A federal appeals court has overturned a lower court and ruled in favor of a commercial valve distributor in litigation coverage with its insurer, holding the company was not given a “full and fair” opportunity to present its case by the lower court.

Granite City, Illinois-based Coyle Mechanical Supply Inc. was sued in Illinois state court by an energy company in connection with the allegedly failed commercial valves it had sold, and was charged with breach of contract, breach of the implied warranty of merchantability and breach of the warranty of fitness, according to Tuesday’s ruling by the 7th U.S. Circuit Court of Appeals in Chicago in Federated Mutual Insurance Co. v. Coyle Mechanical Supply, Inc.

Coyle’s insurer, Owatonna, Minnesota-based Federated, filed suit in U.S. District Court in Benton, Illinois, seeking a declaration it had no duty to defend or indemnify Coyle.

After Coyle answered Federated’s complaint, Federated moved for judgment on the pleadings, which Coyle opposed. 

Coyle later moved to file supplemental briefs that, in its view, showed the state court litigation potentially fell within Federated’s coverage obligations, according to the ruling.

The district court denied Coyle’s motions to file supplemental briefs in the case, and ruled in Federated’s favor, the ruling said. The ruling was reversed by a unanimous three-judge appeals court panel.

In granting Federated’s motion in the case, “the court relied on some of the new facts that Coyle had unsuccessfully hoped to introduce through supplemental briefs, while ignoring other facts – including facts that worked in Coyle’s favor,” the ruling said.

Coyle correctly points out, the ruling said, “that the district court’s handling of the case ran afoul of both local rules and the Federal Rules of Civil Procedure.

“Worse, the court’s errors deprived Coyle of its right to present material factual evidence bearing on the central issue in the case,” the ruling said.

The panel said it was reversing and remanding the case “so that Coyle may have a full and fair opportunity to defend against Federated’s lawsuit.”

Attorneys in the case did not respond to requests for comment.