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The Sixth Circuit has ruled that Mercedes-Benz's North American research division is not entitled to summary judgment in a legal dispute involving a fire at a testing facility. The court has instructed a lower court to reconsider whether hazardous materials involved in the fire should have been on the property.

A panel of three judges determined that while Mercedes-Benz's insurer, Allianz Risks US Insurance Co., was rightfully granted summary judgment on claims from another insurer, Pioneer State Mutual Insurance Co., the automaker could still be liable for significant property damage resulting from the fire.

The incident took place in 2021 when a fire started during an attempt to transfer flammable gasoline between two vehicles at the Mercedes-Benz testing site. According to the panel, the lease agreement for the facility contained a clause prohibiting the handling or storage of hazardous materials. The judges emphasized that the fire occurred as Mercedes-Benz employees were attempting to transfer gasoline, which could be considered a breach of the lease terms.

Pioneer State Mutual, acting as the insurer for Mercedes-Benz's landlord, Airport Boulevard Associates LLC, sought over $1 million in reimbursement for coverage it provided following the fire. The lower court had ruled in favor of both Mercedes-Benz and Allianz Risks, granting them summary judgment, but the Sixth Circuit reversed the decision regarding Mercedes-Benz.

The judges noted that the insurance policies and the lease agreement played a critical role in their ruling. While Allianz Risks was correctly granted summary judgment due to its commercial liability coverage, Mercedes-Benz may still be liable for the damage, as its lease prohibited the handling of hazardous materials like gasoline at the facility.

Mercedes-Benz argued on appeal that having gasoline in test vehicles did not equate to storing or handling hazardous materials on the property. However, the panel found that the act of transferring gasoline from one vehicle to another could indeed breach the lease terms. The court stated that whether parking a vehicle with gasoline qualifies as a violation of the lease's hazardous material clause was a separate issue from whether siphoning gasoline from the vehicle constitutes a breach.

The case now returns to the Eastern District of Michigan for further proceedings, where the lower court will reconsider whether Mercedes-Benz's actions violated the terms of the lease and, if so, whether the automaker should be held responsible for the fire damage.