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JW Aluminum Co. is urging the Fourth Circuit to overturn a lower court's ruling that capped its damages at $10 million, arguing that the fire and water damage it sustained should not be subject to any sublimit or exclusion due to a molten material endorsement.

In an appeal filed on Tuesday, JW Aluminum contended that a South Carolina federal judge made an error in determining that the molten material endorsement in its four all-risk policies unambiguously limited recovery for damages caused by fire, water, and a utility shutdown. These policies were issued by Ace American Insurance Co., AIG Specialty Insurance Co., Westport Insurance Corp., and General Security Indemnity Co. of Arizona.

"Allowing insurers to minimize coverage by selecting which link in a causal chain determines coverage when the policy is ambiguous on that point would render much insurance coverage illusory to the detriment of insureds in the state, going against decades of South Carolina public policy," JW Aluminum argued to the Fourth Circuit.

The dispute originated from a minor, accidental discharge of molten metal at JW Aluminum's facility in August 2020. The molten metal droplets landed on a beam supporting the facility's roof, causing aluminum dust to ignite. The company shut down its power and gas lines to avoid an explosion, and the fire department's efforts to extinguish the fire resulted in further water damage. JW Aluminum reported nearly $35 million in property damage due to this series of events.

JW Aluminum sought coverage from its insurers, who argued that the endorsement limited coverage to $10 million. The company subsequently sued the insurers in April 2021, claiming that its losses were due to fire damage, not directly from the molten material.

In December, the lower court sided with the insurers, finding that the losses from fire, debris, and water ultimately stemmed from the accidental discharge of molten material.

In its appeal, JW Aluminum contended that U.S. District Judge Bruce Howe Hendricks' ruling was misguided. The company argued that the relevant policy sections are unclear and inconsistent and that, at a minimum, the policy could be reasonably interpreted to afford more than the $10 million sublimit for its losses.

JW Aluminum asserted that the lower court's reading of the policy renders other sections superfluous. The company pointed out that other sublimits and endorsements within the policy apply more broadly to limit coverage for other losses, and applying the narrow molten material endorsement to all the incurred losses would negate the other endorsements.