Security National Insurance Company v. Glorybee Foods, Inc. et al

Filing 39

ORDER: Plaintiff Security National's Motion for Partial Summary Judgment 29 is denied. Defendant GloryBee's Motion for Partial Summary Judgment 21 is granted. Signed on 3/15/2011 by U.S. District Judge Michael R. Hogan. (jw)

Security National Insurance Company v. Glorybee Foods, Inc. et al

Doc. 39

FILED "11 t1AR 1512:47 USDC-QRE

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
EUGENE DIVISION

SECURITY NATIONAL INSURANCE COMPANY, Plaintiff, Civil No. 09-1388-HO ORDER

v.
GLORYBEE FOODS, INC., an Oregon corporat ; and NATURE'S PATH FOODS,) INC., a foreign corporation, Defendants. GLORYBEE FOODS, INC., an Oregon corporation, Party iff,
) ) ) ) ) ) ) ) ) ) )

v.
BEECHER CARLSON INSURANCE AGENCY, LLC,

----------~~~~~~~~~~~-----)

Dockets.Justia.com

Plaintiff a declaration t defend or indemni Path. In the underl

y National Insurance brings this s not owe a lawsuit filed

seeking

GloryBee Foods a duty to GloryBee by Nature's

action,

Nature's

alleges

that

ed 80,000

of roasted peanuts, manufactured by Peanut from GloryBee. s Nature's Path inco precl uded their

Co

ration of America,

the nuts into its removal. Subsequently, t Uni ted States is a recall

in such a manner

Texas Department of State Health services of Food ss the peanut·s ch Administration in turn caused

Nature's Path to issue a recall for its products
s.

rporating the r the loss of

Nature's Path alle

s it incurred

value of its products and by 's breach of purpose,
i
t

s in recalling its products caus terms of merchantabil inability of t , fitness for s to pass

a
wi the

ection in the trade.

All damages all

are premised on

ct that GloryBee delivered peanuts that became subject to a s were irrevocably rated into

mandatory recall and such Nature Path's product. ty National which' it obli to pay those to pay as damages

surance coverage to sums that GloryBee becomes of property

under legally

Under the

2 - ORDER

icy,

Security Nat damages.

also has t However,

duty to defend against any policyexc coverage for

suit seeking s

Damages claimed for loss for ... recall ... of: (1) "Your Product U ; [or J (2) "Impaired Property"

incurred by you or others

If such product or property is thdrawn or recalled from the mar or from use by any reason or organization because of a known or suspect de j deficiency, inadequacy or dangerous condition it. Gene De Li lity pol im (#31) as at
p.

5 t

(attached

to

the

ration of Marianne

2 at p. 9).

"Your Product" is defined as
Any goods or products, r than re property,
manufactured, sold, handled, distributed or sposed of by:
(a) You; at p. 15. "Impai y" is defi as that

tangible property; other than "Your Product" cannot be or is less useful cause: It rporates "your product" thought to be defective, def dangerous; or
b.

a.

that is known or inadequate or terms of a contract or

You have failed to ful agreement;

11

if such property can be restored to use by: a. b. Id. at p.
3 - ORDER

The repair, replacement, adjustment or removal of "your product" ... or Your fulfilling the terms of the contract or agreement.

Security National ass GloryBee has seek the action fi

three reasons for refus by Nature's Path, but Se recall exc as to sion.

to defend· ty National. Both of rt s the

ly abandoned all but partial summary judgment

applicabili

exclusion to the duty to

the Nature's Path case. damage was caused by a re the peanuts sold by
GloryBee. 1
I

ryBee argues that the aloe of Nature Path's products, not

Security National asserts been recalled and recall. Inte law. tion of
t~e

the peanuts are the

that has int relate to

damages in the underlying

policy P

sions is a

stion of contracts

governing rule of the construction of intent 298 Or. 765, of the parties. 770 (1985). Totten v.

is to ascerta Life Ins. Co.,

New York

Ambiguous terms contained st the insurer,

within an insurance who fted the

icy are to be construed icy.

James and Co. of Oregon, 313 Or 464, 470 (1992). For a term to be guous in a sense that j usti s resort to the foregoing ,however, re needs to more than a showing of two plausible interpretat gi ven t breadth flexibility of the English language, the task sting p e alternat meanings is to counsel. Competing plaus e simply establis ambiguity will rpretive act the court. s triggers a series of anal ical steps, anyone of which may reso the ambiguity. The rule on which pIa iffs rely is t

11;:)

does

addition, asserts tha:. the Nature '.5 Path product no:: meet the definition of "ircpaired property," however, National is not relying on that provision.

4 - ORDER

last of these steps. In other words, a term is ambiguous in a sense that justifie~ application of the rule of construction against the insurer only if two or more plausible interpretations of that term withstand scrutiny, i.e., continues to be reasonable, after the interpretations are examined in the light of, among other things, the particular context in which that term is used in the policy and the broader context of the policy as a whole .... Ambigui ty requires resort ultimately to the rule that plaintiffs invoke because, when two or more competing, plausible interpretations survive the kind of scrutiny described, the term still must "reasonably be given a broader or a narrower meaning, depending upon the intention of the parties in the context in which such words are used by them." Shadbolt v. Farmers Insur: Exch., 275 Or. 407, 411, 551 P.2d 478 (1976) .... That is, when two or more competing, plausible interpretations prove to. be reasonable after all other methods for resolving the dispute over the meaning of particular words fail, then the rule of interpretation against the drafter of the language becomes applicable, because the ambiguity cannot be permitted to survive. It must be resolved. Id. 470-71. Whether an insurer has a duty to defend an action against its insured depends on, in addition to interpretation of the policy, Oakridge Comm. Ambulance v.

interpretation of the complaint. Fidelity, 278 Or. 21, 24 (1977).

u.s.

An insurer has a duty to defend an

action against its insured if the claim against the insured stated in the complaint could, without amendment, impose liability for conduct covered by the policy. Id. The insurer has a duty to defend if the

complaint provides any basis for which the. insurer provides coverage. Nielsen v. St. Paul Companies, 283 Or. 277, 280 (1978). Even if the

complaint alleges some conduct outside the coverage of the policy, the insurer may still have a duty to defend if certain allegations of the
5 -

complaint
ORDER

c.ould

impose

liability for

conduct

covered by the

policy.
(1969) .

254

Or. with

496,

506-07

Again,

any ambigui

t

complaint

respect

to

whether the allegations could be cove ins u red.
(1962) . B1 ohm eta 1 v.

is resolved in favor of the
Co.,

G1 en s

Fa 1 l s I n s.

2 31 Or.

410 ,

416

The exclusion at issue here- is the cost of preventative in situations Inc. or cur.at

to exclude from coverage by withdrawal is of a

product

in which a Transportation Ins.

to be apprehended.
282 Or. 401, 408

Wyoming Sawmills,
(1978).

Co.,

The insurer has the burden

exclusionary clauses
332

that are clear and unambiguous. Or. 22, 29 (Or. 2001). Therefore, st
r.

an exclusionary

clause is strictly construed

Guaranty Life Ins. Co., 280 Or. 525, 527 (Or. 1977). The underlying complaint recal all s resulting from the

peanuts which, in turn, re

recall of Nature's Path's policy is as
"

products inextrrcably incorporating those peanuts. unambiguous with respect to inclusion of the peanuts

It is undisputed that the peanuts have been recal is so undisputed that Nature's Path's product incorporating s have been recalled. re ing to The underlying complaint al
I

It

s damages

recall of Nature's Path s product.

The

also all recall

s that the underlying recall of the peanuts is a cause of of t Nature's Path product. Thus, areas e

6

ORDER

interpretation of the policy exclusion, isolated from the rest of the policy, could be to exclude coverage because the complaint could be interpreted as alleging damage because of a recall of "your product. " This is because GloryBee's product itself has become subject to a recall and that led to alleged damage to Nature's Path because it incorporated such product into its own product. However, the policy went further to exclude coverage for

"impaired property" which includes property other than "your product" when such property incorporates coverage "your for product." claimed The for exclusion, "impaired

though,

only

excludes

damage

property"

if such property can be restored to use by the repair, Accordingly,

replacement, adjustment or removal of "your product."

given this context, a reasonable interpretation of the exclusion as applied to the underlying complaint, would prevent application of the exclusion. The parties intended the exclusion to apply to damage

claims related to products of others only when the insured's product was not inextricably incorporated into such product. complaint alleges damages related to
the

Because the of a product

recall

irrevocably impaired by the insured's product and because the policy ynambiguously excepts policy must be from the exclusion in favor of such damage claims, Had
the

construed

coverage.

Security

National intended to exclude coverage under the facts presented in
the

underlying complaint,

it could have

simply defined

"impaired

property" to include any property of which the insured's product is

7 -

ORDER

a component part

rdless

whether it could be rest r part

to use.

Accordingly, Security National's mot . is denied Because

summary judgment

th respect to the sistership exclusion . Security National relies y on the sisters is grant

exclusion, GloryBee's mot

for part

summary j

Accordingly, Security National does have a duty to defend underlying act filed Nature's Path.

CONCLUSION For the motion for reasons stated judgment pia (#29) iff Security National's is deni and de

ial summa

GloryBee's motion for partial SUmITlary judgment (#21) is DATED this

~~aay

of March, 2011.

Dist~

8

ORDER