                                                                           FILED
                            NOT FOR PUBLICATION                             MAY 27 2011

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS




                            FOR THE NINTH CIRCUIT



SILGAN CONTAINERS                                No. 10-15869
CORPORATION,
                                                 D.C. No. 4:08-cv-02246-PJH
              Plaintiff - Appellant,

  v.                                             MEMORANDUM *

NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA,

              Defendant - Appellee.



                    Appeal from the United States District Court
                       for the Northern District of California
                    Phyllis J. Hamilton, District Judge, Presiding

                        Argued and Submitted May 13, 2011
                             San Francisco, California

Before: HUG and PAEZ, Circuit Judges, and WATSON,** District Judge.

       Plaintiff-appellant Silgan Containers Corporation (“Silgan”) appeals the

district court's decision granting summary judgment to defendant-appellee National


        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
             The Honorable Michael H. Watson, District Judge for the U.S.
District Court for Southern Ohio, Columbus, sitting by designation.
Union Insurance Company (“National Union”) in Silgan's diversity action arising

from an insurance dispute. The district court held that National Union did not

breach its contractual duty to pay because Silgan did not suffer a covered loss

under the umbrella insurance policy issued by National Union. Because the parties

are familiar with the factual and procedural history of this case, we do not recount

additional facts except as necessary to explain the decision.

      The parties agree that California law applies and that it is Silgan’s burden to

establish that its claims fall within the scope of the insurance policy. We review

the district court’s grant of summary judgment de novo. Lindahl v. Air France,

930 F.2d 1434, 1436 (9th Cir. 1991). Jurisdiction is proper under 28 U.S.C. §

1291, and we affirm.

      Under the terms of the umbrella policy, National Union is obligated to pay

sums that Silgan is liable for due to ‘Property Damage’. The policy defines two

types of ‘Property Damage’: (1) “physical injury to tangible property, including all

resulting loss of use of that property,” and (2) “loss of use of tangible property that

is not physically injured.” We conclude that neither type of ‘Property Damage’

occurred here. Thus, National Union did not breach its duty to pay.

      1.     “Physical injury to tangible property”




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      The prevailing view under California law is that where property damage is

defined as a “physical injury to tangible property,” the “mere incorporation of a

defective but functioning [product] that might fail in the future [does] not

constitute ‘property damage.’” F & H Const. v. ITT Hartford Ins. Co. of Midwest,

12 Cal. Rptr. 3d 896, 905 (Cal. Ct. App. 2004). We conclude that coverage is not

triggered by this first definition of ‘Property Damage’ because it is undisputed that

Silgan’s defective lids did not physically harm the fruit inside the cups. There was

no alteration in the appearance, shape, or color of the fruit and the fruit remained

edible. Silgan's defective lids, moreover, were not so inherently dangerous that

they can be considered to have inflicted a physical injury on the fruit by the mere

fact of incorporation. Cf. Armstrong World Indus. Inc. v. Aetna Casualty & Surety

Co., 52 Cal. Rptr. 2d 690, 733-34 (Cal. Ct. App. 1996) (holding that the

installation of asbestos-containing materials caused immediate physical injury to

the building because asbestos is ultrahazerdous).

      2.      “Loss of use of tangible property that is not physically injured"

      A “classic ‘loss of use’” claim occurs where “the insured’s defective

property rendered the property of a third party unusable.” Sony Computer Entm’t

Am. Inc. v. Am. Home Assur. Co., 532 F.3d 1007, 1019 (9th Cir. 2008) (applying

California law). We conclude that coverage is not triggered by this second


                                           3
definition of ‘Property Damage’ because Silgan has not demonstrated that the fruit

inside the defective cups was completely “unusable.” Although Del Monte may

have made a business decision not to sell the fruit cups, Silgan has not shown that

the edible fruit was unsuitable for other purposes, such as sale on a secondary

market.

      In sum, because Silgan has not established that its defective lids caused “a

physical injury to tangible property” or the “loss of use of tangible property that is

not physically injured,” National Union did not breach its duty to pay under the

terms of the policy.

      AFFIRMED.




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