United States District Court, W.D. Washington, Seattle
CERTAIN UNDERWRITERS AT LLOYD'S, LONDON, that participate on marine cargo policy no. B0799MC030730k, foreign corporations, Plaintiffs,
MILLS BROS. INTERNATIONAL, INC., dba GLOBAL HARVEST FOODS, LTD., a Washington corporation, Defendant.
C. COUGHENOUR UNITED STATES DISTRICT JUDGE.
matter comes before the Court on Plaintiffs' motion for
partial summary judgment (Dkt. No. 22). Having thoroughly
considered the parties' briefing and the relevant record,
the Court finds oral argument unnecessary and hereby DENIES
the motion for the reasons explained herein.
are a group of syndicates who proportionally subscribe to or
provide capital to underwrite Marine Cargo Insurance Policy
No. B0799MC030730k (the “Policy”). (Dkt. No. 1 at
1.) Plaintiffs issued the Policy to Defendant on July 24,
2017, with one amendment executed on October 21, 2017.
(See Dkt Nos. 1, 1-1.) The effective dates of the
Policy were August 1, 2017 to August 1, 2018. (Dkt. No. 1-1
at 4.) Defendant timely paid the premiums due on the Policy.
(Dkt. Nos. 16 at 5, 18 at 2.)
manufactures bird seed products, including “pressed
seed products.” (Dkt. Nos. 1 at 4, 28 at 6.) Pressed
seed products are formed using gelatin, dried to reduce
moisture, and then packaged for sale. (Dkt. No. 28 at 6.) For
many years, Defendant used an oven heating method to reduce
moisture in its pressed seed products. (See Dkt.
Nos. 1 at 4-5, 16 at 3.) This method reduced moisture in the
pressed seed products by at least three percent. (Dkt. Nos.
22 at 7, 28 at 6-7.)
sought advice as to how to increase its manufacturing
capacity, and an expert advised Defendant that it should
replace the oven with a spiral cooling drying system (the
“spiral dryer”). (Dkt. No. 28 at 6-7.) Through
research, Defendant learned that spiral dryers “had
widespread utilization in food processing.”
(Id. at 6.) Defendant's gelatin suppliers
informed Defendant that a spiral dryer “would be
preferable.” (See Id. at 6-7.) Defendant
negotiated a warranty with a spiral dryer supplier to obtain
a guarantee of at least a three percent extraction of
moisture from the pressed seed product. (Id. at 7.)
Defendant alleges it tested the spiral dryer and received
positive results, and in April 2018 “beg[a]n commercial
production using its new spiral dryer, utilizing the exact
same process as [Defendant's] plant ha[d] used for more
than 14 years.” (Id.; see also Dkt.
No. 30 at 2.)
2018, several customers reported mold on Defendant's
pressed seed products. (Dkt. No. 28 at 7.) Defendant claims
that mold was discovered on about 28 percent of the pressed
seed products in its warehouse, in transit, and at
third-party locations. (Id.) Plaintiffs claim that
the mold was discovered on some of the inventory at
Defendant's warehouse facilities. (Dkt. No. 1 at 5.)
After discovering the mold, Defendant reverted to using the
oven heating method for at least some of its pressed seed
products. (See id., Dkt. No. 16 at 3.) On July 26,
2018, Defendant submitted a Property Loss Notice to
Plaintiffs, reporting that a loss occurred on June 22, 2018.
(Dkt. Nos. 22 at 6-7, 23-1 at 2.) Defendant submitted a claim
exceeding $511, 000 to Plaintiffs for reimbursement (the
“Claim”), which included alleged losses of at
least $300, 000 in unsalable products and $175, 000 in
reimbursements to clients. (Dkt Nos. 1 at 5, 28 at 7.)
hired insurance adjuster Charles Colella of EIMC to
investigate the Claim, and Colella submitted two reports to
Plaintiffs. (Dkt Nos. 16 at 5, 18 at 2, 22 at 9.) On or about
August 15, 2018, Colella determined that Defendant incurred
costs of $511, 633.02. (Dkt. Nos. 16 at 5, 18 at 2.) The
parties dispute whether Colella concluded that Plaintiffs
were liable to Defendant for reimbursement of those costs.
(See id.) Defendant alleges that Plaintiffs
“demanded that the adjuster reverse his coverage
conclusion, but he refused to do so.” (Dkt. No. 16 at
5.) Defendant also alleges that “[o]n or about November
2, 2018, [Plaintiffs'] agent, [broker] Lonmar Global
Risks Limited [(“Lonmar”)], also confirmed that
the [C]laim was covered.” (Id.) Plaintiffs
deny both allegations. (See Dkt. No. 18 at 2.)
Relevant Policy Provisions
Policy is governed by Washington law. (Dkt. No. 1-1 at 7.)
The Policy covers “[a]ll risk of physical loss or
damage from whatsoever cause howsoever arising” subject
to the Policy conditions and clauses (the “all-risk
language”). (Id. at 5.) The Policy applies to
“[a]ll goods . . . incidental to the business of
[Defendant] or in connection therewith . . . .”
(Id. at 4.) The Policy covers shipments from
“[p]orts and/or places in North America” to
“[p]orts and/or places in the World and/or vice versa .
. . Including whilst at rest and/or in store and /or whilst
at contractors.” (Id.) Coverage attaches:
from the time [Defendant] assumes an interest in and/or
responsibility for the subject matter insured and continues
uninterrupted, including transit, stock and location coverage
until that interest and/or responsibility ceases.
(Id. at 5.) The Policy contains a process exclusion
clause (the “exclusion clause”), that provides:
Stock/Location coverage (other than in the normal course of
transit and/or whilst at third party locations) shall ...