INSURANCE-RELATED COURT CASES
Digested from case reports published online
Leave it to the expert
Following two operation-disabling accidents, Noranda Aluminum Holding Corporation, an aluminum products manufacturer whose all-risks property insurance policy with XL Insurance America, Inc., and other insurers included business interruption coverage, did not rebuild its damaged facility and consequently did not resume operations.
Noranda and its insurers agreed that the failure to rebuild and resume operations did not negate the business interruption coverage. But when Noranda submitted its business interruption claim, the parties could not agree on how to calculate Noranda’s gross earnings loss, which was the measure of the insurers’ liability under the relevant policy.
A jury found in favor of Noranda, and the insurers appealed.
At trial, Noranda’s damages expert employed a model that measured the insured’s gross earnings loss by comparing the value of the insured’s production had the accident not occurred with the value of its production after the accidents had it repaired and resumed operations with due diligence.
Although the parties disputed whether the insurers took issue with this methodology at trial in this appeal, the insurers contended that the model was inconsistent with the policy’s formula for calculating gross earnings loss and that it grossly exaggerated the amount of Noranda’s claim.
The insurers also challenged Noranda’s expert’s factual assumptions and claimed he improperly included amounts that the insured had waived in an earlier property damage settlement.
The Delaware Supreme Court concluded that Noranda’s expert’s damages model was consistent with the relevant policy provisions, and that the trial court’s determination that the factual assumptions made by the expert were sufficiently reliable for the jury to consider was not an abuse of discretion. Likewise, the court held that the insurers’ claim that the earlier property damage settlement precluded a portion of Noranda’s recovery was without merit. The supreme court affirmed the lower court’s decision.
XL Insurance America, Inc., et al. v. Noranda Aluminum Holding Corporation—Supreme Court of Delaware—October 2, 2020—No. 444, 2019.