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The Collaborative Clearinghouse for Lawsuits and Other Claims Against ACE Group Insurance Companies

Penn Millers Files Suit in Duty to Defend Claim

May 1st, 2013 - An ACE Group unit has sued a former client in an effort to avoid liability in half a dozen lawsuits filed against the firm.

Penn Millers Insurance Co. said it has no duty to defend Meherrin Agricultural and Chemical Co. because terms of its policy cover property damage. And the loss of any crop yield due to alleged action by Meherrin does not qualify, Penn Miller said in a lawsuit filed in U.S. District Court in Florence, South Carolina.

Penn Millers had issued a commercial general liability policy to Meherrin, for a one-year period starting August 1st, 2007. The Severn, North Carolina-based Meherrin distributed a legume inoculant to peanut farmers in South Carolina in 2008 that at least at least six growers said was ineffective. They determined that the product was either inactive or failed to perform, which they said forced them to apply additional fertilizers and lower their production of peanuts.

Those farms or farm corporations sued Meherrin on the basis that its sale of the inoculant to them constituted a breach of express and implied warranties.

Penn Millers was notified of the suits and has been defending them under a reservation of rights. Now it has gone to court, stating that property damage as defined by the policy does not include damages based on increased production costs for the farmers, or loss of yield. The suit further asserts that the policy contains an “impaired property” exclusion to coverage that applies to the claims alleged in the underlying actions.

Penn Millers’ suit, which was filed pursuant to the Federal Declaratory Judgment Act, named as defendants Meherrin and INTX Microbials LLC, an Indiana firm that supplied the chemical. Also named were the six farmers or farm corporations that sued Meherrin.

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