Court Opinion

ID: 6498528
Source: CourtListenerOpinion
Date Created: 2022-07-07 20:00:36.799474+00
Date Added: 2024-06-11T08:51:20.743567
License: Public Domain

NOT FOR PUBLICATION                            FILED
                    UNITED STATES COURT OF APPEALS                         JUL 7 2022

                           FOR THE NINTH CIRCUIT                      MOLLY C. DWYER, CLERK
                                                                        U.S. COURT OF APPEALS

EGG AND I, LLC, a Nevada limited liability No. 21-15545
company; EGG WORKS, LLC, a Nevada
limited liability company; EGG WORKS 2, D.C. No. 2:20-cv-00747-KJD-DJA
LLC, a Nevada limited liability company;
EGG WORKS 3, LLC, a Nevada limited         MEMORANDUM*
liability company; EGG WORKS 4, LCC, a
Nevada limited liability company; EGG
WORKS 5, LLC, a Nevada limited liability
company; EGG WORKS 6, LLC, a Nevada
limited liability company; EW
COMMISSARY, LLC, a Nevada limited
liability company,

                Plaintiffs-Appellants,
    v.
U.S. SPECIALTY INSURANCE
COMPANY, a Texas Corporation;
PROFESSIONAL INDEMNITY AGENCY,
INC., DBA Tokio Marine, HCC-Specialty
Group, a New Jersey corporation,
                Defendants-Appellees.

                   Appeal from the United States District Court
                            for the District of Nevada
                    Kent J. Dawson, District Judge, Presiding
                             Submitted June 16, 2022**
                             San Francisco, California

*
  This disposition is not appropriate for publication and is not precedent except as
provided by Ninth Circuit Rule 36-3.
**
   The panel unanimously concludes that this case is suitable for decision without
oral argument. See FED. R. APP. P. 34(a)(2)(C).
Before: BYBEE, CALLAHAN, and COLLINS, Circuit Judges.

      Plaintiffs-Appellants are a group of affiliated corporations that operate

family-style restaurants in Clark County, Nevada. On March 20, 2020, in response

to the Covid-19 pandemic, Nevada Governor Steve Sisolak issued an emergency

order prohibiting in-person dining at all restaurants in the State. Plaintiffs, who are

insureds under a “restaurant recovery insurance” policy issued by Defendants-

Appellants U.S. Specialty Insurance Company and Professional Indemnity

Agency, claimed that, as a result of the Governor’s order, they had incurred

covered “business interruption” losses under this policy. Alleging that Defendants

refused to cover the losses, Plaintiffs filed a class action complaint in the district

court challenging the denial of coverage under a variety of state-law theories and

seeking, inter alia, damages and declaratory relief. The district court granted

Defendants’ motion to dismiss for failure to state a claim, holding that, as a matter

of law, the “alleged losses are not covered” by the policy’s terms. The district

court had jurisdiction under 28 U.S.C. § 1332(d), and we have jurisdiction under

28 U.S.C. § 1291. Reviewing the district court’s construction of the insurance

policy de novo, see Blue Ridge Ins. Co. v. Stanewich, 142 F.3d 1145, 1147 (9th

Cir. 1998), we affirm.

      The parties agree that the insurance policy at issue is governed by Nevada

law. Under Nevada law, courts must interpret insurance policy language

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“according to the plain meaning of its terms.” Century Sur. Co. v. Casino West,

Inc., 329 P.3d 614, 616 (Nev. 2014); see also American Excess Ins. Co. v. MGM

Grand Hotels, Inc., 729 P.2d 1352, 1354 (Nev. 1986) (stating that policy terms

must be construed “in their plain, ordinary and popular connotations”). Here, the

district court correctly held that, under the plain language of the policy, Plaintiffs’

alleged losses are not covered.

      The policy limits covered losses (including business interruption losses) to

specified losses “incurred by the Insured directly and solely as the result of a

covered Insured Event.” Plaintiffs’ claim of a covered “Insured Event” rests solely

on their allegation that an “Accidental Contamination” has occurred. The policy

defines “Accidental Contamination” as follows:

          Any accidental or unintentional contamination, impairment or
          mislabeling of an Insured Product(s), which occurs during or
          as a result of its production, preparation, manufacture,
          packaging or distribution—provided that the use or
          consumption of such Insured Product(s) has resulted in or
          would result in clear, identifiable, internal or external visible
          physical symptoms of bodily injury, sickness, disease or death
          of any person(s), within three hundred and sixty five (365)
          days following such consumption or use.

The phrase “Insured Product(s),” in turn, is defined as follows:

          INSURED PRODUCT(S) means all ingestible products for
          human consumption, or any of their ingredients or
          components, that have been reported to the Insurer on the
          application on file with the Insurer for the effective dates of
          this Policy or by addendum to such application and that are:

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          a. in production; or
          b. have been manufactured, handled or distributed by the
             Insured; or
          c. manufactured by any contract manufacturer for the Insured;
             or
          d. being prepared for or are available for sale; or
          e. all ingestible products for human consumption served at any
             restaurant location operating under the same trade name as
             the Insured.

The declarations page further states that “Insured’s Products” are “[a]ll retail

restaurant offerings served during the Policy period at any time at any of the

Insured’s Locations in the manner prescribed in the Application form signed and

dated August 29, 2019 and held on file with the Insurer.” The referenced August

29, 2019 application required Plaintiffs to list the percentages of the various

categories of “Insured Products” sold, such as “Fountain Drinks,” “Poultry,” etc.

      Plaintiffs contend that “in-person food service” qualifies as an “Insured

Product” under the policy and that, as a result, all of the elements of an “Accidental

Contamination” are met: the Governor’s order and the pandemic resulted in

“impairment” of that product; that impairment occurred “during” the “production,

preparation, manufacture, packaging or distribution” of that product; and use of

that product—i.e., in-person food service—“would result in . . . physical symptoms

of bodily injury, sickness, disease or death of any person” within a year of such

use. This theory fails, because Plaintiffs’ effort to define the “insured product” as

“in-person food service”—as opposed to the food items served—contradicts the

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plain language of the policy. Casino West, 329 P.3d at 616. The policy’s express

definition of “Insured Product(s)” limits that term to “ingestible products for

human consumption, or any of their ingredients or components” (emphasis added).

Plaintiffs’ reliance on the further statement in the declarations page is unavailing,

because “restaurant offerings” that are “served” likewise plainly refers to ingestible

items. If any further confirmation were needed, that understanding of the

declarations page’s language is confirmed by the referenced application, which

explicitly describes various categories of ingestible items as the “Insured

Products.”

       Plaintiffs argue that the policy’s inclusion of a specific “Avian Flu”

exclusion proves that the policy covers more than contamination and impairment

of food products, because Avian Flu assertedly “cannot spread through food.”

This exclusion is irrelevant. As we recently held in construing Nevada insurance

law, “exclusions to coverage are not considered unless the court first concludes

that there is coverage under the coverage clauses of the policy,” and exclusions

therefore cannot be used to “expand the policy’s coverage beyond its underlying

coverage terms.” American Nat’l Prop. & Cas. Co. v. Gardineer, 25 F.4th 1111,

1118 (9th Cir. 2022) (concluding that Nevada law would follow California law on

this point).

       AFFIRMED.

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