Foster Poultry Farms, Inc. v. XL Insurance et al

Filing 59

MEMORANDUM AND ORDER signed by Senior Judge William B. Shubb on 10/9/2015 re Motions for Summary Judgment; Motion to Strike: IT IS ORDERED that: 1) 46 Foster's Motion for Partial Summary Judgment on its declaratory relief claim be, and the s ame hereby is, GRANTED; 2) 47 Insurers' Motion for Summary Judgment on both of Foster's claims be, and the same hereby is, DENIED; and 3) 54 Foster's Motion to Strike be, and the same hereby is, DENIED as MOOT as to summary judgment and DENIED WITHOUT PREJUDICE as to trial. (Kirksey Smith, K)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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----oo0oo----

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FOSTER POULTRY FARMS, INC.,

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Plaintiff,
v.

CIV. No. 1:14-953 WBS SAB
MEMORANDUM AND ORDER RE: MOTIONS
FOR SUMMARY JUDGMENT; MOTION TO
STRIKE

CERTAIN UNDERWRITERS AT
LLOYD’S, LONDON,
Defendants.

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----oo0oo---Plaintiff Foster Poultry Farms, Inc. (“Foster”) brought
this action for declaratory relief and breach of contract against
defendants Certain Underwriters at Lloyd’s, London (“Insurers”).
Presently before the court are Foster’s motion for partial
summary judgment on its declaratory relief claim and Insurers’
motion for summary judgment under Federal Rule of Civil Procedure
56, and Foster’s motion to strike the deposition testimony and
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opinions of Thomas James Hoffman and Dr. William James under
Rules 30(d)(2) and 37(c)(1), respectively.
I.

Factual and Procedural Background

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Foster is a poultry producer with its largest chicken
processing plant in Livingston, California (the “Facility”).
(O’Connor Decl. ¶ 4 (Docket No. 46-3); Lavella Decl. (Docket Nos.
46-4 to 46-6) Ex. 24 at 36:7-22.)

two processing areas called “Plant 1” and “Plant 2,” which share
a common packaging floor.
O’Connor Decl. ¶ 5.)

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(Lavella Decl. Ex. 24 at 38:20-40:3;

Insurers, a group of Lloyd’s underwriters

organized into three syndicates,1 issued a product contamination
insurance policy to Foster, effective May 25, 2013 to May 25,
2014 (the “Policy”).

(Lavella Decl. Ex. 1 (“Policy”); Topp Decl.

(Docket Nos. 50-2 to 50-4) Ex. U at 12:17-13:3.)
governed by a New York choice of law provision.

The Policy is
(Id. at 8.)

The

Policy provides coverage for all “Loss” arising out of “Insured
Events” during the policy period.

(Id. at 10.)

Two types of

Insured Events under the Policy, which are at issue here, are
“Accidental Contamination” and “Government Recall.”

(Id. at 10,

23.)

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The Facility is comprised of

On October 7, 2013, the United States Department of
Agriculture Food Safety and Inspection Service (“FSIS”) issued a
Notice of Intended Enforcement (“NOIE”) to suspend the assignment

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“Lloyd’s operates as a marketplace for the placement of
insurance. Syndicates made up of individual underwriters insure
risks on behalf of their members. Normally, several syndicates
will provide insurance for a given risk by agreeing to cover a
percentage of that risk.” Alexander & Alexander Servs., Inc. v.
These Certain Underwriters at Lloyd’s, London, England, 136 F.3d
82, 84 n.2 (2d Cir. 1998).
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of inspectors at the Facility and withhold marks of inspection
for products produced there, which are required for the products
to be eligible for sale.

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its implication in a salmonella illness outbreak, and its
noncompliance with federal sanitation regulations.

(Id.)

proffered corrective actions in response to the NOIE.
Decl. Ex. 9).

Foster

(Lavella

As a result, FSIS placed the NOIE in deferral to

allow Foster an opportunity to implement those corrective actions
and to achieve compliance.

(Lavella Decl. Ex. 2 (“LOC”) at 1-2.)

On December 6, 2013, FSIS issued Foster a Letter of
Concern that noted Foster’s continued failure to remedy the high
incidence of salmonella at the Facility, and informed Foster of
live cockroach sightings at the Facility.

(See id.)

On January

8, 2014, based on Foster’s continued noncompliance and a German
cockroach infestation at the Facility, FSIS issued Foster a
Notice of Suspension (“NOS”) suspending the assignment of
inspectors at the Facility and withholding marks of inspection
for the chicken produced there.

(Lavella Decl. Ex. 3 (“NOS”).)

As a result, the Facility ceased production from January 8, 2014
to January 21, 2014.

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FSIS

based its notice on the Facility’s high prevalence of salmonella,

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(Lavella Decl. Ex. 8 (“NOIE”).)2

(O’Connor Decl. ¶¶ 9, 21.)

Five days after the issuance, FSIS held the NOS in
abeyance pending Foster’s implementation of a comprehensive

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Under FSIS regulations, a “‘withholding action’ is the
refusal to allow the marks of inspection to be applied to
products. A withholding action may affect all product in the
establishment or product produced by a particular process.” 9
C.F.R. § 500.1(b). “A ‘suspension’ is an interruption in the
assignment of program employees to all or part of an
establishment.” Id. § 500.1(c).
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action plan that included fumigating the Facility.
Decl. Ex. 5.)

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Subsequently, Foster requested FSIS to apply marks

of inspection to its chicken product that was produced on January
7 and 8, 2014.

(Lavella Decl. Ex. 7.)

FSIS granted Foster’s

request as to chicken produced exclusively in Plant 2 on January
8, but denied its request as to all remaining chicken produced at
the Facility on January 7 and 8.

(Id.; O’Connor Decl. ¶¶ 16-18.)

Under FSIS supervision, Foster thus destroyed 1.3 million pounds
of the denied chicken, which was ineligible for sale.

(O’Connor

Decl. ¶ 18-20; see Lavella Decl. Exs. 6, 7; O’Connor Tr. at
206:23-208:11, 209:25-211:8; Wolff Decl. (Docket Nos. 47-4 to 4724) Ex. R at 7 ¶ 7.)

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(Lavella

Foster submitted a coverage claim with Insurers for
over $12 million in expenses that it claimed to have incurred as
a result of the NOS.
R at 4 ¶ 1.)

(Lavella Decl. Ex. 11 at 3; Wolff Decl. Ex.

Foster claimed coverage under the Policy’s

Accidental Contamination and Government Recall provisions, but
Insurers denied Foster coverage under both.

(Id. Exs. 12-14.)3

Foster then instituted this action for declaratory relief and
breach of the insurance contract.

(Docket No. 1.)

Foster now

moves for partial summary judgment on its declaratory relief
claim and Insurers move for summary judgment on both of Foster’s
claims.

(Docket Nos. 46, 47.)

Foster also moves to strike the

deposition testimony and opinions offered by two of Insurers’
expert witnesses, Thomas James Hoffman and Dr. William James.

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3

Insurers admit that Foster satisfied the conditions
precedent to coverage in Sections 6(A), 7(B), and 7(G)(i) of the
Policy. (Docket No. 50-1 ¶ 19.)
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(Docket No. 54.)
II.

Analysis

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Summary judgment is proper “if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
P. 56(a).

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A material fact is one that could affect the outcome

of the suit, and a genuine issue is one that could permit a
reasonable trier of fact to enter a verdict in the non-moving
party’s favor.
248 (1986).

Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

The party moving for summary judgment bears the

initial burden of establishing the absence of a genuine issue of
material fact and can satisfy this burden by presenting evidence
that negates an essential element of the non-moving party’s case.
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
Alternatively, the moving party can demonstrate that the nonmovant cannot produce evidence to support an essential element
upon which it will bear the burden of proof at trial.

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Fed. R. Civ.

Id.

Once the moving party meets its initial burden, the
burden shifts to the non-moving party to “designate specific
facts showing that there is a genuine issue for trial.”
324.

Id. at

To carry this burden, the non-moving party must “do more

than simply show that there is some metaphysical doubt as to the
material facts.”

Matsushita Elec. Indus. Co. v. Zenith Radio

Corp., 475 U.S. 574, 586 (1986).

“The mere existence of a

scintilla of evidence . . . will be insufficient; there must be
evidence on which the jury could reasonably find for the [nonmoving party].”

Anderson, 477 U.S. at 252.

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In deciding a summary judgment motion, the court must
view the evidence in the light most favorable to the non-moving
party and draw all justifiable inferences in its favor.
255.

“Credibility determinations, the weighing of the evidence,

and the drawing of legitimate inferences from the facts are jury
functions, not those of a judge” ruling on a motion for summary
judgment.

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Id.

When parties submit cross-motions for summary

judgment, the court must consider each motion separately to
determine whether either party has met its burden, “giving the
nonmoving party in each instance the benefit of all reasonable
inferences.”

ACLU of Nev. v. City of Las Vegas, 333 F.3d 1092,

1097 (9th Cir. 2003); see also Fair Hous. Council v. Riverside
Two, 249 F.3d 1132, 1136 (9th Cir. 2001) (when parties submit
cross-motions for summary judgment, “each motion must be
considered on its own merits” and “the court must review the
evidence submitted in support of each cross-motion”).
A.

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Id. at

Principles of Interpretation for Insurance Policies
Under New York law, the threshold question of law for

the court to determine is whether a policy’s terms are ambiguous.
Duane Reade Inc. v. St. Paul Fire and Marine Ins. Co., 411 F.3d
384, 390 (2d Cir. 2005).

An insurance “contract is unambiguous

if the language it uses has a definite and precise meaning” such
that it is reasonably susceptible to one interpretation.
Greenfield v. Philles Records, Inc., 780 N.E.2d 166, 170–71 (N.Y.
2002).

An unambiguous contract provision is enforced according

to the plain meaning of its terms, id., and courts commonly refer
to the dictionary to ascertain a provision’s plain and ordinary

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meaning, Ellicott Square Court Corp. v. Mountain Valley Indem.
Co., 634 F.3d 112, 119 (2d Cir. 2011).

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“Ambiguity is determined by looking within the four
corners of the document, not to outside sources.”

Planning Corp. v. CRP/Extell Riverside, L.P., 920 N.E.2d 359, 363
(N.Y. 2009).

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An insurance policy is ambiguous if “its terms are

subject to more than one reasonable interpretation.”

Universal

Am. Corp. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 37 N.E.3d
78, 80 (N.Y. 2015).

To determine whether an insurance contract

is ambiguous, the court must interpret its terms “according to
common speech and consistent with the reasonable expectations of
the average insured.”
500, 500 (2011).

Cragg v. Allstate Indem. Corp., 950 N.E.2d

In a case involving a policy issued to a

business, the court must also examine the “reasonable expectation
and purpose of the ordinary business [person] when making an
ordinary business contract.”

Michaels v. City of Buffalo, 651

N.E.2d 1272, 1273 (N.Y. 1995) (citation omitted).

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Riverside S.

The court must take into account not only the policy’s
literal language, but whatever may be reasonably implied from
that language, including “any promises which a reasonable person
in the position of the promisee would be justified in
understanding.”

Sutton v. E. River Sav. Bank, 435 N.E.2d 1075,

1078 (N.Y. 1982) (citation omitted).

In construing policy terms

according to these standards, the court should strive to give
meaning and effect to every sentence, clause, and word of the
contract.

Northville Indus. Corp. v. Nat’l Union Fire Ins. Co.

of Pittsburgh, 679 N.E.2d 1044, 1048 (N.Y. 1997).

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If the policy’s language is susceptible to more than
one reasonable interpretation, the language is “deemed to be
ambiguous and thus interpreted in favor of the insured.”

Ins. Co. v. Int’l Bus. Machines Corp., 965 N.E.2d 934, 936 (N.Y.
2012); see also Handelsman v. Sea Ins. Co., 647 N.E.2d 1258, 1260
(N.Y. 1994) (“Where there is ambiguity as to the existence of
coverage, doubt is to be resolved in favor of the insured and
against the insurer.”).4

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When “an insurer wishes to exclude

certain coverage from its policy obligations, it must do so ‘in
clear and unmistakable’ language.”
938 (citation omitted).

Fed. Ins. Co., 965 N.E.2d at

Any such exclusions or exceptions must

be specific and clear to be enforced: “[t]hey are not to be
extended by interpretation or implication, but are to be accorded
a strict and narrow construction.”

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Fed.

Id. (citation omitted).

“[B]efore an insurance company is permitted to avoid
policy coverage, it must satisfy the burden which it bears of
establishing that the exclusions or exemptions apply in the
particular case, and that they are subject to no other reasonable
interpretation.”

Dean v. Tower Ins. Co. of N.Y., 979 N.E.2d

1143, 1145 (N.Y. 2012) (citation omitted).

If an “insurance

carrier drafts an ambiguously worded provision and attempts to
limit its liability by relying on it,” the court must construe
the language against the carrier.

Metro. Prop. & Cas. Ins. Co.

v. Mancuso, 715 N.E.2d 107, 112 (N.Y. 1999).

This “exceptionally

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New York follows the “well-settled maxim of contra
proferentem” under which courts resolve ambiguities against the
party who drafted the contract. Graff v. Billet, 477 N.E.2d 212,
213 (N.Y. 1985); 151 W. Assocs. v. Printsiples Fabric Corp., 460
N.E.2d 1344, 1345 (N.Y. 1984).
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strong principle” is particularly enforced where the contract
includes non-negotiable, form policy language that was not chosen
by the insured.

Co., 393 N.E.2d 974, 975 (N.Y. 1979).
B.

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Mount Vernon Fire Ins. Co. v. Travelers Indem.

“Accidental Contamination” Provision
The Policy defines Accidental Contamination as an error

in the production, processing, or preparation of any Insured
Products “provided that” their use or consumption “has led to or
would lead to bodily injury, sickness, disease or death.”
(Policy at 11.)5

It is undisputed that Foster’s chicken products

are “Insured Products” under the Policy.

(Id. at 12.)

The plain

meaning of this provision thus requires that Foster show (1) an
error in the production of its chicken product (2) the
consumption of which “would lead to” bodily injury.

Insurers

here denied coverage on the ground that Foster failed to
establish the second element.

(Lavella Decl. Exs. 13, 14.)

The

court examines each element in turn.

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The court examines only the relevant part of the
definition applicable to the facts here. The full definition
under the Policy provides: “Error in the manufacture, production,
processing, preparation, assembly, blending, mixing, compounding,
packaging or labelling (including instructions for use) of any
Insured Products, or the introduction into an Insured Product of
an ingredient or component that is, unknown to the Insured,
contaminated or unfit for its intended purpose, or error by the
Insured in the storage or distribution of any Insured Products
whilst in the care or custody of the Insured[;] provided that the
use or consumption of such Insured Products has led to or would
lead to: (i) bodily injury, sickness, disease or death of any
person(s) or animal(s) physically manifesting itself within 365
days of use or consumption, or (ii) physical damage to or
destruction of tangible property (other than the Insured Products
themselves).” (Policy at 11.)
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Foster states that its failure to comply with federal
sanitation regulations, which resulted in a high incidence of
salmonella and a cockroach infestation at the Facility, was an
“error” in the production of its chicken products because the
“sanitary conditions of a slaughter facility, including that
facility’s pest control service, is a fundamental component of a
poultry producer’s production process.”

(Docket No. 51-1 at 13.)

In common usage, an “error” means “a mistake” or “[s]omething
incorrectly done through ignorance or inadvertence.”

Error,

Black’s Law Dictionary (10th ed. 2014); Oxford English Dictionary
Online, http://www.oed.com/viewdictionaryentry/Entry/64126 (last
visited Oct. 8, 2015); accord

Merriam–Webster Online Dictionary,

http://www.merriam-webster.com/dictionary/error (last visited
Oct. 8, 2015) (defining “error” as “an act or condition of
ignorant or imprudent deviation from a code of behavior”).
In its NOIE dated October 2013, FSIS notified Foster of
its failure to comply with sanitation regulations, 9 C.F.R. Parts
416 and 417, based on the Facility’s high frequency of salmonella
positives and implication in an “ongoing Salmonella Heidelberg
illness outbreak.”

(NOIE at 1-2.)

FSIS found that the

Facility’s control measures and antimicrobial interventions
failed to prevent the production of chicken contaminated with
salmonella, including strains of Salmonella Heidelberg, a
serotype known to cause human illness.

(Id. at 4.)

The agency

affirmed that adequate control measures and interventions,
including “measures necessary to prevent the persistent
recurrence of Salmonella, . . . are an important, fundamental,

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and integral aspect of an adequate food safety system.”

(Id.)

In its Letter of Concern dated December 2013, FSIS
addressed the Facility’s ongoing noncompliance with sanitary
regulations due to ineffective process controls and the
continuing high prevalence of salmonella in Foster’s consumerready chicken products.
101:20-104:3.)

(See LOC; Lavella Decl. Ex. 18 at

One month later, FSIS issued the NOS because of

the Facility’s “egregious insanitary conditions,” including a
live cockroach infestation.

(See NOS.)

The Notice stressed that

Foster was unable to ensure that its chicken product was not
adulterated or injurious to health and noted Foster’s overall
failure “to abide by the rules and regulations promulgated under
the Poultry Products Inspection Act.”

(See id.)

These facts are

undisputed and demonstrate that Foster “incorrectly” or
“mistakenly” implemented sanitary measures that were required by
federal regulations.

As the FSIS affirmed, such measures were

also vital to controlling food safety hazards during that
production.

(NOIE at 4.)

Foster’s failure is thus an “error” in

the production of its chicken products.
The evidence also demonstrates that Foster’s regulatory
noncompliance lasted from October 7, 2013 to January 10, 2014.
As indicated in the Letter of Concern, Foster’s corrective
actions in response to the NOIE were ineffective in addressing
the noncompliances that the NOIE identified.

(LOC at 3-4.)

For

example, the Facility’s 26.7% rate of positive salmonella as of
October 7 was comparable to its 23.3% rate of positive salmonella
eight weeks later on December 6.

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(Id. at 2.)

There is no

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evidence that Foster achieved regulatory compliance in the onemonth period before the NOS issued on January 8, 2014.

To the

contrary, the evidence reveals that the Facility’s new pest
control operator, Orkin Pest Services, was employing ineffective
pest control procedures during that time, which allowed pests to
multiply.

(Lavella Decl. Ex. 21 at 109:25-110:17; Ex. 24 at

89:21-25, 96:23-97:19, 98:1-99:13.)

Foster’s noncompliance ended

on January 10, 2014 when FSIS notified it that the Facility
“provided adequate corrective actions to address the
noncompliances identified in the NOS.”

(Id. Ex. 5 at 3.)

Foster’s chicken products from October 7, 2013 to January 10,
2014 were thus “erroneously produced” under the Policy.
The second element for Accidental Contamination
coverage requires a showing that Foster’s “erroneously produced”
chicken product “would lead to bodily injury, sickness, disease
or death.”

(Policy at 11.)

The Policy, however, does not

specify the manner in which Foster must establish this element.
(See Policy at 11; Lavella Decl. Ex. 22 at 123:20-24.)

Insurers

posit that to trigger coverage, Foster must prove actual
contamination in that some harmful matter must have been
introduced into the chicken product.

Insurers cite three cases

to support this argument, all of which are distinguishable from
the facts here.
In Ruiz Food Products, Inc. v. Catlin Underwriting
U.S., Inc., Civ. No. 1:11-889 BAM, 2012 WL 4050001 (E.D. Cal.
Sept. 13, 2012), the policy at issue provided coverage for “any
accidental or unintentional contamination . . . provided that the

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use or consumption of Insured product(s)” had resulted in or
would result in bodily injury.

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There, a downstream

manufacturer of hydrolyzed vegetable protein (“HVP”) issued a
recall after a finished lot of its HVP product tested positive
for salmonella.

Id. at *1.

A different lot of HVP subject to

the recall was sent to a company that used it to produce a beef
spice mix, which the plaintiff Ruiz incorporated into its food
products.

Id. at *2.

food product.

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Id. at *7.

The HVP constituted only .0007% of Ruiz’s

Id.

All three companies conducted sample testing on the HPV
that was sent to Ruiz’s supplier but the results were all
negative for salmonella.

Id.

“Only one lot of [the

manufacturer’s] HPV tested positive for Salmonella, and that
particular lot was not sent to [Ruiz’s beef spice mix supplier],
and thus, did not reach Ruiz.”

Id.

Despite this, the FDA

imposed a recall of Ruiz’s food product and Ruiz claimed coverage
under the policy.

Id.

The court held that the policy required

objectively verifiable evidence of actual contamination: because
all the samples tested by the three companies were negative for
salmonella, there was no evidence that Ruiz’s product was in fact
contaminated with salmonella.

Id. at *7.

On that basis, Ruiz’s

product would not result in bodily injury and therefore was not
covered.

Id.
In Wornick Co. v. Houston Casualty Co., Civ. No. 1:11-

391, 2013 WL 1832671 (S.D. Ohio May 1, 2013), a company that
manufactured dairy shake packets, which Wornick incorporated into
its food products, issued a voluntary recall after salmonella was

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found in a finished lot of its packets, causing Wornick to recall
and replace 700,000 cases of its own food product.

Id. at *1-2.

It was later determined that the tainted lot had not been sent to
Wornick and that none of its food products contained salmonella.
Id. at *2.

Wornick’s insurer denied a claim under a product

contamination policy similar to the one in Ruiz.

Id.

The court

held that the term “contamination” in that policy required “that
the insured’s product be soiled, stained, corrupted, infected, or
otherwise made impure by contact or mixture.”
multiple dictionaries).

Id. at *6 (citing

Because there was no evidence that

Wornick’s products came into contact with salmonella, they were
not “contaminated” under the policy.

Id.

Lastly, in Little Lady Foods, Inc. v. Houston Cas. Co.,
819 F. Supp. 2d 759 (N.D. Ill. 2011), Little Lady’s testing
revealed that its food products may be contaminated with a
harmful bacteria.

Id. at 761.

Little Lady put its products on

hold pending further analysis but tests ultimately concluded that
the product contained a harmless bacteria.

Id.

The court held

that Little Lady was not covered under a contamination policy
similar to the one in Ruiz because none of its products were ever
contaminated with harmful bacteria.

Id. at 762-63.

According to these cases, Insurers contend that a mere
possibility that Foster’s chicken product is contaminated is
insufficient to trigger coverage for Accidental Contamination
under the Policy.
the present facts.
“contamination.”

None of these three cases, however, apply to
The provision here does not contain the word
It is triggered by an “error,” not actual

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contamination.

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Even if the Policy required Foster to prove “actual
contamination” with evidence that a foreign matter was introduced
into its chicken, that requirement would have been met.

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It is

undisputed that the “[c]onsumption of food contaminated with
Salmonella can cause salmonellosis, one of the most common
bacterial foodborne illnesses.”

(Wolff Decl. Ex. L.)

The

organism can cause a serious infection that can lead to death and
can also develop resistance to antibiotics.
O’Connor Tr. at 74:4-12.)

(Id.; NOIE at 3;

The salmonella organism is introduced

into processing facilities when lives birds are delivered for
slaughter.

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Cases construing the meaning

of the word “contamination” are therefore inapposite.

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(See Policy at 11.)

(O’Connor Dep. at 72:9-23, 87:15-24.)6

Unlike the cases cited, here, Foster’s chicken product
consistently tested positive for salmonella for half of a year
before Foster destroyed the product for which it claims coverage.
In October 2013, FSIS “identified multiple noncompliances
including . . . direct product contamination” and documented
Foster’s failure “to prevent the [Facility’s] production of
products contaminated with Salmonella.”

(NOIE at 4.)

In

December 2013, FSIS also notified Foster that about a quarter of
its chicken samples tested positive for salmonella.

(LOC at 2.)

FSIS identified an array of insanitary conditions, including the
presence of cockroaches, that could directly and indirectly

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6

In response to FSIS’s December 6, 2013 Letter of
Concern, Foster acknowledged that live chickens containing
salmonella were came into the Facility before processing began,
which overwhelmed the systems in place to reduce the prevalence
of salmonella. (Wolff Decl. Ex. Y.)
15

1

spread salmonella at the Facility.

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On the day of the NOS on January 8, 2014, three out of
eight chicken samples at the Facility tested positive for
salmonella.

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(Lavella Decl. Ex. 21 at 126:21-127:18; O’Connor Tr.

at 32:22-33:22.)7

Further evidence of actual contamination is in

the high levels of salmonella that persisted at the Facility
after the NOS was lifted.

(Lavella Opp. Ex. 6 at 67:24-72:8,

78:8-81:24, 113:7-114:15; O’Connor Dep. at 66:2-68:13; Wolff
Decl. Exs. L, M.)

Foster eventually linked this high prevalence

to live birds that were coming into the Facility from particular
growing farms.

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(Id. at 2-3.)

(Wolff Decl. Ex. W at 117:6-119:2.)

Unlike the food product in Insurers’ cited cases, which
were never found to contain any harmful substances, it is
undisputed that Foster’s chicken products were actually
contaminated with organisms able to cause a variety of serious
illnesses, infection, and death.

(LOC at 3.)

Foster even

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7

Insurers object to Dr. O’Connor’s statement regarding
the January 8, 2014 test results on the ground that it lacks
foundation and constitutes hearsay. (Wolff Decl. Ex. G at
185:20-186:7, 198:25-199:9.) Insurers also object to Charles
Giglio’s expert opinion on the ground that it lacks factual basis
and is “based on speculation or conjecture.” (Docket No. 55-1 ¶
48.)
Even if the non-moving party’s evidence is presented in
a form that is currently inadmissible, such evidence may be
evaluated on a motion for summary judgment so long as the moving
party's objections could be cured at trial. See Burch v. Regents
of Univ. of Cal., 433 F.Supp.2d 1110, 1119–20 (E.D. Cal. 2006).
Objections to evidence on the ground that the evidence is
irrelevant, speculative, argumentative, vague and ambiguous, or
constitutes an improper legal conclusion are all duplicative of
the summary judgment standard itself. (See id.) Accordingly,
objections on any of these grounds are superfluous and the court
will overrule them.
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satisfies the definition of contamination set forth in Wornick
requiring that a “product be soiled, stained, corrupted,
infected, or otherwise made impure by contact or mixture.”
Insurers’ contention that Foster’s destroyed product was not
actually contaminated thus fails.
Insurers’ next argument that the presence of salmonella
in fresh chicken product does not by itself render the product
harmful because normal cooking practices destroy the organism is
equally unavailing.

In October 2013, FSIS identified the

Facility as the likely source of an outbreak of Salmonella
Heidelberg infections that began in March of that year.
1-2; Lavella Decl. Ex. 21 at 126:21-127:18.)

(NOIE at

By October 2013,

over two hundred people from fifteen states were hospitalized for
salmonella illness, eighty percent of whom reported that they
consumed Foster’s chicken.

(NOIE at 2; O’Connor Tr. at 76:1-17.)

An FSIS health alert issued in October 2013 also warned that an
estimated 278 illnesses were reported in eighteen states,
predominantly in California.

(Wolff Decl. Ex. L.)

In addition, on July 3, 2014, after the NOS, Foster
recalled chicken products that were produced at the Facility from
March 7 through March 13, 2014 because they were associated with
a Salmonella Heidelberg illness outbreak in California.
Opp. Ex. 1.)

(Lavella

In its official recall notice, FSIS stated that

there was “a reasonable probability that the use of the product
will cause serious, adverse health consequences or death.”
at 17032.)

(Id.

The record evidence establishes that chicken products

containing Salmonella Heidelberg outbreak strains can cause

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illness even where normal cooking practices are followed.

Even

in Ruiz, the case cited by Insurers, the court found “no dispute
that had plaintiff shown that the product was tainted or
contaminated, that consumption ‘would result in’ injury.”

Ruiz,

2012 WL 4050001, at *14.
Insurers also state that the provision’s “provided
that” connector requires a causal link between Foster’s “error”
and any injury that results upon consuming its product.

They

argue that Foster must establish that the harm its product would
have caused is directly related to the “error.”

A plain reading

of the provision, however, shows no such requirement.

As a

conjunction, “provided” means “on the condition that,” or “and.”
Provided, Black’s Law Dictionary (10th ed. 2014); Merriam–Webster
Online Dictionary, http://www.merriamebster.com/dictionary/provided (last visited Oct. 8, 2015);
Oxford English Dictionary Online,
http://www.oed.com/view/Entry/153449 (last visited Oct. 8, 2015).
Black’s Law Dictionary provides an example: “a railway car must
be operated by a full crew if it extends for more than 15
continuous miles, provided that a full crew must consist of at
least six railway workers.”

“That one party to the agreement may

attach a particular, subjective meaning to a term that differs
from the term’s plain meaning does not render the term
ambiguous.”

Slattery Skanska Inc. v. Am. Home Assur. Co., 885

N.Y.S.2d 264, 274 (App. Div. 2009).
Construing the words “provided that” as “and,” Foster
thus needs to prove only (1) that products were erroneously-

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produced,

and (2) that those products would have caused harm if

consumed.

There is no requirement which error or combination of

errors in its production caused the harm.

There is also no

requirement stated in the Policy that Foster prove how its
product would have caused harm.

The Policy requires that Foster

simply prove that the product was consumed.

The Policy further

does not require that Foster show what specific kind of harm
would be caused by the consumption of its product.

It states

only that “bodily injury, sickness, disease or death” be shown.
As Foster points out, New York courts have construed
the term “bodily injury” broadly in insurance policies.

For

example, in Lavanant v. General Accident Insurance Co. of
America, 595 N.E.2d 819 (N.Y. 1992), the Court of Appeals held
that the term “bodily injury, sickness or disease” in a
comprehensive general liability policy permitted the insured to
receive coverage for a claim involving emotional trauma that was
unaccompanied by physical injury.

Id. at 822.

More importantly, the provision does not use any
language of causation.

Courts generally decline requests by

insurance companies to rewrite their policies to make them more
restrictive.

E.g., id.

As the Court of Appeals recognized in

Lavant, Insurers could have included language of causation in the
Policy, but did not do so.

See id.; Mount Vernon Fire Ins. Co.,

393 N.E.2d at 975 (if the insurer intended to have a right under
the policy, “it would have been a simple matter for it to have
said so in so many words”).

This is particularly true where

coverage is set out in a “form” policy that was drafted by the

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insurer and was non-negotiable.
N.E.2d at 975.

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It is undisputed here that that the Policy uses

Insurers’ standard form language for product contamination
policies.

5
6

Mount Vernon Fire Ins. Co., 393

(Lavella Decl. Ex. 22 at 101:9-102:21.)
Insurers spend a great deal of their briefs arguing

against Foster’s assertion that cockroaches at the Facility may
have contributed to the prevalence of salmonella.

As explained

above, the plain language of the Policy does not require that
Foster prove a causal link between the error in production and
the harm that would result if erroneously-produced products were
consumed.

See Newmont Mines Ltd. v. Hanover Ins. Co., 784 F.2d

127, 135 (2d Cir. 1986) (under New York law, “words should be
given the meanings ordinarily ascribed to them”).
Furthermore, Insurers contend that the words “would
lead to bodily injury” require conclusive evidence that Foster’s
chicken product would have necessarily caused harm if consumed.
By extension, this means that Foster would need to prove that all
of the chicken that it destroyed would have caused injury to have
received coverage.

The court must “construe the policy in a way

that affords a fair meaning to all of the language employed by
the parties in the contract and leaves no provision without force
and effect.”

Platek v. Town of Hamburg, 26 N.E.3d 1167, 1171

(N.Y. 2015).

“Reasonable effort must be made to harmonize all of

the terms of the contract.”

Hartford Ins. Co. of Midwest v.

Halt, 646 N.Y.S.2d 589, 594 (App. Div. 1996).
Here, coverage under the Government Recall provision
requires a “reasonable probability” that Foster’s chicken product

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will cause “serious adverse health consequences or death.”

the benefits under Government Recall and Accidental Contamination
are congruent throughout much of the Policy, it is logical that
the parties intended the words “would lead to bodily injury” to
have a comparable meaning.

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Since

The average insured reading the Policy would not
reasonably expect that to receive coverage in the event its
product was contaminated, it would have to prove that each and
every one of its products would cause harm if consumed; a
reasonable probability of such harm occurring would be
sufficient.

The construction that the Policy requires a

“likelihood” or “reasonable probability” that products will cause
harm also gives effect to the words “would lead to,” since
otherwise, insureds would be held to an unreasonably difficult
standard.

It is rarely the case that every single product

produced by a producer is contaminated such that it will cause
harm if consumed.

“An insurance contract should not be read so

that some provisions are rendered meaningless.”

County of

Columbia v. Cont’l Ins. Co., 634 N.E.2d 946, 950 (1994).

Taking

into account not just the provision’s literal language, but the
inferences that an average insured may be draw from it, it would
be unreasonable for the parties to have intended that Foster bear
such a high burden to receive coverage under this provision.
It would also be unreasonable to imply that a product
must first be put into commerce and injure somebody before the
policy will provide coverage.

The parties could not have

reasonably interpreted the policy to encourage a producer to sell

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goods that have been deemed unfit for consumption, risking the
public welfare and subjecting itself to civil liability and
criminal prosecution.

sanitary noncompliance at the Facility since from October 2013 to
January 2014, its findings linking the Facility’s chicken to a
salmonella illness outbreak, and its finding of “egregious
sanitary conditions” such that “products may have been rendered
adulterated and/or injurious to health” should be sufficient here
to satisfy the second element here.

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Even if Insurers’ interpretation was reasonable, that
would subject the words at issue to more than one reasonable
interpretation.

24

The ambiguity would thus be construed in favor

of Favor and against Insurers and the result would be the same.
White v. Cont’l Cas. Co., 878 N.E.2d 1019, 1021 (N.Y. 2007).
Accordingly, because Foster has established that both
elements of this provision are met and there are no genuine
issues of material fact, the court must grant Foster’s motion for
partial summary judgment and deny Insurers’ motion for summary
judgment as to Foster’s claim for Accidental Contamination
coverage.
C.

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Thus, FSIS’s consistent findings of

“Government Recall” Provision
The Policy defines Government Recall as (1) a voluntary

or compulsory recall of Insured Products arising directly from a
Regulatory Body’s8 determination that there is a reasonable

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8

“Regulatory Bodies” are defined as “the Food and Drug
Administration, the United States Department of Agriculture [or
any other U.S.] regulatory body with similar authority with
regard to food safety.” (Policy at 23.)
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probability that Insured Products will cause “serious adverse
health consequences or death,” or (2) a voluntary or compulsory
recall of Insured Products arising directly from a Regulatory
Body’s determination that Insured Products at Foster’s facilities
“have a reasonable probability of causing serious adverse health
consequences or death” and an order suspending the registration
of those facilities issued in conjunction with or following the
recall.

9

(Policy at 23.)9
The Policy does not define the term “recall.”

But it

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The court examines only the relevant part of the
definition applicable to the facts here. The full definition
under the Policy provides: “(1) The recall of Insured Products
which has been initiated (a) voluntarily by the Insured, or (b)
as a result of an order by the Food and Drug Administration, the
United States Department of Agriculture, the Canadian Food
Inspection Agency or any other US or Canadian state or regulatory
body with similar authority with regard to food safety
(Regulatory Bodies), and where either of (a) and (b) above arise
directly from a determination by the Regulatory Bodies that there
is a reasonable probability of Insured Products causing serious
adverse health consequences or death to humans or animals, or
have otherwise been classified as Class I or Class II by the
Regulatory Bodies, or
(2) any order of suspension of registration of any of
the Insured’s facilities or operations, only in conjunction with
or following the recall of Insured Products per Item 1. above,
which arises directly from a determination by the Regulatory
Bodies, that Insured Products which have been manufactured,
processed, packed, received or held by the Insured at the same
suspended facilities or operations have a reasonable probability
of causing serious adverse health consequences or death to humans
or animals, or have otherwise been classified as Class I or Class
II by the Regulatory Bodies, or
(3) outside the USA or Canada, the recall of Insured
Products which has been ordered by any country’s regularly
constituted national, federal, state, provincial or local
regulatory agency or judicial body pursuant to regulations on
food safety but only in respect to the actual or likely threat of
Insured Products causing physical bodily injury or death to
humans or animals.” (Policy at 23.)
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defines a type of Loss called “Recall Expenses” as “costs and
expenses reasonably and necessarily incurred by [Foster] arising
solely and directly out of an Insured Event for the purpose of or
in connection with recalling, withdrawing, reworking, destroying
or replacing Contaminated Products.”

(Id. at 14, 23.)

“Contaminated Products” are defined as “Insured Products which
have been subject to Accidental Contamination [or Government
Recall].”

(Id. at 12, 24.)

Insurers denied coverage under the

Government Recall provision on the ground that Foster’s
destruction of its product did not constitute a “recall” because,
they argue, a recall applies only to products that had first left
Foster’s control.

(Lavella Decl. Exs. 12, 14.)

Foster voluntarily destroyed the product produced on
January 7 and 8.

Because the NOS was issued before Foster’s

alleged “recall,” and not in conjunction with or following it,
Foster may claim coverage only under Item (1) of the provision.
Foster’s “recall” arose directly from FSIS’s determination that
there was a reasonable probability that Foster’s chicken product
at the Facility could cause serious adverse health consequences.
Aside from product that was produced exclusively in Plant 2 on
January 8, FSIS rejected Foster’s request for marks of inspection
on all remaining product produced at the Facility on January 7
and 8, on the ground that Foster did not provide substantial
evidence the product was unadulterated.

(Id. Ex. 7 at 1.)

Foster argues that because the term “recall” should be
interpreted as “cancel” or “revoke,” the term encompasses the
voluntary destruction of Insured Product that did not leave

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Foster’s possession.

unambiguous and applies only to product that has left Foster’s
control.

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They argue that no “recall” occurred because the

destroyed product never left Foster’s possession or entered
commerce.10

Both parties contend that their definitions comport

with the plain and ordinary meaning of the term “recall.”

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8

Insurers contend that the term “recall” is

Foster’s broader interpretation of “recall” is logical
when read in the context of the Policy’s other provisions.

The

word “Recall” in “Recall Expenses” appears to be defined as
“recalling, withdrawing, reworking, destroying or replacing”
Contaminated Products, i.e., products subject to Accidental
Contamination or Government Recall.
14, 24.)

(Lavella Decl. Ex. 1 at 12,

Foster could thus get coverage for Recall Expenses if

it voluntarily (1) destroys product that would lead to “bodily

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10

Insurers rely on the definition used in FSIS Directive
8080.1 and incorporated in Foster’s federally-mandated Recall
Program. (O’Connor Dep. at 185:7-186:1, 186:24-187:10; Wolff
Decl. Ex. J (“Recall Program”); Ex. K.) The definition states
that a “recall” is the voluntary removal of product from commerce
when there is reason to believe that it is adulterated under the
PPIA. (Recall Program at 630 (emphasis added).) The definition
also states that it does not include a “stock recovery,” which is
“the removal or correction of product that has not been marketed
or that has not left the direct control of the firm.” (Id.)
The court is not bound, however, to apply a regulatory
definition to construe a policy term. See Mostow v. State Farm
Ins. Cos., 668 N.E.2d 392, 394-95 (N.Y. 1996); City of Albany v.
Standard Acc. Ins. Co., 165 N.E.2d 869, 874 (N.Y. 1960); Ins. Co.
of N. Am. v. Godwin, 361 N.Y.S.2d 461 (App. Div. 1974). In
addition, a multifaceted term that is undefined in an insurance
contract “is not given a narrow, technical definition by the
law.” Michaels, 651 N.E.2d at 1273 (citation). “It is
construed, rather, in accordance with its understanding by the
average person who . . . relates it to the factual context in
which it is used.” Michaels, 651 N.E.2d at 1273 (citation and
alterations omitted).
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injury, sickness, disease or death,” regardless whether they were
still in Foster’s possession, or (2) destroys product because
FSIS determined that it has a reasonable probability of causing
serious adverse health consequences.

Foster’s possession at the time it is destroyed, Insurers’
interpretation would allow for coverage under the first fact
pattern, but deny it under the second.

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This construction would

appear inconsistent in the context of the entire Policy because
the benefits under Accidental Contamination and Government Recall
are otherwise congruent throughout much of the Policy.

Foster’s

interpretation is thus a reasonable one.

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If the product is in

An interpretation is also reasonable if it gives effect
and meaning to the terms in a contract.
115.

Mellon Bank, 31 F.3d at

Several Loss categories appear to contemplate coverage if

Foster destroys product that is still in its possession.

“Gross

Profit” considers variable costs that are saved from not selling
the destroyed product.

“Recall Expenses” anticipate the costs of

destroying “packaging and labeling material that cannot be
reused,” which reasonably applies to product not yet sold.
at (Q)(viii).)

(Id.

“Pre-Recall Expenses” are defined as the costs of

ascertaining whether Foster’s product is contaminated and the
potential effects of such contamination.

It is reasonable that

Foster would conduct this inquiry on product that is still in its
control.

And because Pre-Recall Expenses focus only on the act

of ascertaining, one could reasonably infer that any action
Foster takes after that, including destroying the product if it
is contaminated, constitutes a “recall.”

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Insurers’ more restrictive construction could also be
supported by the Policy’s language.

Recall Expenses subpart

(Q)(ii) suggests that recalling a product may be synonymous with
withdrawing it--an action likely taken when the product has
already left Foster’s possession.

Subpart (Q)(vii) covers costs

incurred by retailers, wholesalers, and distributors acting on
behalf of Foster.

Thus, it refers to costs associated with

products that have already entered commerce.

Subpart (Q)(x)

governs Foster’s costs for replacing or reimbursing the value of
Contaminated Products already in customers’ possession.

From the

Policy’s language, a reasonably intelligent person could infer
that “recall” applies only to product that has been sold and left
the Facility.

Insurers’ interpretation is thus also not

unreasonable.
Although Insurers could have expressly done so, they
did not limit the definition of “recall” to products that left
Foster’s possession.

“Where the risk is well known and there are

terms reasonably apt and precise to describe it, the use of
substantially less certain phraseology, upon which dictionaries
and common understanding may fairly differ, is likely to result
in interpretations favoring coverage rather than exclusion.”
Vargas v. Ins. Co. of N. Am., 651 F.2d 838, 841 (2d Cir. 1981)
(citation omitted).

Because the term “recall” is reasonably

subject to more than one interpretation, it is “deemed to be
ambiguous and thus interpreted in favor of the insured.”
Ins. Co., 965 N.E.2d at 936.

Fed.

As a result, the court concludes

that Foster’s destruction of its chicken product constituted a

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recall under the terms of the Government Recall provision.
Accordingly, the court must grant Foster’s motion for summary
judgment and deny Insurers’ motion for summary judgment as to
Foster’s claim for coverage under the Government Recall
provision.
D. Foster’s Motion to Strike

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Foster moves to strike the deposition testimony and
opinions offered by two of Insurers’ expert witnesses, Thomas
James Hoffman and Dr. William James.

the court exclude these witnesses’ trial testimony.

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Because the

court did not rely on the witnesses’ testimony or opinions in
this Order, the court denies Foster’s motion to strike as moot
for purposes of summary judgment.

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Foster also requests that

As to trial, Foster’s request is a premature motion in
limine.

It is the court’s practice to provide a schedule for all

matters relating to the trial in the Final Pretrial Order.

With

regard to the propriety of motions in limine, counsel are advised
that such motions are to be reserved only for those matters that
cannot be resolved during the course of trial and for which the
bell truly cannot be “un-rung.”
All other legal points can be sufficiently addressed in
the trial briefs, and the court generally hears Daubert motions
during the trial while the expert is on the stand and can be
questioned about considerations relevant to the court’s ruling.
See, e.g., Betts v. City of Chicago, 784 F. Supp. 2d 1020, 1023
(N.D. Ill. 2011) (“[E]videntiary rulings should [ordinarily] be
deferred until trial so that questions of foundation, relevancy

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and potential prejudice may be resolved in proper context.”)
(citation and alterations omitted).

deny Foster’s request to exclude the witnesses’ trial testimony
without prejudice to the matter being addressed in the parties’
trial briefs and any necessary motions in limine being refiled
after the Final Pretrial Conference.

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The court will therefore

IT IS THEREFORE ORDERED that:
(1) Foster’s motion for partial summary judgment on its
declaratory relief claim (Docket No. 46) be, and the same hereby
is, GRANTED;
(2) Insurers’ motion for summary judgment on both of
Foster’s claims (Docket No. 47) be, and the same hereby is,
DENIED; and
(3) Foster’s motion to strike (Docket No. 54) be, and the
same hereby is, DENIED as moot as to summary judgment and DENIED
without prejudice as to trial.
Dated:

October 9, 2015

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