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PEACH STATE LABS, INC. v. ILLINOIS UNION INSURANCE COMPANY et al

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: 
4:14-cv-00055 Search Pacer
ACE Group party(s): 
Opposing Party: 
Peach State Labs, Inc.
Court Type: 
Federal
US District Court: 
Northern District of Georgia
Date Filed: 
Mar 14 2014

THE CLAIM
21. Plaintiff is a chemical manufacturer that invents and manufactures
chemicals that are used by a variety of industries, including the carpet industry.
22. In this instance, Plaintiff manufactured a chemical for the carpet
industry that was intended to act as a stain blocker (the "Chemical") when
impregnated into carpet.
23. Impregnating carpet with the Chemical is a permanent physical event
that forever alters the physical and chemical state of the structure of the carpet's
fibers.
24. Plaintiff and non-parties Crypton Carpet ("Crypton") and Signature
Carpets ("Signature") developed a business relationship whereby Crypton would
purchase the Chemical from Plaintiff, impregnate carpet owned by Signature with
the Chemical, and then Signature would sell the impregnated carpet to its
customers.
25. In early 2011, Signature began to receive complaints from its
customers that "dark spots" were appearing on the impregnated carpet. Signature
received its first complaint about the "dark spots" on or about January 29, 2011.
26. When Signature first received complaints from its customers, it had a
substantial inventory of carpet—approximately 20,211.16 square yards—that had
been impregnated by the Chemical but that had not been sold (the "Inventoried
Carpet").
27. The Inventoried Carpet—which is valued at approximately $367,781,
less a salvage value of approximately $60,933.48—is unmerchantable and cannot
be sold.
28. Soon after Signature received complaints from its customers,
Signature notified Plaintiff and Plaintiff agreed to investigate the cause of the
"dark spots."
29. Through its investigation, Plaintiff discovered that the "dark spots"
were caused by the Chemical's negative reaction when exposed to metal, such as
the bottoms of chairs, tables, etc.
30. Signature claimed $306,848.33 in damages related to its property—
the Inventoried Carpet—and demanded such amount from Plaintiff.
31. Plaintiff timely notified Defendants, by and through its broker, of
Signature's demand related to the Inventoried Carpet.
32. Plaintiff and Defendants exchanged extensive communications and
materials regarding coverage under the Policy related to the Inventoried Carpet.
33. In addition to the Inventoried Carpet, Plaintiff has received and, at the
time of the filing of this Complaint, is continuing to receive additional claims from
Signature and Crypton for stained carpet that was damaged by Plaintiffs Chemical
during the Policy period (the "Installed Carpet").
34. Despite Plaintiffs demands for coverage and its explanations that a
physical injury has occurred with respect to the Inventoried Carpet and the
Installed Carpet, that Signature has suffered a loss of use of the Inventoried Carpet
and Installed Carpet, and that the Inventoried Carpet and Installed Carpet cannot be
restored by the removal of the Chemical since impregnation is a permanent,
physical event, Defendants have declined to provide coverage related to the
Inventoried Carpet because either the Inventoried Carpet has not been "physically
injured" or exclusion m—the Impaired Property Exclusion—applies.
35. Notwithstanding Defendants denial of coverage related to the
Inventoried Carpet, Plaintiff has paid Signature $306,848 for the damage caused to
Signature's property—the Inventoried Carpet—by the Chemical.
36. On November 26, 2013, Plaintiff notified Defendants of its intent to
seek bad faith damages under O.C.G.A. § 33-4-6 if Defendants did not pay
Plaintiffs claim related to Inventoried Carpet within sixty (60) days.
37. Despite Plaintiffs demand, Defendants have failed to pay Plaintiffs
covered claim.
C0UMT0ME: BREACH OF CONTRACT
38. Plaintiff incorporates by reference, as if fully set forth herein, the
allegations in Paragraphs 1-37 above.
39. Plaintiff is insured under the Policy issued by Defendants that was in
effect during the events giving rise to the covered property damage related to the
Inventoried Carpet, which triggered Defendants' duty to defend and indemnify
Plaintiff.
40. Plaintiff, by and through its broker, sent timely notice of the property
damage related to the Inventoried Carpet that is covered under the Policy to
Defendants and has complied with all provisions of the Policy.
41. No exclusions of the Policy apply to the claim asserted by Plaintiff
related to the Inventoried Carpet.
42. Defendants have an immediate duty to defend and indemnify Plaintiff
for the property damage to the Inventoried Carpet.
43. Defendants' failure to honor their coverage obligations is a breach of
the Policy.
44. Plaintiff has sustained and will continue to sustain substantial losses
as a direct and proximate result of Defendants' breach of the insurance contract,
including being deprived of the benefits of the Policy for which substantial
premiums were paid, for which Defendants are liable, in an amount to be
established at trial.
COUNT TWO: DECLARATORY JUDGMENT
45. Plaintiff incorporates by reference, as if fully set forth herein, the
allegations in Paragraphs 1-44 above.
46. As set forth above, Plaintiff has sustained and will continue to sustain
substantial damages because of Defendants' failure to defend and indemnify
Plaintiff fully for its claim for coverage related to the Inventoried Carpet and the
Installed Carpet under the Policy. The Policy obligates Defendants to defend and
indemnify Plaintiff for all of its covered losses.
47. No exclusions in the Policy apply to Plaintiffs claim related to
Inventoried Carpet or its claim related to the Installed Carpet.
48. Defendants have failed to defend and indemnify Plaintiff for its loss to
the full extent required by the Policy.
49. An actual case and controversy exists between the parties concerning
their respective rights under the Policy.
50. Plaintiff seeks a declaratory judgment to define the rights and other
legal relations of Plaintiff and Defendants under the Policy with respect to the
claim submitted by Plaintiff to Defendants for coverage related to the Inventoried
Carpet and the Installed Carpet.
51. Specifically, Plaintiff seeks a declaratory judgment declaring that
(a) coverage exists under the Policy;
(b) no exclusion applies;
(c) Defendants have an immediate duty to defend and indemnify Plaintiff
for the entire amount due under the Policy; and
(d) Defendants have a continuing duty to indemnify Plaintiff concerning
future claims involving carpet impregnated by the Chemical during
the policy period.
COUNT THREE-STATUTORY DAMAGES
FOR BAD FAITH REFUSAL TO PAY
52. Plaintiff incorporates by reference, as if fully set forth herein, the
allegations in Paragraphs 1-51 above.
53. On November 26, 2013, Plaintiff sent a statutory demand letter to
Defendants, demanding that Defendants fulfill their legal obligations under the
Policy. This letter informed Defendants that, if they refused to pay the
$306,848.33, Plaintiff would assert a claim under O.C.G.A. § 33-4-6 for all
available damages and relief.
54. Upon the date of filing this Complaint, more than sixty (60) days have
passed since Plaintiffs November 26, 2013 demand letter.
55. Defendants have acted in bad faith by failing to pay Plaintiffs insured
losses without any reasonable, substantial, or legitimate legal basis to deny
coverage.
56. Defendants' bad faith failure to pay Plaintiffs insured losses has
caused Plaintiff expense, loss, and injury in addition to the amount claimed under
the Policy.
57. Pursuant to O.C.G.A. § 33-4-6, Plaintiff is entitled to statutory
penalties, in an amount to be determined by a jury, of up to 50% of Defendants'
total liability under the Policy related to the Inventoried Carpet and the Installed
Carpet, plus the attorneys' fees Plaintiff has incurred in this lawsuit.

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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