Welspun Pipes, Inc., et al. Plaintiffs - Appellants
Liberty Mutual Fire Insurance Company Defendant-Appellee
Submitted: January 11, 2018
from United States District Court for the Eastern District of
Arkansas - Little Rock
LOKEN, GRUENDER, and KELLY, Circuit Judges.
14, 2012, a fire damaged equipment vital to production at the
Little Rock steel pipe manufacturing plant of Welspun
Tubular, LLC, a wholly owned subsidiary of Welspun Pipes,
Inc. (together, Welspun). The fire, which forced the plant to
temporarily cease operations, was a covered peril under the
RM Select Commercial Insurance Policy issued to Welspun by
Liberty Mutual Fire Insurance Company (Liberty Mutual). The
policy provided real property, personal property, equipment
breakdown, loss of business income, and extra expense
coverages. In August 2012, Welspun submitted claims for real
and personal property damage, loss of business income, and
extra expenses. In March 2013, Liberty Mutual settled all
claims except Welspun's claim for an additional $14
million in mitigation costs.
2013, Welspun brought this diversity action, alleging that
its unpaid mitigation costs were "necessary
expenses" included in the policy's loss of business
income coverage. Liberty Mutual responded that these costs
could only be covered as "extra expenses, " the
policy limits of which were paid in the settlement. Ruling on
the parties' cross motions for summary judgment, the
district court dismissed Welspun's complaint. Welspun
appeals. Reviewing de novo the district court's
interpretation of the insurance contract and its grant of
summary judgment, we affirm. Source Food Tech., Inc. v.
U.S. Fid. & Guar. Co., 465 F.3d 834, 836 (8th Cir.
2006) (standard of review).
2012, Welspun was awarded a contract to supply approximately
220, 000 metric tons of Submerged Arc Welded Pipe for the
670-mile Seaway Loop Pipeline from Cushing, Oklahoma to
Houston, Texas. At the request of the Seaway construction
manager, Enterprise Products Partners (Enterprise), Welspun
agreed to convert 36, 592 metric tons to a different type of
Submerged Arc Welded Pipe that would be produced by a Welspun
affiliate in India, Welspun Tradings Ltd., at no additional
cost to Enterprise. The remaining 180, 000 metric tons would
be produced at Welspun's Little Rock facility for
delivery on August 31, 2013 (sales value $275 million).
Production in Little Rock was scheduled to begin on July 25,
fire on July 14 suspended Little Rock operations. As the
plant was scheduled to operate at full production capacity
through at least August 2013, leaving no time to make up lost
Seaway production time, Welspun concluded it would be unable
to meet the August 31, 2013 Seaway delivery date. Enterprise
would not accept a later date. Fearing it would lose the
entire unsigned Seaway contract (a fear Liberty Mutual argued
was unjustified), Welspun proposed having its affiliate in
India, Welspun Tradings, produce 39, 957 metric tons of pipe
originally scheduled to be produced in Little Rock.
Enterprise accepted the proposal. Welspun Tubular's Vice
President assured his counterpart at Welspun Tradings that
Welspun Tubular would bear all costs associated with the
shift in production. Under this arrangement, Welspun
fulfilled its obligations under the Seaway contract. The
incremental costs Welspun incurred in shifting Seaway
production from Little Rock to India are the mitigation costs
here at issue.
The Policy Provisions at Issue.
C of the policy's Coverages provided that, when
"coverage for loss of business income
is provided, " Liberty Mutual will pay for:
1. The actual loss of business income you
incur during a period of restoration
directly resulting from damage by a peril insured
against to the type of property covered by this
policy at a covered location.
2. The necessary expenses you incur in
excess of your normal operating expenses
that reduces your loss of business
income. We will not pay more than
we would pay if you had
been unable to make up ...