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Leprino Foods Co. v. Factory Mut. Ins. Co.

United States Court of Appeals for the Tenth Circuit

July 6, 2006, Filed

Nos. 04-1319 and 04-1338


 [*1282]  HENRY, Circuit Judge.

This diversity action stems from a dispute involving the contamination of over eight million pounds of mozzarella cheese manufactured by Leprino Foods Company resulting in damages of $ 13,589,235.45. Leprino sought coverage under an all-risk insurance policy issued by Factory Mutual Insurance Company ("FM"), which denied the claim, citing the FM policy's "contamination exclusion." Leprino argued first, that the insured cheese was covered under the express terms of the FM policy, and second, that Leprino had a reasonable expectation of coverage under the [**2]  FM policy such that it had coverage for all changes in flavor for its cheese.

 [*1283]  The district court disagreed as to the first claim, granting partial summary judgment because the cheese was clearly contaminated. It submitted the reasonable expectations question to the jury. The jury found that Leprino's expectation of coverage was not reasonable.

Leprino appeals the grant of partial summary judgment, the jury verdict and the district court's denial of its motion for a new trial. FM cross-appeals, arguing that the district court erred when it submitted the doctrine of reasonable expectations to the jury. For the reasons given below, we REVERSE the grant of partial summary judgment and REMAND for a new trial.


A. Factual Background

Leprino, a privately-held Colorado corporation, specializes in manufacturing mozzarella cheese and is the largest manufacturer of mozzarella cheese in the United States. Leprino stores vast amounts of newly-manufactured cheese in cold-storage warehouses before shipment, sometimes reaching an inventory of forty million pounds at one time.

In 1998, Leprino sought a three-year "all-risk" property insurance policy to cover risks related to its [**3]  products, plants, and equipment. Leprino entered negotiations with Arkwright Insurance, a predecessor company to FM. Arkwright issued an All-Risk Policy, effective until November 1, 2001 covering "ALL RISK OF PHYSICAL DAMAGE" except where specifically excluded. The proposed Arkwright Policy contained an exclusion (Exclusion No. 6) stating:

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453 F.3d 1281 *; 2006 U.S. App. LEXIS 16903 **

LEPRINO FOODS COMPANY, Plaintiff-Appellant/Cross-Appellee, v. FACTORY MUTUAL INSURANCE COMPANY, Defendant-Appellee/Cross-Appellant.

Subsequent History: On remand at, Summary judgment denied by Leprino Foods Co. v. Factory Mut. Ins. Co., 2007 U.S. Dist. LEXIS 55490 (D. Colo., July 31, 2007)

Prior History:  [**1]  Appeal from the United States District Court for the District of Colorado. (D.C. No. 02-M-1559 (BNB)).


cheese, contamination, warehouse, physical damage, district court, coverage, flavor, chemical, insured, partial summary judgment, cross-appeal, damages, ambiguous, spills, stored, reasonable expectation, summary judgment, new trial, concentrate, all-risk, contends, limonene, products, argues, peril, expectation of coverage, motion for a new trial, expectations, third-party, corrosion

Civil Procedure, Appeals, Reviewability of Lower Court Decisions, Preservation for Review, Summary Judgment Review, Standards of Review, Summary Judgment, Entitlement as Matter of Law, Appropriateness, Legal Entitlement, Standards of Review, Abuse of Discretion, Judgments, Relief From Judgments, Motions for New Trials, Evidence, Admissibility, Procedural Matters, Rulings on Evidence, Insurance Law, Property Insurance, Coverage, All Risks, Exclusions, General Overview, Obligations, Covered Losses, Claim, Contract & Practice Issues, Policy Interpretation, Exclusions, Ordinary & Usual Meanings, Plain Language, Adverse Determinations