On July 3, 2019, a Delaware jury determined that fourteen property insurers for Noranda Aluminum Holding Corp., an aluminum producer that filed for bankruptcy and ceased operations three years ago, owe Noranda over $35 million in time element losses that Noranda sustained as a result of two separate catastrophic incidents that occurred at its aluminum facility in 2015 and 2016.

In August 2015, an aluminum explosion occurred at Noranda’s facility, resulting in substantial property damage and bodily injuries. Though the insurers paid for Noranda’s property damage claim, the insurers only covered $5.64 million of Noranda’s $22 million time element claim.  In January 2016, the same facility sustained significant damage as a result of equipment failure. The insurers again paid for Noranda’s property damage claim arising from the equipment failure but declined to pay any of its $22.8 million time element claim.

In declining to pay for Noranda’s time element losses that resulted from the two incidents, the insurers relied upon the exclusion for “idle periods.” Specifically, the insurers took the position that scheduled routine maintenance would have caused Noranda’s facility to cease operations during the affected periods, even if the two accidents had not occurred, thereby triggering the exclusion. The jury disagreed, finding that the insurers establish by a preponderance of the evidence that Noranda’s facility would have ceased operations for reasons beyond the two accidents and, thus, failed to meet their burden of substantiating the basis for their asserted exclusion.

The decision underscores the significant burden insurers must overcome to assert a policy exclusion as a bar to coverage.  Mere speculation and conjecture is not enough.  The decision should therefore serve as a reminder for policyholders to fully understand the grounds on which an asserted exclusion is based and to contact experienced coverage counsel when the basis for an asserted exclusion appears to be infirm.