Opinion ID: 221953
Heading Depth: 2
Heading Rank: 1

Heading: Storage and Contamination

Text: Leprino is the largest manufacturer of mozzarella cheese in the United States. It stores vast amounts of newly manufactured cheese in cold-storage warehouses before shipment, using its own and third-party warehouses. In 1998, Leprino entered into an all-risk property insurance policy with Arkwright Insurance, a predecessor of Factory Mutual. The policy covered all risk of physical damage except where specifically excluded. After Arkwright merged with another insurance company to form Factory Mutual in 1999, Factory Mutual sent Leprino a replacement policy. Both the Arkwright and Factory Mutual policies included a nearly identical exclusion, stating: D. This Policy excludes the following unless directly resulting from other physical damage not included by this Policy: 1) contamination including but not limited to the presence of pollution or hazardous material. 2) shrinkage. R., Vol. 10 at 2444 (emphasis added). In 2001, Leprino received reports that some of its cheese had an off-odor and an off-flavor, rendering it unusable. Leprino traced the cheese to Gress Warehouse, a third-party warehouse in Pennsylvania that Leprino used to store millions of pounds of cheese. Leprino executives visited the warehouse and noted (1) a strong fruity odor in the warehouse office and freezer areas, (2) spills of fruit juice concentrate all over the warehouse, (3) numerous products whose packaging appeared to have been damaged by forklifts, and (4) stagnant air in the warehouse. Subsequent testing by both parties' experts was consistent and revealed that fruit flavoring compounds, which were also present in the warehouse's air, had contaminated the cheese. The contamination ruined over eight million pounds of cheese, worth more than $13.5 million. Leprino tendered an insurance claim to Factory Mutual, but Factory Mutual denied the claim, relying on the policy's contamination exclusion.