Weaver v. Cca Industries, Inc.

• Decision Date: 27 May 2008
• Docket Number: No. 07-30597.,07-30597.
• Citation: 529 F.3d 335
• Parties: Robert WEAVER, Plaintiff, v. CCA INDUSTRIES, INC., Defendant-Third-Party Plaintiff-Appellant, v. New York Marine & General Insurance Company, Third-Party Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

529 F.3d 335

Robert WEAVER, Plaintiff, v. CCA INDUSTRIES, INC., Defendant-Third-Party Plaintiff-Appellant, v. New York Marine & General Insurance Company, Third-Party Defendant-Appellee.

No. 07-30597.

United States Court of Appeals, Fifth Circuit.

May 27, 2008.

Rehearing Denied June 25, 2008.

Bruce A. Cranner (argued), Karen C. Duncan, Frilot, LLC, New Orleans, LA, for Plaintiff-Appellant.

James R. Sutterfield (argued), John Joseph Danna, Jr., Sutterfield & Webb, New Orleans, LA, for Third Party Defendant-Appellee.

Appeal from the United States District Court for the Western District of Louisiana.

Before DAVIS and SOUTHWICK, Circuit Judges, and DRELL, District Judge.^*

W. EUGENE DAVIS, Circuit Judge:

This appeal challenges the district court's conclusion that the policy issued by Third-Party Defendant New York Marine & General Insurance Company ("NY Marine") to Phoenix Laboratories, Inc. ("Phoenix") provided no coverage to Third-Party Plaintiff-Appellant CCA Industries, Inc. ("CCA") and that NY Marine had no obligation to defend or indemnify CCA. For reasons stated below, we vacate and remand for further proceedings.

I.

Plaintiff Robert Weaver ("Weaver") brought this lawsuit to recover for injuries he allegedly sustained from ingesting Permathene, a product marketed and sold by CCA. In 1995, Weaver began taking Permathene, an over-the-counter diet drug/appetite suppressant which contains phenylpropanolamine ("PPA"). Eleven days after he began taking Permathene, Weaver suffered a hemorrhagic stroke. Weaver contends that the PPA in Permathene caused his stroke.

Weaver filed this products liability suit against CCA, as manufacturer and seller of Permathene. Weaver contends that Permathene was unreasonably dangerous due to defective manufacture and design, Permathene failed to conform to CCA's express warranty, CCA failed to provide an adequate warning regarding the risks associated with Permathene, and CCA negligently failed to adequately and properly test Permathene.

Although CCA sells and markets Permathene, Phoenix manufactures the product. Using a formula provided by CCA Phoenix combined the component Permathene ingredients in its factory and then shipped the product in bulk to CCA to be packaged and labeled. CCA marketed Permathene for sale to the general public at retail outlets.

Weaver has not asserted any claim against Phoenix directly. CCA made demands on Phoenix's insurer, NY Marine, for defense and indemnification of any damages it might have to pay Weaver. NY Marine declined coverage and the request for defense in July 2002, and again in May 2006.

It is undisputed that NY Marine had in effect a Claims-Made Products/Completed Operations Liability Insurance Policy (the "Policy") affording liability coverage to Phoenix and other insureds. The Policy provides coverage to its insureds for "those sums that the insured becomes legally obligated to pay as damages because of `bodily injury' or `property damage' included within the `products-completed operations hazard' to which the insurance applies."

In June 2006, CCA filed a third-party complaint against Phoenix and against NY Marine for defense and indemnification. CCA asserts that Phoenix obtained a claims-made liability policy from NY Marine and that under its vendor's endorsement, the Policy afforded liability coverage to CCA for liability arising out of its sale of the product manufactured by Phoenix.

CCA was not a named insured under the Policy and does not claim coverage on this basis. CCA claims coverage under the Policy's vendor's endorsement ("Endorsement # 5"), which provides in full:

ENDORSEMENT # 5

ADDITIONAL ASSURED — VENDORS

(BROAD FORM — BLANKET BASIS)

In consideration of the premium charged, it is hereby agreed that the definition of insured is amended to include any person or organization designated as a vendor but only with respect to the distribution or sale in the regular course of the vendor's business of the Named Insured's products subject to the following additional provisions:

1. The insurance with respect to the vendor does not apply to:

(a) any express warranty unauthorized by the named insured;

(b) bodily injury or property damage arising out of

(i) any physical or chemical change in the form of the product made intentionally by the vendor,

(ii) repacking, unless unpacked solely for the purpose of inspection, demonstration, testing or the substitution of parts under instruction from the manufacturer and then repacked in the original container,

(iii) demonstration, installation, servicing or repair operations, except such operations performed at the vendor's premises in connection with the sale of the product, or

(iv) products which after distribution or sale by the named insured have been labeled or relabeled or used as a container, part or ingredient of any other thing or substance by or for the vendor.

2. The insurance does not apply to any person or organization, as insured, from whom the named insured has acquired such products or any ingredient, part or container, entering into, accompanying or containing such products.

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.

NY Marine filed a motion for summary judgment, which the district court granted. In its ruling, the district court found that CCA is not an additional insured under Endorsement # 5 because the claims were based on CCA's independent negligence, and under Louisiana law vendor's endorsements only extend coverage for claims involving strict liability. The court further ruled that even if CCA could otherwise qualify for coverage under the vendor's endorsements, several of the limitations under that endorsement would exclude coverage. The district court then dismissed CCA's third-party demand against NY Marine and this appeal followed.

II.

A.

We review the district court's grant of summary judgment de novo. Facility Ins. Corp. v. Employers Ins. of Wausau, 357 F.3d 508, 512 (5th Cir.2004) (citing Gowesky v. Singing River Hosp. Sys., 321 F.3d 503, 507 (5th Cir.2003)). Under Federal Rule of Civil Procedure 56, summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." FED.R.CIV.P. 56. A genuine issue of material fact exists if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

B.

The parties agree that Louisiana law governs interpretation of the Policy. The Louisiana Supreme Court recently announced a number of helpful rules to guide us in interpreting insurance policies. See generally Cadwallader v. Allstate Ins. Co., 848 So.2d 577, 580 (La.2003). Under Louisiana law, an "insurance policy is a contract between the parties and should be construed by using the general rules of interpretation of contracts set forth in the Louisiana Civil Code." Id. (citations omitted). "The judiciary's role in interpreting insurance contracts is to ascertain the common intent of the parties to the contract." Id. (citing, inter alia, La. Civ.Code art. 2045). "Words and phrases used in an insurance policy are to be construed using their plain, ordinary and generally prevailing meaning, unless the words have acquired a technical meaning." Id. (citing, inter alia, La. Civ.Code art. 2047). "The determination of whether a contract is clear or ambiguous is a question of law." Id. (citation omitted).

CCA argues that it is entitled to both defense and indemnity. With respect to the duty to defend, the Louisiana Supreme Court has set out the appropriate standard as follows:

Generally the insurer's obligation to defend suits against its insured is broader than its liability for damage claims. The insurer's duty to defend suits brought against its insured is determined by the allegations of the injured plaintiff's petition, with the insurer being obligated to furnish a defense unless the petition unambiguously excludes coverage. Thus, if, assuming all the allegations of the petition to be true, there would be both (1) coverage under the policy and (2) liability to the plaintiff, the insurer must defend the insured regardless of the outcome of the suit. Additionally, the allegations of the petition are liberally interpreted in determining whether they set forth grounds which bring the claim within the scope of the insurer's duty to defend the suit brought against its insured.

Yount v. Maisano, 627 So.2d 148, 153 (La. 1993) (citing Am. Home Assurance Co. v Czarniecki, 255 La. 251, 230 So.2d 253 (1969); Meloy v. Conoco, Inc., 504 So.2d 833 (La.1987); Benoit v. Fuselier, 195 So.2d 679 (La.App. 3d Cir.1967)).

C.

We now turn to the first issue presented in this appeal: whether CCA qualifies as an additional insured under the vendor's endorsement in the Policy NY Marine issued to Phoenix.¹ The critical language in Endorsement #5 provides: "it is hereby agreed that the definition of insured is amended to include any person or organization designated as a vendor but only with respect to the distribution or sale in the regular course of the vendor's business in [Phoenix's] products subject to the following additional provisions ...."

The district court correctly found that CCA qualifies as a vendor. But this does not completely answer our question. Under Louisiana law, vendor's endorsements "have been interpreted as providing coverage where the vendor is found strictly liable for selling a defective product and excluding coverage where the vendor is found to be independently negligent." McGill v. Cochran-Sysco Foods, 818 So.2d 301, 308 (La.App. 2 Cir.2002) (citation omitted); see also Easton v. Chevron Indus., Inc., 602 So.2d 1032 (La.App. 4 Cir. 1992), writs denied, 604 So.2d 1315 and 604 So.2d 1318 (La.1992).

It is true that Weaver's petition...