724 F.2d 369 (3rd Cir. 1983), 83-5060, Compagnie des Bauxites de Guinee v. Insurance Co. of North America
|Citation:||724 F.2d 369|
|Party Name:||COMPAGNIE DES BAUXITES DE GUINEE, a corporation, Appellant, v. INSURANCE COMPANY OF NORTH AMERICA, the Insurance Corporation of Ireland, Ltd., Mercantile & General Reinsurance Co., Ltd., [*] Eagle Star Insurance Co., Ltd., Hanover Insurance Company, Continental Assurance Company of London, Ltd., the Century Insurance Co., Ltd., Yuval, the Insurance|
|Case Date:||December 22, 1983|
|Court:||United States Courts of Appeals, Court of Appeals for the Third Circuit|
Argued Sept. 12, 1983.
Cloyd R. Mellott (argued), Dale Hershey, Robert W. Doty, Andrew M. Roman, Louis J. Moraytis, Eckert, Seamans, Cherin & Mellott, Pittsburgh, Pa., for appellant.
Randall J. McConnell, Jr. (argued), Stephen R. Mlinac, Dickie, McCamey & Chilcote, P.C., Pittsburgh, Pa., for appellee, Ins. Co. of North America.
Thomas F. Weis (argued), David L. Beck, Weis & Weis, Pittsburgh, Pa., for appellees, excess insurers.
Before SEITZ, Chief Judge, and GIBBONS and ROSENN, Circuit Judges.
SEITZ, Chief Judge.
Compagnie des Bauxites de Guinee (CBG) is appealing an order of the district court granting summary judgment to the Insurance Company of North America (INA) and a number of foreign excess insurers (the excess insurers), in CBG's action to recover on its business interruption insurance policies. This is a diversity action in which the district court, following a hearing, determined that Pennsylvania law was controlling, a ruling not challenged on appeal. The Court of Appeals has jurisdiction under 28 U.S.C. Sec. 1291.
This appeal involves one of several suits filed by CBG against its insurers to recover for business interruption losses arising from various casualties at its bauxite mining and processing facility in the Republic of Guinea. A more complete statement of the facts as well as some of the history of this case can be found in our opinion in Compagnie des Bauxites de Guinee v. Insurance Company of North America, 651 F.2d 877 (3d Cir.1981), aff'd sub nom. Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982).
CBG holds all-risk business interruption insurance policies, with a $10 million primary layer carried by INA and a $10 million excess layer carried, in varying percentages, by the excess insurers. 1 At issue is whether CBG may recover from its insurers for the business interruption caused by the structural failure of its tippler building and crusherhouse. This facility raises freight cars loaded with bauxite ore and empties their contents into a feed hopper. Machinery within the structure separates chunks of ore too large to ship and transports them to hammermills where they are crushed to a consistency suitable for shipment. At some time in 1974, not long after the plant became operational, CBG became aware of serious damage to the concrete structural members of the tippler/crusherhouse, as well as to the feeders onto which
the ore cars are emptied. CBG alleges that it suffered a protracted and costly business interruption during the time needed to rebuild and reinforce the structure and machinery.
The cause of the damage was the subject of much investigation and discovery. An early report by an adjuster for the insurer of the structure itself concluded that the damage was caused by blocks of bauxite much larger than anticipated being fed into the machinery. CBG claims that only after the damage occurred did it learn that the engineers for the conveyor system had not followed CBG's specifications. The machinery had been designed to accommodate the weight of crushed bauxite, 84 lbs/cubic foot, rather than the weight of bauxite blocks, 159 lbs/cubic foot. It was also discovered that the structural engineers for the building and supports used an incorrect equation to compute the severe stresses to which the structure would be subjected.
INA and the excess insurers separately filed motions for summary judgment based on several grounds. First, they argued that the design defects in the equipment and structure meant that the structural failure and ensuing business interruption was inevitable rather than fortuitous, and that as a matter of law CBG could not recover for losses not caused by a fortuitous event. Second, they alleged that CBG did not file timely notice of loss as required by the terms of the insurance policy, and that they suffered prejudice from this delay. Third, they alleged that CBG did not file suit within 12 months of the date of the loss, also as required by the policy.
The district judge ruled that factual disputes precluded entry of summary judgment based on the latter two grounds, but he granted summary judgment based on the first ground. He held that insurance covers only risks, not certainties, so that a loss must be caused by a fortuitous event in order to be covered. He then held that the design defects made the failure of the...
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