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Law360 (May 25, 2021, 7:30 PM EDT) -- A Puerto Rico food importer and distributor can't look to coverage for over $550,000 in losses from expired seafood product during the COVID-19 pandemic, a federal judge ruled Monday, saying a government lockdown order wasn't directed at the goods themselves or their sale.
U.S. District Judge Francisco A. Besosa tossed Northwestern Selecta Inc.'s suit, finding Guardian Insurance Co. Inc.'s civil authority coverage doesn't extend to the lost inventory without a closer connection between the damage and the Puerto Rico government lockdown order tied to the pandemic.
"While the order had the alleged effect of eventually leading to the seafood product expiring its shelf life, a mere change in outcome is not enough to trigger coverage," Judge Besosa said.
Northwestern Selecta filed suit in December, alleging a marine cargo stock throughput policy covers its $552,851.50 loss when 10,936 boxes of seafood product expired and lost any commercial value. The food importer blamed the loss on the lockdown order forcing its customers to halt purchases due to closures.
In Monday's ruling, Judge Besosa held that Guardian, a U.S. Virgin Islands insurer, didn't have to cover the loss, saying the lockdown order exempted businesses in the food supply chain. The destruction of Northwestern Selecta's seafood product wasn't caused by a civil authority order, according to the judge.
"The fact that the two events may be part of the same causal chain does not create enough of a nexus between the civil authority's action and Northwestern Selecta's loss when the plain meaning of the policy's text requires that the civil authority directly affect the insured," the judge said.
And Northwestern Selecta can't tap into the "all-risk" provision in the policy's institute cargo clauses, Judge Besosa ruled. That provision excludes coverage for loss "from cargo that expires its natural life through the passage of time, even if such 'delay' is caused by a covered peril," the judge said.
Counsel for the parties didn't immediately respond to requests for comment Tuesday.
Northwestern Selecta is represented by J. Ramón Rivera Morales and Jorge F. Blasini of Jiménez Graffam & Lausell.
Guardian is represented by Pedro Jiménez and Katarina Stipec Rubio of Adsuar Muñiz Goyco Seda & Pérez-Ochoa PSC.
The case is Northwestern Selecta Inc. v. Guardian Insurance Co. Inc., case number 3:20-cv-01745, in the U.S. District Court for the District of Puerto Rico.
--Editing by Bruce Goldman.
For a reprint of this article, please contact reprints@law360.com.
