The United States District Court for the Southern District of New York, predicting New Hampshire law, has held that the "Your Product" exclusion precludes coverage for a settlement between a New York-based organic food distributor and its Canadian customer after the Canadian government recalled raspberry crumble sold by the distributor that contained multiple contaminants. Tradin Organics USA, Inc. v. Maryland Cas. Co., No. 06 Civ. 5494 (WHP), 2008 WL 241081 (S.D.N.Y Jan. 29, 2008). The distributor's parent in Amsterdam purchased raspberry crumble from a Serbian company to satisfy a supply contract between the distributor and its customer. Upon delivery the crumble was found to contain "plastic, pits, cherry stems, glass and other materials" and was recalled as contaminated by the Canadian government. The distributor then settled with the customer and sought coverage for the settlement amount. The policy at issue excluded property damage to "'your product' arising out of it or any part of it" and defined "your product" to include "any goods or products . . . manufactured, sold, handled, distributed or disposed of by" the distributor. The court held that, although New Hampshire courts had not yet addressed this exclusion, courts from other jurisdictions "have held that similarly defined 'your product' exclusions unambiguously preclude coverage for losses caused by a contaminated or defective product sold by the insured." The court also held that the plain language of the exclusion would apply to preclude coverage even in the absence of such persuasive authority because it was undisputed that the distributor sold the contaminated raspberry crumble to its customer.
The result in this case is straightforward and correct. It is a refreshing example of the application of plain policy language in a context—defective food and product claims—that is becoming increasingly contentious. The facts of this case, however, highlight the factual complexity of many of today's defective product and food situations. This case not only involved a New Hampshire-based insured with a parent in Amsterdam, but also a Serbian subcontractor and Canadian customer. Defective product scenarios are increasingly presenting claims against foreign subcontractors, vendors and others, which in turn may pose difficult jurisdictional issues. Further, there is growing recognition that additional insured claims may be presented to insurers by a policyholder's vendor or subcontractor if claims are successfully asserted against them.