Contract analysis

I. Purpose and Statutory Basis of Notice This firm represents Stonefield Logistics Group Inc. ("SLG"), a Texas corporation duly organized and existing under the laws of the State of Texas, with its principal office located at 2900 Petroleum Tower Boulevard, Suite 400, Midland, Texas 79701 (Federal Employer Identification Number: 84-3291057). We write on behalf of SLG in connection with the above-referenced claim unde

II. Background Facts — The Insured and the Policy SLG is a Texas-based intermodal freight brokerage, trucking, and transload/warehousing company. SLG operates fourteen (14) terminals across Texas, New Mexico, and Oklahoma, specializing in Permian Basin oilfield supply-chain logistics. SLG's operations encompass the receipt, warehousing, transloading, and delivery of a wide range of oilfield materials and equipment, i

III. The Loss Event On November 17, 2023, at approximately 2:14 a.m. Central Standard Time, a fire broke out in Warehouse Building C (the "Building C Fire") at SLG's Midland Facility, located at 4501 East County Road 130, Midland, Texas 79706 (the "Midland Facility"). The Midland Facility is one of SLG's principal transloading and warehousing hubs, serving as the primary staging area for oilfield materials destined f

1. Permian Wellhead Services LLC — Casing Pipe: Three hundred twelve (312) joints of 5-1/2" P-110 casing pipe owned by Permian Wellhead Services LLC, valued at $1,842,000. This casing pipe was stored in Bays 1 through 4 of Building C and was staged for delivery to multiple well sites in Midland and Upton Counties.

2. Cantera Chemical Supply Co. — Completion Chemicals: Forty-seven (47) pallets of completion chemicals owned by Cantera Chemical Supply Co., valued at $1,126,500. These chemicals, which included friction reducers, scale inhibitors, and gel breakers, were classified as Class IIIB combustible liquids (flash point exceeding 200°F) and were stored in Bays 9 through 12 of Building C.

3. Triton Subsurface Technologies Inc. — Downhole Tools and Sensors: Eighteen (18) crates of downhole tools and sensors owned by Triton Subsurface Technologies Inc., valued at $987,000. These items included measurement-while-drilling ("MWD") tools, rotary steerable systems, and associated electronic sensor packages.

4. Miscellaneous Freight (Multiple Shippers): Additional freight belonging to various shippers, valued at $824,500, consisting of pipe fittings, wellhead components, safety equipment, and other oilfield supplies. After application of the $250,000 per-occurrence self-insured retention under the Policy, the net claim amount is $4,530,000. This amount is well within the $5,000,000 per-occurrence limit and presents no ag

IV. Meridian's Claim Handling and Denial A. Reservation of Rights — December 4, 2023 SLG promptly reported the Building C Fire to Meridian on November 17, 2023, the date of the loss. Meridian acknowledged receipt of the claim and assigned the file to Brian Woolf, Senior Claims Examiner. On December 4, 2023 — seventeen (17) days after the loss — Meridian issued a Reservation of Rights letter (the "ROR Letter") to SLG,

1. Exclusion 4(f) — Improper Storage: Meridian alleged that SLG stored casing pipe and completion chemicals in the same warehouse bay in violation of shipper instructions and in violation of the segregation requirements set forth in OSHA regulations at 29 C.F.R. § 1910.106. Meridian contended that this purported improper storage constituted a breach of the Policy's Exclusion 4(f), which excludes loss arising from the

2. Exclusion 4(k) — Failure to Maintain: Meridian alleged that SLG failed to maintain the Building C sprinkler system in compliance with NFPA 25 by failing to complete an annual full-flow inspection. Meridian's Denial Letter stated that SLG's last full-flow inspection of the Building C sprinkler system was conducted on September 14, 2022, and that a re-inspection was due by September 14, 2023, pursuant to the annual

V. Specific Unfair or Deceptive Acts or Practices Complained Of Pursuant to Texas Insurance Code § 541.154, the following is a detailed description of the specific unfair or deceptive acts or practices of which SLG complains. These acts and practices constitute violations of Chapter 541 of the Texas Insurance Code, including but not limited to the provisions cited below. A. Wrongful Denial of a Valid Claim — Tex. Ins

Section 541.060(a)(2)(A) of the Texas Insurance Code prohibits an insurer from engaging in an unfair settlement practice by "failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer's liability has become reasonably clear." Meridian denied SLG's claim in its entirety despite the clear applicability of the Policy's all-risk coverage grant and

Section 541.060(a)(7) of the Texas Insurance Code prohibits an insurer from "refusing to pay a claim without conducting a reasonable investigation with respect to the claim." Meridian's conduct in invoking Exclusion 4(f) violates this provision. Meridian's December 4, 2023 Reservation of Rights Letter cited only Exclusion 4(k) (Failure to Maintain) as a potential basis for denying coverage. Exclusion 4(f) (Improper S

VI. Actual Damages Pursuant to Texas Insurance Code § 541.154, the following is a statement of the specific amount of actual damages and expenses, including attorney's fees, reasonably incurred by SLG as a result of Meridian's unfair or deceptive acts or practices. SLG's actual damages include, but are not limited to, the following:

1. Net Indemnity Owed Under the Policy: $4,530,000, representing the total documented cargo loss of $4,780,000, less the $250,000 per-occurrence self-insured retention under Policy No. IML-TX-0039821-2023. This amount is supported by the sworn Proof of Loss prepared by Whitlock & Associates, Certified Public Accountants, P.C., and submitted to Meridian on February 1, 2024.

2. Consequential Damages: SLG has sustained consequential damages arising from Meridian's wrongful denial, including but not limited to: (a) loss of use of funds that should have been paid under the Policy; (b) business disruption costs incurred as a result of the inability to promptly replace destroyed cargo and resume normal operations at the Midland Facility; (c) increased insurance costs and related expenses; and

3. Attorney's Fees and Costs of Suit: SLG has incurred, and will continue to incur, reasonable and necessary attorney's fees and litigation costs in connection with this matter. These amounts will be documented and proven at trial or other appropriate proceeding. The specific amount of actual damages as of the date of this letter attributable to policy benefits wrongfully withheld by Meridian is $4,530,000. Additiona

VII. Additional Statutory Remedies In addition to actual damages, SLG is entitled to the following additional statutory remedies: A. Treble Damages — Tex. Ins. Code § 541.152 Texas Insurance Code § 541.152(b) provides that a plaintiff who prevails on a claim under Chapter 541 is entitled to recover up to three (3) times the amount of actual damages upon a finding that the defendant's acts were committed "knowingly."

VIII. Demand and Notice of Intent to Sue Based on the foregoing, SLG hereby demands that Meridian pay the following amounts within sixty (60) days of Meridian's receipt of this letter:

1. The full net claim amount of $4,530,000 under Policy No. IML-TX-0039821-2023;

2. Accrued statutory penalty interest under Texas Insurance Code § 542.060 at the rate of eighteen percent (18%) per annum, calculated from April 29, 2024 through the date of actual payment; and

3. Reasonable and necessary attorney's fees and costs incurred by SLG in connection with this matter through the date of resolution. If this matter is not fully and finally resolved within the sixty (60)-day period prescribed by Texas Insurance Code § 541.154, SLG intends to file suit against Meridian Surety & Indemnity Company in the District Court of Midland County, Texas, asserting the following claims: • Breach o

IX. Direction to Communicate Through Counsel SLG is represented by this firm in connection with all matters relating to the above-referenced claim, the Policy, and any disputes arising therefrom. All communications regarding this matter — whether written, electronic, or oral — should be directed exclusively to the undersigned at: Calderwood & Harkness LLP 700 Louisiana Street, Suite 4500 Houston, Texas 77002 Telephon