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Noranda Aluminum Holding Co. v. XL Insurance America, Inc.

Superior Court of Delaware

March 21, 2019

NORANDA ALUMINUM HOLDING COMPANY, Plaintiff,
v.
XL INSURANCE AMERICA, INC., ETAL., Defendants.

          Submitted: October 1, 2018

         Plaintiff's Motion for Partial Summary Judgment - GRANTED IN PART, DENIED IN PART

         Defendants' Motion for Partial Summary Judgment - Sale of the New Madrid Facility - DENIED

         Defendants' Motion for Partial Summary Judgment - Non-Continuing Payroll - DENIED

         Defendants' Motion for Partial Summary Judgment - "Idle Periods" Exclusion - DENIED

          David J. Baldwin, Esquire; Carla M. Jones, Esquire; Potter Anderson & Corroon LLP, 1313 North Market Street, Sixth Floor, Wilmington, DE 19801. Attorneys for Plaintiff.

          David B. Goodwin, Esquire (Argued); Christine S. Haskett, Esquire (Argued); Nicholas M. Lampros, Esquire; Rebecca A. Jacobs, Esquire; Covington & Burling LLP, One Front Street, San Francisco, CA 94111. Attorneys for Plaintiff.

          John L. Reed, Esquire; Ethan H. Townsend, Esquire; Harrison S. Carpenter, Esquire; DLA Piper LLP, 1201 North Market Street, Suite 2100, Wilmington, DE 19801. Attorneys for Defendants.

          John N. Love, Esquire; Jonathan D. Mutch, Esquire (Argued); Matthew P. Cardosi, Esquire; Robins Kaplan LLP, 800 Boylston Street, Suite 2500, Boston, MA 02199. Attorneys for Defendants.

          MEMORANDUM OPINION

         WILLIAM C. CARPENTER, JR. JUDGE.

         Before the Court is Plaintiff Noranda Aluminum Holding Company's ("Noranda" or "Plaintiff") Motion for Partial Summary Judgment, as well as the Defendant Insurers' ("Insurers" or "Defendants") Motions for Partial Summary Judgment on Sale of the New Madrid Facility, Non-Continuing Payroll, and Idle Periods. For the reasons set forth in this Opinion, Plaintiff's Motion for Partial Summary Judgment is granted in part and denied in part. Defendants' Motions for Partial Summary Judgment are denied.

         I. FACTUAL & PROCEDURAL BACKGROUND

         This litigation stems from property insurance policies that Defendants issued to Plaintiff for the period of May 18, 2015 to May 18, 2016.[1] The policies at issue "provide coverage to Noranda for physical damage and time element loss resulting from two accidents at a Noranda aluminum production facility located in New Madrid, Missouri."[2] Plaintiff contends that the Insurers "breached their insurance contracts with regard to Noranda's time element losses resulting from the accidents … with the Insurers offering to pay only a small fraction of Noranda's actual losses."[3] The Defendants argue that they have not breached the policies because various provisions in the insurance contracts preclude coverage for Noranda's time element claims.[4]

         A. Noranda's Insurance Coverage Program

         There is no dispute that the policies Defendants issued to Plaintiff included coverage for property damage and resulting time element losses at its aluminum plant in New Madrid, Missouri ("New Madrid Plant").[5] More specifically, the "Time Element" provision gave Noranda the option to make a claim for time element loss based on its gross earnings.[6] It further provides that:

The recoverable GROSS EARNINGS loss is the Actual Loss Sustained by the Insured of the following during the PERIOD OF LIABILITY:
a) Gross Earnings;
b) less all charges and expenses that do not necessarily continue during the interruption of production or suspension of business operations or services;
c) less ordinary payroll; and
d) plus all other earnings derived from the operation of the business.
e) Ordinary Payroll, including taxes and charges dependent on the payment of wages:
(i) for a period of time of not more than the number of consecutive days shown in the LIMITS OF LIABILITY clause of the DECLARATIONS section immediately following the interruption of production or suspension of business operations or services, and
(ii) only to the extent such payroll continues following the loss and would have been earned had no such interruption happened. [7]

         The "PERIOD OF LIABILITY" for building and equipment is defined as:

a) starting from the time of physical loss or damage of the type insured; and
b) ending when with due diligence and dispatch the building and equipment could be:
(i) repaired or replaced; and
(ii) made ready for operations,
under the same or equivalent physical and operating conditions that existed prior to the damage.
c) not to be limited by the expiration of this Policy.[8]

         B. Accidents at the New Madrid Plant

         On August 4, 2015, a casthouse explosion occurred at the New Madrid Plant, "causing extensive property damage to the facility and equipment, necessitating significant repair costs, and resulting in lost revenue due to business interruption while production was halted by the explosion and the damage it caused."[9] After the explosion, Noranda tendered a claim to Insurers for the property damage and time element losses purportedly caused by the accident.[10] The parties have "resolved the property damage component of the [casthouse explosion] claim, but the Insurers have refused to pay most of Noranda's time element losses."[11]

         Several months later, on January 7, 2016, two of the three potlines at the New Madrid Plant froze due to a switchgear failure, which also caused "significant property damage" and "a sizeable time element loss."[12] Plaintiff subsequently tendered another claim to Defendants for the potline freeze.[13] Again, Noranda alleges that Insurers paid the property damage component of the claim, but have refused to make any payment for its time element losses relating to the potline freeze.[14]

         C. Noranda Files for Bankruptcy and Sells New Madrid Plant

         On February 8, 2016, Noranda filed a petition for Chapter 11 bankruptcy.[15]Approximately one month later, on March 12, 2016, Plaintiff idled the New Madrid Plant to comply with the terms of its debtor-in-possession financing.[16] In November 2016, Noranda ultimately sold the New Madrid Plant "as part of a bankruptcy restructuring that resulted in the liquidation of certain … assets."[17]

          D. The Instant Litigation

         On January 6, 2017, Plaintiff filed its Complaint against the Defendant Insurers, alleging that they "breached the Policies by failing to make the required payments for Noranda's time element losses."[18] On August 3, 2018, Plaintiff filed a Motion for Partial Summary Judgment on a variety of defenses to coverage raised by the Insurers, including the idle periods exclusion and sale of the New Madrid Facility. Defendants also filed their own Motions for Partial Summary Judgment on the idle periods exclusion, sale of the New Madrid Facility, and non-continuing payroll. During oral argument on October 1, 2018, the Court denied Plaintiff and Defendants' Cross-Motions for Partial Summary Judgment as to the idle periods exclusion, and in addition to what was articulated in open court, the reasoning for that decision is included in this Opinion. This is the Court's decision on the remaining Motions for Partial Summary Judgment.

         II.STANDARD OF ...


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