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Tube City IMS Corp. v. Allianz Global Risks U.S. Ins. Co.

United States District Court, W.D. Pennsylvania

December 1, 2014

TUBE CITY IMS CORPORATION, Plaintiff

Decision text below is the first available text from the court; it has not been editorially reviewed by LexisNexis. Publisher's editorial review, including Headnotes, Case Summary, Shepard's analysis or any amendments will be added in accordance with LexisNexis editorial guidelines.

Cercone, Judge.

REPORT AND RECOMMENDATION

ROBERT C. MITCHELL United States Magistrate Judge

I. Recommendation

It is respectfully recommended that the motion to dismiss Counts IV and V of the Complaint, filed on behalf of the defendant (ECF No. 9) be denied.

II. Report

Plaintiff, Tube City IMS Corporation (" TCIMS"), brought an action in the Court of Common Pleas of Allegheny County, Pennsylvania against Defendant, Allianz Global Risks U.S. Insurance Company (" Allianz"), seeking a declaration that Allianz owed coverage to TCIMS under its insurance policy based on losses that occurred when a bell rod that was part of a two-bell top charging system that was located at the entrance to the blast furnace at AK Steel (with which TCIMS had a contract to perform services) fractured and fell into the blast furnace, thereby shutting down the facility. TCIMS also alleged that Allianz's denial of coverage constituted a breach of contract and bad faith, or in the alternative, that if the policy did not apply under these circumstances, that Allianz had negligently and/or fraudulently and intentionally misrepresented the scope of the policy's coverage to TCIMS.

On September 12, 2014, Allianz removed the action to this Court based upon diversity of citizenship jurisdiction. The parties then stipulated that Allianz's answer to the Complaint would be due on or before October 20, 2014. (ECF No. 2.)

On October 20, 2014, Defendant filed an answer and affirmative defenses with respect to Counts I-III of the Complaint (ECF No. 11). However, it also filed a motion to dismiss Counts IV and V, on the basis that Plaintiff cannot state a claim for either negligent or fraudulent/intentional misrepresentation. For the reasons that follow, this motion should be denied.

Facts

TCIMS purchased Policy No. CLP 3013774 (the " Policy") from Allianz providing boiler and machinery coverage for " accidents" occurring at an " insured location" during the period October 30, 2012 to October 30, 2013. (Compl. ¶¶ 5, 10 & Ex. A.)[1] The " time element" section of the Policy extended coverage for up to 180 days to commissions, profits and royalties lost by TCIMS as a result of an accident which it was unable to make up within a reasonable period of time. (Compl. ¶¶ 13-19.)

TCIMS had contracts to perform various services for AK Steel at its facility in Middleton, Ohio, which is within the territory of the Policy. (Compl. ¶¶ 20-23.) On June 22, 2013, a bell rod which was part of a two-bell top charging system at the blast furnace at AK Steel's facility suddenly fractured and the bell rod and one of the bells fell into the blast furnace. (Compl. ¶¶ 26-32.) As a result of this accident, the blast furnace was shut down for a period of time to repair and/or replace the bell rod and the bell, and the flow of goods to TCIMS was interrupted, TCIMS was prevented from producing goods and/or services to AK Steel and AK Steel was prevented from supplying goods and/or services to TCIMS. TCIMS lost sales and was unable to make up lost production within a reasonable period of time. (Compl. ¶¶ 33-41.)

Therefore, it sought coverage from Allianz under the Policy.

Allianz denied the claim for four different reasons, one of which was that the bell rod was part of the furnace and thus excluded by the furnace exclusion. (Compl. 47-48 & Ex. B.) Even after TCIMS provided Allianz with a report from a world-renowned expert on blast furnaces stating that the two-bell top charging system was not part of the furnace, Allianz continued to deny the claim. (Compl. ¶¶ 50-53 & Exs. C, D.) However, TCIMS states that, before it purchased the Policy, its brokers questioned Arturo Alvarez, Executive Underwriter for Allianz, about the scope of the exclusion and Alvarez wrote on January 22, 2008 that " precipitators" were covered, but that " the oven box itself, refractory and foundation" were not. TCIMS submits that it relied on this representation to purchase the Policy, that the furnace exclusion in the Policy was unchanged from the language being discussed by Mr. Alvarez, and that the bell rod and charging system are not part of the oven box, refractory or foundation. (Compl. ¶¶ 55-57 & Ex. E.) It further alleges ...


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