Tom Orlando and Michael Foran Achieve Appellate Win for Insurer Client in Furnace Failure Coverage Dispute

Shareholders Tom Orlando and Michael Foran successfully defended their client, ACE American Insurance, in a furnace failure coverage dispute against Aluminum Recovery Technologies (ART). The Seventh Circuit upheld the district court’s decision, affirming that ACE is not obligated to cover the $400,000 cost of replacing the refractory in the aftermath of a smelter furnace failure.

Case Background

The dispute arose when Foran Glennon’s client, ACE, having already covered some losses resulting from ART’s smelter furnace failure, refused to pay for the replacement of the furnace’s refractory, at a cost of approximately $400,000.

The district court, in a diversity jurisdiction case, ruled in favor of the insurer, holding that the insurer was not liable for the cost of replacing the refractory.

A joint investigation by Engineering Systems, Inc. and ART representatives, identified faulty welding as the cause of the furnace failure. ACE denied ART’s claim for damage to the furnace refractory because the policy did not cover damage to refractory, unless such damage was caused directly by specific perils like fire or explosion.

ART claimed an explosion damaged the refractory so the exclusion did not apply.

Court Ruling

The U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s decision in favor of Foran Glennon’s client, concluding ART failed to present any evidence that an explosion damaged the furnace refractory.

ART’s attempt to establish causation relied on legal arguments, lacking expert engineering support. The court dismissed ART’s reliance on “res ipsa loquitur” and “post hoc ergo propter hoc” logic and highlighted the alignment between ACE’s expert and ART’s contractor attributing the failure to faulty welding.  The court also refuted ART’s claim of unnecessarily destructive testing, noting ART’s prior agreement to the investigative plan.

Mike concentrates his practice on first-party property insurance disputes. His experience includes the full array of first-party property insurance matters, including bad faith claims, environmental damage, builder’s risk claims, construction and design defect claims, arson and fraud issues and cargo losses. His experience also extends to reinsurance disputes, particularly those dealing with first-party property claims, as well as subrogation and casualty defense.

Focusing his practice on insurance and appellate law in both insurance and non-insurance disputes, Tom has experience representing both appellants and appellees in several state and federal courts nationwide. He is well-seasoned in a range of insurance coverage disputes, including property and liability coverage and litigation matters involving commercial and personal insurance.

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