Finazzo Cossolini prevails before U.S. Eighth Circuit Court of Appeals by defeating $13.5M claim for extra-contractual "mitigation costs."
Posted on August 8, 2018
In Welspun Pipes, Inc. v. Liberty Mutual Fire Insurance Company, 891 F.3d 951 (8th Cir. 2018), the issue in dispute was whether a manufacturer of welded pipes for oil pipelines could recover beyond its business interruption loss and the policy limit for extra expenses following a fire at its plant. The manufacturer argued that in order to avoid a cancellation of a client’s large production order at the time of the fire, the manufacturer was forced to shift the production to its overseas affiliate. From there, the manufacturer claimed that it should be entitled to recover its costs to prevent the loss of the entire order under the policy’s “necessary expenses” provision, despite the fact that it had already recovered for the full lost time of its plant production and received the full policy limit for its extra expenses. The trial court disagreed and granted Liberty Mutual’s motion for summary judgment on the basis that the claimed costs did not constitute “necessary expenses” under the policy, as the expenses did not reduce an otherwise covered loss. On appeal, the Eighth Circuit affirmed the trial court’s determination. The Eighth Circuit focused on the policy’s “necessary expenses” provision which provided coverage for "additional expenses that are necessary because they reduce a covered business income loss." The Court then correctly concluded that although the decision to shift production may have been a sound business decision, it was not covered under the policy because it did not reduce an otherwise covered loss as the manufacturer had already recovered for its lost production. Read more at: https://www.law360.com/articles/1047593