Case 2:13-cv-01104-ER Document 1 Filed 03/01/13 Page 1 of 7

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA SOUTHERN RESEARCH INSTITUTE, 2000 9th Avenue South Birmingham, Alabama 35205 Plaintiff, v. ACE AMERICAN INSURANCE COMPANY, 436 Walnut St. Philadelphia, PA 19106 Defendant. ) ) ) ) ) ) ) ) ) ) ) ) )

CIVIL ACTION NO.

JURY TRIAL DEMANDED

COMPLAINT COMES NOW Plaintiff Southern Research Institute ("Plaintiff" or SRI), by and through its undersigned counsel, and for its Complaint against Defendant ACE American Insurance Company ("Defendant") states as follows: PARTIES, JURISDICTION, AND VENUE 1. Plaintiff Southern Research Institute is an Alabama non-profit corporation with

its principal place of business in Jefferson County, Alabama. 2. Defendant ACE American Insurance Company is a Pennsylvania corporation with

its principal place of business in Philadelphia, Pennsylvania. 3. The Court has original jurisdiction over this action pursuant to 28 U.S.C. 1332

because the parties are citizens of different states and the amount in controversy exceeds the sum or value of $75,000.00, exclusive of interest and costs. 4. Venue is proper in this district pursuant to 28 U.S.C. 1391 because the

Defendant is a resident of the Eastern District of Pennsylvania and because the parties agreed to venue in the Eastern District of Pennsylvania.

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FACTUAL ALLEGATIONS 5. On or about October 28, 2010, SRI purchased an insurance policy for

$220,012.00 from Defendant to cover damage to its property, Policy Number MAUD3786727-5 (the Policy). A true and correct copy of the Policy is attached hereto as Exhibit A. 6. The Policy provides for coverage for damage to SRIs property during the policy

period of November 1, 2010 to November 1, 2011. 7. In April 2011, SRI owned two highly specialized machines called mass

spectrometers, an AB Sciex Model API 3000 Serial No. 0099804 and an AB Sciex Model API 4000 Q-Trap Triple Quadrupole Serial No. U03550502 (together the Mass Spectrometers). 8. SRI used the highly-technical Mass Spectrometers to provide chemical analysis Specifically, SRI used the Mass Spectrometers to identify the

services for its customers.

chemicals in pharmaceuticals and drugs, among other things. The Mass Spectrometers were capable of analyzing extremely small quantities of materials. 9. The Mass Spectrometers required a high vacuum chamber to prevent interaction

between the samples being tested and surrounding gases and other materials, because such interaction could lead to inaccurate test results regarding the desired samples. 10. The high vacuum chambers in the Mass Spectrometers required extremely high

levels of cleanliness. If these high vacuum chambers were not extremely clean, the chambers would be useless for testing. 11. SRI used a pure nitrogen gas blanket over certain portions of the inside of the

Mass Spectrometers to prevent air and other materials from interacting with the samples being tested.

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12.

SRI hired nexAir, Inc. (nexAir) to supply the pure nitrogen which was used as

the gas blanket inside the Mass Spectrometers. 13. On or about April 19, 2011, nexAir delivered to SRI a shipment of nitrogen to use

in the Mass Spectrometers. On or about April 25, 2011 SRI discovered that this nitrogen shipment delivered by nexAir had accidentally become mixed with diesel fuel (Impure Nitrogen) prior to its delivery to SRI. 14. Before SRI became aware that the nitrogen delivered by nexAir had been mixed

with diesel fuel, nexAir deposited the Impure Nitrogen into SRIs gas supply system which then pumped the Impure Nitrogen into the Mass Spectrometers. 15. The Impure Nitrogen damaged the Mass Spectrometers and caused the Mass

Spectrometers to become inoperable. 16. The Impure Nitrogen was contained in the gas supply system and inside the Mass

Spectrometers at the time it damaged the Mass Spectrometers. 17. Due to the high level of damage caused by the Impure Nitrogen, the Mass

Spectrometers could not be cleaned in such a manner that they could be brought back to their original performance level. 18. Due to the damage caused to the Mass Spectrometers by the Impure Nitrogen,

SRI was forced to replace the Mass Spectrometers by purchasing two new mass spectrometers at a price of more than $634,000.00. 19. Further, as a result of the damage to the Mass Spectrometers, SRI was forced to

pay for assay validation on the new mass spectrometers to confirm that they would perform to the pre-damage capabilities of the Mass Spectrometers. This assay validation has cost SRI over $1,000,000.00 to date, and has not yet been completed.

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20.

Also, as a result of the damage to the Mass Spectrometers, SRI incurred expenses

of more than $534,000.00 for work it had to outsource to another company, and expenses continue to be incurred for such work. 21. Additionally, as a result of the damage to the Mass Spectrometers, SRI lost

significant business income and will continue to lose business income from the time the Mass Spectrometers were damaged until the assay validation is completed because it cannot perform testing for customers during this time. 22. SRIs Mass Spectrometers were damaged by the Impure Nitrogen during the

policy period under the Policy. 23. SRI notified Defendant in May 2011 of its claim under the Policy related to the

damage to its Mass Spectrometers (the Claim). 24. 25. Defendant denied SRIs Claim under the Policy on September 19, 2011. As a result of the damage to the Mass Spectrometers and Defendants denial of

the Claim, SRI has also incurred significant professional fees and expenses related to the pursuit of SRIs claims against nexAir. 26. and expenses. 27. As a basis for its denial of SRIs Claim, Defendant states that SRIs claim is The Policy provides that Defendant must reimburse SRI for such professional fees

subject to a Policy exclusion for damage caused by Pollutants and Contaminants, as those terms are defined in the Policy. 28. The exclusion for Pollutants and Contaminants under the Policy is inapplicable to

the product and the circumstances which caused the damage to the Mass Spectrometers as a matter of settled law in Pennsylvania.

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29.

As a basis for its denial, Defendant also states that SRI cannot show that a

Breakdown occurred as defined in the Policy. 30. Contrary to Defendants position, a Breakdown did occur, as there was a

mechanical failure of the nitrogen gas blanket inside the Mass Spectrometers caused by the Impure Nitrogen. 31. 32. Defendant had no reasonable basis to deny benefits to SRI under the Policy. Further, Defendant knew of and/or recklessly disregarded its lack of such

reasonable basis by denying SRIs Claim. CLAIMS FOR RELIEF COUNT I BREACH OF CONTRACT 33. SRI realleges and adopts by reference all prior allegations in the Complaint as if

fully set forth herein. 34. 35. 36. SRI purchased the Policy from the Defendant. Defendant owed a duty of good faith and fair dealing to SRI. Defendant breached its agreement with SRI and its duty of good faith and fair

dealing by failing to pay for the damage which resulted from the Impure Nitrogen damaging the Mass Spectrometers as required by the Policy and as more fully set forth above. 37. As a proximate result of Defendant's breach of its agreement and its duty of good

faith and fair dealing under the Policy, SRI has suffered damages and continues to suffer damages. WHEREFORE, PREMISES CONSIDERED, SRI demands judgment against Defendant in an amount to be determined by the jury for compensatory damages, including lost profits, plus interest, costs, attorney's fees, and any other relief which the Court deems appropriate. 5

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COUNT II BAD FAITH UNDER 42 PA. C.S.A. 8371 38. SRI realleges and adopts by reference all prior allegations in the Complaint, as if

fully set forth herein. 39. Defendant has refused to pay SRIs Claim under the Policy for the damage which

resulted from the Impure Nitrogen damaging the Mass Spectrometers as more fully set forth above. 40. Defendant owed a duty of good faith and fair dealing to SRI to pay the Claim

under the Policy, and breached said duty in denying the Claim. 41. 42. Defendant has no reasonable basis to deny SRIs Claim. Defendant knew of and/or recklessly disregarded its lack of such reasonable basis

by denying SRIs Claim. 43. Defendant has acted in bad faith and continues to act in bad faith in refusing to

pay SRI the full amount owed to SRI under the Policy for its Claim. 44. damaged. WHEREFORE, PREMISES CONSIDERED, SRI demands judgment against the Defendant in an amount to be determined by the jury for compensatory damages, including lost profits, punitive damages, plus interest, costs, attorney's fees, and any other relief which the Court deems appropriate. As a result of Defendants wrongful conduct as described herein, SRI has been

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DEMAND FOR JURY TRIAL Plaintiff demands a jury trial on all claims against Defendant. Dated this 1st day of March, 2013. /s/Richard P. McElroy Richard P. McElroy (PA No. 03599) /s/Jeffrey C. McElroy Jeffrey C. McElroy (PA No. 87091) Attorneys for Plaintiff Southern Research Institute OF COUNSEL: Richard P. McElroy (PA No. 03599) Jeffrey C. McElroy (PA No. 87091) MCELROY & ASSOCIATES LLP 202A North Monroe Street Media, PA 19063 Telephone: (610) 566-8301 Fax: (610) 566-8305 Email: rmcelroy@themcelroyfirm.com jmcelroy@themcelroyfirm.com

Robert E. Battle (pro hac vice motion to be filed) Harlan F. Winn, III (pro hac vice motion to be filed) BATTLE & WINN LLP 2901 2nd Avenue South, Suite 220 Birmingham, AL 35233 Telephone: (205) 397-8160 Fax: (205) 397-8179 Email: rbattle@battlewinn.com hwinn@battlewinn.com