Aluminum Recovery Technologies, Inc. v. Ace American Insurance Co.

Words & Phrases

Fire Insurance: Exclusions

Trial Judge

William C. Lee

Appellate Judge

Easterbrook

Holding

Insurer can demonstrate through expert testimony the applicability of a property insurance policy exclusion for specific types of damage.

Fact Summary

Aluminum Recovery Technol­ogies (ART) operates a smelter, which recovers aluminum from scrap metal. It renovated and enlarged Furnace #4, which failed the very day it was put back into operation. Molten alu­minum escaped and damaged both the plant and the furnace itself. ACE American Insurance paid some of ART's losses but not the cost of replacing the furnace's refractory. 

After the furnace failed, the insurer retained Engineering Systems, Inc., to determine why. Francisco Godoy, a mechanical engineer, conducted the investigation on its behalf. Engineering Systems concluded that faulty welding led the furnace's frame to fail, allowing aluminum to escape.

Ace denied coverage on the basis of an exclusion in the policy providing that: "This Policy does not cover:... Any refractory lining or catalyst, except for damage or destruction directly resulting from the perils of fire, lightning, windstorm, hail, explosion..."

ART contended, by contrast, that an explosion in the furnace caused the structure's failure.The district court sided with the insurer. The judge doubted that evidence would permit a reasonable jury to find that an explosion, if any, preceded the leak.

Godoy, the insurer's expert engineer, concluded that faulty welding explained the failure. William Sale of K-Industrial of Indiana, LLC, ART's refractory contractor, agreed with this assessment. On the other side, ART offered ... lawyers' talk, but no evidence.

 

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