It is up to a jury to decide whether FM Global is obligated to indemnify an AT&T Corp. unit under its business interruption policy for damage to a supplier’s facilities caused by monsoonal flooding in Thailand, says a federal appeal court in reversing a lower court’s ruling dismissing the case.

El Segundo, California-based DirecTV, a direct broadcast satellite provider unit of AT&T Corp., had a business interruption policy with Johnston, Rhode Island-based Factory Mutual Insurance Co., which does business as FM Global, that provided coverage for “contingent time element locations,” according to Monday’s ruling by the 9th U.S. Circuit Court of Appeals in San Francisco in DirecTV, a Delaware Corporation, v. Factory Mutual Insurance Co., a Rhode Island corporation.

The policy’s definition of locations included any location “of a direct supplier, contract manufacturer or contract service provider” to DirecTV,” said the ruling.

San Jose, California-based Western Digital Corp., a computer data storage firm that manufactures hard drives used in DirecTV’s set-top boxes, suffered losses caused by monsoonal flooding in northern Thailand in 2011 that damaged two of its hard drive manufacturing facilities. DirecTV sought coverage under its business interruption policy.

DirecTV had argued Western Digital fits the definition of a direct supplier, although it does not have a contractual relationship with DirecTV and does not send its hard drives directly to the company to be integrated into the set-top boxes, according to the ruling.

In court papers, DirecTV said FM Global “attempts to define ‘direct supplier’ in a way contrary to its long-term industry usage and without regard to the fact that its interpretation ignores other reasonable interpretations.”

It states the phrase “direct supplier” in the insurance policy is “a technical term within the electronics supply chain industry, and must, therefore, be interpreted according to its trade usage.”

A unanimous three-judge appellate court panel reversed a ruling by the U.S. District Court in Pasadena, California, which had granted summary judgment to FM Global in the case.

Citing an earlier case, the appellate panel said, “In light of the extrinsic evidence of trade use introduced by plaintiff, the phrase ‘direct supplier’ is ‘reasonably susceptible’ to the meaning urged by plaintiffs.”

“Whether the phrase ‘direct supplier’ was intended in a trade usage seen and, if so, whether Western Digital falls within the trade usage definition are questions of fact to be resolved by a jury,” said the ruling, in remanding the case for further proceedings.