757 F. Supp. 2d 738
N.D. Ohio2010Background
- HoneyBaked Foods processed cooked spiral-sliced hams and turkey breasts in Holland, Ohio, with FSIS/USDA oversight.
- In Nov. 2006, FSIS found listeria monocytogenes in HoneyBaked’s production runs, prompting a temporary production halt and recalls.
- HoneyBaked halted use of its conveyor’s hollow roller after contamination and conducted extensive cleaning and sampling before resuming production.
- HoneyBaked notified Affiliated FM of potential loss and submitted a claim under an all-risk policy; Affiliated FM denied coverage.
- HoneyBaked sued for declaratory judgment, breach of contract, and bad faith; the insurer moved for partial summary judgment.
- The court granted partial summary judgment to Affiliated FM and directed certification questions to the Ohio Supreme Court regarding coverage under Ohio law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Group II exclusions bar coverage? | HoneyBaked argues exclusions are ambiguous and may not preclude the loss. | Affiliated FM contends Group II exclusions clearly preclude coverage. | Ambiguity exists; exclusions do not plainly bar coverage. |
| Contamination exclusion governs; is the loss excluded? | Contamination losses are not necessarily excluded if arising from covered causes. | Contamination exclusion precludes coverage of listeria-related losses. | Contamination exclusion applies; no coverage for the loss. |
| Is there an exception to the exclusion that could cover the loss? | Contends an ensuing-loss exception could cover losses caused by excluded contamination. | Exception does not apply to transform excluded contamination into covered loss. | Exception does not create coverage; Leprino distinction discussed but not controlling. |
| Reasonable expectation of coverage governs? | Insured argues it reasonably expected coverage for spoliation-type losses. | No clear historical basis to imply coverage; Andersen discusses but not controlling. | Reasonable-expectations issue could require Ohio Supreme Court guidance; certified question proposed. |
| Fungus, Mold or Mildew provision provides coverage? | Bacteria included in the definition could trigger extension. | Extension requires fungus/mold/mildew as direct result of insured loss; not here. | Extension does not apply; bacteria-contamination loss excluded. |
Key Cases Cited
- TMW Enters. v. Fed. Ins. Co., 619 F.3d 574 (6th Cir. 2010) (enjoining or interpreting ensuing-loss clauses in exclusions)
- Blaine Constr. Corp. v. Ins. Co. of North America, 171 F.3d 343 (6th Cir. 1999) (ensuing-loss concepts in construction defect contexts)
- Andersen v. Highland House Co., 93 Ohio St.3d 547 (Ohio 2001) (reasonable-expectations doctrine in insurance policy interpretation)
- St. Marys Foundry v. Employers Ins. of Wausau, 332 F.3d 989 (6th Cir. 2003) (contract interpretation and coverage under insurance policies under Ohio law)