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The Fourth Circuit patiently explains things about exclusion of consequential damages

A fumigation company caused millions of dollars of damage to a customer’s peanut-storage facility. The service agreement contained an exclusion of consequential damages, but the customer and its insurance carrier sued for consequential damages anyway. In upholding summary judgment in favor of the fumigator, the Fourth Circuit ‘splained things about such exclusions:

Companies faced with consequential damages limitations in contracts have two ways to protect themselves.

First, they may purchase outside insurance to cover the consequential risks of a contractual breach,

and second, they may attempt to bargain for greater protection against breach from their contractual partner.

Severn apparently did take the former precaution – it has recovered over $19 million in insurance proceeds from a company whose own business involves the contractual allocation of risk.

But it did not take the latter one,

and there is no inequity in our declining to rewrite its contractual bargain now.

Severn Peanut Co. v. Industrial Fumigant Co., No. 15-1063, slip op. at 9 (4th Cir. Dec. 2, 2015) (extra paragraphing added).

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