Manufacturer’s Flood Claim Hinges on Definition of High-Hazard Area

For the second time, a federal appellate court reversed a trial judge’s finding that a policy issued by a unit of American International Group did not limit coverage for a 2011 flood that forced the company to shut down an auto parts plant in Thailand.

The Sixth Court of Appeals, in a decision handed down on Monday, rejected the trial court’s summary judgment finding that a $30 million “sublimit” in the manufacturer’s policy applied only to property losses and not “time-element” losses related to the shutdown of the plant.The Sixth Circuit had also reversed an earlier ruling by the trial court that the policy’s limit on damages caused by flooding did not apply at all.

The decision in Federal-Mogul v. Insurance Co. of Pennsylvania might save the carrier $25 million, but the case isn’t over.

Federal-Mogul, a manufacturer headquartered in Southfield, Michigan, owned a factory in the Rojana Industrial Park facility in Ayutthaya, Thailand. The area flooded in October 2011, forcing Federal-Mogul to shut the plant down. The manufacturer filed a claim with Insurance Co. of Pennsylvania seeking $64.5 million in damages.