They Could Have Used a Captive Insurance Company: Bruce Foods Company

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We formed and operate the first series LLC in Montana (named Aegis) for captive insurers.  Several other firms provide key services such as accounting, audit and actuarial work.  Please contact us at 832.330.4101 if you'd like to discuss forming a captive for your company 

The following article is based on the fact of Bruce Foods Corp. v. Tex. Gas Serv.,  (W.D. Tex., 2014)

     From the case:

Plaintiff owns and operates a manufacturing facility in El Paso, Texas … that processes peppers and other vegetables.  Plaintiff requires a steady supply of natural gas to operate the boilers at the Facility. Because harvesting and processing peppers is a time-sensitive operation, any interruption in Plaintiff's natural gas supply can severely harm Plaintiff's business.

Based on this one paragraph, a captive would benefit the company in several ways. 

1. Regardless of the product they produce, every manufacturer faces two potentially catastrophic risks: product liability and product recall.  A product liability policy will provide funds for legal representation and could, depending on the jurisdiction, reimburse the insured for at least part of the losses from an adverse verdict.  A product recall policy will provide funds for the insured in the event it has to remove a product from the “stream of commerce.”  It also provides funds for brand rehabilitation and legal representation if needed.
2. Supply chain interruption: there are two supply chains in the case’s fact pattern.  The first is the supply of raw materials while the second is the natural gas powering production.  A supply chain interruption policy could indemnify the insured for losses in the event either supply chain is disrupted.
3. Contract liability: contracts are the life blood of practically all businesses; it’s the primary way they formally establish their business relationships.  But not everybody lives up to their contractual obligations.  When the counter-party breaches, a contractual liability policy indemnifies the insured to help them cure the breach, or at least make them legally whole.

These are only a few of the policies this manufacturer could purchase from a captive insurance company.  If you’d like to learn more, please call us at 832.330.4101.