Oregon Court Ruled Insurance Exclusion Ambiguous
A federal court found that policy language regarding communicable diseases was too ambiguous to deny coverage.
Updated on Oct. 6, 2026 in Insurance
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A federal court in Oregon ruled that a communicable disease exclusion in a commercial excess liability policy is ambiguous. The decision means the insurer must cover lawsuits stemming from listeria-related bodily injuries.
Why it matters
The ruling limits an insurer's ability to deny claims based on vague contract language. By requiring the insurer to cover bodily injury lawsuits, the court has set a precedent for how meat-processing companies may navigate liability disputes.
The federal court examined a commercial excess liability policy issued by Scottsdale Insurance Company to Bruce Packing Company. The policy contained a communicable disease exclusion that attempted to define coverage through the specific use of the phrase and/or.
The players
Bruce Packing Company
This company operates meat-processing facilities and faced bodily injury claims following a 2024 product recall.
Scottsdale Insurance Company
This insurer issued a commercial excess liability policy that the court found contained an ambiguous definition.
The details
The court found that while listeria is an infectious disease, it does not qualify as a contagious one, leading the judge to rule that the insurance definition was legally ambiguous. Applying Oregon law, the court construed this ambiguity against Scottsdale Insurance Company to favor coverage for the Bruce Packing Company.
Timeline
Listeria was detected and a product recall was initiated in 2024.
Market Dynamics
This case highlights how courts in Oregon interpret contractual language in favor of policyholders when definitions are unclear. This shift positions companies against insurers who may attempt to utilize broad exclusion clauses to deny liability coverage in the meat industry.
Business stakeholders and policyholders should review their own liability contracts for similarly ambiguous and/or phrasing that could lead to unexpected coverage denials. This ruling suggests that courts may prioritize clarity in contract definitions when determining financial responsibility.
The takeaway
Companies should ensure that all disease-related exclusions in their insurance policies are clearly and specifically defined to avoid legal ambiguity. Ambiguous definitions in liability contracts often result in courts siding with the insured party when disputes over coverage arise.
Further reading
For more on industry standards, visit the Insurance section.
Source note: This article includes information reported by The National Law Review - A Free To Use Nationwide Database of Legal Publications.
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