Welspun Pipes Inc. v. Liberty Mutual Fire Insurance Co., No. 17-1470 (8th Cir. 2018)
Annotate this CaseWelspun filed suit against its insurer, Liberty Mutual, arguing that its unpaid mitigation costs were "necessary expenses" included in the policy's loss of business income coverage. The Eighth Circuit affirmed the district court's grant of summary judgment for Liberty Mutual. The court held that the district court did not err in limiting necessary expenses covered in Paragraph C.2. of the policy to expenses incurred to avoid or reduce a loss of business income; reading the loss of business income policy provisions together, in light of their historical roots and obvious purpose, the court agreed with the district court that "necessary expenses" in Paragraph C.2. were limited to expenses that reduce a covered business income loss; and the incremental costs Welspun incurred in shifting some Seaway production to an affiliate in India were not "necessary expenses" within the meaning of Paragraph C.2. of the policy.
Court Description: Loken, Author, with Gruender and Kelly, Circuit Judges] Civil case - Insurance. Under the facts presented and the provisions of the insurance policy at issue, the district court did not err in determining Welspun's mitigation costs were not necessary expenses included in the policy's loss of business income coverage because they did not reduce a covered business income loss; there was no evidence that Welspun's spending $14 million to shift some production to India after a fire at its Arkansas plant was necessary to satisfy Welspun's duty to mitigate the insurer's obligation to indemnify covered business losses; the plain language of the policy, the origins of the loss of business income coverage, prior cases and insurance treatises, and the undisputed facts established in the summary judgment record make clear that the incremental costs Welspun incurred in shifting the production were not "necessary expenses" within the meaning of the relevant policy provision.
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