United States District Court, D. Massachusetts
MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR SUMMARY
JUDGMENT AND PLAINTIFF'S MOTION TO STRIKE
Dennis Saylor IV United States District Judge.
an insurance coverage dispute. Jurisdiction is based on
diversity of citizenship. Defendants Valley Forge Insurance
Company and Continental Casualty Company are insurance
companies who have declined to defend their policy holder,
plaintiff Cheer Pack North America, LLC, in litigation. The
litigation concerned food contamination allegedly caused by
the failure of packaging products manufactured by Cheer Pack.
Pack manufactures flexible pouches used to package and
process various food products. It sold pouches to Plum, a
manufacturer of organic baby foods, which in turn had a
manufacturing agreement with SunOpta, a food processor. In
2013, various Plum products manufactured and processed by
SunOpta using Cheer Pack pouches became contaminated with
bacteria when the pouches allegedly failed to maintain a
hermetic seal during processing. The contamination resulted a
voluntary recall of millions of Plum products.
subsequently filed suit against both SunOpta and Cheer Pack,
and SunOpta then filed a cross-claim against Cheer Pack.
Valley Forge and Continental declined to defend Cheer Pack in
that litigation, contending, among other things, that the
relevant insurance policies contain an exclusion for bodily
injury or property damage arising out of
“microbe” exposure. Those exclusions, however,
contain an exception for insureds whose “business is
food processing.” Cheer Pack contends that its business
is food processing, and therefore the exception to the
exclusion should apply.
parties have cross-moved for partial summary judgment on
defendants' duties to defend. Cheer Pack has also moved
for summary judgment on defendants' affirmative defense
of misrepresentation. For the reasons stated below, the
motion of Cheer Pack will be granted as to the duty to
defend, and denied without prejudice as to the
misrepresentation defense. Defendants' motion for partial
summary judgment as to their duties to defend will be denied.
Pack North America, LLC is a manufacturing company located in
West Bridgewater, Massachusetts. It manufactures and sells
flexible pouches with screw caps. The pouches are used in the
manufacturing, processing, and packaging of various food
products, including baby food, fruit purees, yogurt,
condiments, pet food, and beverages. (Giovannone Aff.
¶¶ 3, 5).
Cheer Pack's pouches are used in a “hot fill”
application, in which food is pasteurized after being filled
in the pouch and heat-sealed, typically through a hot-water
spray. (Id. ¶ 6). Cheer Pack is a corporate
affiliate of Gualapack North America, Inc., and brokers the
sale of Gualapack filling equipment used to fill the pouches.
(Id. at ¶ 4-5). Cheer Pack also provides
on-site guidance, technical support, and maintenance services
in connection with the use of its pouches and the Gualapack
filling equipment. (Def. Ex. 1 at p. 26 ¶¶ 17, 19).
January 1, 2013, through January 1, 2014, Valley Forge
Insurance Company insured Cheer Pack under a commercial
general liability policy. (Pl. Ex. C). During the same
period, Continental Casualty Company insured Cheer Pack under
a commercial umbrella policy. (Pl. Ex. D).
the primary policy, Valley Forge is obligated to pay
“those sums that [Cheer Pack] becomes legally obligated
to pay as damages because of ‘bodily injury' or
‘property damage' to which this insurance
applies.” (Pl. Ex. C at 1142). The policy also provides
that Valley Forge had a duty to defend Cheer Pack
“against any ‘suit' seeking those
primary policy provides that it does not apply to claims of
“bodily injury” or “property damage”
“arising out of or relating to” contact with,
exposure to, or the growth or presence of any “fungi or
microbes.” (Id. at 1173). That exclusion does
not apply, however, to claims involving bodily injury
“where [the insured's] business is food processing,
sales, or serving, and the ‘bodily injury' is
caused solely by food poisoning in connection with such
processing, sales, or serving.” (Id.).
the umbrella policy, Continental is obligated to pay
“on behalf of [Cheer Pack] those sums in excess of
‘scheduled underlying insurance, '
‘unscheduled underlying insurance' or the
‘retained limit' that [it] becomes legally
obligated to pay as ‘ultimate net loss' because of
‘bodily injury, ' ‘property damage' or
‘personal and advertising injury' to which this
insurance applies.” (Pl. Ex. D at 0025). The umbrella
policy also includes a duty to defend. (Id. at
the primary policy, the umbrella policy excludes coverage for
any injury caused by “the actual, alleged or threatened
inhalation of, ingestion of, contact with, exposure to,
existence of, or presence of any ‘fungi or
microbes.'” (Id. at 0029). Also like the
primary policy, the “microbe” exclusion in the
umbrella policy contains an exception for “microbes
that cause food poisoning, if [the insured's] business is
food processing, sales, or serving.” (Pl. Ex. D. at
The Underlying Claims
claims underlying this dispute arise out of a contractual
relationship between Cheer Pack, Plum (a provider of organic
foods and snacks), and SunOpta (a food manufacturer). (Pl.
Ex. E. at ¶¶ 19-20). In 2011, Plum and SunOpta
entered into an agreement in which SunOpta would manufacture,
process, sanitize, and package Plum's products to
Plum's specifications. (Id. at ¶ 22). As
part of that agreement, SunOpta agreed to manufacture Plum
products in packages made by Cheer Pack and to use filling
equipment manufactured by Gualapack. (Id. ¶
23). The Plum products that SunOpta agreed to produce
included pureed fruit, vegetable, and grain combinations
intended for consumption by babies and toddlers.
(Id. ¶ 19).
of the manufacturing process, SunOpta subjected filled Cheer
Pack pouches to heat pasteurization, in which the pouches
were held under a hot water spray for a minimum of three
minutes. (Id. ¶¶ 39-40). Following
pasteurization, the pouches were then cooled using cold
water. (Id. ¶ 41). According to the complaint
subsequently filed by Plum against SunOpta, between June and
August of 2013, SunOpta did not adequately control or test
the water in the cooling tower to minimize microbial
contamination. (Id. ¶ 43). When testing was
conducted in August 2013, it revealed the presence of
substantial microbial growth in the cooling water.
(Id. ¶ 46).
September and early October of 2013, Plum and SunOpta began
receiving complaints from customers that pouches of
Plum's products were bloated or swollen, which is
evidence of bacterial growth in the pouches. (Id.
¶¶ 49-50). Plum also received complaints from
customers who had experienced gastrointestinal symptoms and
discomfort. (Id. ¶ 3). On November 5, 2013,
SunOpta notified Plum of the presence of microbial growth in
the cooling water. (Id. ¶ 57). Three days
later, Plum initiated a voluntary recall of all products
manufactured at the SunOpta facility during the affected
dates. (Id. ¶ 60).
acknowledged that it produced contaminated products for Plum
and that the contamination occurred during the cooling
process, but disclaimed any responsibility for the
contamination. (Id. ¶¶ 82, 85). SunOpta
alleged that Cheer Pack's pouches contained a defect that
prevented them from maintaining a hermetic seal and that it
was the failure to seal that caused the pouches to become
contaminated during the cooling process. (Id. ¶
filed a complaint against SunOpta on February 3, 2015,
alleging that SunOpta breached the manufacturing agreement by
failing to ensure that its products were manufactured in a
clean and sanitary environment, and sought damages on that
basis. (Pl. Ex. M). Plum then filed an amended complaint on
April 13, 2015, adding Cheer Pack as a defendant and alleging
that it breached its express and implied warranties by
selling pouches that failed to maintain a hermetic seal. (Pl.
Ex. E at ¶¶ 132, 137). Plum also sought damages
from Cheer Pack. (Id. ¶ 139).
4, 2015, SunOpta filed a cross-claim against Cheer Pack.
(Def. Ex. 1). SunOpta alleged that the contamination was
caused by the failure of the Cheer Pack pouches to seal
properly. (Id. at 29 ¶¶ 35-38). SunOpta
sought to recover damages from Cheer Pack related to the
recall of contaminated pouches. (Id. at 54 ¶
November 19, 2013-after the recall, but before Plum had filed
suit-Cheer Pack notified its insurers of the potential claims
against it. (Pl. Ex. I). On December 13, 2013, Valley Forge
responded by letter, stating that it would investigate the
matter, but that it retained the right to disclaim coverage.
(Pl. Ex. J at 1011, 1014). After receiving a notification on
May 20, 2014, that Plum had retained counsel to represent it
in connection with the recall, Valley Forge and Continental
wrote to Cheer Pack stating that they would “defend
this claim under the reservation of rights below.” (Pl.
Ex. K at 1025). The letter then set forth several bases on
which coverage might be denied, including the microbial
exclusion. (Id. at 1028). The insurers also reserved
the right to re-evaluate the duty to defend if and when Plum
filed a lawsuit. (Id. at 1033).
April 15, 2015, Cheer Pack notified the insurers that Plum
had filed suit against it. (Def. Ex. 6). On May 8, 2015,
Cheer Pack further notified the insurers that SunOpta had
filed a cross-claim against it. (Def. Ex. 7). On May 26, the
insurers informed Cheer Pack of their conclusion that
“the Plum suit seeks damages that are not covered under
the policies” and that they “therefore deny any
obligation to defend or indemnify Cheer Pack with regard to
the Plum suit.” (Bell Aff. Ex. O). As grounds for that
denial, the insurers stated that: (1) the amended complaint
did not include any allegations suggesting “bodily
injury;” (2) the allegations may not satisfy the
policies' definitions of “property damage;”
(3) the allegations may not describe an