Appeals court says insurer can attempt to recover $1M loss

The 6th U.S. Circuit Court of Appeals said Monday an insurer can attempt to recoup a $1 million payment from Mercedes-Benz Research and Development North America Inc. for a fire loss caused by the transfer of gasoline from a test vehicle to another automobile.

The three-judge panel in Pioneer State Mutual Insurance Co. v. Mercedes-Benz Research and Development NA et al. said the Mercedes unit could be responsible for paying for the Flint Township, Michigan-based insurer’s loss because of a possible lease violation for handling hazardous materials.

The appellate panel agreed with a federal judge in Detroit that Pioneer could not seek to recover the payment from Mercedes-Benz’s insurer, Allianz Global Risks US Insurance Co., under the Michigan No-Fault Act, which only allows a third party to pursue a claim against providers of “property protection insurance” after obtaining a valid assignment as a judgment creditor.

Allianz, however, issued a commercial general liability policy to Mercedes-Benz that excluded coverage for most property damage arising from the use of motor vehicles, court records show.

Mercedes-Benz used the Ann Arbor, Michigan, site it leased from Airport Boulevard Associates LLC to store a vehicle it used to test emissions and diagnostic features. ABA insured the property through a general liability and commercial property policy it obtained from Pioneer.

The 2021 fire occurred when workers were attempting to transfer gas from the test vehicle, which had been designated for scrapping, to another automobile, court records show.

Pioneer paid for the property damage incurred by ABA and sued Allianz and Mercedes-Benz in 2022 seeking repayment. U.S. District Judge Nancy G. Edmunds of the Eastern District of Michigan awarded summary judgment to Allianz and Mercedes-Benz, and Pioneer appealed.

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