven't since at least early 2013.

Represented by attorneys Kevin Shenkman and Mary Hughes of Shenkman & Hughes in Malibu, Calif., Starks filed her suit Feb. 14, 2013 in Los Angeles County Superior Court.

The Champaign, Ill.-based Jimmy John’s operates more than 1,500 restaurants in more than 40 states. The company has experienced rapid growth in recent years in both the number of new restaurants regularly being opened and in its sales.

However, alfalfa sprouts have proven to be a sore subject for the sandwich chain.

While it included alfalfa sprouts on at least four of the sandwiches listed on its menu for years, the company’s ownership in 2012 ordered their removal after public health officials indicated sprouts served at several Jimmy John’s shops may have been responsible for salmonella outbreaks that sickened scores of people in 27 states since 2008.

Following those revelations, other suits related to that outbreak were filed against Jimmy John’s. The company’s decision to remove the sprouts from its stores was announced publicly in early 2012.

While the sprouts were removed and can no longer be ordered by customers, Starks asserts in her suit that Jimmy John’s menu boards have not been sufficiently altered to reflect the change, causing her and others like her to buy sandwiches they believed would contain alfalfa sprouts.

Her complaint includes a litany of the potential nutritional benefits derived from eating alfalfa sprouts, which she said led her to desire to purchase the Jimmy John’s sandwiches.

She has asked the California courts to let her suit proceed as a class action and to award an unspecified amount of damages.

In March 2013, Utica Mutual sent Jimmy John’s a letter declaring that, while it had issued a commercial general liability policy to the sandwich chain, it would not defend it against Starks' suit.

Utica Mutual noted in its recently-filed complaint for declaratory judgment that it doesn't have a duty to defend Jimmy John's based on its policy because Starks' suit does not allege bodily injury or property damage.

In addition, the insurance company claims the cause of the action in Starks' suit arose as a result of allegations of “Jimmy John’s oral or written publication of false material, with Jimmy John’s knowledge that such material was false” and “out of the failure of goods, products or services to conform with a statement of quality or performance made in Jimmy John’s advertisement.”

All of those elements, under the terms of the insurance policy, exempt it from having to defend the chain in the California suit, the insurance company asserts in its complaint.

Utica Mutual is being represented in the action by attorneys Glenn F. Fencl and Daniel R. Bedell of Johnson & Bell Ltd. in Chicago.

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