Windsor Food Quality Co. v. The Underwriters of Lloyds of London CA4/2

*1180 Opinion

I

INTRODUCTION

Plaintiff and appellant Windsor Food Quality Company, Ltd. (Windsor), manufactured Jose Ole frozen food products, using ground beef supplied by Westland/Hallmarlc Meat Company (Westland). In 2008, after a voluntary United States Department of Agriculture (USDA) recall of Westland beef, Windsor made a claim under its contamination products insurance policy, 1 issued by defendants and respondents — QBE Insurance (Europe) Limited and the Underwriters of Lloyds of London (Lloyds). After Lloyds denied coverage on various grounds, Windsor sued for breach of contract and bad faith. The trial court granted Lloyds’s summary judgment motion, finding no triable issues of material fact and no coverage.

Windsor appeals, arguing that it is entitled to insurance coverage based on a reasonable interpretation of Lloyds’s policy. Windsor also contends that whether Lloyds acted in bad faith remains a triable issue of fact, which only a jury can resolve.

Lloyds responds that Westland’s ground beef was not an “Insured Product” under the policy and — even if the ground beef was an insured product — it was not “tampered with” or the tampering was not “malicious.”…

Dissenting. — As the moving party, the defendant has the burden of demonstrating there is no potential for coverage under the terms of its policy. (See Powerine Oil Co., Inc. v. Superior Court (2005) 37 Cal.4th 377, 390 [ 33 Cal.Rptr.3d 562 , 118 P.3d 589 ] [defendant and moving party/nonparticipating insurer failed to meet its burden of showing that no potential for indemnity existed under terms of its policy on motion for summary adjudication]; see also Standard Fire Ins. Co. v. Spectrum Community Assn. (2006) 141 Cal.App.4th 1117, 1124 [ 46 Cal.Rptr.3d 804 ] [plaintiff and moving party insurer failed to meet its burden of showing there was no potential for *1189 coverage under the terms of its policy on motion for summary judgment]; Code Civ. Proc., § 437c, subd. (p)(2).)

We independently review a trial court’s interpretation of the terms of an insurance contract, pursuant to well-settled rules of contract interpretation. (E.M.M.I. Inc. v. Zurich American Ins. Co. (2004) 32 Cal.4th 465, 470 [ 9 Cal.Rptr.3d 701 , 84 P.3d 385 ] (E.M.M.I.).)

“ ‘The fundamental rules of contract interpretation are based on the premise that the interpretation of a contract must give effect to…

INTRODUCTION

Plaintiff and appellant Windsor Food Quality Company, Ltd. (Windsor)

manufactured Jose Ole frozen food products, using ground beef supplied by

Westland/Hallmark Meat Company (Westland). In 2008, after a voluntary United States

Department of Agriculture (USDA) recall of Westland beef, Windsor made a claim under

its Contamination Products Insurance policy,1 issued by defendants and respondents—

QBE Insurance (Europe) Limited and Underwriters of Lloyds, London (Lloyds). After

Lloyds denied coverage on various grounds, Windsor sued for breach of contract and bad

faith. The trial court granted Lloyds’s summary judgment motion, finding no triable

issues of material fact and no coverage.

Windsor appeals, arguing that it is entitled to insurance coverage based on a

reasonable interpretation of Lloyds’s policy. Windsor also contends that whether Lloyds

acted in bad faith remains a triable issue of fact, which only a jury can resolve.

Lloyds responds that Westland’s ground beef was not an “Insured Product” under

the policy and—even if the ground beef was an insured product—it was not “tampered

with” or the tampering was not “malicious.” Finally, Lloyds contends…