Fireworks will literally be exploding outside of my home next to Channelside in Tampa. The video above depicts the view from my master bedroom. So long as those fireworks are blowing up outside of my home and over Tampa Bay, my insurance company has no problem. The question is at what point do fireworks inside the home become an insurance coverage issue.

Manufacturing fireworks inside a residential structure may clearly raise a coverage issue. In Erie Insurance Exchange vs. Cotten,1 a policyholder’s garage was destroyed by fire and so was part of his neighbor’s house. The policyholder bright suit to collect under his homeowner’s policy and the neighbor’s subrogating insurance company sued the policyholder to recover under the same policy.

Erie Insurance Exchange denied coverage claiming that the policyholder manufactured fireworks inside the garage and lied about during the post loss investigation. The appellate court stated:

[W]hether Cotten was manufacturing fireworks is something a reasonable insurance company would attach importance to in determining coverage under its policy, and its exposure to other claims, including subrogation claims.

So, what did the evidence show?

Responders to the scene noted chemicals, tubing, and other items used to manufacture explosive devices. They also found un-exploded, homemade fireworks. Peterman, from the Ohio Fire Marshal’s office, found evidence at the scene of chemicals used for making fireworks; concluded the use of dangerous chemicals consistent with the manufacturing of fireworks and explosives contributed to the cause of the explosion; and found the illegal assembly and possession of chemicals and substances for manufacturing fireworks and explosives created a substantial risk of serious physical harm. Churchwell stated in his report that he found numerous items consistent with the manufacturing and handling of fireworks and opined that the presence of explosive, firework-related materials at the Cottens’ premises contributed to the explosion and fire….Cotten testified during his deposition that he made various purchases from websites selling materials for making fireworks such as Skylighter, Inc. and Cotten also confirmed he purchased a book about the introduction to the practice of pyrotechnics.

Cotten made other misrepresentations regarding whether he bought firework materials, how much and what he bought, what he used the materials for, and where or how much he sold them. Cotten first stated he purchased a few hundred feet of fuse to use with his friend’s homemade cannon; then he stated at his deposition that he acquired most of the fuse to sell at cost to a local gunsmith and used some of it to make rockets for himself. In his sworn statement, Cotten stated the numerous cardboard tubes found at the scene were premade fireworks he purchased from Wholesale Fireworks in Youngstown and he only had 10–12 of them; however, at his deposition when he was presented with evidence of purchases from online sellers, he stated he bought them online and sold the tubes to a gunsmith. Cotten initially testified he purchased bags of aluminum powder to sell at gun shows, but later testified he bought and sold it for a friend. Cotten initially denied selling other items at gun shows, but then testified he sold other items at a gun show.

The court found no coverage because the policyholder wrongfully increased the hazard and made material misrepresentations during the investigation about the increased hazard posed by the manufacture of fireworks.

I would suggest that having fireworks manufacturing as a hobby or part-time business can have a huge downside if things go wrong.

Positive Thought For The Day

“Baby you’re a firework, come on, let your colors burst!!”
—Katy Perry
1 Erie Ins. Exchange v. Cotten, 217 Ohio 9, 2017 WL 35505 (Ohio App. 5 Dist. 2017).