T hi s di s pos i t i on i s notappr opr i a t e f orpubl i c a t i on a nd i s notpr e c e de nt * e xc e pta s pr ovi de d by 9th C i r . R . 36- 3.

Th e H o n o r ab l e M i c h a e l H . W a t s o n , D i s tr i c tJ u d g e f o rth e U . S. ** D i s tr i c tC our tf

orS outhe rn O hi o, C ol um bus , s i tt i ng by de s i gna t i on.

NOT F OR P UB L I CAT I ON UN I TE D STATE S C OU RT OF APPE ALS FOR T HE NI NTH CI RC UI T SI LG A N CO N TA I N ERS C OR P OR AT I ON , P la in tif

f - A p p e lla n t, v. N A TI O N A L U N I O N FI RE I N SU RA N CE C OMP AN Y O F P I T T S B UR GH , P A, D ef

endant- A pp el l ee . N o. 10- 15869 D . C . N o . 4 : 0 8 -cv -0 2 2 4 6 -P JH ME MOR AN DU M *

A pp ea l fr om the U ni t ed S t at es D i stri ctC ou rt f o rth e N o r th e rn D is tr ic t o f C a lif o rn ia P hy l l i s J . H a m i l t on, D i s tr i c tJ udge , P r e s i di ng A r gue d a nd S ubm i tt e d M a y 13, 2011 S a n F r a n c is c o , C a lif

o rn ia B ef ore: H U G and P A E Z , C i rc ui tJudg es , and W A T S O N , D i stri ctJudg e. ** P l a i nt i f f - appe l l a ntS i l ga n C ont a i ne r s C orpor a t i on ( “ S i l ga n” ) appe a l s the di stri ctcourt ' s dec i si on grant i ng sum m ary j ud gm entt o d ef endant -app el l ee N at i on al 

# FI LED MA Y27 2 011 M OLLY C. DW Y ER, CLERK U . S. C O U R T OF APPE ALS2

U ni on I ns ur a nc e C om pa ny ( “ N a t i ona l U ni on” ) i n S i l ga n' s di ve r s i ty a c t i on a r i s i ng f r om a n i ns ur a nc e di s put e . T he di s tr i c tc our the l d tha tN a t i ona l U ni on di d not b reach i t s co n tractu al d u ty t o p ay b ecau se S i l g an d i d n o tsu ffer a co v ered l o ss un der the um brel l a i nsurance pol i cyi ss ued b y N at i on al U ni on . B ec ause the part i es a r e f a m i l i a rw i th the f

a c tua l a nd pr oc e dur a l hi s t ory of thi s c a s e , w e do notr e c ount a d d itio n a l f

a c ts e x c e p t a s n e c e s s a ry to e x p la in th e d e c is io n . T h e p a r tie s a g r e e th a t C a lif o rn iala w ap p lie s a n d th a t it is S ilg a n ’s b u r d e n to es t abl i sh thati t s c l ai m s f al l w i thi n the sc op e of the i nsurance pol i cy . W e r evi ew th e d is tr ic t c o u r t’s g r a n t o f s u m m a ry ju d g m e n t d e n o v o . L i ndah l v. A i r France , 9 3 0 F .2 d 1 4 3 4 , 1 4 3 6 ( 9 th C ir . 1 9 9 1 ) . J u r is d ic tio n is p r o p e ru n d e r2 8 U .S .C . § 1 2 9 1 , a n d w e a f

f i rm. U nd erthe t erm s of the um brel l a pol i cy , N at i on al U ni on i s obl i gat ed t o p ay s u m s th a tS i l g a n i s l i ab l e f o rd u e t o ‘ P r o p e r ty Da m a g e ’ . T h e p o l i c y d e f i n e s two ty p e s o f ‘P r o p e r ty D a m a g e ’: ( 1 ) “p h y s ic a l in ju ry to ta n g ib le p r o p e r ty , in c lu d in g a ll re sul t i ng l oss of use of thatprop erty, ” a nd (2) “ l oss of use of t angi bl e property that i s notph ys i ca l l y i nj ured. ” W e c on cl ud e thatnei ther type of ‘ P roperty D am age’ o c c u rr e d h e r e . T h u s , N a tio n a l U n io n d id n o t b r e a c h its d u ty to p a y . 1 . “ P h ysi cal i n

j u ry t o t an g i b l e p ro p erty”3

T h e p r e v a ilin g v ie w u n d e rC a lif o rn iala w is th a t w h e r e p r o p e r ty d a m a g e is defi ned as a“ ph ys i ca l i nj ury t o t angi bl e property, ” the “ m er e i ncorpo ra t i on of a de f e c t i ve butf

unc t i oni ng [ pr oduc t ] tha tm i ghtf a i l i n the f

utur e [ doe s ] not const i tut e ‘ prop erty dam age. ’ ” F & H C o n st . v. ITT

H a rt f o rd In s. C o . o

f Mi dw est , 12 C a l . R ptr . 3d 896, 905 ( C a l . C t . A pp. 2004) . W e c onc l ude tha tc ove r a ge i s not tri gg er ed by thi s f

i rs tdefi ni t i on of ‘ P roperty D am age’ because i ti s und i sput ed that S i l gan’ s def

ec t i ve l i ds di d n otph ys i ca l l y harm the frui ti nsi de the cups. T here w as no al t er at i on i n the appearance, shape, or col or of the frui tand the frui tre m ai ned edi bl e. S i l gan' s def

ec t i ve l i ds, m oreover, w er e notso i nh er ent l y dangerous that they c an be consi dere d t o h ave i nfl i ct ed a physi ca l i nj ury on the frui tby the m er e f a c t o f in c o rp o r a tio n . C

f. A rm s tr o n gW

o r ld I n du s . I n c . v . A e tn a C a s u a lty & Su r e ty C o. , 52 C a l . R ptr . 2d 690, 733- 34 ( C a l . C t . A pp. 1996) ( hol di ng tha tthe in s ta lla tio n o f

a s b e s to s - c o n ta in in g m a te r ia ls c a u s e d im m e d ia te p h y s ic a l in ju ry to the bu i l di ng because a sbes t os i s ul tra haze rdou s) . 2. “ L os s of

us e of t a ngi bl e pr ope r ty tha ti s notphy s i c a l l y i nj ur e d" A “ c l a s s i c ‘ l os s of

us e ’ ” c l a i m oc c ur s w he r e “ the i ns ur e d’ s de f e c t i ve p r o p e r ty r e n d e r e d th e p r o p e r ty o f a th ir d p a r ty u n u s ab le .” So ny C om pu terE ntm ’t A m . I nc . v . A m . H

om e A s s ur . C o. , 532 F . 3d 1007, 1019 ( 9th C i r . 2008) ( appl y i ng C a l i f orni a l a w ) . W e c onc l ude tha tc ove r a ge i s nottr i gge r e d by thi s s e c ond4

d e f in itio n o f ‘P r o p e r ty D a m a g e ’ b e c a u s e S ilg a n h a s n o t d e m o n s tr a te d th a t th e f ru it i nsi de the defec t i ve cups w as com pl et el y “ un usabl e. ” A l tho ug h D el M on t e m ay have m ade abu si ness deci si on no tt o sel l the frui tcups, S i l gan h as no tshow n that the edi bl e f

rui tw as un sui t abl e f

or other purpo se s, such as sa l e on a se cond ary m a rk e t. In su m , b ec au se S il g an h as n o t estab li sh ed th at it s d ef ec ti v e lid s c au se d “a p h y s ic a l in

ju ry to ta n g ib le p r o p e r ty ” o rth e “lo s s o f u s e o f ta n g ib le p r o p e r ty th a t is notphy s i c a l l y i nj ur e d, ” N a t i ona l U ni on di d notbr e a c h i t s duty t o pa y unde rthe te rm s o f th e p o lic y . A F F I R M E D .