The opinion of the court was delivered by: Michael A. Telesca United States District Judge
Plaintiff JTC Industries, Inc., ("JTC") a manufacturer of industrial rollers, brings this action against its insurer The Travelers Indemnity Company of America, ("Travelers") seeking insurance coverage from Travelers for property damage that JTC sustained in connection with its manufacture of certain rollers. Specifically, JTC claims that several of its rollers were damaged and rendered unusable as a result of using contaminated raw material in the manufacturing process. JTC claims that the contaminated raw material, which was supplied to JTC by a third-party vendor, also contaminated the equipment used to make the rollers, resulting in JTC being required to stop production of the rollers until the manufacturing equipment could be cleaned. JTC sought insurance coverage from Travelers for the damaged rollers, repair and cleaning of the manufacturing equipment, and lost business income resulting from production delays. Travelers, however, denied JTC's claim on grounds that the damage was not covered under JTC's insurance policy. Thereafter, JTC brought the instant action seeking declarations that the damage it sustained is a covered loss under its insurance policy, and that Travelers is obligated to pay for JTC's loss.
The parties have now filed competing motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Defendant Travelers contends that there are no material issues of fact in dispute, and that it is entitled to judgment as a matter of law on grounds that the insurance policy at issue excludes losses for which JTC seeks coverage. JTC argues that the relevant terms of the insurance policy are ambiguous, and that under a reasonable interpretation of the policy terms, and construing the policy exclusions narrowly as the court must do, it is entitled to coverage for its losses.
For the reasons set forth below, I find that the losses for which JTC seeks coverage are excluded by JTC's insurance policy, and I therefore grant defendant's motion for summary judgment, and deny plaintiff's motion for summary judgment.
Plaintiff JTC Industries, Inc., is a manufacturer of industrial rollers known as "Corona Treater Rollers" that are commonly used in the film, plastics, and paper industries. One of the materials used in the manufacture of the rollers is a substance known in the industry as "frit." According to the parties, frit is a powder-like material that is used to coat the rollers during the production process.
In December, 2008, and again in February, 2009, JTC did not know that the frit it received from a supplier was contaminated with a metallic substance. The contaminated frit was used during the roller production process, and as a result, 11 rollers manufactured by JTC were defective, and unsuitable for use or sale. Additionally, the production equipment used to manufacture the rollers became contaminated by the frit, and had to be shut down until it could be decontaminated. As a result of the shut-down, JTC suffered production delays and lost business.
After determining the source of the problem, and after decontaminating its equipment, JTC submitted a claim to its insurer, defendant Travelers. JTC sought coverage for the costs of the 11 treater rollers that were rendered unuseable as a result of the contaminated frit, the costs of decontaminating the production equipment, and lost business income resulting from production delays. On March 18, 2009, following an investigation into the plaintiff's claim, Travelers disclaimed coverage on grounds that the policy at issue excluded coverage for losses attributable to property that was being "processed," "manufactured," or "worked upon," and also excluded coverage for losses attributable to contamination, or property damaged as a result of faulty or defective materials. Following defendant's denial of coverage, the plaintiff commenced the instant action.
I. The Parties' Motions for Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." When considering a motion for summary judgment, all genuinely disputed facts must be resolved in favor of the party against whom summary judgment is sought. Scott v. Harris, 550 U.S. 372, 380 (2007). If, after considering the evidence in the light most favorable to the nonmoving party, the court finds that no rational jury could find in favor of that party, a grant of summary judgment is appropriate. Scott, 550 U.S. at 380 (citing Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-587 (1986).
Travelers moves for summary judgment on grounds that there are no material facts in dispute, and that as a matter of law, it is entitled to judgment in its favor. In support of its motion, Travelers contends that because the insurance contract contains unambiguous language specifically excluding the types of losses claimed by JTC, it properly denied plaintiff's claim, and is therefore entitled to judgment in its favor.
JTC cross-moves for summary judgment seeking a declaratory judgment that Travelers is obligated under the relevant policy to pay damages it sustained as a result of using the contaminated frit to manufacture its rollers. JTC claims that the policy provisions relied on by Travelers either do not apply, or are ambiguous, and must be narrowly construed against Travelers. JTC contends that if ...