Title: Conagra Foods, Inc. v. Lexington Insurance Co.

State: delaware

Issuer: Delaware Supreme Court

Document:

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
CONAGRA FOODS, INC., 
§ 
 
 
§ 
No. 227, 2010 
 
Plaintiff Below- 
§ 
 
Appellant, 
§ 
Court Below: Superior Court 
 
 
§ 
of the State of Delaware in and 
v. 
 
§ 
for New Castle County 
 
 
§ 
LEXINGTON INSURANCE CO., 
§ 
C.A. No. 09C–02–170 
 
 
§ 
 
 
Defendant Below- 
§ 
 
Appellee. 
§ 
 
Submitted: April 7, 2011 
     Decided: April 28, 2011 
 
Before STEELE, Chief Justice, HOLLAND, JACOBS, RIDGELY, Justices, and 
NEWELL, Judge,1 constituting the Court en Banc. 
 
 
Upon appeal from the Superior Court.  REVERSED and REMANDED. 
 
 
John E. James, Esquire, of Potter Anderson & Corroon, LLP, Wilmington, DE; Of 
Counsel: Jonathan M. Cohen (argued) and William E. Copley, Esquires, of Gilbert, 
LLP, Washington, D.C., for Appellant. 
 
Denise Seastone Kraft, Paul D. Brown, Aleine M. Porterfield, Esquires, of 
Edwards Angell Palmer & Dodge, LLP, Wilmington, DE; Of Counsel: Stephen M. 
Prignano, Esquire, (argued) of Edwards Angell Palmer & Dodge, LLP, Providence, 
RI, for Appellee. 
 
 
 
 
RIDGELY, Justice, for the Majority: 
                                          
 
1 Sitting by designation pursuant to Del. Const. art. IV, § 12 and Supr. Ct. R. 2 & 4. 
 
2
This case arises from the alleged contamination in 2007 of certain Peter 
Pan® and Great Value® peanut butter products that Plaintiff-Below/Appellant, 
ConAgra Foods, Inc. (“ConAgra”), manufactured at its Sylvester, Georgia plant 
site.  The Centers for Disease Control (“CDC”) informed ConAgra that it 
suspected a link between a certain strain of salmonella and those peanut butter 
products.  Thereafter, ConAgra announced a voluntary, nationwide recall of all its 
peanut butter products.  But, some of the peanut butter products reached 
consumers, and many of those consumers have sued ConAgra. 
ConAgra 
had 
purchased 
an 
insurance 
policy 
from 
Defendant-
Below/Appellee, Lexington Insurance Co. (“Lexington”), to insure itself against 
personal injury claims arising from contamination of its products.  ConAgra sought 
coverage under that policy.  Lexington denied coverage.  ConAgra and Lexington 
have different views on the extent to which the insurance policy provides coverage 
because they interpret the provision in that policy called the “lot or batch” 
provision differently.  For insurance coverage purposes, a “lot or batch” provision 
may operate to treat as a group all insurance claims that arise out of the same lot or 
batch of products.  ConAgra contends that the “lot or batch” provision serves to 
expand coverage and does not apply where there is a single “occurrence,” as 
defined by the policy.  Lexington claims that the “lot or batch” provision applies to 
limit coverage and requires ConAgra to satisfy a separate deductible (“retained 
 
3
limit”) for each separate lot or batch to access coverage.  The Superior Court 
upheld Lexington’s position. 
We conclude that the “lot or batch” provision of the policy is ambiguous.  
Under one of the two reasonable interpretations of the “lot or batch” provision, 
Lexington’s duties to defend and indemnify were triggered.  Because the policy 
arguably provides coverage to ConAgra, Lexington’s duty to defend was thereby 
triggered when ConAgra satisfied the applicable “retained limit” for a single 
“occurrence.”  Accordingly, we reverse the judgment of the Superior Court and 
remand to ascertain the intent underlying the ambiguous policy language for 
purposes of determining whether there is ultimate policy coverage. 
The Policy 
Nearly five years ago, ConAgra purchased an “Umbrella Prime® 
Commercial Umbrella Liability Insurance with Crisis Response®” insurance 
policy (the “Policy”) from Lexington.  Under the terms of the Policy, ConAgra 
paid Lexington $1.15 million in premiums.  In exchange for those premium 
payments, Lexington insured ConAgra against many risks.  One of those risks was 
the Products-Completed Operations Hazard, which the Policy defines as “all 
Bodily Injury and Property Damage occurring away from premises [ConAgra] 
own[s] or rent[s] and arising out of [ConAgra] Product . . . .”  The Policy defines 
the term “Occurrence” for general liability purposes as follows: “as respects Bodily 
 
4
Injury or Property Damage, an accident, including continuous or repeated exposure 
to substantially the same general harmful conditions.  All such exposure to 
substantially the same general harmful conditions will be deemed to arise out of 
one Occurrence[]” (a “General Liability Occurrence”). 
If that were the only definition of “Occurrence,” interpretation of the Policy 
would be straightforward.  But, the Policy is a relatively complex sixty-six page 
document, which includes twenty-one endorsements.  One of those endorsements, 
Endorsement # 3 -- the “Lot or Batch Provision” -- contains a separate definition of 
“occurrence,” as follows: 
Section IV. LIMITS OF INSURANCE is amended to include 
the following additional paragraph: 
With respect to the Products-Completed Operations Hazard, all 
Bodily Injury or Property Damage arising out of one lot or 
batch of products prepared or acquired by you, shall be 
considered one Occurrence.  Such Occurrence shall be subject 
to the Each Occurrence and General Aggregate Limits of this 
policy shown in Item 3. of the Declarations and shall be 
deemed to occur when the Bodily Injury or Property Damage 
occurs for the first claim of the claim of that lot or batch. 
For the purposes of this Endorsement, Lot of Batch is defined 
as a single production run at a single facility not to exceed a 7 
day period. 
Nothing in this endorsement shall be construed to provide 
coverage for any Occurrences taking place outside the Policy 
Period. 
All other terms, definitions, conditions and exclusions of this 
policy remain unchanged. 
 
5
Thus, the Lot or Batch Provision provides another definition of the term 
“Occurrence” (a “Lot or Batch Occurrence”). 
The Policy’s two different definitions of the term “Occurrence” are relevant 
because Endorsement # 10 -- the “Retained Limit Amendatory Endorsement” -- 
contains a “Schedule of Retained Limits,” which prescribes different retained 
limits for a General Liability Occurrence, on the one hand, and for a Lot or Batch 
Occurrence, on the other.  The Policy defines “Retained Limit” as “the Self-
Insured Retention applicable to each Occurrence that results in damages not 
covered by Scheduled Underlying Insurance nor any applicable Other Insurance 
providing coverage to the Insured.”  In other words, the Retained Limit, like a 
deductible, is the amount of liability that ConAgra must itself pay, to trigger 
Lexington’s contractual duties to pay for ConAgra’s defense and tort liabilities.  
For a General Liability Occurrence, the Schedule of Retained Limits provides that 
ConAgra must pay $3 million per Occurrence or $9 million regardless of the 
number of Occurrences, to trigger Lexington’s duties under the Policy.  For a Lot 
or Batch Occurrence, the Schedule of Retained Limits requires ConAgra to pay $5 
million per Occurrence, regardless of the aggregate liability that ConAgra pays, to 
trigger Lexington’s duties under the Policy.  If a Retained Limit is satisfied, the 
Policy limits Lexington’s liability to $25 million. 
 
 
6
The Salmonella-Tainted Peanut Butter 
The Policy had a term of one year.  During that year, an event occurred at 
ConAgra’s Sylvester, Georgia plant site, where ConAgra manufactures peanut 
butter.  The CDC informed ConAgra that it suspected a link between a certain 
strain of salmonella and the peanut butter that ConAgra manufactured.  ConAgra 
immediately announced a voluntary, nationwide recall of all its peanut butter 
products.  Thereafter, the United States Food and Drug Administration cautioned 
consumers not to eat Peter Pan® or Great Value® brand peanut butter that bore 
code number 2111, which was used to identify all peanut butter products that 
ConAgra manufactured at its Sylvester, Georgia plant site.  In its complaint, 
ConAgra alleges that approximately twenty thousand people will bring bodily 
injury or illness claims in courts throughout the country.  ConAgra also alleges that 
it has settled or otherwise resolved over two thousand claims. 
Lexington Denies Coverage 
Shortly after the CDC informed ConAgra of the suspected link, ConAgra 
contacted Lexington about coverage for the claims arising from the contaminated 
peanut butter (the “Peanut Butter Claims”).  Approximately nine months later, 
Lexington preliminarily reserved its rights under the Policy in a letter to ConAgra 
that relevantly stated: 
[W]e request a face-to-face meeting to discuss these cases and 
related coverage issues . . . . 
 
7
In the interim, Lexington preliminarily reserves its rights, 
including, but not limited to, the right to limit or decline 
coverage of the claims discussed herein, or later asserted, under 
the Policy and consistent with Lexington’s findings and 
analysis pending completion of our ongoing investigation of the 
[Peanut Butter Claims]. 
In that letter, Lexington also explicitly referred to the Lot or Batch Provision, 
explaining: “The coverage provided under the Policy is guided by several 
provisions, including, and without limitation . . . Endorsement No. 3 (Lot or 
Batch) . . . .  Please be advised that Lot or Batch is defined as ‘a single production 
run at a single facility not to exceed a 7-day period.’” 
Six months later, ConAgra sent a letter to Lexington that requested a 
statement of Lexington’s coverage position, as well as any advice regarding 
settlement of the Peanut Butter Claims.  Over the next six months, ConAgra and 
Lexington exchanged more letters, and ConAgra provided Lexington with 
numerous documents to aid Lexington in developing its coverage position.  
ConAgra also informed Lexington that it had paid or agreed to pay over $3 million 
in settlements.  ConAgra believed that Lexington’s duties under the Policy had 
been triggered because that amount exceeded the Retained Limit for a General 
Liability Occurrence.  In response, Lexington issued a reservation of rights letter 
that advised ConAgra of Lexington’s position that the Lot or Batch Provision 
applied to the Peanut Butter Claims.  Lexington informed ConAgra that 
Lexington’s duties under the Policy had not been triggered because ConAgra had 
 
8
not demonstrated that it had exhausted the Retained Limit -- $5 million -- for any 
one Lot or Batch. 
Procedural History 
Approximately three and one-half months later, ConAgra filed this action in 
the Superior Court, requesting compensatory and punitive damages for breach of 
contract and breach of the implied duty of good faith and fair dealing.  ConAgra 
also requested a declaratory judgment that would define the scope of the parties’ 
respective rights and obligations under the Policy for the Peanut Butter Claims.  
ConAgra further requested a declaratory judgment that would order Lexington to 
defend ConAgra, and pay defense costs that ConAgra incurred, in connection with 
the Peanut Butter Claims. 
Lexington denied ConAgra’s allegations and asserted numerous affirmative 
defenses.  Lexington also counterclaimed for declaratory judgments regarding the 
application of the Lot or Batch Provision, exhaustion of the Retained Limits, and 
Lexington’s duties to defend and indemnify.  Finally, Lexington asked the Superior 
Court to declare that Lexington did not act in bad faith. 
Lexington then moved for summary judgment, arguing that the Lot or Batch 
Provision should apply as a matter of law and that ConAgra’s bad faith claim 
should be dismissed.  ConAgra cross-moved for partial summary judgment, 
arguing that Lexington’s duty to defend had been triggered because the Peanut 
 
9
Butter claims at least arguably fell within the Policy coverage.  ConAgra also 
argued that the Lot or Batch Provision did not apply to the Peanut Butter Claims.  
The Superior Court denied ConAgra’s partial summary judgment motion and 
granted Lexington’s summary judgment motion, in part, declining to dismiss 
ConAgra’s bad faith claim.  In a Memorandum Opinion, 2 the Superior Court 
explained: 
The court finds that the insurance policy is not ambiguous.  If 
the policy only defined “occurrence,” ConAgra would be 
correct that there was only one occurrence, because the bodily 
injury claims arose collectively out of one cause-salmonella-
tainted peanut butter made in one plant.  And, because the 
peanut butter was made continuously, ConAgra would still be 
correct if the policy included an open-ended Lot or Batch 
Provision.  But, the policy seemingly contemplates continuous 
production and, by its terms, the policy limits a lot or batch to 
all the product ConAgra manufactures in seven days, or less.  
Drilling down through the policy’s terms hits the seven-day 
limit at the bottom.  ConAgra’s reading of the policy renders 
the seven-day limit meaningless. 
Where lots or batches take longer than seven days, including 
the sort of continuous production ConAgra asserts, after seven 
days, for insurance purposes, a new lot or batch begins.  The 
occurrence was not the delivery of a bad batch of peanuts.  That 
is between ConAgra and the peanuts’ supplier.  The occurrence 
was ConAgra’s negligently making defective peanut butter and 
putting it on the market, thereby causing bodily injury.  In other 
words, although ConAgra did not segregate finished jars of 
peanut butter according to lots or batches, the insurance that it 
purchased segregates the production by runs of no more than 
seven days, each.  The policy allows aggregation of the injured 
consumers’ claims, but only to a point. 
                                          
 
2 ConAgra Foods, Inc. v. Lexington Ins. Co., 2009 WL 3688014 (Del. Super. Oct. 30, 2009). 
 
10
Even if, as ConAgra asserts, peanut butter’s production is 
different from the other products manufactured by ConAgra 
that are also covered under the policy’s umbrella, the seven day 
provision makes sense and it cannot simply be read out of the 
policy.  The court appreciates ConAgra’s point that its 
insurance policy will not respond until the claim is much larger.  
But, that is consistent with the policy’s character as umbrella 
coverage.  And, again, Lexington made it clear that there is no 
such thing as a production run lasting more than seven days for 
policy purposes.3 
Lexington then moved for reargument on the bad faith claim, but the 
Superior Court denied that motion.4  Pursuant to Supreme Court Rule 42 and 
Superior Court Civil Rule 74, both parties applied for certification of an 
interlocutory appeal.  The Superior Court declined to certify that appeal because 
“such an appeal’s outcome [would] not be case-dispositive.”5  We also refused the 
parties’ interlocutory appeal.6  ConAgra then agreed to withdraw with prejudice its 
bad faith claim against Lexington in order to obtain a final judgment and 
immediately pursue an appeal to this Court.  The Superior Court entered a final 
order, and this appeal followed. 
ConAgra raises four arguments on appeal.  First, ConAgra contends that the 
Superior Court erred in concluding that the Lot or Batch Provision supplants the 
Policy’s General Liability Occurrence definition, thereby disaggregating a single 
                                          
 
3 Id. at 4–5. 
4 ConAgra Foods, Inc. v. Lexington Ins. Co., 2010 WL 663746 (Del. Super. Jan. 21, 2010). 
5 ConAgra Foods, Inc. v. Lexington Ins. Co., 2010 WL 748171 (Del. Super. Feb. 4, 2010). 
6 Lexington Ins. Co. v. ConAgra Foods, Inc., 991 A.2d 17, 2010 WL 618025 (Del. 2010) 
(TABLE). 
 
11
Occurrence into multiple Occurrences.  Second, ConAgra contends that the 
Superior Court erred in concluding that the Lot or Batch Provision applies to 
continuous production processes, i.e., processes continuing beyond seven days.  
Third, ConAgra contends that the Superior Court erred in concluding that 
Lexington had not waived, and should not be estopped from asserting, the Lot or 
Batch Provision as a defense to coverage.  Fourth, ConAgra contends that the 
Superior Court erred in concluding that the Peanut Butter claims have not triggered 
Lexington’s duty to defend. 
Analysis 
We review the Superior Court’s grant or denial of a summary judgment 
motion de novo. 7   We also review the Superior Court’s interpretation of an 
insurance contract de novo.8  Here, the only questions raised on appeal are matters 
of contract interpretation.  The parties agree that Delaware law applies to the 
interpretation of the Policy. 
The Policy is Ambiguous 
This Court has adopted traditional principles of contract interpretation.  One 
such principle is to give effect to the plain meaning of a contract’s terms and 
                                          
 
7 Stonewall Ins. Co. v. E.I. du Pont de Nemours & Co., 996 A.2d 1254, 1256 (Del. 2010). 
8 Pac. Ins. Co. v. Liberty Mut. Ins. Co., 956 A.2d 1246, 1254 (Del. 2008) (citing Eon Labs Mfg., 
Inc. v. Reliance Ins. Co., 756 A.2d 889, 892 (Del. 2000)). 
 
12
provisions when the contract is clear and unambiguous.9  But, “when we may 
reasonably ascribe multiple and different interpretations to a contract, we will find 
that the contract is ambiguous.”10 
We interpret insurance contracts similarly.  “Clear and unambiguous 
language in an insurance contract should be given ‘its ordinary and usual 
meaning.’”11  “[W]here the language of a policy is clear and unequivocal, the 
parties are to be bound by its plain meaning.”12  “In construing insurance contracts, 
we have held that an ambiguity does not exist where the court can determine the 
meaning of a contract ‘without any other guide than a knowledge of the simple 
facts on which, from the nature of language in general, its meaning depends.’”13  
“An insurance contract is not ambiguous simply because the parties do not agree 
on its proper construction.”14  “[C]reating an ambiguity where none exists could, in 
effect, create a new contract with rights, liabilities and duties to which the parties 
had not assented.”15  But, we also have explained that an insurance contract is 
                                          
 
9 Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159–60 (Del. 2010) (citing Rhone-Poulenc 
Basic Chem. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992)). 
10 Id. at 1160 (citing Twin City Fire Ins. Co. v. Delaware Racing Ass’n, 840 A.2d 624, 628 (Del. 
2003)). 
11 O’Brien v. Progressive N. Ins. Co., 785 A.2d 281, 288 (Del. 2001) (quoting Rhone-Poulenc, 
616 A.2d at 1195). 
12 Id. (quoting Emmons v. Hartford Underwriters Ins. Co., 697 A.2d 742, 745 (Del. 1997)). 
13 Id. (quoting Rhone-Poulenc, 616 A.2d at 1196). 
14 Axis Reinsurance Co. v. HLTH Corp., 993 A.2d 1057, 1062 (Del. 2010) (citing Rhone-
Poulenc, 616 A.2d at 1196). 
15 O’Brien, 785 A.2d at 288 (quoting Rhone-Poulenc, 616 A.2d at 1196). 
 
13
ambiguous when it is “reasonably or fairly susceptible of different interpretations 
or may have two or more different meanings.”16 
Applying those principles to this case, we conclude that the Policy is 
ambiguous, not “simply because the parties do not agree on its proper 
construction,” 17  but also because multiple and different interpretations may 
reasonably be ascribed to it.18  On the one hand, one reasonably may interpret the 
Lot or Batch Provision as limiting coverage.  The Lot or Batch Provision defines a 
“lot or batch” as “a single production run at a single facility not to exceed a 7 day 
period.”  The Lot or Batch Provision provides that “all Bodily Injury or Property 
Damages arising out of one lot or batch of products . . . shall be considered one 
Occurrence.”  Reading those two elements of the Lot or Batch Provision together, 
one reasonably may interpret the Lot or Batch Provision as segmenting, for 
insurance coverage purposes, claims into separate seven day periods.  That 
interpretation would disregard the actual number of Occurrences.  Under that 
interpretation, Lexington’s duties would be triggered only when ConAgra incurred 
$5 million in liability for a given seven day period.  The Superior Court adopted 
that interpretation as the only reasonable interpretation of the Policy.19 
                                          
 
16 Phillips Home Builders, Inc. v. Travelers Ins. Co., 700 A.2d 127, 129 (Del. 1997) (quoting 
Rhone-Poulenc, 616 A.2d at 1196). 
17 See Axis Reinsurance Co., 993 A.2d at 1062 (citing Rhone-Poulenc, 616 A.2d at 1196). 
18 See Phillips Home Builders, 700 A.2d at 129 (quoting Rhone-Poulenc, 616 A.2d at 1196). 
19 ConAgra Foods, Inc., 2009 WL 3688014, at *3–5. 
 
14
At least one other court has found that interpretation persuasive.  In London 
Market Insurers v. Superior Court, 20  a California appellate court considered 
whether a similarly worded “lot or batch” provision permitted thousands of 
individual asbestos exposures to be deemed a single “occurrence” for insurance 
coverage purposes.21  The insurance policy at issue in London Market relevantly 
provided: “All . . . damages arising out of one lot of goods or products prepared or 
acquired by the Named Insured or by another trading under his name shall be 
considered as arising out of one occurrence.”22  Although the London Market court 
concluded that the provision was ambiguous,23 the court also explained that the 
“lot or batch” provision “preclude[d] treating all asbestos claims as a single 
‘occurrence.’”24 
On the other hand, one also reasonably could interpret the Lot or Batch 
Provision as expanding coverage.  Under that interpretation, the Lot or Batch 
Provision would operate to convert multiple claims in one lot or batch into a single 
Occurrence for insurance coverage purposes.  But, that provision would not 
operate to convert multiple claims arising out of multiple lots or batches into 
distinct multiple Occurrences.  Consistent with that interpretation, the Retained 
                                          
 
20 53 Cal. Rptr. 3d 154 (Cal. Ct. App. 2007). 
21 Id. at 170. 
22 Id. at 162. 
23 Id. at 171 n.8. 
24 Id. at 170. 
 
15
Limit for a General Liability Occurrence would apply.  That is, Lexington’s duties 
would be triggered when ConAgra paid $3 million of liability claims.  Under that 
interpretation, the Lot or Batch Provision would supplement the General Liability 
Occurrence.  If multiple Occurrences arose from a single lot created during a 
seven-day period, those Occurrences would be aggregated pursuant to the Lot or 
Batch Provision.  But, if only one Occurrence arose, the Lot or Batch Provision 
would not balkanize that one Occurrence into multiple Occurrences corresponding 
to seven-day intervals. 
At least two other courts have adopted this interpretation.  In Diamond 
Shamrock Chemicals Co. v. Aetna Casualty & Surety Co.,25 a New Jersey appellate 
court interpreted a similarly worded “lot or batch” provision in the context of 
claims arising from the use of Agent Orange during the Vietnam War.26  The 
United States used Agent Orange to defoliate Vietnamese jungle trails to deny 
enemy forces the benefit of concealment.27  But, Agent Orange had a side effect -- 
it made Vietnam War veterans more susceptible to various diseases.28  Several 
veterans brought suit, and the chemical company that made Agent Orange sought 
insurance coverage. 29   The policy at issue in Diamond Shamrock relevantly 
                                          
 
25 609 A.2d 440 (N.J. Super. Ct. App. Div. 1992), petition for cert. denied, 634 A.2d 528 (N.J. 
1993) (TABLE). 
26 Id. at 479–80. 
27 Id. at 452. 
28 Id. at 452–53. 
29 Id. 
 
16
provided: “[A]ll [] damages arising out of one lot of goods or products prepared or 
acquired by the named insured or by another trading under his name shall be 
considered as arising out of one occurrence.”30  The insurers contended that the 
provision operated to make each of the 133 lots of Agent Orange delivered to the 
military a single occurrence. 31   The Diamond Shamrock court rejected that 
argument and agreed with the lower court that the provision was intended to apply 
only to manufacturing defects, and not to design errors.32  The court recognized 
that the manufacturing-design distinction was debatable, but it concluded that the 
following principle was “indisputable”: 
The intent of the parties in adding the batch clause to the 
policies was to minimize the number of occurrences in order to 
maximize coverage.  If the batch clause is interpreted to require 
aggregation of deductibles to correspond with the number of 
lots distributed, it will run counter to the parties’ intent.  On the 
other hand, although the language of the batch clause makes no 
distinction between manufacturing and design defects, the 
Chancery Division’s interpretation of the provision is consistent 
with the purpose of the clause and the parties’ understanding. 
While the question is far from clear, we choose the 
interpretation of the contractual language that best advances the 
purpose of the clause and comports with the parties’ intent.  We 
are convinced that the clause should be applied only where the 
product manufactured is nonconforming, not where the product 
is consistent with a faulty design.  The equation of “lots” and 
“occurrences” is consistent with the idea that the clause is 
designed to prevent the stacking of deductibles where 
manufacturing errors have taken place.  The Chancery 
                                          
 
30 Id. at 480. 
31 Id. 
32 Id. 
 
17
Division’s construction of the clause also comports with the 
rationale of the cases we cited previously, referring to the cause 
of the injury in defining the number of occurrences.33 
The United States District Court for the District of Maryland and the United 
States Court of Appeals for the Fourth Circuit also have concluded that a “lot or 
batch” provision similar to the one in this case should be interpreted to expand 
coverage.  In Nationwide Mutual Insurance Co. v. Lafarge Corp.,34 those courts 
interpreted that provision in the context of claims for property damage arising from 
the sale of poorly performing cement.35  The policy at issue in Lafarge relevantly 
provided: “[W]hen goods or products are of one prepared or acquired lot, all 
claims arising therefrom shall be deemed to have arisen from a common cause and 
to constitute one occurrence or accident.” 36   The insurer contended that the 
provision operated to make each lot of defective cement a single occurrence.37  The 
district court rejected the insurer’s interpretation and explained: 
The purpose of a batch clause is to limit the number of 
occurrences, not to expand it. 
If this Court were to find that each lot constituted an 
occurrence, then Lafarge’s insurance coverage would be 
                                          
 
33 Id. (citation omitted). 
34 Civ. Nos. H–90–2390, H–93–4173, Bench Op. (D. Md. Oct. 31, 1995), aff’d, 121 F.3d 699, 
1997 WL 532509 (4th Cir. 1997) (TABLE). 
35 Lafarge, 1997 WL 532509, at *1. 
36 Lafarge, Civ. Nos. H–90–2390, H–93–4173, Bench Op., at 4039. 
37 Id. at 4040; Lafarge, 1997 WL 532509, at *4. 
 
18
eviscerated.  That result is clearly not what the parties 
intended.38 
The district court concluded: “The lot clauses plainly apply to situations when 
multiple claims arise from a single defective lot.  They do not purport to extend to 
situations when multiple claims arise from multiple lots.”39  The Fourth Circuit 
agreed with that interpretation and explained: 
After reviewing the district court’s extensive opinion from the 
bench on this issue, we agree with the court’s interpretation of 
“each occurrence,” its conclusion that the “occurrence” and 
underlying cause of the liability was the “continuous, large-
scale manufacture and sale” of defective cement, and its 
holding that there was only one “occurrence” for deductible 
purposes.  Here, we affirm on the reasoning of the district 
court.40 
Given the two reasonable and competing interpretations before us -- one that 
limits coverage and one that expands coverage -- we conclude that the Lot or Batch 
Provision is ambiguous.41  That ambiguity permits a court to consider extrinsic 
evidence of the parties’ intent.42  In this case, the extrinsic evidence reveals that the 
Lot or Batch Provision was negotiated.43  We therefore remand this case for the 
                                          
 
38 Lafarge, Civ. Nos. H–90–2390, H–93–4173, Bench Op., at 4040 (citing Diamond Shamrock, 
609 A.2d at 480). 
39 Id. at 4041. 
40 Lafarge, 1997 WL 532509, at *4. 
41 See Phillips Home Builders, 700 A.2d at 129 (quoting Rhone-Poulenc, 616 A.2d at 1196). 
42 AT&T Corp. v. Lillis, 953 A.2d 241, 252–53 (Del. 2008) (citing Appriva S’holder Litig. Co., 
LLC v. ev3, Inc., 937 A.2d 1275, 1291 (Del. 2007)). 
43 In reply to an inquiry by this Court during the course of this appeal, the parties have proffered 
extrinsic evidence that was produced during discovery before the Superior Court granted 
summary judgment in Lexington’s favor.  That extrinsic evidence includes meeting notes and 
email exchanges.  The documents reflect that the parties actively discussed the Lot or Batch 
 
19
Superior Court to consider extrinsic evidence of what the parties intended when 
agreeing to Endorsement # 3.  If the extrinsic evidence does not reveal the parties’ 
intent as to the Lot or Batch Provision, then the Superior Court should apply the 
“last resort” rule of contra proferentem and interpret it in favor of ConAgra.44 
Lexington Has a Duty to Defend 
The duty to defend may be broader than the duty to ultimately indemnify.45  
In assessing either of those duties, “a court typically looks to the allegations of the 
complaint to decide whether the third party’s action against the insured states a 
claim covered by the policy, thereby triggering the duty to defend.”46  “The test is 
whether the underlying complaint, read as a whole, alleges a risk within the 
coverage of the policy.”47  In determining whether an insurer is bound to defend an 
action against an insured, we apply the following principles: (1) “where there is 
                                                                                                                                        
Provision, including whether a Lot or Batch should be defined as a single production run at a 
single facility not to exceed a 7 day period or a 24 hour period.  ConAgra argues that “[t]he 
extrinsic evidence shows that the wording of the terms . . . was drafted exclusively by 
Lexington.”  Lexington argues that the documents reflect that the Lot or Batch Provision was 
“the product of [an] arms’ length negotiation[] between sophisticated parties of equal bargaining 
power.”  We do not address the intention of the parties at this stage because this extrinsic 
evidence is now a matter for the Superior Court to address in the first instance on remand. 
44 E.I. du Pont de Nemours & Co., Inc. v. Shell Oil Co., 498 A.2d 1108, 1114 (Del. 1985) (“[T]he 
rule of contra proferentem is one of last resort, such that a court will not apply it if a problem in 
construction can be resolved by applying more favored rules of construction.”) (citing Schering 
Corp. v. Home Ins. Co., 712 F.2d 4 (2d Cir. 1983)).  See also 11 SAMUEL WILLISTON & RICHARD 
A. LORD, A TREATISE ON THE LAW OF CONTRACTS § 32:12 (4th ed. 1993 & Supp. 2010) (“The 
rule of contra proferentem is generally said to be a rule of last resort and is applied only where 
other secondary rules of interpretation have failed to elucidate the contract’s meaning.”). 
45 Am. Ins. Grp. v. Risk Enter. Mgmt., Ltd., 761 A.2d 826, 830 (Del. 2000) (citing Charles E. 
Brohawn & Bros., Inc. v. Emp’rs Comm. Union Ins. Co., 409 A.2d 1055, 1058 (Del. 1979). 
46 Pac. Ins. Co., 956 A.2d at 1254 (quoting Risk Enter. Mgmt., 761 A.2d at 829). 
47 Id. (citing Cont’l Cas. Co. v. Alexis I. duPont Sch. Dist., 317 A.2d 101, 103 (Del. 1974)). 
 
20
some doubt as to whether the complaint against the insured alleges a risk insured 
against, that doubt should be resolved in favor of the insured,” (2) “any ambiguity 
in the pleadings should be resolved against the carrier,” and (3) “if even one count 
or theory alleged in the complaint lies within the policy coverage, the duty to 
defend arises.”48 
Here, we conclude that the Lot or Batch Provision is ambiguous because it is 
susceptible to two reasonable and competing interpretations -- one that limits 
coverage and one that expands coverage.  Because the latter interpretation arguably 
applies in this case, ConAgra need not satisfy the Retained Limit for a Lot or Batch 
Occurrence -- $5 million -- to trigger Lexington’s duty to defend.  Rather, 
consistent with the interpretation of the Lot or Batch Provision that expands 
coverage, ConAgra need only satisfy the Retained Limit for a General Liability 
Occurrence -- $3 million.  ConAgra surpassed that threshold approximately three 
years ago.  Consequently, Lexington’s duty to defend was triggered as of the date 
that ConAgra’s liabilities exceeded the $3 million Retained Limit for a General 
Liability Occurrence. 49  Whether or not there is ultimate coverage is for the 
Superior Court to determine, upon an expanded record, on remand. 
 
 
                                          
 
48 Id. (citing Alexis I. duPont, 317 A.2d at 105). 
49 See id. 
 
21
Conclusion 
The judgment of the Superior Court is REVERSED and REMANDED for 
proceedings consistent with this Opinion. 
 
 
 
STEELE, Chief Justice, and NEWELL, Judge, dissenting: 
 
ConAgra Foods, Inc. filed suit against Lexington Insurance Co. to obtain 
insurance coverage for claims arising out of ConAgra’s production of salmonella-
tainted peanut butter.  The Superior Court awarded summary judgment to 
Lexington on the basis of the insurance contract between the parties.  ConAgra 
now appeals this judgment.  Because we believe the contractual text is 
unambiguous and favors Lexington’s position, we would affirm.  Therefore, we 
respectfully dissent. 
I. 
FACTS AND PROCEDURAL HISTORY 
 
In 2006, ConAgra bought an insurance policy from Lexington which 
provides broad general liability coverage to ConAgra once ConAgra satisfies 
stipulated retained limits.  These retained limits operate like deductibles—
ConAgra pays up to the stipulated level, and under the conditions provided in the 
contract, Lexington pays ConAgra’s liabilities that exceed the retained limits.  The 
 
22
general liability retained limit is $3 million for what the policy defines as a general 
“Occurrence.”50 
With regard to product liability claims specifically, the policy provides 
coverage according to a defined “Products-Completed Operations Hazard.”51  The 
policy clarifies the limits of coverage pertaining to this Products-Completed 
Operations Hazard in the “Lot or Batch Provision” made part of the policy by 
Endorsement #3.  According to Endorsement #3, “[w]ith respect to the Products-
Completed Operations Hazard, all Bodily Injury or Property Damage arising out of 
one lot or batch of products prepared or acquired by [ConAgra], shall be 
considered one Occurrence.”  Endorsement #3 also defines “lot or batch” as “a 
single production run at a single facility not to exceed a 7 day period.”  Finally, 
Endorsement #10 amends the schedule of retained limits applicable under various 
conditions to show that while the limit for general liability is $3 million per 
Occurrence, the limit for lot or batch coverage is $5 million per Occurrence. 
                                          
 
50 The contract generally defines “Occurrence” as “an accident, including continuous or repeated 
exposure to substantially the same general harmful conditions.  All such exposure to 
substantially the same general harmful conditions will be deemed to arise out of one 
Occurrence.” 
51 The contract defines the “Products Completed Operations Hazard,” in relevant part, as “all 
Bodily Injury and Property Damage occurring away from premises [ConAgra] own[s] or rent[s] 
and arising out of [ConAgra’s] Product or [ConAgra’s] Work.”  It explicitly excludes products 
still in ConAgra’s physical possession, work ConAgra has not yet completed or abandoned, and 
bodily injury or property damage arising out of the transportation of property or the existence of 
tools, uninstalled equipment, or abandoned or unused materials. 
 
23
ConAgra manufactures its peanut butter at a plant in Sylvester, Georgia in an 
uninterrupted, continuous process that exceeds seven days in duration.  On 
February 15, 2007, ConAgra notified Lexington that it had recalled Peter Pan 
Peanut Butter it produced at its Georgia plant after the Centers for Disease Control 
identified salmonella contamination in the peanut butter.  Later, ConAgra faced 
thousands of claims asserting that ConAgra was liable for damages for its failure to 
detect and eliminate the salmonella at its Georgia plant. 
ConAgra notified Lexington that defending the peanut butter claims would 
likely exceed the $3 million retained limit on general liability and trigger 
Lexington’s obligations under the policy.  On November 8, 2007, Lexington issued 
a reservation of rights letter advising ConAgra of the potential applicability of the 
Lot or Batch Provision and requesting documents related to ConAgra’s 
manufacturing process.  On June 23, 2008, ConAgra informed Lexington that it 
was about to exceed the $3 million general liability retained limit, and on June 25, 
2008, ConAgra exceeded it.  On October 31, 2008, Lexington sent ConAgra 
another reservation of rights letter in which it informed ConAgra that the Lot or 
Batch Provision applied.  In this letter, Lexington did not deny coverage, but 
informed ConAgra of its belief that ConAgra had not yet triggered Lexington’s 
obligations because ConAgra had not alleged that it had satisfied the $5 million 
retained limit applicable under the Lot or Batch Provision. 
 
24
The central issue in this case is whether the Lot or Batch Provision applies.  
ConAgra argues that it does not apply.  According to ConAgra, the general 
Occurrence definition applies, the peanut butter claims arise from a single 
Occurrence, and ConAgra must pay a single $3 million retained limit in order to 
trigger Lexington’s coverage obligation.  Because ConAgra has spent more than $3 
million defending against the peanut butter claims, it argues that it has triggered 
Lexington’s insurance coverage.  Contrarily, Lexington argues that the Lot or 
Batch Provision applies.  According to Lexington, the Endorsement’s Occurrence 
definition applies, the peanut butter claims arise out of multiple lots or batches of 
product, and therefore ConAgra must pay a $5 million retained limit for each lot or 
batch represented by the peanut butter claims before it triggers Lexington’s 
coverage obligation.  Because ConAgra neither has asserted that it has exceeded 
the $5 million lot or batch retained limit, nor has provided documentation to that 
effect, Lexington argues that it has no coverage obligation. 
The parties pursued the same arguments in Superior Court.  ConAgra sued 
Lexington to collect all excess liability over the $3 million general retained limit.  
Lexington counterclaimed and sought a declaration that the Lot or Batch Provision 
applied and that it had no coverage obligation unless and until ConAgra exceeded 
the $5 million per lot or batch retained limit.  Lexington filed a Motion for 
Summary Judgment and ConAgra filed a Cross Motion for Summary Judgment.  A 
 
25
Superior Court judge found the insurance policy unambiguous, agreed that the 
Endorsement’s Occurrence definition applied and granted summary judgment to 
Lexington.  ConAgra appeals that judgment. 
II. 
STANDARD OF REVIEW 
 
We review a trial court’s decision to grant summary judgment de novo with 
respect to both the facts and the law.52  We also review the proper interpretation 
and construction of an insurance contract de novo. 53  If the relevant contract 
language is clear and unambiguous, we must give it its plain meaning.54 
III. 
ANALYSIS 
 
We believe the language of this insurance policy is clear and unambiguous 
on its face.  The Products-Completed Operations Hazard provisions of the policy 
apply to product liability claims, and Endorsement #3 changes the definition of 
Occurrence for purposes of those claims.  The peanut butter claims in this case fall 
within the purview of the Products-Completed Operations Hazard because they are 
bodily injury claims occurring away from ConAgra’s premises and arising out of 
ConAgra’s products.  Endorsement #3 instructs the parties to treat as a single 
Occurrence all bodily injury claims that arise from each lot or batch of product, 
and it defines a “lot or batch” as “a single production run at a single facility not to 
                                          
 
52 LaPoint v. AmerisourceBergen Corp., 970 A.2d 185, 191 (Del. 2009). 
53 Phillips Home Builders, Inc. v. Travelers Ins. Co., 700 A.2d 127, 129 (Del. 1997). 
54 Id. 
 
26
exceed a 7 day period.”  Consequently, with respect to products liability claims 
arising out of the Products-Completed Operations Hazard, there is one Occurrence 
for, at most, every seven day period of production during which bodily injury 
claims, like the peanut butter claims here, arise. 
ConAgra argued that the policy’s general Occurrence definition applies in 
this case, primarily because it manufactured the tainted peanut butter products in 
an uninterrupted, continuous production schedule that exceeded seven days in 
duration.  ConAgra’s argument implies that reliance upon Endorsement #3 
disaggregates claims that should otherwise be aggregated and defeats coverage 
rather than enhances it.  This interpretation, however, conflicts with the explicit 
agreement of the parties.  ConAgra and Lexington agreed to specific terms—in 
Endorsement #3—that apply to the precise product liability bodily injury claims 
that are asserted here.  Specifically, those terms dictate that all bodily injury claims 
arising out of one lot or batch of completed products constitute one Occurrence, 
and they define one lot or batch as a single seven day production run.  They make 
no exception nor are they subject to any caveat that depends upon the de facto 
production schedule ConAgra decides to pursue.  Accepting ConAgra’s argument 
that the general policy definition of Occurrence applies in this case would 
eviscerate the seven day limitation contained in the Lot or Batch Provision and 
 
27
defeat the method that the parties expressly agreed upon for determining an 
Occurrence for purposes of product liability claims.   
The insurance policy in this case is a general insurance policy.  The parties 
agreed to a general definition of Occurrence that applies in cases of general 
liability.  The parties also agreed to the terms of Endorsement #3, including the Lot 
or Batch Provision.  The very purpose of Endorsement #3 and its Lot or Batch 
Provision is to allow the parties to zero in on production—specifically, products 
liability claims.  It explicitly changes the definition of Occurrence for purposes of 
bodily injury claims subject to the Products-Completed Operations Hazard.  In 
cases involving those claims, which include this case, Endorsement #3 
intentionally temporally limits the aggregation of claims to those arising out of the 
same discrete seven day period of production and then subjects those aggregated 
claims to an increased retained limit of $5 million.   
Considering the vast scope of potential liability that could arise from 
ConAgra’s completed products it produces in continuous manufacturing cycles, 
imposing these dual limitations—redefining Occurrence to permit aggregation of 
claims only within distinct seven day production runs and raising the applicable 
retained limit from $3 million to $5 million—may have been the only way that 
Lexington could offer insurance coverage at a price ConAgra would pay.  
Regardless of the motivation underlying the inclusion of these terms in the policy, 
 
28
however, their import is clear.  With respect to bodily injury claims arising out of 
finished products under the Products-Completed Operation Hazard, the insurance 
policy imposes a $5 million retained limit on each lot or batch, which the policy 
defines as a discrete production run lasting seven days or less.  Unless and until 
ConAgra satisfies that heightened limit for any of its lots or batches, ConAgra does 
not trigger Lexington’s coverage. 
IV. 
CONCLUSION 
 
We believe the text of the insurance policy is clear.  Consequently, we 
interpret the text according to its plain meaning.  In this case, ConAgra and 
Lexington used Endorsement #3 to alter the general definition of Occurrence and 
raise the applicable retained limit in cases of bodily injury claims arising out of the 
Products-Completed Operation Hazard.  Because the peanut butter claims are 
products liability claims for bodily injury, they fall within the purview of 
Endorsement #3.  Therefore, we believe that the policy requires ConAgra to satisfy 
a $5 million per seven day production run retained limit with respect to the peanut 
butter claims before it can trigger Lexington’s insurance coverage.  Because we 
believe the text is unambiguous and yields this result, and because ConAgra has 
not asserted that it reached its applicable retained limit, we believe ConAgra has 
not yet triggered Lexington’s coverage and exposure to the tainted peanut butter 
 
29
claims.  We would affirm the Superior Court.  The majority believes otherwise, 
and therefore, we respectfully dissent.