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Wendy’s Chili and the Severed Finger

17 Aug
Wendy's restaurant at 375 South Churton Street...

Image via Wikipedia

Some of us may have forgotten the severed finger put in the Wendy’s chili but I, for one, would still never buy chili at a Wendy’s restaurant. The incident occurred about five years ago when Anna Ayala planted a man’s finger that was severed in a workplace accident into a bowl of Wendy’s chili. She purchased the severed finger for $100.00 from a co-worker of her husband. Hoping to win a fast-big lawsuit from Wendy’s instead Anna is just finishing serving four years in prison for her part in the scam on Wendy’s.

Ayala falsely accused Wendy’s of having a severed finger in their chili when she told authorities that she found a severed finger in a bowl of chili at Wendy’s when, in fact, she planted it. This was a very costly prank to Wendy’s and not just the restaurant where she did the crime. The incident caused an immediate furor in 2005 that resulted in the sales at Wendy’s to drop, forcing layoffs and reduced hours in Northern California. Joseph Desmond, owner of the local Wendy’s franchise, called the situation a nightmare.

Cost to Company: Wendy’s International Inc.’s earnings dropped one percent in the second quarter of 2005. That may not seem like a lot, but when you are the third-largest burger chain in the US, one percent of your revenue is a significant chunk of change. For the first six months of 2005, profits fell to $122 million, compared to $124 million in 2004. And other estimates say that Wendy’s may have lost as much as $21 million in revenue due to the incident.

Wendy’s is not the only company who has lost significant money due to “false accusation”. In recent years other companies have had similar situations including: Pringles (Proctor and Gamble); McDonald’s; Taco Bell; Toyota. For more details on all these losses refer to this link: http://www.businesspundit.com/5-corporations-damaged-by-false-accusations/

Now to the point—there is NO business income coverage for any of these major losses. As we look to protecting our insureds for loss of income our normal solution is to rely on an insurance form that requires direct damage to the insured’s premise by a situation for which they have purchased coverage. These losses just don’t fall within that basic test for insurance. And yet these types of claims present much more risk to many businesses especially those that enjoy a national reputation and are targets for fraud. So where is the remedy? Needless to say national companies of the size mentioned have a team that has examined these types of vulnerabilities and developed crises management programs including communication plans for immediately responding and mitigating loss. To the extent they have purchased insurance the program would be specially designed to respond to their “disruption in trade and brand” which is a specialized form of coverage.

~Laurie

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