Current Issues with Genetically Modified Foods

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A genetically modified organism (GMO) is a plant, crop, food, or something related to those things, that was created with biotechnology. So genetically modified foods are foods produced from organisms that have had specific changes introduced into their DNA using the methods of genetic engineering. Growing GMO crops brings benefits but also risks. This session will discuss what GMOs are what crops are GMO crops and what are not, some of the risks associated with GMO crops, and the types of losses that can occur and the ex- tent of insurance coverage.

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2 Current Issues with Genetically Modified Foods

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Objectives

Differences between hybridization and genetically modified What are the concerns Labeling laws: present and future Insurance concerns Lawsuits that might affect insurance and related areas Managing risks going forward

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3 Hybridization versus Genetically Modified Organisms (GMOs)

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Hybridization

Genetics: The offspring of genetically dissimilar parents or stock, especially the offspring produced by breeding plants or animals of different varieties, species, or races. American Heritage Dictionary of the English Language Biology: an animal or plant resulting from a cross between genetically unlike individuals. Hybrids between different species are usually sterile. Harper Collins English Dictionary

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4 Hybrids

Definitions: • The result of interbreeding between two animals or plants of different taxa (a species or genus) • Crosses between populations, breeds, or cultivars of a single species

www.sciencedaily.com

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Hybrid Facts

• Offspring of the hybrid are generally sterile • This prevents the movement of genes from one species to another • Hybrids display the traits and characteristics of both parents

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5 Genetically Modified

Genetically modified (GM) foods are foods derived from organisms whose genetic material (DNA) has been modified in a way that does not occur naturally, e.g. through the introduction of a gene from a different organism.

aka: GMOs, transgenics, GEs (genetically engineered)

World Health Organization

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Genetically Engineered Foods

• Genetically engineered foods have had foreign genes (genes from other plants or animals) inserted into their genetic codes. • Genetic engineering can be done with plants, animals, or microorganisms. Historically, farmers bred plants and animals for thousands of years to produce the desired traits. For example, they produced dogs ranging from poodles to Great Danes, and roses from sweet-smelling miniatures to today’s long-lasting but scent- free reds.

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6 Genetically Engineered (GE) Foods

• Selective breeding over time created these wide variations, but the process depended on nature to produce the desired gene. • Humans then chose to mate individual animals or plants that carried the particular gene in order to make the desired characteristics more common or more pronounced. • GE allows scientists to speed this process up by moving desired genes from one plant into another—or even from an animal to a plant or vice versa.

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How Is GE Different from Classical Past Breeding Methods?

• With classical breeding, reproduction can only occur between closely related species—for example, corn to corn or a closely related species. • With GE, any gene from any organism can be transferred to another organism—for example, DNA from a bacterium such as Bacillus thuringiensis to be transferred into corn or cotton. • Thus, classical breeding is limited to DNA found within the selected species. • GE introduces outside DNA into another organism.

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7 It All Started In 1996

• Genetic engineering is a key component of modern agricultural biotechnology. The first genetically engineered (GE) plant, a tomato, was developed in 1982 (USDA/ARS, 2012). By 1985, the USDA had approved four releases of GE organisms for field testing. Commercial use of major GE crops began in 1996.

Fernandez-Cornejo, Jorge, Seth Wechsler, Mike Livingston, and Lorraine Mitchell. Genetically Engineered Crops in the United States, ERR-162 U.S. Department of Agriculture, Economic Research Service, February 2014.

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GMO Current Uses

8 Hybrid Examples

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Top Ten GMO/GE Crops in the US

SOURCE: USDA As of EOY 2014

10. Sugar Beets 5. Papaya 9. Apples 4. Potatoes 8. Alfalfa 3. Cotton 7. Canola/Rapeseed 2. Soybeans 6. Squash 1. Corn

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9 Current Plantings—US

In 2013, US farmers planted approximately: • 169 million acres of GE corn, soybeans, and cotton • That accounts for almost one-half of the total estimated land used to grow all crops in the United States . Approximately 90% of all corn acreage . Approximately 93% of soybean acreage . Approximately 90% of cotton acreage US Department of Agriculture (USDA) Economic Research, 2013

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10 Global Plantings

Over 448 million acres in 28 countries as of 2014—Major adopters US acreage = 181,000,000 acres planted with GE seeds Brazil = 104,000,000 Argentina = 60,000,000 Canada & India = 28,650,000 each China & Paraguay = 9,630,000 each Pakistan = 7,160,000 South Africa = 6,670,000 International Service for the Acquisition of Agri-Biotech Applications, 2014

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11 Why the Interest and What Are the Concerns

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Why the Interest

“… access to healthful and nutritious food is not enjoyed by everyone. According to the United Nations, more than 850 million people worldwide suffer from malnutrition. This situation will likely worsen by 2050, when the world’s population will increase by 50% and the cultivable land will decrease by 50%, placing new pressures on global agriculture.”

Business Week, The Debate Room

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12 The Ultimate GMOs?

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What Are the Concerns

To Consumers: New allergies Unknown concerns Environmental Concerns: Toxic effects to beneficial animals Overuse-caused resistance—pests/weeds Outcrossing Unwanted growth locations Wild relatives Unknown concerns #IRMI2016 21

13 • Genetically Modified Organisms . Toxins . Pollution . Pharmaceuticals . Other dangers

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14 Labeling Laws

Some Examples

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From 2015 to 2016

• Last year we took a look at three (3) states – Connecticut, Maine & Vermont; and three (3) counties – Maui, Jackson & Humboldt.

• Let’s get an update on two of the counties and the three states

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15 Maui County

• Originally passed in November 2014 was a moratorium on genetically modified crops being grown in Maui County. • Federal Judge Susan Oki Mollway overturned the new law saying that it violated the county’s authority in June 2015. • Supporters vowed a further appeal up the federal food chain.

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Jackson County

• Passed in May 2014 banning the use of GMOs in Jackson County, OR • Sued by two farmers in the area who grow GMO (roundup ready) alfalfa – they demanded $4.2m in compensation • Enforcement was stayed pending suit and negotiations • December 2015 – farmers settled, being allowed to grow their crops for up to 8 years or until the crop cycle ended

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16 Connecticut and Maine

• Passed June 2013 (Connecticut) and January 2014 (Maine) • Both require four (4) neighboring states to pass laws before their state laws go into effect. • Neighboring states involved include: . Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont . Nothing yet to update on any of these states except…

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Vermont Labeling

• Currently being challenged in US federal court • Issues being put forth are 1st Amendment, 5th Amendment and the Commerce Clause as well as Federal pre-emption by statute. • Vermont has a website to collect money to assist in the court fight • Scheduled to go into effect on July 1, 2016 • Requires labeling of foods with GMOs

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17 Vermont Labeling

• Foods offered for sale by a retailer have to be labeled as produced entirely or partially from GE if: 1) they will be sold via Vermont retailers 2) they have been entirely or partially produced with GE • One of three labels will be required: . Partially produced with genetic engineering . May be produced with genetic engineering . Produced with genetic engineering

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Vermont Labeling

• EXCEPTIONS include: . Food derived or entirely made of animal . Raw agricultural commodities and process food that was grown without knowledge or intentional use of food or seeds produced with GE . Alcoholic beverages . Processed food that includes less than 0.9% GE materials . Medical food . Food that is not packaged and is either processed for immediate consumption OR will be served, sold to a restaurant or other food establishment preparing it

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18 Vermont Labeling

• Penalties – civil penalty of $1,000 per day, per product

• Enforcement – State Attorney General (AG) has the power to make rules, investigate conduct, enter into assurances of discontinuance, and bring civil actions. Private causes of action are not allowed.

• AG can also adopt new rules including one allowing a disclaimer on GE produced items that the FDA does not consider GE food to be materially different from other foods.

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19 Insurance Concerns

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Why Insurance Becomes Involved

Food safety Product recall Crop insurance Environmental legal liability and remediation Others???

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20 Insurance Coverage Concerns

Workers compensation Employer’s liability Farm liability and commercial general liability Commercial property Umbrella and excess

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Insurance Coverage Concerns

Your insured, the processor, takes in GMO crops and processes them unknowingly. These GMO crops leave residue behind, which is now mixed into the next crop he processes. He normally handles only organic products. Now he needs to “clean” his processing equipment so that he can return to working with his non-GMO/organic clients. • Where’s the coverage?

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21 Insurance Coverage Concerns

Someone ingests your farmer’s GMO product and now comes down with severe allergies. These allergies are discovered to be directly related to the GMO foods ingested by the consumer. • Is there a trigger for bodily injury/property damage in the farm liability/commercial general liability policy that will now provide the protection that the farmer expects? • If the coverage trigger is not activated, there is no insurance response here.

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Insurance Coverage Concerns

Your insured has purchased product recall as one of her risk management strategies. Inadvertently, some of her GE product is mislabeled and sent to market. • Is there a coverage trigger to invoke policy response? • Is the recall coverage on a voluntary or government-mandated basis? • Any other concerns?

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22 Insurance Coverage Concerns

Arkansas rice farmers subjected to severe financial harm when GMO outcrossing damaged their rice crop’s market value. Their fields needed to be cleared of the “tainted” crops and their residue. Also, all of their equipment had to be cleaned and treated as well. • Does the pollution coverage respond? • Is this remediation of a “pollutant”?

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Coverage Thoughts

• General Liability responds to “Bodily Injury” (BI) & “Property Damage” (PD)

• BI means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time • PD means physical injury to tangible property, including all resulting loss of use of that property…

• PD means loss of use of tangible property that is not physically injured...

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23 Coverage Thoughts

• General Liability - beware the “pollution” exclusion. • “Pollutants” mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed. • Did the “pollutant” cause the BI or PD?

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Coverage Thoughts

• Commercial Property forms (both Property & Business Income) rely upon the covered “causes of loss” to determine the applicability of coverage or not. • Under “Special Form” all losses are covered except those that are specifically excluded. • Under “Basic” and “Broad” forms, only those items addressed as “covered” will respond to a loss.

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24 Coverage Thoughts

• Commercial Property cannot find coverage in the coverage form. • Business Income if there has been no “direct damage” to property, then Business Income coverage would not apply.

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Coverage Thoughts

• Mechanical/Equipment Breakdown coverage requires “breakdown” for coverage to apply. • “Breakdown” means the following direct physical loss that causes damage to “Covered Equipment” and necessitates its repair or replacement: (1) Failure of pressure or vacuum equipment; (2) Mechanical failure including rupture or bursting caused by centrifugal force; or (3) Electrical failure including arcing;…

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25 Coverage Thoughts

• Pollution Coverage essentially every insurer writes their own coverage form. • Might we find coverage?

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26 Lawsuits

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What Claims/Suits Have There Been?

Rice Farmers v. Bayer CropScience Syngenta and Corn Farmers Monsanto and GMO Wheat Organic Seed Growers v. Monsanto Bowman v. Monsanto

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27 Rice Farmers v. Bayer CropScience

Rice farmers settlement of $750 million (July 2011) Bayer CropScience paid to US farmers for a series of lawsuits. About 6,000 rice farmers filed suit against Bayer after the USDA announced in August 2006 that trace amounts of genetically modified Liberty Link rice were found in US long grain rice stocks. Although Liberty Link (LLRICE 601) is now deregulated by the USDA, at the time of the suits (2006), it had not yet been approved for human consumption nor export

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Syngenta and Corn Farmers

Corn growers in 11 states now suing Syngenta AG, including Nebraska, Illinois, Iowa, Kansas, Alabama, Georgia, Mississippi, Louisiana Release of GMO corn—MIR162—in 2009, aka Agrisure Viptera In November 2013, China began rejecting shipments of corn from United States Damages estimated at $1 billion by plaintiffs This suit is currently in litigation—stay tuned

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28 Monsanto and GMO Wheat

March 2015

Monsanto settlement with wheat farmers in seven states: Kansas, Texas, Missouri, Oklahoma, Louisiana, Illinois, Mississippi May 2013 discovery of GMO wheat on a farm in eastern Oregon The wheat had not yet been approved for export Which then caused subsequent temporary bans on the export of soft white wheat to Japan & South Korea

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Monsanto and GMO Wheat

Settlement included: $50,000 each to agricultural schools in the land grant colleges in the seven states affected Resolved some seven outstanding class action lawsuits Monsanto also reimbursed the plaintiffs and their attorneys for a portion of their expenses and litigation expense. $2.125 million into settlement fund for Pacific Northwest wheat farmers $250,000 to four wheat associations

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29 Organic Seed Growers v. Monsanto

Starting in March 2011, a lawsuit representing over 300,000 farmers, most of whom were represented by the Organic Seed Growers and Trade Association, was dismissed in court. ALL subsequent federal appeals upheld the lower court’s ruling of dismissal. The judge dismissed the case on the grounds that none of the plaintiffs had actually been sued by Monsanto, and therefore their reasons were “unsubstantiated.” Their concern was that if the Monsanto GMO products were to be found in their fields and they had not paid for the seed, they would be sued.

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Bowman v. Monsanto

Farmers who buy Monsanto’s patented seeds must generally sign a contract promising not to save seeds from the resulting crop, which means they must buy new seeds every year. The seeds are valuable because they are resistant to the herbicide Roundup, itself a Monsanto product. But the Indiana farmer, Vernon Hugh Bowman, who had signed such contracts for his main crop, said he discovered a loophole for a second, riskier crop later in the growing season.

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30 Bowman v. Monsanto

For that second crop, he bought seeds from a grain elevator filled with a mix of seeds in the reasonable hope that many of them contained Monsanto’s patented Roundup Ready gene.

Seeds from grain elevators are typically sold for animal feed, food processing, or industrial uses. But Mr. Bowman planted them and sprayed them with Roundup. Many plants survived, and he replanted their seeds.

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Bowman v. Monsanto

Monsanto sued, and a federal judge in Indiana ordered Mr. Bowman to pay the company more than $84,000. The US Court of Appeals for the Federal Circuit, which specializes in patent cases, upheld that decision, saying that by planting the seeds Mr. Bowman had infringed Monsanto’s patents.

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31 Bowman v. Monsanto

Mr. Bowman acknowledged the general principle that he had no right to make a new product with Monsanto’s seeds. But he said he had used the seeds precisely as they were intended to be used—planting them “in the normal way farmers do,” Justice Elena Kagan wrote. Accepting that theory, she wrote, would create an “unprecedented exception” to the exhaustion doctrine. “If simple copying were a protected use,” she wrote, “a patent would plummet in value after the first sale of the item containing the invention.”

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Bowman v. Monsanto

Mr. Bowman also argued in briefs that soybeans naturally “self-replicate or ‘sprout’ unless stored in a controlled manner,” meaning that “it was the planted soybean, not Bowman,” that created the new seeds. Justice Kagan rejected what she called “that blame-the-bean defense.” “Bowman was not a passive observer of his soybeans’ multiplication,” she wrote, adding, “Put another way, the seeds he purchased (miraculous though they might be in other respects) did not spontaneously create eight successive soybean crops.”

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32 Moving Forward

Managing Risks

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Managing Risks

By 2050, our world population is expected to increase from approximately 7 billion today to 9½ billion. By 2050, our agricultural land mass is expected to shrink by approximately half. It is agreed upon in most circles that genetically modified crops are here to stay.

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33 Rice Farmers’ Losses

NO trigger of coverage in any standard liability or property policies All liability rested with Bayer CropScience Those claims take time—how much of THAT can your farmer or ag account afford?

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Risk Awareness

Awareness of risk leads to: Implementation of risk management practices

Risk management practices lead to: The consideration of risk transfer, avoidance, or other considerations

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34 Risk Transfer

Environmental Liability GMO crop growers may need to perform (in the future) some sort of Environmental Impact Studies (EIS) as a future condition of USDA approval Of course, that consideration will be subject to much negotiation, legislation, and subsequent litigation This is not a quick-fix issue

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Risk Transfer

Environment Impact Studies and related areas of education could lead to the crafting of environmental insurance with consideration given to appropriate triggers of coverage for both liability and remediation.

This could then lead to additional resources that would be available for the customers from their environmental insurers.

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35 Labeling Laws

Recalls over labeling issues are increasing in probability.

Negotiation of proper triggers in recall policies to respond to the “event” is a critical consideration going forward.

The new (still to be determined) Food Safety Modernization Act standards will be but a first step in managing risks and providing protocols for risk transfer.

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SO … What’s Insurable?

Intellectual property—patent infringement

Environmental liability—are GMOs “pollutants”?

Product recall—given proper triggers … is there a public health issue or a labeling issue?

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36 Consider

GMOs are already an integral part of the food chain. This will probably not become LESS of an issue. Failing to discuss the use of GMOs with your Ag/Farm accounts could prove to be a costly lesson for you and your insured. Some things are just (at least at this time) uninsurable.

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A Final, Final Note (or) Two

• FDA clears the way for GE salmon to be served at the dinner table. AquAdvantage Salmon – a combination of genes from Atlantic salmon with a growth hormone from a Chinook and added a gene from a pout. Approximately two years from fertilization to dinner plate. • Bangladesh adopts GE eggplant – a staple of the region. As much as 70% of their current crop does not make it to the table because of “shoot borer” that ravages the growing plant. • 2016 Global Food Policy Report – How We Feed The World Is Unsustainable…climate change, loss of land mass, diets, water et al. #IRMI2016 66

37 Notes

This file is set up for duplexed printing. Therefore, there are pages that are intentionally left blank. If you print this file, we suggest that you set your printer to duplex.