No Ambiguity in Determining Unharvested Pears are Excluded from Coverage

    The federal district court determined there was no coverage for the insured winery's damaged pears. Root v. Hanover Ins. Co., 2024 U.S. Dist. LEXIS 152481 (D. Or. Aug. 26, 2024). 

    The winery owned and operated a commercial vineyard that produced and sold pear cider. To protect their business and property, the winery held a policy with Hanover. 

    In September 2020, a wildfire adjacent to the winery subjected the pear trees to severe heat and smoke, causing the trees to prematurely drop twelve tons of unharvested fruit. The winery attempted to salvage the dropped pears but found them unfit for cider production. The winery submitted a claim to Hanover seeking $30,000 for loss of the pears and $172,014 in business income loss. Hanover partially compensated the winery for physical damage to the buildings and other personal property, but rejected the claim for lost pears.

    The winery filed suit for breach of contract. Hanover moved for partial summary judgment to dispose of some of the winery's clams.

    The dispute resolved around two terms in the policy, "stock" and "growing crops." The policy provided coverage for business personal property defined as "stock" but not "growing crops." The winery claimed that the unharvested pears were covered by the policy as "stock." Hanover disagreed and argued that the pears were excluded from coverage as "growing crops" even if the court found them to be "stock."

    The policy defined "stock" as "merchandise held in storage or for sale, raw materials and in-process or finished goods, including supplies used in their packing or shipping." The policy, however, did not define the phrase "raw materials." The winery submitted that the unharvested pears were the "raw materials" used to produce cider. Hanover argued that the pears were not "stock" until they were harvested and prepared for processing.

    The winery argued that "raw materials" was an ambiguous term, but they failed to present a second plausible interpretation. Hanover, on the other hand, presented a plausible definition: a raw material is ready for processing. In this context, harvested pears were raw materials because they were ready to be processing into cider. 

    Black's Law Dictionary defined a "raw material" as the "basic substances found in their natural, modified, or semi processed state, used as an input to a production process for subsequent modification or transformation into a finished good." Applying this definition, harvested pears may be "ready to be used as an input" in the production of cider. Unharvested pears, however, were not yet ready to be "subsequent[ly] modify[ed] or transform[ed]." 

    The winery's unharvested pears were unambiguously not "stock" under the policy. 

    Regarding coverage for business income loss, the court found that any covered loss had to be caused by the loss of unharvested pears growing in the winery's orchard. While the pears may have been growing within the covered premises, their loss was not caused by a "direct physical loss of" or "damage to" the winery's covered property. 

    Hanover's motion for partial summary judgment was granted.