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Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 1 of 98

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS

WESTERN DIVISION

WELSPUN PIPES, INC. and WELSPUN TUBULAR, LLC

vs.

FILED
1W,:<1, r.own
,, ,,, ' I A!il(i\"'SAS

EAsr~~N~~W 1

JUL 1 9 2013

~~~ES W. M~;MACK. CLCRK

~ q
PLAINTIFFS

IJI.JJ Cl.E~K

LIBERTY MUTUAL FIRE INSURANCE COMPANY

DEFENDANT

COMPLAINT

COMES NOW Plaintiffs, Welspun Pipes, Inc., and Welspun Tubular, LLC (collectively,

"Welspun"), and for their Complaint against Defendant, Liberty Mutual Fire Insurance Company

("Liberty Mutual"), state as follows:

This case assigned to District Jud_ ge ~~~
and to Magistrate Judge

\ e

I.

PARTIES

1.

Welspun Pipes, Inc., is a Delaware corporation qualified to do business in

Arkansas. Its principal place ofbusiness is at 2711 Centerville Road, Suite 400, Wilmington,

Delaware 19808.

2.

Welspun Tubular, LLC is a Delaware corporation qualified to do business in

Arkansas. Its principal place ofbusiness is at 9301 Frazier Pike Road, Little Rock, Arkansas

72206.

3.

The insured property in dispute is located at 9301 Frazier Pike Road, Little Rock,

Arkansas 72206.

4.

Upon information and belief, Liberty Mutual is a corporation qualified to do

business in Arkansas. Its principal place ofbusiness is at 2000 Westwood Drive, Wausau,

Wisconsin 54401.

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 2 of 98

II.

JURISDICTION AND VENUE

5.

This Court has subject matter jurisdiction pursuant to 28 U.S.C. §1332 as the

parties are citizens of different states and the matter in controversy exceeds the sum of

$75,000.00.

6.

Venue is proper in this Court pursuant to 28 U.S.C. § 1391(b)(2) as a substantial

part of the events or omissions giving rise to the claim occurred in Pulaski County, Arkansas,

and the property that is the subject of the claim is situated in Pulaski County, Arkansas. See also

ARK. CODE ANN.§ 23-79-204 (suit shall be brought in the county in which the loss occurred).

III.

FACTS

7.

Welspun manufactures spiral pipes at its facility (the "Facility") located at 9301

Frazier Pike in Little Rock, Arkansas.

8.

Liberty Mutual issued aRM Select Policy (the "Policy"), number YU2-L9L-

453570-011, to Welspun for, inter alia, the Facility. The Policy's period ran from December 31,

2011, to December 31, 2012. A copy of the Policy is attached hereto and incorporated herein as

Exhibit 1.1

9.

The Policy identifies Welspun as the named insured under the Policy. See Policy

at 11.

10.

11.

fire. !d. at 17.

The Policy provides coverage for fire damage. !d.

- - - - -

The Policy also provides coverage for loss of business income resulting from a

12.

The Policy provides blanket "loss of business income" coverage. Section C of the

Policy states that a covered loss of business income includes:

1 Welspun has consecutively repaginated the Policy for the convenience of the Court and the parties.

2

290500

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 3 of 98

(1) The actual loss of business income you incur during a period of restoration2
directly resulting from damage by a peril insured against to the type of property
covered by the policy at a covered location.
(2) The necessary expenses you incur in excess of your normal operating
expenses that reduces your loss of business income ...

Id. at 17?

13.

The Policy further requires that Welspun mitigate its loss ofbusiness income, by:

a. Making up lost production within a reasonable period of time not limited to the
period of restoration.
b. Continuing business operations or services during the period of restoration.
c. Using any property or service:

(1) owned or controlled by you; or
(2) obtainable from any other sources

****

We will not pay for any loss to the extent it can be reduced through these or any
other means whether at a covered location or any other location.

Id. at 18.

14.

The Policy also provides coverage for "extra expense." The Policy defines extra

expenses as the reasonable and necessary extra costs:

1. Incurred to temporarily continue as nearly normal as practicable the conduct of
your business; or
2. Of temporarily using property or facilities ofyours or others.
3. For purposes of applying the above provision "normal" means the condition
that would have existed had no covered loss happened.

Id. at 47.

15.

The Policy provi~es up!~$68,128,941 in blanket loss of income coverage. See

Policy at 15.

2 "Period of restoration" is defined in the Policy for buildings and equipment as the period of time that

starts at the time of the covered loss and ends "when using reasonable speed the building and equipment could be (1)
repaired and replaced; and (2) made ready for operations under the same or equivalent physical and operating
conditions that existed prior to the damage." The Policy also provided for an extension of coverage, called the
"extended period of restoration," that provides loss ofbusiness income coverage for the additional time required,
when Welspun uses reasonable speed, to restore Welspun's business to the condition it would have been in if no
loss had occurred. The extended period of restoration starts at the end of the "period of restoration" and continues
for no more than 60 consecutive days thereafter.

3 Bolded terms are terms that are defmed in the Policy.

3

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Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 4 of 98

16.

17.

18.

The Policy provides up to $1,000,000 in blanket extra expense coverage. !d.

On July 14, 2012, a fire occurred in the control panel room of the Facility.

The control panel room was nearly a complete loss. The control panel room

regulated several processes vital to pipe production. As a result ofthe fire, the Facility was

closed, and Welspun temporarily had to cease its pipe production at the Facility.

19.

At the time of the fire, Welspun was obligated to fulfill certain orders, including

for its customers Access NEX ("Access") and Seaway. Welspun was required to deliver the

ordered product by specific dates.

20.

As a result of the fire, Welspun attempted unsuccessfully to renegotiate the

Access and Seaway completion deadlines of March 2013 and August 2013, respectively.

21.

The Seaway contract was particularly problematic. On May 25, 2012, Seaway

confirmed an order with Welspun for 180,525 metric tons of pipe to be produced at the Facility.4

The order mandated delivery of the pipe on a rolling basis and that the final delivery be

completed by August 31, 2013.

22. Welspun planned to produce some of Seaway's May 25,2012, order during the

time period that the Facility was closed. 5

23.

After the fire, W elspun notified Seaway that it would be unable to meet the

August 31,2013, delivery deadline. Seaway advised Welspun that a later delivery date was

-·-·-------·

unacceptable and that it was unwilling to change the original delivery date. Welspun believed

4 In addition to the 180,525 metric tons of pipe to be produced at the Facility, Seaway designated an

additiona136,592 metric tons of pipe to be produced in India. These pipes required a specific type of manufacturing
not available at the Facility. These L-Saw pipes produced in India are different from, and not to be confused with,
the 39,957 metric tons shifted to India to mitigate Welspun's losses from the fire that are at issue here. Welspun
made no claim against Liberty with respect to the L-Saw pipes.

5 There were later periods of production scheduled as well.

4

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Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 5 of 98

that Seaway would not go forward with the contract if W elspun could not meet the original

delivery date.

24.

To mitigate the loss of the entire Seaway contract, Welspun contacted its sister

company, Welspun Tradings Ltd. ("Welspun Tradings"), in India and requested that it

manufacture a portion of the pipes (39,957 metric tons) for Seaway. Welspun Tradings agreed to

do so provided that Welspun pay it for any incremental costs involved. On or about August 7,

2012, Welspun and Welspun Tradings agreed that Welspun would pay those incremental costs.

25. Welspun gave Seaway the option to contract directly with Welspun Tradings for

the 39,957 metric tons, or to subcontract for the 39,957 metric tons through Welspun. Seaway

chose to contract directly with Welspun Tradings.

26.

As a result, Welspun Tradings and Seaway entered into a formal contract whereby

39,957 metric tons of Seaway's 180,525 metric ton order would be produced by Welspun

Tradings in India (the "Indian Pipes"). The Indian Pipes represented the quantity of the order

that Welspun anticipated it could not, as a result of the fire, produce by Seaway's delivery

deadline.

27.

As a part ofWelspun's agreement with Welspun Tradings, Welspun was

obligated to pay for the incremental costs of, inter alia, steel, shipping, alterations to the pipes to

bring them within the contract's specifications, 6 and other additional production expenses. These

· - - - - - - - - -

incremental costs totaled $14,758,570 (the "Mitigation Cost"). The Mitigation Cost was a

necessary expense in excess of W elspun' s normal operating expenses and was incurred to reduce

Welspun's loss ofbusiness income.

6 The Seaway contract required 80-foot coated pipes. The Indian facility, however, could only produce

40-foot pipes. As a result, the Indian Pipes were shipped from India to Welspun's facility in Little Rock and double
joined there. In addition, the Indian Pipes had to be coated at the Little Rock facility because the transatlantic
shipment would have damaged the pipes' coating.

5

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Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 6 of 98

28.

In late August of2012, Welspun and Seaway signed a written contract for

140,568 metric tons of pipe, which represented the remainder of Seaway's 180,525 metric ton

order.

29.

As a result of the agreement with Welspun Tradings, Welspun was able to go

forward with and fulfill its obligations under the Seaway contract and fulfill its obligations under

the Access contract.

30.

At the time of making the arrangements with Seaway to fulfill the Seaway

contract, W elspun did not know how long it would take for the Facility to become operational

again. Welspun had ordered new equipment for the control panel room, but most of it had to be

custom-built, and there was significant concern that it would not arrive on schedule. W elspun

hoped to start production again in late September of2012, but that date was extremely uncertain

through the summer of2012.

31.

On September 25, 2012, Welspun was able to start test runs of its pipe production

equipment. Thereafter, Welspun manufactured some pipes for Seaway and, in addition, was able

to start on its requirements for Access. Welspun was able to complete Access' order on time.

32.

In addition to the Mitigation Cost, Welspun also incurred $586,568 in costs for

the building of a pad for storage purposes and $200,000 in mobilization/demobilization costs,

__ totaling $15,545,138. Liberty Mutual claims that this amount is compensable under the Policy

solely as an extra expense.

33. Welspun submitted its claim to Liberty Mutual for the Mitigation Cost 7 (the

necessary expenses it incurred to reduce its loss of business income, i.e., the amount of money it

was required to expend in order to avoid the loss of the Seaway contract).

7 As a part of its claim, Welspun submitted various other losses it incurred as a result ofthe fire, but the

parties are in agreement as to these other losses, and thus they are not relevant here.

6

290500

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 7 of 98

34.

Liberty Mutual claimed that the Mitigation Cost did not constitute a loss of

business income, but instead was an "extra expense" under the Policy. See Policy at 47. Liberty

Mutual paid Welspun up to the "extra expense" cap of $1,000,000 for the Mitigation Cost and

the other necessary expenses, leaving a remaining amount of$14,545,138 (the "Disputed

Amount"). 8 !d. at 15.

35.

Liberty Mutual refuses to pay the Disputed Amount on the basis that the

maximum coverage for extra expense under the Policy is $1,000,000.

COUNT I- BREACH OF THE POLICY

36. Welspun incorporates by reference the allegations contained in paragraphs 1-35

above.

37. Welspun and Liberty Mutual entered into a contract, the Policy.

38.

The Policy required Liberty Mutual to pay for loss ofbusiness income of up to

$68,128,941.

39.

The Policy was effective until December 31, 2012.

40.

The July 14, 2012, fire was a covered loss insured by the Policy.

41. Welspun's Mitigation Costs of $14,545,138 for the costs of transferring the

production of approximately 40,000 metric tons of pipe to India is compensable under the Policy

. _ _pursuant to i!~ _los~ of busine~s income provision because these expenses were the necessary

expenses it incurred in excess of its normal operating expenses that reduced its loss of business

income in accordance with Section C(2) of the Policy.

42. Welspun performed its obligations under the Policy.

43. Welspun submitted its claim for the Disputed Amount.

8 The parties agreed that acceptance of the $1,000,000 payment was not a waiver ofWelspun's claim for

the Disputed Amount.

7

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Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 8 of 98

44.

On June 24, 2013, Liberty Mutual gave Welspun formal notice of its intent not to

pay the claim.

45.

Liberty Mutual's failure to pay the Disputed Amount constitutes a breach of its

obligations under the Policy.

46.

As a direct and foreseeable result of Liberty Mutual's breach, Welspun has

incurred damages in the amount of$14,545,138, plus attorneys' fees and costs, in bringing this

action.

COUNT II- FAILURE TO HONOR POLICY

4 7. Welspun incorporates by reference the allegations contained in paragraphs 1-46.

48.

Liberty Mutual has failed to honor its contractual obligation under the Policy.

49. Welspun is entitled to a 12% penalty and attorneys fees pursuant to ARK. CODE

ANN.§ 23-79-208.

COUNT III- DECLARATORY JUDGMENT

50. Welspun incorporates by reference the allegations contained in paragraphs 1-49.

51. Welspun and Liberty Mutual entered into a contract, the Policy.

52.

The Policy requires that Liberty Mutual pay for loss of business income of up to

$68,128,941.

53.

54.

The Policy requires that Welspun mitigate the loss of its business income.

- - - - - - j

The Policy requires that Welspun mitigate the loss of its business income during

and subsequent to the period of restoration and the extended period of restoration.

55.

The Mitigation Cost is compensable under the Policy as a loss of business

income.

56.

The Mitigation cost is not an "extra expense" under the Policy.

8

290500

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 9 of 98

57.

As a result of the agreement with Welspun Tradings, Welspun incurred the

Mitigation Cost in the amount of$14,545,138.

58.

Liberty Mutual's failure to pay the Mitigation Cost constitutes a breach of its

obligations under the Policy.

59.

Plaintiff therefore seeks a declaratory judgment that:

a.

Pursuant to the Policy, Welspun was required to mitigate its loss of

business income;

b.

The Policy requires that Welspun mitigate the loss of its business

income during and subsequent to the period of restoration and the

extended period of restoration;

c.

The Mitigation Cost was a necessary expense that W elspun

incurred in excess of its normal operating expenses that reduced its

loss ofbusiness income;

d.

Under the Policy, the Mitigation Cost does not constitute an "extra

expense";

e.

Welspun's Mitigation Cost in the amount of$14,545,138, is

compensable under the Policy under the Policy's loss of business

income coverage.

WHEREFORE, Welspun respectfully requests that this Court award it judgment in the

amount of$14,545,138, that it be awarded a 12% penalty and attorneys' fees and costs, and that

this Court issue a declaration as specified in paragraph 59 above, and for all other just and proper

relief.

9

290500

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 10 of 98

ROSE LAW FIRM,
A Professional Association
120 East Fourth Street
Little Rock, Arkansas 72201-2893
(501) 375-9131
(501) 375-1309 (fax)
[email protected]
[email protected]
[email protected]

Attorneys for Plaintiff

10

290500

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 11 of 98

~liher1J.
\P Mutual.

Liberty Mutual Fire Insurance Company

(A Stock Company herein called the Company)

While this policy is in effect, you are a member of Liberty Mutual Holding Company Inc. and are entitled
to vote either in person or by proxy at any and all meetings of said company. The Annual Meeting of
Liberty Mutual Holding Company Inc. is in Boston, Massachusetts, on the second Wednesday in April each
year at ten o'clock in the morning.

You shall participate in the distribution of surplus funds of the company through any dividends that may be
declared for this Policy. The amount of any dividends that may be declared shall be to the extent, and upon
the conditions fixed and determined by the Board of Directors and in compliance with any laws that apply.

This policy is classified for dividend purposes in DIVIDEND CLASS I - Fire and Allied Lines.

This policy is not assessable.

In witness whereof, the company has caused this policy to be signed by its President and its Secretary in
Boston, Massachusetts and countersigned on the DECLARATIONS, Form RM1000, by a duly authorized
representative of the company.

PRESIDENT

RM0001 02-11

Page 1 of 2

Policy 01

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 12 of 98

LiberfX
Mutual®

Liberty Mutual Fire Insurance Company

Notice of Membership in Liberty Mutual Holding Company Inc. and

Notice of Annual Meeting

Your policy includes a statement regarding membership rights in Liberty Mutual Holding Company Inc.
Liberty Mutual Fire Insurance Company is a stock insurance company subsidiary of Liberty Mutual
Holding Company Inc. Insurance is provided by Liberty Mutual Fire Insurance Company. You are a
member of Liberty Mutual Holding Company Inc.

As a member of Liberty Mutual Holding Company Inc., you are entitled to vote either in person or by proxy
at the annual meeting of said company. The Annual Meeting of Liberty Mutual Holding Company Inc. is in
Boston, Massachusetts, on the second Wednesday in April each year at ten o'clock in the morning.

Members of Liberty Mutual Holding Company Inc. may request a copy of the company's annual financial
statements, which are posted on Liberty Mutual's website at www.libertymutual.com, by writing to Liberty
Mutual Holding Company Inc., 175 Berkeley Street, Boston, Massachusetts, 02117.

RM0001 02-11

Page 2 of 2

Policy 02

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 13 of 98

~Libert):
tPJ Mutual.

RM SELEC'fTM POLICY

POLICY REFERENCE INDEX

This INDEX is to help you read your Policy. It is not a part of the Policy and is in no way a substitute for reading your entire
Policy.

Your Policy may or may not include all of the forms, endorsements, coverages and provisions listed in this INDEX. Refer to the
POLICY INDEX, Form RM0003, for a list of forms and endorsements that are included on your policy.

PLEASE READ YOUR POLICY CAREFULLY!

Form Number

Beginning on Page

SIGNATURE PAGE

POLICY INDEX

STATE OR MUNICIPAL TAXES, SURCHARGE AND
OTHER MISCELLANEOUS CHARGES SUMMARY

DECLARATIONS

Named Insured and Mailing Address

RMOOOl

RM0003

RM0005

RMlOOO

Policy Period

Policy Premium

A. Insuring Agreement

B. Coverages

C. Limits of Liability

D. Standard Extensions of Coverage

E. Optional Extensions of Coverage- Sublimits of Liability

F. Equipment Breakdown Coverage

G. Deductible and waiting periods

Schedule

COVERAGES

A. Real Property

B. Personal Property

RM1001

2

2

2

2

2

3

4

5

Copyright 2011, Liberty Mutual Group of Companies - all rights reserved.

RM0002 02-11

Page 1 of 6

Policy 03

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 14 of 98

POLICY REFERENCE INDEX- (CONTINUED)

Form Number

Beginning on Page

COVERAGES- (CONTINUED)

RM1001

C. Loss ofBusiness Income

D. Extra Expense

E. Equipment Breakdown

EXTENSIONS OF COVERAGE

RM1002

A. Standard Extensions of Coverage

1. Accounts Receivable
2. Arson Reward
3. Computer Virus and Denial of Access
4. Debris Removal Expense
5. Deferred Payments
6. Duty to Defend
7. Extended Period of Restoration
8. Fire Department Charges
9. Fine Arts
10. Fungus Cleanup Expense
11.
12. Lock and Key Replacement
13. Personal Property of Employees
14. Plants, Trees or Shrubs
15. Pollution Cleanup Expense
16. Professional Fees
17. Removal

Installation of Personal Property or Personal Property of Others

B. Optional Extensions of Coverage

1. Course of Construction
2. Errors and Omissions
3. Exhibitions, Expositions, Fairs or Trade Shows
4. Miscellaneous Locations
5. New Locations
6. Demolition Cost, Increased Construction Cost and Operation of Building Laws
7. Salespeople
8. Transit
-9. Unscheduled Locations

1

3

4

1
2
2
3
3
3
4
4
4
4
5
5
5
5
5
6
6

6

6
7
7
7
7
8
8
9
9----

1

3

EXCLUSIONS

A. GROUP A EXCLUSIONS

B. GROUP B EXCLUSIONS

PROPERTY NOT COVERED

VALUATIONS

A. Replacement Cost

RM0002 02-11

RM1003

RM1004

RM1005

Policy 04

Page 2 of 6

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 15 of 98

POLICY REFERENCE INDEX- (CONTINUED)

Form Number

Beginning on Page

VALUATIONS- (CONTINUED)

RM1005

RM1006

B. A:ctual Cash Value

C. Other Valuations

CONDITIONS

A. Abandonment of Property

B. Appraisal

C. Assignment

D. Brands and Labels

E. Breach of Condition

F. Cancellation

G. Change of Terms

H. Collection from Others

I. Concealment, Misrepresentation or Fraud

J.

Inspection

K. Liberalization

L. Loss Payee

M. Mortgage Holders

N. No Benefit to Bailee

o. No Reduction by Loss

P. Nonrenewal

Q. Other Insurance

R. Our Options
s. Pair, Set or Parts

T. Payment of Loss
u. Policy Period and Territory
v. Recovered Property

W. Right to Adjust with Owner

1

2

2

3

3

3

3

3

4

4

4

4

5

5

5

5

6

6

6

RM0002 02-11

Page 3 of 6

Policy 05

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 16 of 98

POLICY REFERENCE INDEX- (CONTINUED)

Form Number

Beginning on Page

CONDITIONS- (CONTINUED)

RM1006

RM1007

X. Subrogation

Y. Suit
z. Suspension

A.A. Titles of Paragraphs

B.B. Vacancy

c.c. Your Duties After a Loss

DEFINITIONS

A. Accident

B. Actual cash value

c. Average daily value (ADV)

D. Business income

E. Covered location(s)

F. Covered loss

G. Covered property

H. Data

I. Data processing equipment

J. Earth movement

K. Effective date

L. Extra expense

M. Fine arts

N. First tier wind Counties and Parishes

0. Flood

P. Fungus

Q. Hail

R. Limit(s) ofliability
s. Media

6

6

7

7

7

8

1

1

2

2

2

2

2

2

2

2

2

2

3

3

3

3

3

RM0002 02-11

Page 4 of 6

Policy 06

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 17 of 98

POLICY REFERENCE INDEX- (CONTINUED)

Form Number

Beginning on Page

DEFINITIONS- (CONTINUED)

RM1007

T. Miscellaneous location(s)

U. Mobile equipment or tools

V. Named Storm

W. New location(s)

X. New Madrid

Y. Object(s)
z. Occurrence

A.A. Perils insured against

B.B. Period of restoration
c.c. Perishable goods

D.D. Personal property

E.E. Personal property of others

F.F. Policy period

G.G. Pollutant( s)

H. H. Pollution

1.1.

Puget Sound

J.J. Real property

K.K. Replacement cost

L.L. Second tier wind Counties and Parishes

M.M. Sinkhole collapse

N.N. Software

0.0. Specified perils

P .P. Transit

Q.Q. Unscheduled location(s)

R.R. Valuable papers and records

S.S. Volcanic activity

T.T. We, usandour(s)

U.U. Wind

V.V. You and your(s)

RM0002 02-11

3

4

4

4

4

4

5

5

5

6

6

6

7

7

7

7

7

7

7

7

8

-8

8

8

8

9

9

9

9

Policy 07

Page 5 of 6

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 18 of 98

POLICY REFERENCE INDEX- (CONTINUED)

ENDORSEMENTS

See POLICY INDEX

Form Number

Beginning on Page

RM0002 02-11

Page 6 of 6

Policy 08

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 19 of 98

Policy Number YU2-L9L-453570-011

RM SELECT™ POLICY

POLICY INDEX

TITLE

SIGNATURE PAGE
POLICY REFERENCE INDEX
POLICY INDEX
PRODUCER OF RECORD INFORMATION
DECLARATIONS
COVERAGES
EXTENSIONS OF COVERAGES
EXCLUSIONS
PROPERTY NOT COVERED
VALUATIONS
CONDITIONS
DEFINITIONS
ADDITIONAL NAMED INSURED
SCHEDULE OF MORTGAGE HOLDERS OR LOSS PAYEES
MOBILE EQUIPMENT OR TOOLS EXTENSION
EARTH MOVEMENT COVERAGE
FLOOD COVERAGE
INTERRUPTION OF SERVICES COVERAGE EXTENSION
PAYROLL EXPENSE LIMITATION OR EXCLUSION
ADDITIONAL DEDUCTIBLES AND WAITING PERIODS
STANDARD EXTENSIONS AMENDATORY
CAP ON LOSSES FROM CERTIFIED ACT(S) OF TERRORISM
EQUIPMENT BREAKDOWN EXTENSIONS OF COVERAGE
ADDITIONAL TYPES OF PROPERTY NOT COVERED AMENDATORY
ARKANSAS CHANGES
TEXAS CHANGES
TEXAS- EQUIPMENT BREAKDOWN AMENDATORY
ARKANSAS CHANGES- CANCELLATION AND NONRENEWAL
AR.KANSAS.NOTICE TO POI ICYHOLDERS
DISCLOSURE - TERRORISM RISK INSURANCE ACT

FORM
NO.

EDITION
DATE

RMOOOl
RM0002
RM0003
EN4008
RMlOOO
RM1001
RM1002
RM1003
RM1004
RM1005
RM1006
RM1007
RMllOO
RM1102
RM1104
RM1106
RM1108
RM1110
RM1113
RM1115
RM1119
RM1144Rl
RM1250
RM1728
RM1803
RM1842
RM1870
RM1903
EN4003
EN9052

02-11
02-11
02-11
01-11
02-11
09-08
02-11
02-11
02-11
02-11
02-11
02-11
01-04
03-08
03-08
03-08
03-08
02-11
02-11
02-11
03-08
03-08
03-08
09-08
03-08
03-11
03-08
03-08
____ill-10
03-08

Copyright 2011, Liberty Mutual Group of Companies- all rights reserved.

RM0003 02-11

Page 1 of 1

Policy 09

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 20 of 98

Policy number YU2-L9L-453570-0ll

Important Notice

PRODUCER OF RECORD INFORMATION

This policy has been issued by us to you through the following producer of record:

Name and Address of Producer of Record

MEADORS ADAMS & LEE INC
101 S SPRING ST STE 400
POBOX3456
Little Rock, AR 72203

EN4008 01-11

Page 1 of 1

Policy 10

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 21 of 98

~Liber1:):
tP Mutual.

Liberty Mutual Group

175 Berkeley Street Boston, MA 02117

RM SELECT™ POLICY

DECLARATIONS

Form of Business Corporation

Premium Will Be Billed Monthly

Policy number YU2-L9L-453570-011

Named Insured and Mailing Address

W elspun Pipes, Inc.

9301 Frazier Pike
Little Rock AR 72206-9280

Policy Period: 12/31/2011 to 12/31/2012 at 12:01 A.M. standard time at above mailing address.

In return for the payment of the premium, and subject to all the terms of this policy, we agree with you to provide the insurance as
stated in this policy.

Premium (Excluding premium for "certified act(s) of terrorism" under the Terrorism Risk Insurance Act
(TRIA), as amended):
Premium for "certified act(s) of terrorism" under the Terrorism Risk Insurance Act (TRIA), as amended:
State or Municipal Taxes, Surcharges and Other Miscellaneous Charges: (See State or Municipal Taxes, Surcharges
and Other Miscellaneous Charges Summary, Form RM0005, for breakdown)

Total Premium/Other Charges for Above Policy Period:
The Deposit Premium/Other Charges is:

Issued By: Liberty Mutual Fire Insurance Company

By:

$180,334
$1,147

$0

$181,481
$72,592

Authorized Company Representative OR Countersignature (as required)

Copyright 2011, Liberty Mutual Group of Companies - all rights reserved.

RM1000 02-11

Page 1 of 6

Policy 11

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 22 of 98

DECLARATIONS (Continued)

A. Insuring Agreement

Subject to all the terms and conditions of this policy, we will pay for risks of direct physical loss or damage to covered
property as a result of an occurrence, unless excluded.

If this policy provides Equipment Breakdown coverage then subject to all the terms and conditions of this policy we will pay for
direct physical loss or damage to covered property as a result of an accident to an object, unless excluded.

This policy consists of the forms and endorsements shown on the POLICY INDEX, Form RM0003, and any endorsements
attached to the policy. Insurance is provided at those locations and for those coverages and limits of liability shown on the
Schedule of this form. Extensions of coverage, sublimits of liability and deductibles are listed on this form. Endorsements may
contain separate terms, conditions, deductibles and limits or sublimits ofliability.

Words in bold faced type have special meanings in this policy. They are defined in DEFINITIONS, Form RM1007. These
defmitions apply to this entire policy, and to any endorsements to it. Defmitions that apply to individual forms or endorsements
will be italicized and noted in those forms or endorsements. The names of forms are capitalized (for example, DECLARATIONS).

B. Coverages

We provide the following coverages if they are marked with an "X". Coverages are provided in accordance with the terms of this
policy. Terms that apply only to individual coverage forms are set forth in those forms. This policy provides coverage on a
replacement cost basis for real property, personal property, personal property of others and equipment breakdown except as
indicated on VALUATIONS, Form RM1005, or any other forms or endorsements attached to this policy.

(X) Real Property
(X) Personal Property, including personal property of others
(X) Equipment Breakdown
(X) Loss of Business Income

( ) Real Property or Personal Property only
( ) Equipment Breakdown only
(X) Real Property or Personal Property and Equipment Breakdown

(X) Extra Expense

( ) Real Property or Personal Property only
( ) Equipment Breakdown only
(X) Real Property or Personal Property and Equipment Breakdown

C. Limits of Liability

We will not pay more than the applicable limit of liability shown on the Schedule of this form for any one (1) occurrence or any
one (1) accident covered by this policy, nor will we pay for more than your interest in the lost or damaged property.

D~ "Standard Extensions- of Coverage

Refer to A. of EXTENSIONS OF COVERAGE, Form RM1 002, for the standard extensions of coverage, including sub limits of
liability, provided by this policy.

E. Optional Extensions of Coverage- Sublimits of Liability

1. The sub limits of liability shown in E. 4. below apply to the Optional Extensions of Coverage defined in B. of EXTENSIONS

OF COVERAGE, Form RM1002. If no sublimit is shown, no coverage is provided.

2.

If a sub limit is shown in E. 4. below for miscellaneous locations, new locations and unscheduled locations, coverage may
be limited or excluded elsewhere in this policy or its endorsements.

RM1000 02-11

Page 2 of 6

Policy 12

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 23 of 98

DECLARATIONS (Continued)

3. These sub limits are the most we will pay for any loss covered by these Optional Extensions of Coverage. For miscellaneous

locations, new locations and unscheduled locations, the most we will pay for any loss or damage will be the lesser of:

a. The sub limit shown below for miscellaneous locations, new locations or unscheduled locations; or

b. The sublimit shown on any individual coverage form or endorsement.

4. Optional Extensions of Coverage:

a. $No Coverage

Course of Construction;

b. $5,000,000

Demolition Cost;

c. $Included in 4b.

Increased Construction Cost;

d. $Included in 4b.

Operation of Building Laws;

e. $500,000

Errors and Omissions;

f.

$No Coverage

Exhibitions, Expositions, Fairs or Trade Shows;

g. $250,000

h. $1,000,000

at each miscellaneous location;

at each new location, for up to 90 days from the date such new location(s) is first
purchased or rented, whichever is earlier;

i.

$No Coverage

on covered personal property in the custody of salespeople;

j. $1,000,000

Transit;

k. $No Coverage

at each unscheduled location.

F. Equipment Breakdown Coverage

1. Equipment Breakdown limit of liability

If marked with an "X" the following limits of liability apply:

(X) See the Schedule of this form;

() See Form Not Applicable; or

( ) Limit(s) of liability shown below are separate from any other applicable limit of liability or any sub limit of liability of

this policy.

$Not Applicable

Damage to covered object(s), loss ofbusiness income, and extra expense;

,_

$Not Applicable

Damage to covered object(s) and loss ofbusiness income;

$Not Applicable

Damage to covered object(s) and extra expense;

$Not Applicable

Damage to covered object(s);

$Not Applicable

Loss of business income and extra expense;

$Not Applicable

Loss ofbusiness income;

$Not Applicable

Extra expense.

RM1000 02-11

Page 3 of 6

Policy 13

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 24 of 98

DECLARATIONS (Continued)

2. For equipment breakdown extensions of coverage see EQUIPMENT BREAKDOWN EXTENSIONS OF COVERAGE,

FormRM1250.

G. Deductible and waiting periods, except as indicated on any other forms or endorsements attached to this policy.

1. $10,000. Unless marked with an "X" in G. 2., or as provided in G. 3. below, we will not pay unless a covered loss from any

one ( 1) occurrence exceeds the amount shown.

2.

(X) See ADDITIONAL DEDUCTIBLES AND WAITING PERIODS, Form RM1115.

3. Equipment breakdown deductibles or waiting periods will be applied as specified below:

a.

If you have a combined deductible, we will not pay unless a covered equipment breakdown loss from any one (1)
accident is more than:

$Not Applicable

for loss to covered object(s), loss ofbusiness income, and extra expense;

$Not Applicable

for loss to coveredobject(s) and loss ofbusiness income;

$Not Applicable

for loss to coveredobject(s) and extra expense

b. If one (1) or more deductible amounts are shown below, each will be applied separately.

$See Form RM1115

Covered object(s).

$Not Applicable

Loss of business income and extra expense.

$Not Applicable

Loss of business income.

$Not Applicable

Extra expense.

See Form RM1115

times the average daily value of loss of business income or extra expense
during the period of restoration.

Not Applicable

hours immediately following the accident for loss of business income or
extra expense.

c. We will not pay for loss ofbusiness income, extra expense, or, to the extent perishable goods coverage is provided in

EQUIPMENT BREAKDOWN EXTENSIONS OF COVERAGE, Form RM1250, unless a covered equipment
breakdown loss from any one (1) accident to an object exceeds a waiting period ofNot Applicable hours.

Once the waiting period has been exceeded coverage will begin at the initial time of the interruption, and will be subject
to the deductibles shown in G. 3.

~-d. (X) See ADDITIONAL DEDUCTIBLES 1\Nf}WAITING ffiltiODS, FonnRMl rllrc;sc-. -

Once a deductible or waiting period is exceeded, we will then pay for the excess, up to the applicable limit of liability.

If a covered loss, involves two (2) or more deductibles, we will use no more than the largest of the applicable deductibles except
as provided in G. 3. b. or the ADDITIONAL DEDUCTIBLES AND WAITING PERIODS, Form RM1115.

RMlOOO 02-11

Page 4 of 6

Policy 14

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 25 of 98

DECLARATIONS (Continued)

No.

Location or Sub-location

All covered locations as per
Statement of Values on file
with us, except as scheduled
below. Insurance does not
apply at locations and/or
coverages at locations unless
a specific value is provided
by you.

*Limits include Equipment Breakdown

Schedule

Coverage
Blanket Real Property

Blanket Personal Property

Blanket Loss ofBusiness
Income

Limit of Liability

$59,592,139*

$105,996,884*

$68,128,941 *

Blanket Extra Expense

$1,000,000*

RM1000 02-11

Page 5 of 6

Policy 15

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 26 of 98

DECLARATIONS (Continued)

List of Locations:

Loc#

Address

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

1.10

2

3

4

9301 Frazier Pike
Spiral Steel Paint

9301 Frazier Pike
Double Jointing Bldg

9301 Frazier Pike
Coating Bldg

9301 Frazier Pike
Compressor Building

9301 Frazier Pike
Storage Bldg

9301 Frazier Pike
New Office Bldg #1

9301 Frazier Pike
New Office Bldg #2

9301 Frazier Pike
Temple Building

9301 Frazier Pike
Annex Bldg

9301 Frazier Pike
Trailer Building

9601 Frazier Pike

8200 Frazier Pike

15721 Park Row Ste 230

City

State ~ Country

Little Rock

AR

72206

Little Rock

AR

72206

Little Rock

AR

72206

Little Rock

AR

72206

Little Rock

AR

72206

Little Rock

AR

72206

Little Rock

AR

72206

Little Rock

AR

72206

Little Rock

AR

72206

Little Rock

AR

72206

Little Rock

Little~

Houston

AR

72206

AR--.'72206

TX

77084

RMlOOO 02-11

Page 6 of 6

Policy 16

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 27 of 98

COVERAGES

A. If coverage for real property is provided as shown in B. Coverages of the DECLARATIONS, Form RM1000, we will pay for

a covered loss to your real property at or within one-thousand (1,000) feet of a covered location.

B. If coverage for personal property is provided as shown in B. Coverages of the DECLARATIONS, Form RM1 000, we will pay
for a covered loss to your personal property, including personal property of others and valuable papers and records, at or
within one-thousand ( 1 ,000) feet of a covered location.

C. If coverage for loss of business income is provided as shown in B. Coverages of the DECLARATIONS, Form RM1000, we

will pay for:

1. The actual loss of business income you incur during a period of restoration directly resulting from damage by a peril

insured against to the type of property covered by this policy at a covered location.

2. The necessary expenses you incur in excess of your normal operating expenses that reduces your loss of business income.

We will not pay more than we would pay ifyou had been unable to make up lost production or continue operations or
services.

3. The actual loss of business income you incur if you are denied access to a covered location by order of civil or military

authority if:

a.

the order results from a covered loss; or

b.

the order results from damage by a peril insured against to the type of property covered by this policy within one ( 1)
statute mile of a covered location.

This coverage will apply for a period not to exceed twenty-one (21) consecutive days from the date of the order.

4. The actual loss ofbusiness income you incur ifyour ingress to or egress from a covered location is prevented as the
direct result of a peril insured against to the type of property covered by this policy within one (1) statute mile of a
covered location.

This coverage will apply for a period not to exceed twenty-one (21) consecutive days from the date your ingress or egress
is first prevented.

5.

In determining the actual loss ofbusiness income, consideration must be given to:

a. The experience of the business before the loss and the probable experience after the loss;

b. The continuation of only those normal charges and expenses that would have been incurred had no interruption of

production or suspension of business operations or services happened;

c. The demonstration of an actual loss of sales, income, or rental income; and

d. Any amount recovered, at selling price, for loss or damage to merchandise that will be considered to have been sold.

6. We will not pay unless you are wholly or partially prevented from:

a. producing goods; or

b. continuing business operations or services.

Copyright 2008, Liberty Mutual Group of Companies - all rights reserved.

RM1001 09-08

Page 1 of 4

Policy 17

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 28 of 98

COVERAGES (Continued)

7. You are required to mitigate your loss by:

a. Making up lost production within a reasonable period of time not limited to the period of restoration.

b. Continuing business operations or services during the period of restoration.

c. Using any property or service:

(1) owned or controlled by you; or

(2) obtainable from any other sources.

d. Working extra time or overtime.

e. Using inventory.

We will not pay for any loss to the extent it can be reduced through these or any other means whether at a covered
location or any other location.

8. We will not pay for:

a. Any loss during any idle period. Idle period includes, but is not limited to, any period when production, operation or

service would cease or be prevented due to:

(1) physical damage not insured under this policy on or away from the covered location;

(2) planned or rescheduled shutdown or maintenance;

(3) strikes or other work stoppage; or

(4) any reason other than a covered loss.

b. Any increase in loss due to:

(1) suspension, cancellation or lapse of any lease, contract, license or order.

(2) fines or damage for breach of contract for late or non-completion of orders, or for penalties of any nature.

c. Any consequential, indirect or remote loss.

d.. Any loss resulting from damage ro:

(1) finished goods manufactured by you, nor for the time required for their reproduction.

(2) property in transit.

e. Any loss or expense recoverable elsewhere in this policy.

9. The most we will pay for a loss under this coverage is the lesser of:

a. Your actual loss ofbusiness income and necessary expense; or

b. The applicable limit of liability shown on the Schedule of the DECLARATIONS, Form RMlOOO, or any

endorsements to this policy.

RMlOOl 09-08

Page 2 of 4

Policy 18

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 29 of 98

COVERAGES (Continued)

D. If coverage for extra expense is provided as shown in B. Coverages of the DECLARATIONS, Form RMlOOO, we will pay

for:

1. The actual extra expense you incur during a period of restoration directly resulting from damage by a peril insured

against to the type of property covered by this policy at a covered location.

2. The actual extra expense you incur if you are denied access to a covered location by order of civil or military authority

if:

a.

the order results from a covered loss; or

b.

the order results from damage by a peril insured against to the type of property covered by this policy within one
( 1) statute mile of a covered location.

This coverage will apply for a period not to exceed twenty-one (21) consecutive days from the date of the order.

3. We will not pay for:

a. Loss of business income.

b. Costs which would have been incurred in conducting your business during the same period had no covered loss

happened.

c. The cost of permanent repair or replacement of property that has been damaged or destroyed.

d. Any loss during any idle period. Idle period includes, but is not limited to, any period when production, operation or

service would cease or be prevented due to:

(1) physical damage not insured under this policy on or away from the covered location;

(2) planned or rescheduled shutdown or maintenance;

(3) strikes or other work stoppage; or

( 4) any reason other than a covered loss.

e. Any increase in loss due to:

(1) suspension, cancellation or lapse of any lease, contract, license or order.

(2) .. fines or damage for breacl1 of contract for late or non-completion of orders_, orfurpeJ:!alties of any nature.

f. Any consequential, indirect or remote loss.

g. Any loss resulting from damage to:

(1) finished goods manufactured by you, nor for the time required for their reproduction.

(2) property in transit.

h. Any loss or expense recoverable elsewhere in this policy.

RM1001 09-08

Page 3 of 4

Policy 19

l

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 30 of 98

COVERAGES (Continued)

4. The most we will pay for a loss under this coverage is the lesser of:

a. Your actual extra expense; or

b. The applicable limit of liability shown on the Schedule of the DECLARATIONS, Form RMlOOO, or any

endorsements to this policy.

E. If coverage for equipment breakdown is provided as shown in B. Coverages of the DECLARATIONS, Form RMl 000, the

following provisions apply to loss or damage that results from or is caused by an accident to a covered object:

1. Exclusions B. 8., B. 9., B. 10. and B. 11. in EXCLUSIONS, Form RMl 003, do not apply to a covered loss that result

from an accident to covered object(s).

2. We will pay if an accident to covered object(s) causes:

a. Loss to property you own;

b. Loss to the property of others in your care, custody or control and for which you are legally liable.

3.

If direct loss or damage to an electrical object(s) results from the peril of flood we will pay for the amount you actually
expend to dry out the object(s).

Our payment to you will:

a. Be subject to the applicable direct damage limit of liability and deductible as shown in F. 1. and G. 2. of the

DECLARATIONS, Form RMlOOO, for damage to coveredobject(s); and

b. Not exceed the value of the damaged object(s).

RM1001 09-08

Page 4 of 4

Policy 20

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 31 of 98

EXTENSIONS OF COVERAGE

A. Standard Extensions of Coverage

In the event of a covered loss, the coverage provided by this policy is extended as follows:

1. Accounts Receivable

a. We will pay up to a limit of liability of$100,000 for the following expenses you incur directly resulting from loss

or damage by a peril insured against to your records of accounts receivable at a covered location:

(1) Amounts due you from customers that you are unable to collect;

(2) Interest charges on any loan to offset amounts you are unable to collect, pending our payment of those amounts;

(3) Collection expense above your normal collection expense; and

( 4) Reasonable expenses you incur to reestablish your records of accounts receivable.

b. For the purposes of this extension of coverage, the following additional exclusions apply and we will not pay for:

(1) Any loss that requires an audit or inventory to establish its existence;

(2) Any fraudulent, dishonest or criminal act done by:

(a) Anyone entrusted with the accounts receivables, including their employees and agents; or

(b) Anyone having an interest in the accounts receivable.

This exclusion does not apply to the acts of a carrier for hire.

(3) Bookkeeping, accounting, or billing errors or omissions.

(4) Wrongful alteration, falsification, manipulation, concealment, destruction, or disposal of records of accounts

receivable, committed to conceal the wrongful giving, taking, getting, or withholding of money, securities, or
other property.

c. When records of accounts receivable have been damaged or destroyed, you must use all reasonable efforts, including
legal action if necessary, to obtain collection of any outstanding accounts receivable, andwe will pay such costs and
expenses of obtaining collection to the extent they reduce your loss.

d. When records of accounts receivable have been damaged or destroyed, you will use any property or service owned or

controlled by you or obtainable from other sources in order to reduce~our loss ..

e.

If you are unable to accurately determine the amount of outstanding accounts receivable at the time of loss, our
payment will be calculated in the following manner:

Your average monthly accounts receivable amount, based on the twelve (12) months preceding the loss, adjusted for
normal fluctuations in the month in which the loss occurs, or for any demonstrated variance for that month.

Copyright 2011, Liberty Mutual Group of Companies - all rights reserved.

RM1002 02-11

Page 1 of 9

Policy 21

Case 4:13-cv-00418-JLH Document 1 Filed 07/19/13 Page 32 of 98

EXTENSIONS OF COVERAGE (Continued)

f. The following will be deducted from the total amount of accounts receivable, regardless of the method used to

determine that amount:

(1) Balances for accounts not damaged or affected by the loss;

(2) Amounts of accounts you are able to reestablish and collect;

(3) An allowance for bad debts you are not normally able to collect; and

(4) All unearned interest and service charges.

2. Arson Reward

If one ( 1) or more covered losses are caused by or result from any frres of a suspicious nature, we will pay a $25,000
reward to an individual or individuals provided:

a. The individual(s) report(s) the suspected arsonist to local law enforcement officials; and

(1) The arsonist is apprehended, brought to trial, and convicted of arson to your covered property; or

(2) The arsonist is apprehended, confesses and/or pleads guilty to arson to your covered propertywithout going to

trial.

b. Our payment of this reward will not be increased by:

(1) The number of individuals reporting the arsonist(s);

(2) The number of arsonists involved in the covered loss; or

(3) The number of covered losses.

No deductible applies to this extension of coverage.

3. Computer Virus and Denial of Access

We will pay up to $25,000 for loss or damage to, or any cost, claim or expense caused by or resulting directly or
indirectly from any of the following, regardless of any other cause or event that contributes to the loss, damage, cost, claim
or expense at the same time or in any sequence:

a. The introduction of a malicious code, program, virus, worm, Trojan Horse program, macro time or logic bomb or

similar nnanthorizedinstmction :which is designed or intended. to