An interview with Michal Mekota

Obesity — Food industry sued

More than 60% of Americans are overweight. As yet, only a small proportion of them have brought legal action against the food industry because they hold it responsible for their condition. Munich Re claims lawyer Michal Mekota describes current trends in US liability law and the conclusions that may be drawn by the insurance industry.

Obesity — that sounds dangerous. At what point does being a little overweight become a disease?

Michal Mekota: That is a good question to which there is no simple answer. The Body Mass Index (BMI) is now internationally recognised as the standard for measuring obesity. Adults should aim for a BMI of between 20 and 25. If it is over 30, US doctors talk of obesity. The BMI is calculated as body weight divided by height squared (kg/m²). If, for example, a man measuring 1.80 m weighs more than 100 kg or a female measuring 1.60 m weighs more than 77 kg, the diagnosis is obesity.

Obesity is mainly due to bad nutrition, isn't it?

Mekota: The main cause is an unhealthy lifestyle which is largely characterised by poor eating habits. Industrially processed foods in particular often contain large amounts of sugar and fat and are therefore extremely high in calories. In the long term, excessive consumption of fast food results in people being overweight. At the same time, these products are often low in vitamins and minerals. Poor eating habits are often accompanied by a lack of physical exercise. Others causes are a genetic predisposition, which is inherited, and psychological factors like stress.

In the spring of 2004, the NPD Group, a US market research institute¹ published a study on obesity. Its conclusion is that US citizens are getting fatter and fatter. Would it be right to say obesity has reached epidemic proportions?

Mekota: According to the World Health Organization (WHO), obesity is one of the leading chronic diseases in the world today. It is not just a disease, it is one of the most serious public health problems of our time — with repercussions that could turn out to be as grave as those resulting from nicotine abuse. Obesity is an issue that must be taken seriously, especially in the United States, where — as the NPD's study revealed — more than 60% of the 290-million population are overweight; and that percentage is rising. Other studies show that every year about 112,000 deaths in the United States are caused by illnesses resulting from obesity like heart attacks and strokes. The cost to the health system in 2003, for example, was US$ 75bn. In recent years, obesity has also become a problem in Europe, where developments are termed "particularly worrying" by the WHO. According to the WHO, 37.6% of the population in Germany is overweight (BMI: 25-30), 11.4% obese (BMI: 30-40), and 1.5% very obese (BMI: 40+).

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¹"NPD" stands for National Purchase Diary. This was the original name of the institute founded in 1953, at a time when its research was mainly based on paper diaries.

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The case of two overweight US teenagers who sued a major fast food chain received worldwide attention in 2002. What was the basis for their claim?

Mekota: The plaintiffs' initial argument was that fast-food products are fattening and that the manufacturers or vendors should consequently be held liable. The suit was dismissed as unsubstantiated by the court of first instance in 2003. The judge argued that if consumers are aware of potential ill health effects, they cannot blame the manufacturers if they nonetheless choose to satiate their appetite with a surfeit of fast-food meals. At the beginning of 2005, however, the suit was re-opened in New York. The plaintiffs now argued that the manufacturers' advertising was deceptive and that the ingredients were improperly labelled, causing consumers to be misled. The claims made in the new case rest on a fault-based theory of liability, pursuant to which the manufacturer must have culpably breached a legal duty of care owed to consumers. The burden of proof lies with the plaintiffs to establish that this is the case and that the alleged damage or injury was actually caused by such a breach of duty. Whether the two teenagers will succeed in establishing a causal connection between their overweight and the products of a certain manufacturer is questionable, because obesity is caused not only by nutrition but by other factors too, such as a sedentary lifestyle and genetic predisposition. The plaintiffs' arguments can also be countered by the fact that the ingredients of hamburgers and French fries are generally known or stated on the packaging.

What is the current position regarding legal action in the United States?

Mekota: We are only aware of a few lawsuits pending at present. This may be due to the fact that potential plaintiffs or their lawyers are awaiting the outcome of the first court decisions before deciding whether or not to file their claims. So we have to keep a close watch on the current suits because they will have a certain signal effect.

How should we assess the Personal Responsibility in Food Consumption Act, which was passed by the US House of Representatives in October 2005?

Mekota: The bill has gone to the Senate for approval. The Personal Responsibility in Food Consumption Act states that civil action for damages may not be brought against the manufacturers, distributors, or sellers of food and non-alcoholic beverages as long as the products have been produced and marketed in compliance with the applicable legal requirements. This is an unmistakable endeavour on the part of the US legislature to influence customary legal practice. Some 20 US states had already passed state laws limiting the scope for legal action against the food industry, as in the case of the Illinois Common Sense Consumption Act. This means that in the United States, too, the principle of consumer personal responsibility is moving into the foreground. According to a number of surveys, about 90% of the population oppose food manufacturers being held generally responsible for an individual's obesity. This attitude is very significant, since the majority of civil cases in the United States are decided by a jury.

Last year, the media reported that the food industry was worried about class action suits. Have you observed any trends in this connection?

Mekota: Resistance against the abuse of class actions has been growing in recent times. Last year, for instance, Congress passed the Class Action Fairness Act, which restricts the scope and size of these lawsuits. But it would be wrong to generalise, since in many cases the class action is without doubt a justifiable legal remedy; the only problem is that for some time now it has been abused by plaintiff attorneys. They aim for high awards as their fees are geared to the amount the courts award the plaintiffs — and contingency fees in the amount of 30% are not out of the ordinary. A further point is that the attorneys usually finance lawsuits in advance. This accommodates potential plaintiffs in that they do not carry any legal expenses risk and are thus more willing to join a class action suit. Many plaintiffs are said to have a lottery mentality.

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This would suggest that the insurance industry does not have to expect a wave of liability suits. Is that right?

Mekota: At this point in time, I find it unlikely that the United States will be swamped by a wave of liability suits like those initiated against the tobacco industry. For one thing, plaintiffs are likely to have a hard job establishing a causal link between their obesity and the consumption of certain foods. And then, as surveys show, the opinion prevailing in the United States is that people should be held accountable for their own diet and that they cannot blame a specific branch of the food industry if they suffer weight problems. However, this does not mean that individual suits may not be successful. In 2001, for example, a fast food chain was sued by a group of vegetarians when they found out that it used beef fat in making its French fries. The vegetarians were awarded a sum of no less than US$ 12.5m.

Do you think punitive damages are conceivable in the pending suits against the food industry?

Mekota: Punitive damages can only be awarded in the event of gross breaches of duty, which are unlikely to be verifiable in the majority of cases. Furthermore, we have observed a trend towards capping punitive damages. Many federal states have already introduced such restrictions, and the US Supreme Court made it clear in its decision in Campbell vs. State Farm² that punitive damages should generally not exceed ten times the indemnification. Moreover, punitive damages are not insurable in many federal states, because it would contradict the very purpose of this legal tool if companies could insure themselves against grossly negligent action.

Does this mean that the topography of US liability business is constantly changing?

Mekota: Oh sure. In the liability sector, new laws, unexpected court decisions, and also unidentified risks are determinants that are constantly in flux. Economic, legal, and socio-political developments and trends must be monitored and analysed continuously in order to be able to make realistic loss prognoses.

So what conclusions can the insurance sector draw?

Mekota: It is difficult to say what effects the risks of obesity and suits against the food industry will have on the insurance industry. The mounting number of overweight and obese people will certainly have an impact on life insurers, health insurance funds, and workers' compensation insurers. I think that lawsuits in the liability sector are only likely to succeed if the claimants can prove that the labelling on products is inadequate or faulty, meaning that the manufacturers have not observed their duty of care when "packaging" the product. As far as we can tell at present, however, the number of lawsuits will not exceed manageable dimensions.

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²Campbell vs. State Farm Mutual Automobile Insurance Co., cf. Schadenspiegel 2/2005, p. 20.

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