Unpublished Disposition, 922 F.2d 844 (9th Cir. 1991)Annotate this Case
GREAT SOUTHWEST FIRE INSURANCE COMPANY, Plaintiff-Appellant,v.ROYAL GLOBE INSURANCE COMPANY, Defendant-Appellee.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted Dec. 3, 1990.Decided Jan. 7, 1991.
Before WILLIAM A. NORRIS, CYNTHIA HOLCOMB HALL and DAVID R. THOMPSON, Circuit Judges.
This appeal concerns the interpretation of a commercial liability policy issued by appellee Royal Globe Insurance Company, to California Foods. California Foods made a claim against Royal when some allegedly defective plastic bottles it had manufactured and sold to Tropicana Peninsular rendered the orange juice with which they were filled undrinkable. Royal refused coverage on the ground that the damage did not occur within the policy territory. Appellant Great Southwest Fire Insurance Company, California Foods' umbrella insurer and subrogee, sued Royal, seeking a declaratory judgment as to Royal's coverage.
The district court found there was no coverage. Great Southwest appeals.
The pertinent policy provision reads:
Policy territory means:
(1) the United States of America, its territories or possessions, or Canada, or
(2) international waters or air space, provided the bodily injury or property damage does not occur in the course of travel or transportation to or from any other country, state or nation, or
(3) anywhere in the world with respect to damages because of bodily injury or property damage arising out of a product which was sold for use or consumption within the territory described in paragraph (1) above, provided the original suit for such damages is brought within such territory.
The bottles were manufactured in California by California Foods, labeled for Tropicana, including the designation "Hecho in Mexico," and shipped to Tropicana's plant in Tijuana, Mexico to be filled with orange juice and distributed. California Foods not only knew and intended that the bottles would be used in Mexico, but labeled them expressly for distribution in Mexico. The plain language of the policy, as the district court pointed out, includes coverage only for damages caused by "a product which was sold for use or consumption" within the United States or Canada. As California Foods tailored these products for use in Mexico, these products were not sold for use or consumption in the policy territory.
Great Southwest argues that the policy language is ambiguous. It claims that this language could be read, first, to refer to generic types of products normally sold to be used in the United States. Because the plastic bottles here were of the same kind sold in the United States, Great Southwest reasons, there would be coverage under the policy. This interpretation does violence to the plain language of the policy. The policy does not read "a product that is sold for use or consumption," language that clearly refers to the particular products at issue, not to a generic type of product.
Second, Great Southwest argues that there is coverage as long as the products were sold in the United States, regardless of where they were to be ultimately used or consumed. "Within the territory described," on this reading, would modify "sold" and not "for use and consumption." This reading grammatically strains the language, because it reads the adverbial phrase as modifying the distant verb "sold" rather than the prepositional phrase "for use or consumption" immediately preceding it. See Atlas Assurance Co. v. McCombs Corp., 146 Cal. App. 3d 135, 144, 194 Cal. Rptr. 66, 70 (1983). Moreover, this reading renders "for use and consumption" as surplusage, as there would be coverage for any sale in the United States or Canada, regardless of where the product sold was used or consumed. A policy must be construed to give effect to all its terms. Home Indem. Co. v. Leo L. Davis, Inc., 79 Cal. App. 3d 863, 869, 145 Cal. Rptr. 158, 161 (1978).
Third, Great Southwest suggests that the sale itself can be considered sufficient "use or consumption," since California Foods had no further control over the specific bottles sold to Tropicana. Its reliance on Vinocur's Inc. v. CNA Ins. Cos., 132 A.D.2d 543, 517 N.Y.S.2d 277, 278 (1987), app. denied, 71 N.Y.2d 803, 527 N.Y.S.2d 769, 522 N.E.2d 1067 (1988), in support of this point is misplaced. In Vinocur's Inc., a retailer who sold a fireplace to a customer, knowing it would be shipped to Israel, was held to be entitled to coverage because the sale was "consummated and completed at its retail establishment in Brooklyn," and the purchaser's unilateral decision to ship it elsewhere "does not establish that the product was sold for consumption and use other than in the United States". However, in this case, the sale to Tropicana was wholesale, not retail, and Tropicana clearly knew that the bottles were destined for Mexico, tailored them for that market, and shipped them to Tijuana.
Finally, Great Southwest argues that the district court did not properly consider parole evidence, including a subsequent change in the policy language by the Insurance Services Organization. Even if it were clear that the district court did not consider this parole evidence, which was before it, we need not rule on the its admissibility because it would not change our decision. The language is clear on its face.
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3