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All Metals, Inc. v. Liberty Mut. Fire Ins. Co.

United States District Court for the Northern District of Texas, Dallas Division

July 29, 2010, Decided; July 29, 2010, Filed

NO. 3-09-CV-0846-BD



Plaintiff All Metals, Inc. ("All Metals") and Defendant Liberty Mutual Fire Insurance Company ("Liberty Mutual") have filed cross-motions for partial summary judgment in this insurance coverage dispute involving the interpretation of various provisions of a commercial all risk policy. At issue is whether damage to a rotary furnace at the All Metals recycling facility caused by a power outage following a thunderstorm was the result of just one "occurrence," for which Liberty Mutual has paid the policy limits of $500,000, or whether the damage was the result of multiple "occurrences." For the reasons stated herein, the court decides this threshold coverage issue in favor of Liberty Mutual.

The parties have stipulated to all facts necessary for the court to interpret the relevant provisions of the insurance policy.  [*2] On May 2, 2007, a thunderstorm caused a power outage at the All Metals recycling facility in Terrell, Texas. (See Def. MSJ App. at 1, ¶ 2). At the time of the power outage, a rotary furnace at the facility used to covert solder dross and other metal oxides into metal and slag was operating with a full charge of molten metal. (Id. at 1-2, ¶¶ 4 & 9). The molten metal cooled and solidified when the furnace stopped operating, thereby damaging the brick lining of the furnace. (Id. at 2, ¶¶ 9-11). When power was restored to the facility two days later, All Metals restarted the furnace and began reheating the metal and slag. (Id. at 2, ¶¶ 12 & 15). The reheating process continued until May 8, 2007 — six days after the initial power outage. (Id. at 2, P15). However, the damaged brick lining could not sufficiently contain the heat generated by the reheating process, causing further damage to other parts of the furnace, including the shell, electrical wiring, and grease line. (Id. at 2-3, ¶¶ 17-19). On May 19, 2007, All Metals installed new refractory bricks in the furnace to replace the brick lining damaged as a result of the power outage. (Id. at 3, ¶ 20). Within days after the furnace was  [*3] heated to cure the new bricks, All Metals noticed cracks in the furnace shell and damage to the "tires" that supported the shell. (Id. at 3, ¶¶ 21-22). Subsequent investigation revealed that damage to the furnace shell from the May 4-8, 2007 reheating process prevented the shell from expanding with heat and rendered the furnace unsuitable for continued safe use. (Id. at 3, ¶¶ 23-25).

At all times relevant to this suit, All Metals was insured under an "all risk" policy issued by Liberty Mutual. (Id. at 4, ¶¶ 27-28). The policy provides coverage for "direct physical loss or damage to covered property as a result of an occurrence, unless excluded." (Id. at 4, ¶ 28; Plf MSJ Resp., Exh. B at 9) (emphasis in original). Under the policy:

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2010 U.S. Dist. LEXIS 77658 *; 2010 WL 3027045



furnace, Metals, occurrence, outage, brick, coverage, Interruption, reheating, curing, indirectly, heat