Express Packaging of OH, Inc. v. American States Ins. Co.

• Decision Date: 30 June 2011
• Docket Number: Case No. 5:09 CV 2318.
• Citation: 800 F.Supp.2d 886
• Parties: EXPRESS PACKAGING OF OH, INC., Plaintiff, v. AMERICAN STATES INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Ohio

800 F.Supp.2d 886

EXPRESS PACKAGING OF OH, INC., Plaintiff,

v.AMERICAN STATES INSURANCE COMPANY, Defendant.

Case No. 5:09 CV 2318.

United States District Court, N.D. Ohio, Eastern Division.

June 30, 2011.

Anthony E. Brown, James F. Mathews, Baker, Dublikar, Beck, Wiley & Mathews, North Canton, OH, for Plaintiff.

Gary L. Nicholson, Jay C. Rice, Gallagher, Sharp, Fulton & Norman, Cleveland, OH, for Defendant.

MEMORANDUM OPINION & ORDER

WILLIAM H. BAUGHMAN, JR., United States Magistrate Judge.

Introduction

Before me ¹ are cross-motions for summary judgment ² in this diversity case. Plaintiff Express Packaging of Ohio, Inc. claims that its insurer, defendant American States Insurance Company breached its duty to defend and indemnify Express Packaging under the terms of a commercial general liability insurance policy.³ The parties have each filed memoranda in opposition to the other's motion for summary judgment,⁴ and both parties have filed replies to that opposition.⁵ In addition, I conducted a hearing on the cross-motions for summary judgment.⁶ Moreover, the parties have jointly filed stipulated facts and exhibits. ⁷

Accordingly, for the reasons that follow, I will find that no genuine issue of material fact exists, and I can decide motions as a matter of law. Further, on the basis of the non-disputed facts, the relevant terms of the policy and the holdings of Ohio law, I grant American States' motion for summary judgment and deny the motion of Express Packaging.

Facts

A. Background facts

The essential background facts are straightforward and stipulated. The dispute here arose in 2008 when cans of dog food packaged by Express Packaging for Mars Petcare U.S. were damaged by a knife blade attached to a conveyor belt. ⁸ As a consequence, the dog food in the damaged cans became contaminated, thus requiring that it be destroyed.⁹ Mars sought $241, 524 from Express Packaging for the loss.¹⁰ Express Packaging then filed a claim for coverage under its insurance policy with American States, ¹¹ which the insurer denied.¹² After that denial of coverage, Express Packaging settled Mars's claim against it for the full amount sought, ¹³ and the present action ensued.

B. The insurance policy

The policy at issue here is also not in dispute.

Initially, the policy provides in relevant part:

1. Insuring Agreement.

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies.... We may, at our discretion, investigate any “occurrence” and settle any claim or “suit” that may result.

“Occurrence” is later defined in Part V—Definitions, paragraph 13 of the Policy, which provides: “ ‘Occurrence’ means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Express Packaging further contends that no policy exclusion applies.

American States, in response, asserts that there is no coverage and that, even if there was coverage under Section 1 of the Policy, this claim is barred by any one of six exclusions set forth in Part I—Coverages, Paragraph 2—Exclusions. These exclusions are:

j. Damage to Property:

“property damage” to:

...

(4) Personal Property in the care, custody or control of the insured.

...

(6) That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.

...

Paragraph (6) of this exclusion does not apply to “property damage” included in the “products-completed operations hazard.”

k. Damage to your Product:

“Property damage” to “your product” arising out of it or any part of it.

l. Damage to your Work:

“Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard.”

m. Damage to Impaired Property or Property Not Physically Injured:

“Property Damage” to “impaired property or property that has not been physically injured, arising out of:

(1) A defect, deficiency, inadequacy or dangerous condition in “your product” or “your work,” or

(2) ...

n. Recall of Products, Work or Impaired Property:

Damages claimed for any loss, cost or expense incurred by you or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of:

(1) “Your Product”;

(2) “Your Work”; or

(3) “Impaired property”;

If such product, work, or property is withdrawn or recalled from the market or from use by any person or organization because of a known or suspected defect, deficiency, inadequacy or dangerous condition in it.

Analysis

A. Standard of review—summary judgment

Summary judgment is appropriate where the court is satisfied “that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” ¹⁴ The burden of showing the absence of any such “genuine issue” rests with the moving party:

[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of ‘the pleadings, depositions answers to interrogatories, and admissions on file, together with affidavits, if any,’ which it believes demonstrates the absence of a genuine issue of material fact.¹⁵

A fact is “material” only if its resolution will affect the outcome of the lawsuit.¹⁶ Determination of whether a factual issue is “genuine” requires consideration of the applicable evidentiary standards.¹⁷ The court will view the summary judgment motion “in the light most favorable to the party opposing the motion.” ¹⁸

Summary judgment should be granted if a party who bears the burden of proof at trial does not establish an essential element of his case.¹⁹ Accordingly, “[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” ²⁰ Moreover, if the evidence presented is “merely colorable” and not “significantly probative,” the court may decide the legal issue and grant summary judgment.²¹

Once the moving party has satisfied its burden of proof, the burden then shifts to the nonmover.²² The nonmoving party may not simply rely on its pleadings, but must “produce evidence that results in a conflict of material fact to be solved by a jury.” ²³ “In other words, the movant can challenge the opposing party to ‘put up or shut up’ on a critical issue.” ²⁴

In sum, proper summary judgment analysis entails the threshold inquiry of determining whether there is the need for a trial—whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.²⁵

B. Standard of review—choice of law in diversity action

A federal court deciding a matter under its diversity jurisdiction applies federal law to procedural issues and the law of the forum state to substantive questions.²⁶ When applying the substantive law of the forum state, the federal diversity court must follow the decisions of the state's highest court when that court has addressed the relevant issue. ²⁷ If the state's highest court has not directly addressed that issue, the federal diversity court must anticipate how the relevant state court would act.²⁸ Decisions from intermediate state appellate courts are viewed as persuasive unless it is demonstrated that the state's highest court would decide the matter differently.²⁹

In the particular instance of enforcing a contract in a diversity action, the federal court will generally enforce the parties' contractual choice of governing law.³⁰ If the contract has no enforceable choice of law provision, the federal diversity court employs the choice of law analysis of the forum state.³¹

C. Application of standards1. Ohio law applies in interpreting the Policy.

Here, the parties have stipulated that because the relevant policy was issued in Ohio to an Ohio-based insured, Ohio law applies in construing its terms and provisions.³² Thus, in accord with the rubric that a federal diversity court should generally enforce the parties' choice of law, I will analyze the policy under Ohio law.

2. The occurrence here is within the scope of coverage of the Policy.

An insurance policy is a contract subject to a number of principles that govern the interpretation and application of its terms. In Cincinnati Insurance Company v. CPS Holdings, Inc.,³³ the Supreme Court of Ohio reiterated the well recognized principles that interpretation of an insurance policy is a matter of law and that a court must give effect to the intent of the parties, which is presumably reflected in the policy terms. Thus, a court applying Ohio law should look to the plain and ordinary meaning of the policy language unless another meaning “is clearly apparent from the contents of the policy.” ³⁴ If the terms are clear, the court may look no further and, if unambiguous, the term must be given its legal meaning.³⁵ As the Ohio Supreme Court has stated: “[A] contract is unambiguous if it can be given a definite legal meaning.” ³⁶

The parties agree that: (1) Express Packaging is an insured, (2) the occurrence took place during the relevant “policy period,” and (3) was within the “coverage territory.” ³⁷ Whether there is coverage, without consideration of any business risk exclusions, is based upon whether there has been a covered “occurrence.” Under the applicable policy terms and in consideration of the stipulations, the issue becomes: Has there been an occurrence that has harmed property as these terms are defined in the policy? The answer depends on whether there was “an accident” that caused harm to “personal property.” ³⁸

In Erie Insurance Exchange v. Colony Development Corporation, ³⁹ the Ohio appeals court focused on the duty to defend where the insured building contractor had allegedly caused property damage through the...