Altered states: The risks of biotech crops - Risk in Focus

Genetically modified crops have been hailed as an answer to the world's hunger and malnutrition problems. But public fears and concerns about health risks make the use of such products a risky venture.

Just mention the words "genetically modified foods" and you're likely to get some strong opinions. Consumer groups, farmers, and even the Vatican have expressed concerns about bioengineered seeds and crops. But others say they revolutionize farming and could end many of the world's food problems.

Until more is known about the hazards to the environment and to human health, risk managers have to be concerned about possible claims for liability, property damage, personal injury, and even loss of reputation.

Even companies that use just a fraction of bioengineered food or that inadvertently use these crops in their end products are at risk. Just ask Taco Bell and Kraft Foods. In September 2000, the companies were forced to recalled taco shell products in which there was detected a corn that had a bioengineered protein that wasn't approved for human consumption.

The corn in question, called StarLink, is manufactured by Aventis Crop Science. It contains a protein that was genetically modified to be toxic to insects; the corn was used for animal feed. Some of this corn made its way into Taco Bell's taco shells. It is suspected that the StarLink corn had cross-pollinated with the crop used in the taco products.

Headlines in the press at the time referred to the "Taco Bell Scandal" and of "Taco Terrorism." Some consumer organizations loudly decried the use of such a product, even for animal feed, and worried about possible allergic reaction and other health effects should these products get into the human food chain. Soon after, the Food and Drug Administration began receiving complaints about allergic reactions to the taco shells.

Although a study last year by the Centers for Disease Control could not find a link between StarLink corn and the allergic reactions, Taco Bell and Kraft felt a tremendous impact as result of the controversy. First, there was the cost of the product recall, as well as the impact on their stock prices and their reputation.

In addition, Aventis is still feeling the affect. Already the company has agreed to pay a $9 million settlement in one class-action suit. It may face many more lawsuits, as nearly 400,000 farmers are lining up to sue the company, claiming its product cross-pollinated with their crops, causing their crops to be branded as dangerous and the prices paid for those crops to drop.

Farmers and exporters are the feeling the effects as well. The American Corn Growers Association has expressed concern that federal agencies are not doing enough to prevent the release of genetically modified foods into the food supply. Contamination of other crops can lead to recalls or lowered exports, they say.

In one example, Monsanto was forced to recall in Canada canola seed containing GT200, a variety that has not been approved for human use in Japan, which is the primary destination for Canadian canola exports. Japan has also cut imports of U.S. corn by 53 million bushels last year because of concerns about the effects of genetically modified products.

Ironically, one case in Saskatchewan, Canada, has a 70-year-old farmer being sued by Monsanto, the world's largest biotechnology company. St. Louis-based Monsanto claimed that the farmer had planted their canola seeds without purchasing them from the company. The farmer, who countersued, contended that cross-pollination was responsible for the crops. In the end, the farmer was ordered to pay Monsanto for the seeds he didn't purchase.

The Canadian farmer is not the first to be sued by the biotechnology company. Dozens more have been sued for patent infringement as result of growing plants that they didn't buy from Monsanto. Their crime? They saved the seeds and replanted them, something their contracts with Monsanto state they can't do.

The Controversy

Some say that biotechnology will revolutionize farming, allowing for better food products that are resistant to insects, disease, drought and cold and that can be enhanced with nutrients and, some day, contain edible vaccines.

But the uproar caused by some farmers, public interest groups, environmental activists, religious groups, and professional associations confirms that controversy exists. These groups say that bioengineered food products are unnatural and pose serious health threats. Some point to the risks involved in modified crops, including reduced effectiveness of pesticides; gene transfer to other species, which could result in "super weeds"; the possible creation of new allergens; the unknown effects on human health; and the unintended harm to other organisms.

Whatever the truth, genetically modified foods and organisms, or GMOs, are making waves throughout the country and the world. And their use is increasing. According to sources at the U.S. Department of Agriculture, acreage planted with biotech crops, including corn, soybeans, and cotton, totals about 92 million acres in 2002, up from 81 million acres in 2001.

Biotechnology, the field from which GMOs were created, is not new. The 20th century saw more biotechnology being used for developing fermentation processes and for introducing such medicines as penicillin and other antibiotics. In fact, modifying plants and foods is a practice that's been in place for thousands of years. Early Assyrian farmers would cross-pollinate plants by hand.

The term "genetically modified" is most commonly used to refer to crop plants that have been modified in the laboratory to enhance resistance to pests or improve nutritional content.

While many in the industry say that public fears are unfounded, manufacturers of such biotech seeds and crops are taking precautions nonetheless. Additionally, regulations are in place that control the plant cycles and distances between fields of the GMO and traditional crops. Cross-pollination is a danger, and seed distributors are diligent about where GMO crops are planted. Cooperatives providing GMOs go to great lengths to educate their providers on the regulations and the need to keep tight controls on GMO seeds and plants.

Faith Cring, senior insurance service specialist with Growmark Inc., a Bloomington, Ill.-based farm supply cooperative, thinks the precautions are a placebo for a nervous public. She says of the perceived hazards, "Until the public can become more comfortable with these modifications, we have to be very careful."

That care comes in the form of buffer areas and staggered plant cycles between traditional crops and genetically modified crops. Grain silos take care to store either GMOs or traditional crops, not both. Be it public perception or guarding against a real risk, the risks are being handled as real threats. There is even talk of labeling foods that contain genetically modified food products.

Real or Imagined Risk?

Despite the lawsuits and the opposition from public sources, the White House in August 2002 proposed new regulations designed to allow small amounts of genetically engineered plants to be used in food, a move that followed on the heels of several pieces of legislation introduced into Congress in May 2002. One bill, the Real Solutions to World Hunger Act of 2002, was introduced into the House to promote the use of genetically engineered animals and crops "if the biotech industry believes they can help mitigate hunger concerns, domestic or foreign, then requiring biotech companies to make available the necessary resources for this purpose is appropriate."

Four bills in all were introduced simultaneously. The Genetically Engineered Crop and Animal Farmer Protection Act of 2002, which attempts to protect traditional farmers as well as the farmers who deal with GMOs. Still another bill, Genetically Engineered Organism Liability Act of 2002, attempts to hold the biotech companies fully responsible for any damages to neighboring crops. Another bill, the Genetically Engineered Food Right to Know Act, calls for the labeling of GMO foods and products. All four bills are still pending.

Yet manufacturers of genetically modified plants and seeds contend that the precautions only regulate the trial planting periods around the GMOs. The threat, according to Monsanto, is unsupported. A spokesperson from the company said that GMOs are in wide use. "Imports to Europe of soybeans have gone up in the last few years. Ninety-five percent of the soybean crops grown in Argentina are biotechnology; 75 percent in the U.S.; Australia's cotton crop is 20 percent biotech. We're growing biotech crops in Africa. India just approved biotech cotton crops."

Risk managers don't seem to be overly concerned with the risks, says Robert Hartwig, chief economist with the Insurance Information Institute, New York. "I think that risk managers feel that there's an adequate safety level there, that so far there's no science to support any risks. Of course, as a risk manager, that's always going to be in the back of your mind, especially with something you don't understand that has a long wait-and-see period."

The risk manager, says Hartwig, needs to be diligent, however. "The risk manager needs to be concerned that the product has been thoroughly tested and it's not an issue of people suffering adverse physical reactions from consuming. this, or that there's not a chance that this particular crop can damage or cross-pollinate a crop in a nearby field."

Insuring GMOs

Hartwig says that insurers don't seem to be reluctant to cover the risk. "I don't think they're backing away from it, but I think they better understand the risks. They're writing the policy language now that they have a better understanding of what the exposures are, which are many and varied. The risks could be anything from personal injury to property damage and liability claims where people say their fields have been cross-pollinated by some of the genetically modified crop. You can think of other circumstances where people could allege pollution. There are numerous legs for the liability to come. Insurers recognize that lawyers will seize upon this."

Dr. Manuela Zweimueller, risk specialist with Munich Re in Munich, Germany, says that from a European perspective, coverage for GMOs is available. "The normal cover is available, yet it depends on the primary insurer. You may find a whole array, from exclusions to special coverage, even in the United States."

Zweimueller says that Munich Re approaches the GMO issue from a practical standpoint. "There could be several risks involved from farm to table. Generally, we break the risk down into two parts. First is the environmental risk. Then there are the human health risks. There is a third area: public perception. With genetic engineering, public perception maybe a key role."

Zweimueller implements a step-by-step and case-by-case procedure to examine the risks. "We carry out a normal risk analysis. We look at the product portfolio, what kinds of products are manufactured by the company that should get insurance cover. We try to get a closer look at the products, like seeds, for example. We look to see what kind of plant it is. I see two fields of risk. One is in the ecological area. For example, there's a risk for disturbance of ecological systems and balance. The other is the human health risks."

While insuring this risk is still possible, Cring predicts that self-insurance is not far off.

"The insurance carriers out there that deal primarily in agricultural sectors are becoming more-aware of the potential for D&O claims, and they're not comfortable with it," she says. "It's the new kid on the block. Initially with most carriers, the minute they see the new kid on the block, their response is to exclude it until they're more comfortable with the risk. Until they can be comfortable with the exposures, probably through years of experience, more companies are going to have to self-insure the exposure."

Lori Widmer can be reached at lwidmer@lrp.com.

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