A Raging Food Fight.

Labeling of gene-altered foods could benefit manufacturers and their insurance companies.

The growing controversy over genetically modified foods ultimately could affect property/casualty insurers. Product recalls and liability suits could arise out of unforeseen harm to other crops or humans.

Genetically modified foods have been part of the American diet for nearly a decade. In fact, foods created by genetic engineering-the insertion of the DNA from one species into another-have been around since 1992 when a bacterial gene was inserted into the "FlavrSavr" tomato to make it ripen more slowly.

In 1998, about half the soybeans, one-third of the corn and nearly 100% of the canola oil produced in the United States contained genes from other organisms. In recent years, more than 40 new crops have been developed, and gene-spliced plants are grown on an estimated 78 million acres of U.S. farmland.

Genetic research by life-science companies doesn't stop at plants. Scientists are attempting to breed chickens that are resistant to a common poultry parasite. Efforts also are under way to make chickens resistant to other microbes, such as salmonella, that can be spread to humans.

Critics charge that not enough testing has been done to determine whether these products are safe for humans and the environment. Further, they say there are no labels telling consumers that the food they eat contains foreign genes.

Two studies conducted on these products were both alarming and reassuring--alarming because they highlighted dangerous, unintended consequences, and reassuring because testing detected the danger before the products were marketed.

In 1995, the Pioneer Hi-Bred seed company spliced one of the Brazil nut's thousands of proteins into the company's soybeans for added nutritional value. But tests at the University of Nebraska revealed that the transferred protein could cause reactions in people who are allergic to nuts. Although the nut-altered soybean never made it to the grocery stores, the study remains a symbol of everything frightening about genetic modification of food.

Another study at Cornell University concluded that Monarch butterfly caterpillars that gorge on pollen from genetically modified corn would die before turning into butterflies. This corn was spliced with a gene from the bacteria, Bacillus thuringiensis, which acts as a natural pesticide. It was supposed to kill pests that feed on corn crops, but it made the Monarch the canary in the coal mine.

In the wake of mad cow disease, European regulators and consumer activists have insisted on labeling all genetically modified food. But even with labeling, Europeans are resisting importation of these foods, and that worries U.S. farmers. A treaty signed by 130 nations last January in Montreal allows countries to bar imports of genetically altered seeds, microbes, animals and crops that they deem a threat to their environment. This treaty might be the first step to more stringent regulations and labeling in the United States.

Major companies, including Kellogg's, Kraft Foods, McDonald's, Nestle and Quaker Oats, sell gene-altered food in the United States. Some, like Frito-Lay, H.J. Heinz and Gerber Products, have publicly sworn off using genetically modified ingredients in some or all of their products.

Whatever the approach, the food industry and its suppliers generally are opposed to labeling. The industry argues that labeling will put an end to biotechnology and the numerous economic, health and environmental benefits it can deliver.

But adding a discreet label on genetically modified foods near the list of ingredients or nutritional data could benefit both manufacturers and their insurers. While labels can shield against or mitigate damages in a subsequent controversy, opposing them can achieve the opposite result. Labels, particularly those approved by a government agency, frequently have been asserted as a defense in actions for damages premised on theories of strict liability, failure to warn, breach of implied warranty of fitness and negligence.

Armed with the benefit of hindsight litigation involving tobacco and the diet drug known as phen-fen, insurers recognize the potential insulation provided by full disclosure. But the willful failure to disclose genetically modified ingredients in the United States while disclosing the same in Europe is fraught with liability exposure.

Eventually, consumers will learn to appreciate the benefits of genetically altered products. In the meantime, insurers should advise risk managers in the food industry of the potential liability benefits of labeling and surcharge those manufacturers whose products avoid a disclosure. After all, if things turn ugly, opposition to labeling could well be the Achilles' heel for the industry and its insurers.

John R. Cashin is a deputy superintendent in the New York State Insurance Department. This is his final column for Best's Review.