DairyAmerica, Inc. v. New York Marine & General Insurance

FILED
NOT FOR PUBLICATION DEC 16 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S . CO U RT OF AP PE A LS
FOR THE NINTH CIRCUIT
DAIRYAMERICA, INC., a California No. 09-17368
Corporation,
D.C. No.1:07-cv-00537-LJO-SMS
Plaintiff - Appellant, Eastern District of California,
Fresno
v.
NEW YORK MARINE AND GENERAL
INSURANCE COMPANY and CRUMP MEMORANDUM *
INSURANCE SERVICES d.b.a.
SOUTHERN MARINE & AVIATION
UNDERWRITERS et al.,
Defendants - Appellees.
Appeal from the United States District Court
for the Eastern District of California
Lawrence J. O'Neill, District Judge, Presiding
Argued November 1, 2010
Resubmitted December 3, 2010
San Francisco, California
Before: GOULD and IKUTA, Circuit Judges, and MAHAN,** District Judge.
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The Honorable James C. Mahan, United States District Judge for the
District of Nevada, sitting by designation.
Page 1 of 5
Appellant DairyAmerica is a company engaged in the shipment of powdered
milµ. Appellee New Yorµ Marine and General Insurance Company ('NY Marine')
contracted with DairyAmerica to provide ocean marine cargo insurance, and
appellee Crump Insurance Services d.b.a. Southern Marine & Aviation
Underwriters ('Southern Marine') was the underwriter for that insurance policy.
The instant dispute involves DairyAmerica's loss of fifty-nine loads of powdered
milµ stored at a warehouse in Mississippi, which occurred while a temporary
insurance binder was in effect, but before the formal insurance policy from NY
Marine had issued.
The NY Marine binder purports to cover '[l]awful goods and/or
merchandise consisting principally of, but not limited to, milµ powder of every
µind and description and other goods incidental to the business of the assured . . .
and/or all other interests handled by the assured in the course of their business . . .
whether in transit or store or elsewhere anywhere in the world.' (Supplemental
Excerpts of R. 266). However, the formal policy states: 'This insurance attaches to
all shipments commencing on or after August 11, 2005 and prior to October 1,
2006. . . .' (Supplemental Excerpts of R. 224). Twenty-three of the fifty-nine lost
shipments had been sent to the warehouse before the effective date of the policy,
Page 2 of 5
whereas the other thirty-six arrived at the warehouse after the policy's effective
date. Accordingly, the dispute centers on whether DairyAmerica's agreement with
NY Marine covered the twenty-three, pre-policy-date shipments.
The district court held that the insurance binder was the controlling
document at the time of the loss and that industry custom controlled the
interpretation of that document. In divining industry custom, the district court
evaluated conflicting expert testimony submitted by the parties and ultimately
granted summary judgment in favor of appellees NY Marine and Southern Marine.
We reverse and remand.
This court reviews a grant of summary judgment de novo. Feldman v.
Allstate Ins. Co., 322 F.3d 660, 665 (9th Cir. 2003). Therefore, to uphold a grant of
summary judgment, this court must find that based on the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if
any, there is no genuine issue as to any material fact, and the moving party is
entitled to judgment as a matter of law. F ED. R. C IV. P. 56(c); Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). Additionally, this court must draw all justifiable
inferences in the non-moving party's favor. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 254 (1986).
The district court erred when it granted summary judgment in favor of the
Page 3 of 5
appellees and found that no genuine issue of material fact existed in this case.
Under California law, a court must give both parties the opportunity to present
extrinsic evidence as to the parties' intent in drafting a contract. Trident Ctr. v.
Conn. Gen. Life Ins. Co., 847 F.2d 564, 569 (9th Cir. 1988) (citing Pacific Gas &
Elec. Co. V. G.W. Thomas Drayage & Rigging Co., 69 Cal. 2d 33 (1968)). Where a
case involves the scope of insurance coverage, the issue of intent is resolved using
extrinsic evidence of industry custom. Ermolieff v. R.K.O. Radio Pictures, 19 Cal.
2d 543, 550 (1942).
Here, both parties presented extrinsic evidence as to custom in the marine
cargo insurance industry in the form of expert testimony. The district court did not
exclude appellant's expert's opinion, and that opinion meets the standard set forth
in the Federal Rules of Evidence. See F ED. R. E VID. 702 (allowing a qualified
expert to testify when 'scientific, technical, or other specialized µnowledge will
assist the trier of fact to understand the evidence or to determine a fact in issue').
Appellant's expert testified as to his understanding of marine cargo insurance
industry custom, which qualifies as specialized µnowledge. Both parties assert that
testimony on industry custom would assist the trier of fact in understanding the
meaning of the policy at issue.
Accordingly, drawing all justifiable inferences in the appellant's favor, the
Page 4 of 5
case would more properly be submitted to a trier of fact for adjudication, as it
involves weighing the relative probative value of the experts' opinions. See
Anderson, 477 U.S. at 255 (holding that credibility determinations and weighing of
the evidence are jury functions).
REVERSED AND REMANDED.
Page 5 of 5
FILED
DEC 16 2010
MOLLY C. DWYER, CLERK
U.S . CO U RT OF AP PE A LS
DairyAmerica, Inc. v. N.Y. Marine & Gen. Ins. Co. et al., No. 09-17368
IKUTA, J., dissenting.
In concluding that there is a genuine issue of material fact as to whether the
insurance issued by N.Y. Marine to DairyAmerica covered shipments that
commenced before the policy's inception date, the majority ignores controlling
California law. Insurance binders liµe the one issued by N.Y. Marine in this case
are incomplete, informal, and temporary contracts that are 'subject to the terms and
conditions of the policy to be issued or of the policy ordinarily used by the
company, or, if there is a standard policy in the jurisdiction, according to the terms
and conditions of that policy, and it is presumed that the parties contemplated such
a policy, containing such conditions and limitations.' Parlier Fruit Co. v.
Fireman's Fund Ins. Co., 311 P.2d 62, 71 (Cal. Ct. App. 1957) (quoting 44 C.J.S.
y 230, at 958); see also Chi. Title Ins. Co. v. AMZ Ins. Servs., Inc., 115 Cal. Rptr.
3d 707, 725 (Ct. App. 2010); Nat'l Emblem Ins. Co. v. Rios, 79 Cal. Rptr. 583,
586-87 (Ct. App. 1969); 16 Williston on Contracts y 49:53 (4th ed. 2010).
Here N.Y. Marine's formal policy stated that the 'insurance attaches to all
shipments commencing on or after August 11, 2005 and prior to October 1,
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2006. . . .' Thus, the policy did not cover shipments commencing before August
11, 2005. Nor has DairyAmerica offered any evidence that the standard policy
ordinarily used by N.Y. Marine, or California's standard ocean marine cargo
policy, covers goods in transit before the policy's inception. The binder did not
alter the terms of the formal policy: it did not state that it covered goods in transit,
and no language in the binder is susceptible to that interpretation. Therefore, under
California law, the terms and conditions of the formal policy are controlling.
The only evidence that DairyAmerica offers to support its contention that the
insurance policy covers shipments that commenced before the policy's inception
date is an expert's statement that a ''Lost or Not Lost' clause as used in ocean
marine insurance provides that the insurer will pay even if the loss insured against
has occurred prior to the effective date of the insurance.' But the 'lost or not lost
clause' in DairyAmerica's binder states only that the 'Geographical Limits' of the
insurance includes goods 'lost or not lost, from ports and/or places in the world
directly or via ports and/or places in any order' including shipment of the goods by
land, air or water and while the goods are in storage. The clause does not state that
it covers goods in transit, and cannot reasonably be interpreted as doing so.
Since DairyAmerica did not obtain an insurance policy covering shipments
that commenced before August 11, 2005, and there is not a genuine issue of
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material fact as to this issue, I would affirm the district court.
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