Appeals court reverses insurer’s coverage win over silo damage

The 5th U.S. Circuit Court of Appeals Friday overturned a ruling that TIG Insurance Co. was not required to defend a contractor against a lawsuit brought by an agricultural cooperative over damage to two grain silos.

The three-judge appellate panel in TIG Insurance Co. v. Woodsboro Farmers Cooperative said the lower court must determine if the damage to the silos resulted from faulty construction by subcontractor AJ Constructors Inc. or wind and weather.

TIG, successor to American Safety Indemnity Co., issued a general liability policy to general contractor E.F. Erwin Inc., which was retained by Woodsboro in March 2013 to build two grain silos in Woodsboro, Texas. Erwin contracted with AJC to construct the silos, court records say.

AJC began constructing the silos in May 2013 and completed them the following month. Inspections of the work revealed some cosmetic problems with the roof but concluded that they were structurally sound.

Woodsboro discovered multiple defects in November 2013 that caused the silos to leak, requiring repairs that Erwin was unable to make.

Woodsboro sued Erwin in August 2014 in Texas state court and the dispute was sent to arbitration, where a panel found AJC negligently constructed the silos. The panel awarded $988,073.25 to Woodsboro, court records show.

TIG sued Erwin and Woodsboro in federal court in Laredo, Texas, in December 2018, seeking a ruling that it was not obligated to defend or indemnify Erwin against Woodsboro’s lawsuit.

The parties filed competing summary judgment motions and the judge agreed with TIG that it was not required to cover the award because the damage to the silos resulted from AJC’s faulty work.

Representatives for the parties did not respond to requests for comment.