February 20, 2014 4th Circuit published opinion

Millennium Inorganic Chemicals Ltd. v National Union Fire Insurance Company of Pittsburg, PA

Millennium purchased contingent business interruption insurance form National. The policy was limited to interruptions due to property damage at direct suppliers. Millennium contracted with an aggregator to provide natural gas. Due to an explosion at the natural gas production facility of one of the aggregator’s suppliers, Millennium received no natural gas for several days, had to stop production and lost $10 million. National denied the claim on the ground that the natural gas supplier was an indirect supplier. Millennium sued and was granted summary judgment on the basis that “direct suppliers” was ambiguous and the policy must therefore be construed against National. The panel, 2-1, reversed and remanded for entry of judgment in favor of National. The majority held that “direct” is unambiguous and denotes an uninterrupted proceeding, unobstructed operation or transmission without an intermediary. Here, the natural gas form the supplier went through an intermediary-the aggregator- and was not directly supplied. The dissent argued that “Direct” can also mean from source without interruption or diversion. Here, once the natural gas went into the pipeline, it went to Millennium. Thus, the dissent argued there at least two reasonable interpretations and the contract must be construed against National.

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