Trident Seafoods Corp. v. ACE American Insurance Co. ( 2016 )


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  •                                                                           FILED
    NOT FOR PUBLICATION
    SEP 09 2016
    UNITED STATES COURT OF APPEALS                   MOLLY C. DWYER, CLERK
    U.S. COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    TRIDENT SEAFOODS CORPORATION,                    No.   13-36035
    a Washington corporation,
    D.C. No. 2:12-cv-02265-JLR
    Plaintiff-Appellant,
    v.                                              MEMORANDUM*
    ACE AMERICAN INSURANCE
    COMPANY, a foreign insurance company,
    Defendant-Appellee.
    Appeal from the United States District Court
    for the Western District of Washington
    James L. Robart, District Judge, Presiding
    Argued and Submitted August 29, 2016
    Seattle, Washington
    Before: HAWKINS and McKEOWN, Circuit Judges, and EZRA,** District
    Judge.
    *
    This disposition is not appropriate for publication and is not precedent
    except as provided by Ninth Circuit Rule 36-3.
    **
    The Honorable David A. Ezra, Senior United States District Judge for the
    District of Hawaii, sitting by designation.
    Trident Seafoods Corporation (“Trident”) appeals the summary judgment
    dismissal of its claim for breach of contract against ACE American Insurance
    Company (“ACE”). We affirm.
    Trident sought partial indemnification from ACE, one of its insurers, after
    settling product complaints from a customer, Matsuura Suisan Company
    (“Matsuura”), which claimed Trident’s fish oil product made Matsuura’s farmed fish
    unusable. The fish oil had been harvested at sea onboard one of Trident’s vessels and
    was contaminated with petroleum when a crack between adjacent tanks allowed
    petroleum to seep into one fish oil tank. As the fish oil was pumped off the vessel, the
    petroleum residue spread to other pipes and tanks, leading to contamination of fish oil
    subsequently stored in those other tanks. Matsuura purchased the fish oil and used it
    to make fish pellets it then fed to its farmed tuna stock. When Matsuura’s customers
    found the “oily” smell and taste of its tuna unsuitable, Matsuura recalled the tuna and
    alerted Trident. Avoiding a lawsuit, Trident settled with Matsuura for roughly $5
    million, to which two of Trident’s other insurers contributed. ACE denied coverage
    based on a watercraft exclusion term in its policy, the interpretation of which is at the
    heart of this dispute.
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    ACE’s commercial general liability policy dictates that it excludes coverage for
    “bodily injury” or “property damage” “arising out of the ownership, maintenance, use,
    or entrustment to others of any aircraft, ‘auto’ or watercraft owned or operated by . . .
    any insured. Use includes operation and ‘loading and unloading.’” This is the so-
    called watercraft exclusion.      The policy, which provides products-completed
    operations hazard (“PCOH”) coverage for third party product liability claims, defines
    PCOH coverage to exclude damage arising from transportation of completed goods,
    with a carve-out that includes coverage for damage to such goods arising out of “a
    condition in or on a vehicle created by the ‘loading or unloading’ of it.”
    The watercraft exclusion is not ambiguous and encompasses the contamination
    at issue here. Washington courts have defined “arising out of” to mean “originating
    from,” “having its origin in,” “growing out of,” or “flowing from.” Toll Bridge Auth.
    v. Aetna Ins. Co., 
    773 P.2d 906
    , 908 (Wash. Ct. App. 1989) (quoting Avemco Ins. Co.
    v. Moc, 
    721 P.2d 34
    , 35 (Wash. Ct. App. 1986)). “[U]nder Washington law it is not
    necessary to analyze causation issues” when assessing an “arising from” policy term.
    Krempl v. Unigard Sec. Ins. Co., 
    850 P.2d 533
    , 535 (Wash. Ct. App. 1993). The but-
    for causation analysis in which Trident invites us to participate is thus impermissible.
    The damage here originated with a crack in tanks aboard Trident’s vessel, fairly
    characterized as the use or maintenance of a Trident watercraft. That loading and
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    unloading of the fish oil may have causally contributed to the contamination does not
    negate the effect of the watercraft exclusion’s “arising out of” clause. See Krempl,
    
    850 P.2d at 534
     (finding that a risk excepted by an “arising out of” clause cannot set
    into motion an insured one).
    Such a reading does not render coverage illusory. ACE’s product liability
    coverage extends to Trident’s onshore operations and facilities, and would apply to
    product defects originating with onshore events or negligence. See Toll Bridge, 
    773 P.2d at 910
     (finding a watercraft exclusion not illusory based on similar reasoning).
    Trident’s alternate theory that the damage is the result of intervening negligence
    that occurred onshore invites but-for causation analysis inappropriate for interpreting
    “arising out of” exclusions.     American Best Food, Inc. v. Alea London, Ltd.,
    concerning an insurer’s duty to defend, is inapposite. 
    229 P.3d 693
    , 695, 700-01
    (Wash. 2010) (holding that a nightclub’s act of “dump[ing]” a gunshot-wounded
    patron out on the sidewalk contributed significantly to the patron’s injuries, triggering
    a duty to defend in spite of the club’s insurance policy exclusion for injuries arising
    from assault or battery). Even if we were to extend Best Food’s post-accident
    negligence theory to the indemnification context, the facts are distinguishable in that
    in Best Food, the patron’s injuries were compounded by his eviction from the
    club—or, at least, this seemed plausible enough to justify that the club’s insurer mount
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    its defense. Here, no further damage worsened the fish oil’s condition once it reached
    shore; at most, Trident failed to test the oil once it discovered the crack, or to recall
    the fish oil from Matsuura. We thus affirm based on the Washington Court of
    Appeals’ reasoning in Toll Bridge, 
    773 P.2d 906
    –10, and accordingly, we deny
    Trident’s request for fees under Olympic Steamship Co. v. Centennial Ins. Co., 
    811 P.2d 673
    , 681 (Wash. 1991).
    AFFIRMED.
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Document Info

Docket Number: 13-36035

Judges: Hawkins, McKeown, Ezra

Filed Date: 9/9/2016

Precedential Status: Non-Precedential

Modified Date: 3/1/2024