ST. LOUIS (CN) – An insurance company does not have to indemnify a company whose employee caused millions of dollars in damages by leaving a cloth rag in a machine, the 8th Circuit ruled.
Tonicstar Limited obtained a declaratory judgment in district court that it was not required to cover Lovegreen Turbine Systems for the mistake that occurred in their service of a compressor at a Minnesota oil refinery.
Judge Bye ruled that the insurance policy excludes property damage due to work that was performed improperly.
“Leaving a cloth rag inside the compressor falls within the policy’s definition of work,” Bye ruled. “Lovegreen’s work was incorrectly performed, and the compressor required repair as a result.”
The compressor was out of service for five days, costing Flint Hills Resources $6.5 million in business damages.