Case Information
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 v. ORDER 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, )
)
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Plaintiff
y National Insurance brings this seeking a declaration t s not owe GloryBee Foods a duty to defend or indemni a lawsuit filed GloryBee by Nature's Path.
In the underl action, Nature's alleges that
ed 80,000 of roasted peanuts, manufactured by Peanut Co ration of America, from GloryBee. Nature's Path inco the nuts into its s in such a manner precl uded their removal. Subsequently, t Texas Department of State Health services
Uni ted States Administration of Food a recall ss the peanut·s ch in turn caused Nature's Path to issue a recall for its products rporating the
s. Nature's Path alle s it incurred r the loss of value of its products and s in recalling its products caus 's breach of by i terms of merchantabil , fitness for a purpose, inability of t s to pass t wi ection in the trade. All damages all are premised on the ct that GloryBee delivered peanuts that became subject to a mandatory recall and such s were irrevocably rated into Nature Path's product.
ty National surance coverage to under which' it to pay those sums that GloryBee becomes legally obli to pay as damages of property Under the
icy, Security Nat also has t duty to defend against any suit seeking s damages. However, policyexc coverage for
Damages claimed for loss incurred by you or others for ... recall ... of: (1) "Your Product U ;
[or J
(2) "Impaired Property" If such product or property 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 Li lity pol at p. 5 (attached to the De ration of Marianne im (#31) as t 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 tangible property; other than "Your Product" that cannot be or is less useful cause:
a. It rporates "your product" that is known or
thought to be defective, def inadequate or dangerous; or
b. You have failed to ful terms of a contract or
agreement; if such property can be restored to use by: a. The repair, replacement, adjustment or removal
of "your product" ... or b. Your fulfilling the terms of the contract or
agreement.
Id. at p.
Security National ass three reasons for refus to defend· GloryBee the action fi by Nature's Path, but Se ty National. has ly abandoned all but recall exc sion. Both rt s of the seek partial summary judgment as to applicabili exclusion to the duty to the Nature's Path case.
ryBee argues that the aloe damage was caused by a re I of Nature Path's products, not the peanuts sold by GloryBee. that has Security National asserts the peanuts are the been recalled and t~e damages in the underlying int relate to
recall.
Inte tion of policy P sions is a stion of law. governing rule of the construction of contracts is to ascerta intent of the parties. Totten v. New York Life Ins. Co., 298 Or. 765, 770 (1985). Ambiguous terms contained within an insurance icy are to be construed st the insurer, who fted the 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 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;:) addition, asserts tha:. the Nature '.5 Path product does no:: meet the definition of "ircpaired property," however, National is not relying on that provision.
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, interpretation of the complaint. Oakridge Comm. Ambulance v. u.s.
Fidelity, 278 Or. 21, 24 (1977). 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 complaint c.ould impose liability for conduct covered by the policy. 254 Or. 496, 506-07 (1969) . Again, any ambigui complaint with respect to t whether the allegations could be cove is resolved in favor of the ins u red. B 1 ohm eta 1 v. G 1 en s Fa 1 l s I n s. Co., 2 31 Or. 4 1 0 , 4 1 6 (1962) .
The exclusion at issue here- is to exclude from coverage the cost of preventative or cur.at by withdrawal of a product in situations in which a is to be apprehended. Wyoming Sawmills, Inc. Transportation Ins. Co., 282 Or. 401, 408 (1978). The insurer has the burden exclusionary clauses that are clear and unambiguous. 332 Or. 22, 29 (Or. 2001). Therefore, an exclusionary clause is strictly construed st r.
Guaranty Life Ins. Co., 280 Or. 525, 527 (Or. 1977).
The underlying complaint all s resulting from the recal peanuts which, in turn, re recall of Nature's Path's products inextrrcably incorporating those peanuts. policy is unambiguous with respect to inclusion of the peanuts as "
It is undisputed that the peanuts have been recal It so undisputed that Nature's Path's product incorporating s have been recalled. The underlying complaint al s damages re ing to recall of Nature's Path I s product. The also all s that the underlying recall of the peanuts is a cause of
recall of t Nature's Path product. Thus, areas e 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 "your product." The exclusion, though, only excludes coverage for damage claimed for "impaired property" if such property can be restored to use by the repair, replacement, adjustment or removal of "your product." Accordingly, 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. Because the complaint alleges damages related to the recall of a product irrevocably impaired by the insured's product and because the policy ynambiguously excepts from the exclusion such damage claims, the policy must be construed in favor of coverage. Had 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 a component part rdless whether it could be rest to use. Accordingly, Security National's mot r part summary judgment . is denied th respect to the sistership exclusion . y on the sisters
Because Security National relies exclusion, GloryBee's mot for part summary j is grant Accordingly, Security National does have a duty to defend
underlying act filed Nature's Path.
CONCLUSION For the reasons stated pia iff Security National's motion for ial summa judgment (#29) is deni and de GloryBee's motion for partial SUmITlary judgment (#21) is
DATED this ~~aay of March, 2011.
Dist~ ORDER