Farm Linked to Listeria Outbreak Files for Bankruptcy

A cantaloupe farm linked to a September 2011 listeria outbreak that caused 30 deaths and made hundreds sick filed for Chapter 11 bankruptcy on Friday after reaching a deal with its insurance company, which had argued that the company’s insurance policy didn’t cover personal injury.

Jensen Farms of Holly, Colo., filed for bankruptcy protection after its insurer, Travelers Indemnity, agreed to pay Jensen $2.5 million to buy back Jensen’s insurance policies. The insurance coverage was for $1 million per incident, with a $2 million cap, however Travelers had argued that the policy wouldn’t cover damages stemming from the listeria outbreak.

Listeria bacteria, sometimes found in raw milk and in food processing plants, generally cause flu-like symptoms but can be deadly for the elderly and those with weak immune systems. A Food and Drug Administration investigation found that Jensen Farms’ packaging and processing facility tested positive for listeria.

Jensen is asking the U.S. Bankruptcy Court in Denver for permission to put $2 million of the settlement with Traveler’s into a trust for those who were affected by the outbreak and set aside $500,000 for administrative costs associated with the trust. Another $1.9 million is being contributed by other defendants, including a food safety company and an equipment manufacturer, as long as their settlements are approved. That would bring the amount available for those affected by the outbreak to $3.9 million.

The trust fund appears to be the only money available to satisfy the load of pending litigation that Jensen Farms is facing as a result of the outbreak; Jensen listed 19 pending wrongful death or personal-injury cases. The company listed just over $2 million in assets and $2.5 million in liabilities, a figure that doesn’t account for any of those lawsuits. The settlement is supported by a majority of those suing Jensen, the company said.

Jensen Farms filed for Chapter 11, which usually indicates a company’s desire to restructure rather than liquidate. But the court filings didn’t specifically detail the farm’s intentions. Jensen’s bankruptcy attorney wasn’t available for comment Tuesday.

Despite the recall of its products and the negative publicity surrounding the outbreak, Jensen had $4.79 million in income between May 2011 and May 2012, compared to $5.08 million during the same period in 2010, according to court papers. In addition to cantaloupes, Jensen also grows watermelons, pumpkins, wheat, corn and alfalfa, according to its website.

However, in addition to a crop of cantaloupe it couldn’t harvest last September, Jensen wasn’t able to plant onions in 2011 and lost its pumpkin crop due to wind damage in October 2011, according to court papers.

UPDATE: James Markus, an attorney representing Jensen Farms, said that “at this point, we’re not sure what will happen next” with the company and that everything depends on resolving the listeria claims. Markus also noted that the farm didn’t plant any crops this year.