Security National Insurance Company v. Glorybee Foods, Inc.
6:09-cv-01388
| D. Or. | Mar 15, 2011Background
- Security National Insurance sues to determine whether it owes a defense/indemnity for a Nature's Path suit about recalled peanuts and related damages.
- Peanuts produced by GloryBee were recalled; the recall flowed into Nature's Path products that used GloryBee peanuts.
- Nature's Path issued a recall and suffered damages including loss of product value and recalls due to contamination risk.
- Nature's Path alleges GloryBee’s delivery of recalled peanuts caused product impairment and recall-related damages.
- Policy excludes certain recall-related and impaired-property damages; interpretation of these exclusions is disputed.
- Court analyzes whether the claims against GloryBee fall within coverage or are excluded, and whether insurer has a duty to defend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the recall/impaired-property exclusion apply? | National contends exclusion bars coverage for damages from recall-related impairment. | GloryBee argues the exclusion is either inapplicable or ambiguous and should not foreclose coverage. | Exclusion is ambiguous; policy construed in insured's favor to require defense |
| Does the complaint allege damages within the policy's coverage? | Complaint asserts damages caused by recall and impairment related to GloryBee peanuts. | Defendant asserts underlying damages relate to others’ products and not GloryBee’s recall. | Complaint supports coverage; insurer has duty to defend |
| What is the proper interpretation of 'Your Product' and 'Impaired Property' in this context? | Definitions support a broad interpretation that includes the recalled product and its impairments. | Definitions should be read narrowly to limit coverage to the insured's own product. | Context supports broader interpretation favorable to coverage |
Key Cases Cited
- Totten v. New York Life Insurance Co., 298 Or. 765 (Or. 1985) (statutory interpretation principles for contract ambiguity and intent)
- James & Co. of Oregon, 313 Or. 464 (Or. 1992) (ambiguous terms construed against the insurer)
- Shadbolt v. Farmers Insurance Exch., 275 Or. 407 (Or. 1976) (ambiguity resolved by considering context and contract intent)
- Oakridge Community Ambulance v. U.S. Fidelity, 278 Or. 21 (Or. 1977) (duty to defend depends on the complaint and potential covered conduct)
- Nielsen v. St. Paul Companies, 283 Or. 277 (Or. 1978) (duty to defend if the complaint could impose covered liability)
- Wyoming Sawmills, Inc. Transport. Ins. Co. v., 282 Or. 401 (Or. 1978) (strict construction of exclusionary clauses when clear and unambiguous)