The Moral Hazard, Foreign Trade Edition

Via US Food Policy blog.

Why and how do insurers write this kind of policy? It's like picking up nickels in front of a steamroller AFTER AGREEING TO HAVE YOURSELF CHAINED DOWN TO THE ROAD!

These shipments were already known to be in violation of trade rules. Why underwrite this risk?

PRESS RELEASE:
Kelley Drye & Warren LLP Files $1 Billion Lawsuit on Behalf of Domestic Producers Against Insurers and U.S. Government for Damages Caused by Dumped Chinese Food Products

04/07/09


Today, domestic producers of fresh garlic, crawfish tail meat, canned mushrooms and honey, represented by the law firm of Kelley Drye & Warren LLP, filed a class action lawsuit against major insurance companies to recover close to $1 billion in damages. The Washington, D.C. law firm of Adduci, Mastriani & Schaumberg, LLP is co-counsel with Kelly Drye for many domestic producers of crawfish tail meat. The complaint states that the insurers\' negligent issuance of customs surety bonds, and subsequent refusal to pay under those bonds, allowed the sale of huge amounts of competing food imports from China at below-cost, or \"dumped\" prices. This caused severe financial damages to the domestic producers. The lawsuit, filed in the federal Court of International Trade, also claims that the U.S. Customs and Border Protection and the Commerce Department failed to enforce the four antidumping orders issued years ago to protect the domestic producers from dumped Chinese imports.