Custom Container Solutions, LLC v. Century Surety Company

Custom Container Solutions, LLC (Custom Container) (plaintiff) purchased a commercial-insurance policy from Century Surety Company (Century) (defendant). This policy contained endorsements stating that for Custom Container to maintain coverage, it must: (1) remove “[u]sed or soiled rags” from its paint booths daily or else store them in self-closing metal containers and (2) maintain a fire-suppression system “in complete working order” in its paint booth. Custom Container installed a fire-suppression system in its paint booth and hired a professional fire-equipment company to inspect it every six months. In December 2019, the inspection company determined the suppression system was functioning correctly. Five months later, a fire broke out in the paint booth. No one was working in the booth that day, and a loose fitting prevented the fire-suppression system from operating correctly. Custom Container made a claim to Century for the fire damage. Century’s fire investigator determined that the fire was most likely caused by the spontaneous combustion of cotton rags that were sitting on the booth’s floor. Based on this finding and the fact that the suppression system had not operated correctly, Century denied the claim. Custom Container sued Century in federal district court for breach of the insurance contract and the tort of bad-faith claim handling. Century counterclaimed for a declaration that the claim was not covered. Century moved for summary judgment on all claims. The court considered the motion.