A federal appeals court has overturned a lower court decision in favor of a Travelers Cos entity. Inc. in a claim for damages in connection with an underground fuel storage tank.
Travelers Property Casualty Co. of America had provided coverage to Meridian, Idaho-based Engineered Structures Inc. while ESI built a fuel station for Fred Meyer Stores Inc. in Portland, Oregon, according to Monday's ruling of the 9th U.S. Circuit Court of Appeal in San Francisco Engineered Structures Inc v. Travelers Property Casualty Co. of America.
After damage occurred during tank installation, travelers determined that they resulted from ESI or its subcontractor not placing enough ballast water in the tank to prevent flow during a period of rainy weather. It denied coverage and cited an exclusion in the policy that excludes coverage for "incorrect, insufficient or deficient … construction (or) construction," the decision said.
ESI then filed a lawsuit against travelers in the U.S. District Court in Boise, Idaho, for breach of contract, negligence and bad faith, according to the decision.
The court concluded that the exclusion was ambiguous and granted ESI a brief assessment of its breach of contract, although it granted travelers a brief assessment of ESI's bad faith
A three-judge appellate court panel unanimously ruled that the exclusion was not ambiguous. The district court focused on "execution" to find the exclusion ambiguous and not applicable.
"But that focus took into account the exception's unambiguous, process ̵
"Since we find that" construction "has an unambiguous, process-oriented meaning in the exclusion, the arrest is appropriate … further proceedings before the district court are necessary to resolve whether ESI's losses were actually caused by or result (ed) from incorrect, insufficient or defective … construction, "making the exclusion applicable," the panel said, reversing the court's ruling.
The panel also confirmed the dismissal of the allegation of bad faith.
Lawyers in the case could not be reached for comment.
Earlier this month, a federal appeals court upheld a lower court decision and included a unit for Travelers Cos. Inc. not liable to defend a trucking company for damages caused by a hydrochloric acid cloud due to the exclusion of contaminants in its coverage.