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Insurer wins ruling over property damage to warehouse

Posted On: Mar. 4, 2020 2:30 PM CST


A federal district court ruled in favor of a Cincinnati Financial Corp. unit Tuesday in coverage litigation filed by a warehouse owner based in part on a pollution exclusion provision in its coverage.

Belle Vernon, Pennsylvania-based Vale Vista Associates issued a 10-year lease to Pittsburgh-based Aquion Energy Inc., which manufactured and assembled sodium ion batteries and electricity storage systems, in March 2013, according to the ruling by the U.S. District Court in Pittsburgh in Vale Vista Associates LP v. Cincinnati Casualty Co.

The lease’s terms required Aquion to keep the building neat, clean sanitary and safe, and to surrender the premises at the end of the lease in “broom clean” and good operating and physical condition. It also required a $29,278 security deposit.

In September 2017, the entity that purchased Aquion’s assets after it declared bankruptcy vacated the premises and stopped making rental payments. Vale Vista discovered Aquion did not clean the warehouse as required, and that there was a black powder residue throughout the premises.

Vale Vista filed a claim with its insurer, Fairview, Ohio-based Cincinnati Financial unit Cincinnati Casualty. The insurer denied the damage was not accidental, which was required for coverage under the policy, and that a pollution exclusion in the coverage applied. Vale Vista then filed suit against the insurer.

The district court agreed with the insurer. The “physical loss resulting from Aquion’s breach of contract was not ‘accidental’ under the terms of the policy,” and was therefore not a covered loss under the policy, said the ruling.

The court also agreed with a magistrate judge’s recommendation that the coverage’s pollution exclusion applied. “The record fully supports that (the magistrate judge) appropriately and correctly concluded that Cincinnati established the toxic nature of the powder, with no question of material fact existing,” said the ruling.

Attorneys in the case could not be reached for comment.

A federal appeals court last year overturned a lower court decision and ruled Chubb Ltd. was not obligated to provide coverage under an international property insurance policy issued to a battery manufacturer, under litigation filed by the manufacturer’s landlord, because the loss did not reach a deductible.