Arson by insured’s employee results in multimillion dollar settlement against sprinkler manufacturer and “Bulk Box” industry

A disgruntled employee set two fires inside a plastic injection molding facility. The fires quickly overwhelmed the water based sprinkler system and virtually destroyed the entire facility. The fire was investigated by local, state and federal agencies who all concluded that the cause of the fire was arson. The fire resulted in nearly $60 million in damages.

After the initial investigation, which took several months, Stutman Law’s New Loss and Litigation teams developed a plan for a successful subrogation recovery. The plan focused on two sets of defendants. The first group of defendants were responsible for the design, installation and maintenance of the sprinkler system which was deemed inadequate for the plastic processing application taking place at the facility. The second set of defendants manufactured high density polyethylene (HDPE) bulk box shipping containers which were widely used at the facility. HDPE is a highly flammable, petroleum based plastic, but bulk boxes made of it are highly prevalent in a number of industries.

Stutman Law was able to show that the sprinkler system at the plant was undersized for the plastic processing operation within, and that the HDPE boxes used at the facility were defective because they rendered the existing sprinkler system useless. During discovery, Stutman Law learned that various state and national fire protection organizations had warned manufacturers about flammability concerns of plastic pallets made of HDPE. The manufacturers were warned that the use of plastic pallets would typically require a costly upgrade to customers’ sprinkler systems. The industry, however, did not provide this information to its customers.

After nearly four years of litigation, the exchange of hundreds of thousands of documents, over one hundred depositions, and the production and exchange of dozens of expert reports, Stutman Law was able to secure confidential settlements from each of the defendants for a significant percentage of the provable damages. In addition to the settlement, Stutman Law’s Litigation team aggressively defended, and ultimately thwarted, the manufacturers’ effort to shift responsibility for the loss to the subrogated carrier for its routine underwriting practices.

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