Pyramid Technologies, Inc. v. Hartford Casualty Insurance Co

FACTS

Pyramid Technologies, Inc. (“Pyramid”) purchased an insurance policy (the “Policy”) from Hartford Casualty

1 Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993). Insurance Company (“Hartford”). The Policy provides coverage limits of $1 million for building replacement costs, $5.5 million for business personal property replacement costs, and $3 million for lost business income and additional expenses due to the interruption of business operations. To trigger coverage for building or business personal property replacement costs, the Policy requires damage to property or its direct physical loss.

Pyramid purchased and resold electronic parts, many of which were out-of-date or not state-of-the-art. It did not test the inventory unless required to do so by a customer or prospective customer. Pyramid stored its inventory on shelves in a warehouse that did not have air conditioning or humidity control. Pyramid had approximately 52 million items in its warehouse at the time of the flood.

In the morning hours of August 11, 2005, Pyramid employees arrived at work to find the warehouse and certain other building locations flooded with one to two inches of water. Although the…