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Factory Mutual Insurance Co. v. Federal Insurance Co.

United States District Court, D. New Mexico

November 5, 2019




         THIS MATTER comes before the Court upon Defendant's “Motion for Partial Summary” Judgment [ECF 64] (“Motion”). The Motion is fully briefed. See ECFs 81 (Plaintiff's Response), 91 (Plaintiff's Errata Notice), 101 (Defendant's Reply). For the reasons articulated below, the Court will GRANT IN PART and DENY IN PART this Motion.

         I. BACKGROUND

         On July 31, 2014, a lightning storm occurred near a manufacturing plant of OSO Biopharmaceuticals Manufacturing, LLC (“OSO”) in Albuquerque, New Mexico. ECF 50 at 11. At approximately 6:23 p.m. that evening, a lightning strike was recorded within 0.2 miles of this facility, which at the time was being used to manufacture an injectable antibiotic, Cubicin (daptomycin), for treating complicated infections. Id. at 12. Around this same time, the facility experienced a power interruption and doors leading from an interior “clean room” unexpectedly opened, while certain fans and other equipment shut down. See ECFs 47 at 3; 68 at 4; 71 at 8. Unacceptable levels of mold were later detected in this room, requiring OSO to discard the antibiotics that it was producing and cease further production until remediation efforts concluded in December 2014. See ECFs 47 at 5; 50 at 6; 68 at 3.

         As a result, OSO submitted a claim for over $10 million in losses to Defendant Federal Insurance Company. See ECF 50 at 5. Defendant paid OSO the maximum sublimit of $600, 000 under two of its contract provisions. Id. OSO then submitted a claim to Plaintiff Factory Mutual Insurance Company, which ultimately paid $7, 385, 110 to OSO for its losses. Id. at 6. Plaintiff, as an assignee of OSO, now seeks reimbursement from Defendant. Id. at 5. Plaintiff's fundamental claim is that Defendant breached its insurance contract by not paying for the loss under its “Building and Personal Property for Life Sciences” (“BPPLS”) provision, which provided much higher limits of coverage. See ECF 64 at 2-3.

         In the instant Motion, Defendant seeks summary judgment on a sole issue. Mot. 1. Specifically, it argues that-if its BPPLS provision applies-the parties' “other insurance” provisions would nevertheless “cancel each other out” and result in a respective 54 and 46 percent “apportionment of the loss” as between Defendant and Plaintiff. Id. at 1-2, 7.


         A. Coverage Under the Policies

         Defendant's policy caps coverage at $58, 286, 814 for an insured “Building, ” $56, 340, 820 for “Personal Property” (e.g., pharmaceutical products), and $32, 000, 000 for any resulting “Business Income” loss (i.e., business interruption). ECF 47-2 (Defendant's insurance policy) at 16-17, 19.[1] Defendant's BPPLS provision states that it will “pay for direct physical loss or damage to: building; or personal property, that is caused by or resulting from a peril not otherwise excluded.” Id. at 92; see also Id. at 75 (separate provision requiring Defendant to pay for resulting business interruption losses). Defendant's policy, however, generally excludes losses resulting from “contaminants” (e.g., mold), unless an exception applies:

This insurance does not apply to loss or damage caused by or resulting from the mixture of or contact between property and a contaminant . . . . [unless] the mixture or contact is directly caused by or directly results from a specified peril [e.g., lightning] . . .

Id. at 104.

         For its part, Plaintiff's policy provides coverage, pursuant to its “Automatic Coverage” provision, up to $50, 000, 000 for “insured physical loss or damage to insured property at any location” that occurs within 90 days of the property's acquisition. ECF 64-2 (Plaintiff's insurance policy) at 18, 36.[2] This coverage protects against “all [non-excluded] risks of physical loss” and applies to “Real Property, ” “Personal Property, ” and “time element loss[es]” (i.e., business interruption). Id. at 14, 26, 54-59.[3] Plaintiff's policy likewise excludes contamination, while also providing an exception to this exclusion-one that implicitly incorporates damage caused by lightning:

This Policy excludes . . . contamination, and any cost due to contamination . . . . If contamination due only to the actual not suspected presence of contaminant(s) directly results from other physical damage not excluded by this Policy [e.g., lightning], then only physical damage caused by such contamination may be insured . . . .

Id. at 31.

         B. “Other Insurance” Provisions

         Each party's policy has an “other insurance” provision-a provision that assigns primary liability to the “other” insurer. Defendant's “other insurance” provision states the following:

If you have any other insurance covering the same loss or damage as is insured against by this policy, we will only pay for the amount of loss or damage which is insured against by this policy in excess of the amount due from such other insurance, whether you can collect on such other insurance or not.

ECF 47-2 at 170. And Plaintiff's “other insurance” provision states the following:

A. If there is any other insurance that would apply in the absence of this Policy, this Policy will apply only after such insurance whether collectible or not.
B. In no event will this Policy apply as contributing ...

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