Peanut Corp.’s assets tied to insurance

ROANOKE, Va. – Sickened consumers who sued the peanut processor blamed for a national salmonella outbreak could have trouble recovering damages from company accounts because assets listed in a bankruptcy filing Friday will likely go to other businesses that bought its products.

Lynchburg-based Peanut Corp. of America filed documents listing nearly $11.4 million in assets and debts of $4.8 million Friday in U.S. Bankruptcy Court. However, more than $7 million listed as assets was in insurance that covers the company’s products and will not be used for claims by consumers. Among the uses for that money would be compensating businesses that had bought Peanut Corp. products that were recalled, trustee Roy V. Creasy said.

However, the consumers who filed lawsuits aren’t necessarily out of luck, said a Seattle lawyer who has filed several suits against Peanut Corp. Attorney Bill Marler said he expects his 85 clients to be paid through the company’s personal injury insurance policy, which is separate from the assets tied to the product insurance.

Hartford Casualty Insurance Co. has asked for a ruling on whether its $12 million personal injury coverage of Peanut Corp. includes salmonella claims. Hartford has argued that Peanut Corp.’s actions may have negated its insurance coverage.

Peanut Corp. filed for Chapter 7 bankruptcy last month amid growing fallout from the outbreak, which has sickened more than 650 people, may have caused nine deaths, and led to one of the largest product recalls in U.S. history.

The FBI is conducting a criminal investigation of the company, and Peanut Corp.’s statement of financial affairs included a $100,000 payment for corporate criminal legal representation.