Insurer Prevails in Fish Oil Contamination Suit

Trident Seafoods Corp. v. Ace American Ins. Co. (W.D. Wash., August 2, 2013)

Trident alleged that ACE breached the insurance contract in refusing to indemnify it against product liability claims for its fish oil product contaminated with petroleum, which it sold to a Japanese company. Petroleum had contaminated the fish oil stored in a tank on Trident’s ship through a crack in the fuel tank which was then dispersed to other tanks during unloading.

The CGL policy excluded coverage for liability “arising out of the ownership, maintenance, use, or entrustment to others of any aircraft, auto, or watercraft owned or operated by or rented or loaned to any insured.” The product liability provision also contained an exception stating that the coverage did not include damage arising out of the “transportation of property, unless the injury or damages arises out of a condition in or on a vehicle created by the ‘loading or unloading’ of it.”

The court held that the insurer convincingly demonstrated that the watercraft exclusion in the policy precluded coverage of Trident’s claim, as a matter of law, under Toll Bridge Auth. v. Aetna Ins. Co., 54 Wn. App. 400 (Wash. Ct. App. 1989). In Toll Bridge, supra, it was held that “the phrase ‘arising out of’ is unambiguous and has a broader meaning than ‘caused by’ or ‘resulted from.’ It is ordinarily understood to mean ‘originating from,’ ‘having its origin in,’ ‘growing out of,’ or ‘flowing from.’” Furthermore, it has been held that “arising out of” and “proximate cause” describe two different concepts such that it is not necessary to examine the proximate cause of an incident in order to determine whether the incident is excluded from coverage by “arising out of” language.

Thus, although the policyholder attempted to distinguish Toll Bridge, on several grounds, the court discredited those arguments holding that summary judgment for the insurer was appropriate where, like Toll Bridge, the insurance policy excluded coverage “arising out of the ownership, use, or maintenance of any watercraft.” Here, it was uncontested that the contamination of the fish oil originated from a cracked fuel tank aboard the ship which clearly indicated that the contamination originated from the maintenance of the ship. Therefore, the watercraft exclusion applied to preclude coverage for the claim.