Ohio Supreme Court rules for policyholder in contamination case

The Ohio Supreme Court ruled Wednesday that a metal products company is entitled to coverage for a contaminated product under its umbrella policy.

Niles, Ohio-based Ironics Inc. buys and sells metal products, including waste generated by steel mills and similar facilities, according to the ruling in Motorists Mutual Insurance Co. v. Ironics Inc. Ironics obtains a product called tube scale in raw form, processes it, then resells it.

In 2016, Perrysburg, Ohio-based Owens-Brockway Glass Container Inc. purchased tube scale from Ironics to use as a coloring agent to make its containers amber or brown.

After using the tube scale, though, Owens discovered that “chrome stones” were embedded in the containers, increasing the likelihood they would break and it had to scrap more than 1,850 tons of glass containers.

On investigation, Ironics learned the tube scale had been contaminated when its materials processor subcontracted the tube scale’s screening to another company. The product was contaminated with chrome stones when it fell to the ground, and it was then put back into the screening process, according to court documents.

In January 2017, Owens asserted claims against Ironics for breach of contract and warranties, among other claims. Ironics asked its insurer, Columbus, Ohio-based Motorists, to defend and indemnify it.

Motorists sought a declaratory judgment it had no obligation to defend and indemnity Motorists. A trial court held that neither Ironics’ commercial general policy nor its commercial umbrella policy covered Owens’ claims and granted Motorists summary judgment in the case.

A state appeals court agreed there was no coverage under the CGL policy but held Ironics was entitled to coverage under its umbrella policy.

The state Supreme Court unanimously affirmed the appeals court ruling. “We reject Motorists’ argument that there was no ‘property damage’ in this case. Under the plain language of the umbrella policy, Owens’s claims against Ironics are for ‘property damage,’” the ruling said.

The court also concluded that Owens’ claims arose out of an “occurrence” under the umbrella policy and that none of the policy exclusions applied.

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