There was no coverage based upon the plain language of a contingent time element provision regarding business interruption coverage. Directv v. Factory Mut. Ins. Co., 2016 U.S. Dist. LEXIS 12320 (C.D. Cal. Feb. 1, 2016). The insured, Directv. contracted with four companies to provide "set-top boxes" (STBs) or receivers, to pick up satellite signals that were transmitted to a subscriber's television. The four STB manufacturers used hard drive disks made by one of two companies, Western Digital Technologies, Inc. and Seagate Technology LLC. Directv did not purchase any hard drives directly from Seagate or Western Digital. Monsoonal flooding in northern Thailand damaged two of Western Digital's hard drive manufacturing facilities. Although the flooding did not affect any of the four STB manufacturer's facilities, Directv alleged that the damage to the Western Digital facilities reduced the supply of hard drives. Directv further claimed that the resulting price increase in Western Digital hard drives, as well as the expense of obtaining substitute hard drives from Seagate, cost Directv approximately $22 million in losses and extra expense. Directv's property insurance policy with Factory Mutual provided coverage for both property damage and time element, or business interruption, losses. Coverage was extended, including business interruption and extra expense coverage, beyond Directv's own property to certain "contingent time element locations." The policy's definition of such locations included any location "of a direct supplier, contract manufacturer or contract services provider to Directv." Factory Mutual denied Directv's claim for contingent time element losses because Western Digital was not Directv's "direct supplier." Directv argued that, despite the lack of any contractual relationship between Directv and Western Digital, the latter was nevertheless a "direct supplier" because of the direct working relationship between the two. The court disagreed with Directv. Directv argued that the phrase "direct supplier" should be defined according to its usage in the "electronics supply chain industry" based on the context of the policy and the parties' usage of the phrase. But Directv pointed to no evidence that the parties intended "direct supplier" to have some technical or industry-specific definition. While the policy defined many terms, such as "location," "occurrence," etc., not defining "direct supplier" anywhere in the policy suggested that the parties did not intend the term to carry any technical or specialized meaning.The ordinary meaning of "direct supplier" did not apply to a situation where Directv never received anything form Western Digital.
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