Dismissal of hydroponics company’s suit against HSB affirmed

A federal appeals court on Tuesday affirmed dismissal of a lawsuit filed against Hartford Steam Boiler Inspection and Insurance Co. by a hydroponics company, ruling in part that it did not function as a direct insurer in its oversight of a claim dispute.

Sutersville, Pennsylvania-based Three Rivers Hydroponics LLC operated a hydroponic basil-farming greenhouse that used an ozone-based water sterilization system, according to the ruling by the 3rd U.S. Circuit Court of Appeals in Philadelphia in Florists’ Mutual Insurance Co. and the Hartford Steam Boiler Inspection and Insurance Co.

Edwardsville, Illinois-based Florists’ insurance policy covered crop loss, which included an equipment breakdown endorsement that excluded loss because of design errors, poor workmanship, inherent and latent defects and faulty materials. This equipment breakdown coverage was reinsured by Hartford Steam.

In July 2014, TRH filed an insurance claim with Florists’, reporting there was equipment damage to the ozone system, which resulted in crop loss. 

Florists’, which investigated the claim with HSB’s help, eventually denied coverage, beyond replacing the ozone generator, after receiving a report the loss was caused by an incorrectly installed pipe and was not covered under its policy.

TRH then sued Florists’ in U.S. District Court in Pittsburgh, alleging breach of contract and bad faith, and later filed an amended complaint adding HSB as a defendant and a civil conspiracy claim against both Florists’ and HSB.

The district court granted summary judgment on HSB’s motion to dismiss, Florists’ motion for summary judgment and preclusion of witness testimony.

The rulings were affirmed by a three-judge appeals court panel. In affirming dismissal of the HSB claim, the ruling said TRH argued that HSB had functioned as the direct insurer because of its direct dealing with the company and its oversight of the claim dispute.

“This argument holds no weight as it would be no different than if Florists had contracted with an independent claims adjuster,” the ruling said. “In other words, outsourcing the claim adjustment function does not manifest an intent to benefit as an individual policyholder,” the ruling said, in affirming the lower court’s rulings.

Attorneys in the case did not respond to requests for comment.