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

LEXINGTON INSURANCE COMPANY v. DELEK U.S. HOLDINGS, INC.

ATTENTION: It is possible that this information may no longer be current and therefore may be inaccurate. The index contains both open and closed cases and is not a complete list of cases in which an ACE Insurance Group company is involved. This information is provided to give interested persons an idea of the issues disputed in the indexed cases. For a full understanding of a case, one should read the rest of the court file, including the response. For the most up-to-date and complete information on a case, visit www.pacer.gov or contact the clerk of the relevant court.

Case Number: 
3:13-cv-01054 Search Pacer
ACE Group party(s): 
Opposing Party: 
Lexington Insurance Company
Court Type: 
Federal
US District Court: 
Middle District of Tennessee
Date Filed: 
Sep 27 2013

"COUNT 1

Plaintiffs incorporate and re-allege Paragraphs 1 through 37 by reference as if fully setforth herein.

38. The Policies include a faulty workmanship exclusion that provides: This policy does not insure:
* * *
B. against the cost of making good defective design or specifications, faulty material, or faulty workmanship; however, this exclusion shall not apply to loss or damage resulting from such defective design or specifications, faulty material, or faulty workmanship.

39, The Policies include an exclusion for wear and tear and latent defect, which provides:

This policy does not insure:
* * *
D. against ordinary wear and tear, gradual deterioration, dampness or dryness of atmosphere, changed in temperature, smog, shrinkage, evaporation, depletion, termites, moth, vermin, loss of weight, erosion, wet or dry rot, inherent vice, latent defect, rust or corrosion unless loss or damage not otherwise excluded ensues and then this policy shall cover for such ensuing loss or damage

40. The Contingent Time Element coverage requires that direct physical damage to property causes the interruption of the delivery of goods and/or services from the direct supplier.
The coverage grant provides:
(5) Time Element Extensions
(a) This policy, subject to all provisions and without increasing the limits of this policy, also insures against loss resulting from damage to or destruction by causes of loss insured against, to:
(ii) Contingent Time Element: property that wholly or partially prevents any direct supplier of goods and/or services to the Insured from rendering their goods and/or services, or property that wholly or partially prevents any direct receiver of goods and/or services from the Insured from accepting the Insured's goods and/or services, such supplier or receiver to be located anywhere in the Policy Territory;

41. Based on the above cited provisions from the Policies, and for the following reasons, there is no coverage under the Policies for the Claim:
A. The cause of the rupture of the Pipeline was not a peril insured against by the Insurance Policies. The weld defect identified as the cause of the rupture by EMPCo is faulty material, faulty workmanship, and latent defect, which are excluded causes of loss. Contingent Time Element coverage is triggered only where the damage to the suppliers' property was caused by a covered peril.
B. The rupture and the interruption in the supply of crude oil to the El Dorado Refinery are not "ensuing losses" within the meaning of the exceptions to the exclusions. Damage to the property that is the manifestation of faulty material or faulty workmanship is not loss resulting from the excluded peril. Similarly, damage to the defective property from the latent defect is not ensuing loss.
C. The Policies do not provide Contingent Extra Expense coverage.
D. The Service Interruption coverage does not apply to loss resulting from damage to a crude oil pipeline. The plain language of the provision shows the coverage is for loss resulting from damage to utilities that provide services needed to operate the refinery.
E. The interruption in the flow of oil beyond the replacement of the damaged section was not the result of physical damage to property, a required element of Contingent Time Element coverage.

42. The Claim is also not covered for other reasons.

43. Plaintiffs are entitled to a Declaration that the Policies do not provide coverage for the Claim."

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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