The genetically modified food industry has battled opposition from consumer and environmental groups to get its food on the table. Its lobbyists have cajoled skeptical politicians; its scientists have produced studies contradicting other studies suggesting the food is somehow tainted.
Now the industry faces another hurdle with long-range, dire consequences: It may be uninsurable.
The reason, industry representatives say, is that the Food and Drug Administration does not regulate GMO products. Without government regulation, no one knows the rules, and that troubles insurers.
"When it comes to a drug or medical device, what underwriters look to as most important is FDA oversight," said Thomas Greany, senior vice president and national practice leader for medical technology at Marsh, a risk-management firm. "It gives a great deal of comfort that FDA has high standards, and if something happens, a method or standard operating procedure is in place to handle adverse outcomes."
The genetically modified foods currently on the market are likely safe, said Michael Taylor, a senior fellow at Resources for the Future. But with the industry evolving toward more significant genetic changes, he said, FDA oversight would help ensure safety as well as encourage wider public acceptance. A recent study found that 89 percent of Americans believe the FDA should regulate genetically modified foods.
Groups concerned about the long-term health and environmental effects of genetically modified organisms agree, and empathize with insurers.
"Insurers should be concerned about this," said Craig Culp, a spokesman for the Center for Food Safety in Washington, D.C., promoting organic and sustainable agriculture. "It doesn't take much in terms of the regulatory landscape for them to suddenly find themselves in a position of paying out a lot of money because of genetic contamination."
Now, when agricultural biotech companies can get coverage, it's limited and expensive. Even if genetically modified crops prove to be safe for humans and the environment, the perception of risk can be enough to do damage, because insurers know all too well how that can influence a jury.
The top five insurers in Great Britain recently declared they'll have nothing to do with the genetically modified crop industry. Despite fewer protests by American consumers against agricultural biotech products than Europeans, U.S. insurers also express fears about class-action suits against GMO producers.
"Genetically modified foods are among the riskiest of all possible insurance exposures that we have today," said Robert Hartwig, the chief economist for the Insurance Information Institute, an industry trade association in New York. "And there's a good reason. No one company knows where this path of genetically modified foods is ultimately going to take us in terms of either human health or environmental contamination."
Agricultural biotech companies say insurers should treat their products in the same way they do conventionally grown crops.
Researchers worldwide recognize GMO products as "substantially equivalent to their conventional counterparts," said Lee Quarles, a spokesman for Monsanto, a leading agricultural biotech company based in the United States. "Therefore, there is no justification that would establish why the insurance model should be any different for a biotech versus a nonbiotech product – when both are recognized as safe and substantially equivalent to one another."
The FDA's website says its job is to "see that the food we eat is safe and wholesome, the cosmetics we use won't hurt us, the medicines and medical devices we use are safe and effective, and that radiation-emitting products such as microwave ovens won't do us harm."
That's no small order, and a labyrinth of legislation determines how these tasks are executed. The agency must first determine what is a risk and then whether the product requires approval of a product before it hits the market.
The FDA decided in 1992 that genetically modified foods are "substantially equivalent" to regular food, and therefore do not require pre-market approval. Instead, companies voluntarily provide the FDA with a statement that their products are safe.
In January 2001, members of the FDA filed a proposal calling for some pre-market FDA oversight of genetically altered foods, but it was never enacted.
"The FDA is still looking into mandatory reporting," said Michael Herndon, a spokesman for the agency.
Without the FDA setting guidelines for consumers and insurers, critics believe insurers are more likely to face large payouts in various scenarios. Cross-contamination of conventional or organic crops from genetically modified fields is one potentially litigious scenario. Some farmers have already filed such lawsuits. In other cases, Monsanto has sued farmers for patent infringement.
Others fear genetically modified foods could pose a health threat to humans when eaten directly, or when consumed indirectly from livestock fed with genetically modified grains.
Every insurance company is in the business of risk, but it's not a topic companies enjoy talking about with the press. Representatives from Chubb insurance, which has a large life science unit, and Prudential declined to comment for this story. A representative from American International Group, which covers some biotechs as well as malpractice, flood, and terrorism, did not respond to requests for comment.
"Some insurers view it as potentially one of the biggest long-term problems this industry might face," said the Insurance Information Institute's Hartwig.
Genetically modified foods can be found in 75 percent of processed foods – everything from cornflakes, bread, pasta and soy sauce to ice cream and candy, making the potential reach of a class-action lawsuit far-ranging. Millions of people eat genetically modified foods every day without knowing it – because the FDA considers them "substantially equivalent" to regular foods, they're not labeled. But a recent study found that only 24 percent of Americans believe they have eaten GMO foods.
Companies cannot count on juries to rule in their favor, even taking into account that most Americans' knowledge of GMO foods remains low.
"The real risk that you're running is the capricious and arbitrary behavior of a jury," Greany said.
In 2000, the industry got a glimpse of what biotech companies could face in terms of liability. A genetically modified corn product called Starlink, made by Aventis CropScience, was approved only for animal feed, but it accidentally made its way into Taco Bell tortillas. Courts awarded farmers a $110 million settlement, and a $6 million settlement to individuals claiming they suffered severe allergic reactions.
Meanwhile, a man who won $10,000 in a Starlink lawsuit claiming he suffered allergies is apparently not allergic to the corn after all, according to a study published recently in the Journal of Allergy and Clinical Immunology.
"In today's litigious climate, where people seem to sue for things both real and imagined, (liability) can be a very costly proposition for companies and their insurers," said David Zoffer, an attorney in Chapel Hill, North Carolina, who runs a litigation management and outsourcing consulting practice.
In other cases, farmers claiming their fields have been contaminated by nearby genetically modified crops have been unable to win judgments. Monsanto sued Percy Schmeiser, a Canadian canola farmer, for growing its genetically modified version of the grain, although Schmeiser says the seeds drifted onto his land from a neighboring farm, ruining a crop he spent 40 years perfecting. Monsanto won two lower court rulings in Canada on the matter. The Canadian Supreme Court will hear the case in January.
The high court's decision "could be precedent-setting for North America," the Center for Food Safety's Culp said.
With the number of acres of genetically modified crops worldwide up to 145 million in 2002 and growing, cross-contamination – and the potential for lawsuits resulting from it – will likely increase in the coming years. The burden of liability could be heavily influenced by the outcome of these early lawsuits.
With so much uncertainty, it's not surprising insurance companies are skittish.
When risky businesses get insurance, a significant gap exists between how much coverage they can get and the amount of damage they may incur, Greany said.
A company the size of Monsanto would likely buy insurance with coverage for between $200 million and $300 million in assets. But lawsuits could result in settlements in the billions, experts said.
One option for difficult-to-insure companies is to self-insure by setting money aside for themselves. Or they can set up what's called a captive insurance company, often in Bermuda, where the tax situation is particularly favorable. Companies can establish captives individually or as a group within the same industry. But these options are much less efficient than a traditional insurance plan, Greany said.
There is always a limit to the amount of insurance coverage available to an industry at any given time. Marsh tracks those numbers closely. It can change day to day, and has been steadily decreasing over the past three years, according to the company's 2003 "Limits of Liability" report.
"For biotech, the most that would be available today is about $700 million," Greany said. "Three years ago it would have been about $1 billion."
Despite the concerns from insurance industry representatives, Monsanto officials insist coverage is not a problem.
"Monsanto has had no difficulty getting commercial insurance," spokesman Quarles said. "This is not something that we are concerned about at this time."