A Florida appeals court has upheld a $70.1 million judgment against Arizona Chemical Co. over defective carpet resin. The court found that Mohawk Industries Inc.’s evidence at trial was sufficient to justify the damages awarded. The First District Court of Appeal said Mohawk had provided plenty of evidence to show a spike in warranty claims for Mohawk carpets that used Arizona Chemical’s Unibond resin was not just a coincidence. The three-judge panel said:
Mohawk did not argue simply that the coincidence of a claims spike with the use of Arizona’s resin established causation. Mohawk argued that other factors, such as the history of Unibond claims and the lack of any significant change to the product other than the manufacturer of the resin during the relevant time period, combined with the claims spike to suggest that the resin was to blame.
Arizona Chemical had begun supplying Mohawk and Aladdin Manufacturing Corp. with pine-based resin in 2005. In subsequent years, Mohawk noticed an increase in warranty claims related to the carpeting. The carpets’ backing deteriorated, causing unraveling of edges, backing delamination and offensive odors, according to court documents. Mohawk notified Arizona Chemical of the problem in 2008 and stopped using the company’s resin before suing in 2011.
In March 2014, a Jacksonville jury returned a $70.1 million verdict against Arizona Chemical that comprised $32.3 million for future lost profits, $16.9 million for warranty claims and $20.9 million for past costs incurred by Mohawk for warranty claims and carpet that was sold at a discount or destroyed. This was the largest “commercial” jury award in Florida in 2014.
In a separate appeal, Arizona Chemical had asked the First District to slice nearly $15 million in prejudgment interest from the verdict – which now totals $93 million – arguing that the clock on interest should start when Mohawk discovered the problem, not on the date the resin was delivered. Arizona Chemical argued that the damages should be calculated from the date Mohawk had to pay customer warranty claims or discard the carpet, which at that point was several years after Arizona Chemical supplied the resin.
Excess insurer XL Insurance America Inc. sued other insurers in the Middle District of Florida to escape having to cover the verdict. XL is asking the court to rule that Commerce and Industry Insurance Co. and National Union Fire Insurance Co. of Pittsburgh, Penn., are obligated to cover the judgment against Arizona Chemical under their umbrella policies.
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