Ocean Accident & Guarantee Corp. v. Penick & Ford

• Decision Date: 22 March 1939
• Docket Number: No. 11290.,11290.
• Citation: 101 F.2d 493
• Parties: OCEAN ACCIDENT & GUARANTEE CORPORATION, Limited, v. PENICK & FORD, Limited, Inc.
• Court: U.S. Court of Appeals — Eighth Circuit

101 F.2d 493 (1939)

OCEAN ACCIDENT & GUARANTEE CORPORATION, Limited, v. PENICK & FORD, Limited, Inc.^*

No. 11290.

Circuit Court of Appeals, Eighth Circuit.

February 6, 1939.

As Amended March 22, 1939.

Leslie H. Vogel and Richard H. Merrick, both of Chicago, Ill. (Ralph F. Potter, of Chicago, Ill., on the brief), for appellant.

Owen N. Elliott, of Cedar Rapids, Iowa (V. C. Shuttleworth, of Cedar Rapids, Iowa, on the brief), for appellee.

Before GARDNER, SANBORN, and VAN VALKENBURGH, Circuit Judges.

GARDNER, Circuit Judge.

This is an appeal from a judgment entered against the Ocean Accident and Guarantee Corporation, Limited, defendant below, in favor of appellee Penick & Ford, Ltd., Incorporated, plaintiff below. We shall refer to the parties as they appeared below.

Plaintiff brought the action to recover upon a policy of machinery insurance issued by defendant, whereby it agreed to indemnify plaintiff against loss to certain specified machinery resulting from its accidental breakdown, as defined in the policy. It was alleged in plaintiff's petition that subsequent to the issuance of the policy, and on August 25, 1936, there was a breakdown of one of the generators covered by the policy.

The answer as amended denied all the allegations of the petition, except those alleging the issuance of the policy and the making of proof of loss, and alleged that the injury to the generator, if any, occurred while it was undergoing an insulation breakdown test and as a result of such test, and that any claim therefor was specifically excluded by the terms of the policy.

At the close of all the evidence, defendant moved for a directed verdict, which motion was denied, and the cause was submitted to the jury upon instructions to which certain exceptions are here urged. The jury having returned a verdict in favor of plaintiff for $17,327.30, judgment was entered thereon from which this appeal is prosecuted.

In seeking reversal, defendant contends: 1, that the court erred in denying its motion for a directed verdict because (1) there was no evidence of an accident within the meaning of the policy, and (2) there was no evidence of impairment of function because the claimed injury occurred while the generator was undergoing an insulation breakdown test; 2, that the court erred in admitting evidence of the cost of power purchased by plaintiff and in submitting plaintiff's claim therefor to the jury, for the reason that the use and occupancy endorsement did not cover such claim; 3, that counsel for plaintiff, in his closing argument to the jury, was guilty of prejudicial misconduct.

At all times pertinent to this action, plaintiff owned and operated a corn and sugar cane products refining plant at Cedar Rapids, Iowa. The policy in question was issued in April, 1934, and provided that defendant would indemnify plaintiff against loss resulting from accident to the machinery covered by the policy. The term "accident" was defined in the policy as "a sudden and accidental breaking, deforming, burning out or rupturing of the object or any part thereof, which manifests itself at the time of its occurrency by immediately preventing continued operation or by immediately impairing the functions of the object and which necessitates repair or replacement before its operation can be resumed or its functions restored." The policy also provided that the defendant should not be liable for any loss resulting from "an accident to any object * * * while said object is undergoing experimentation or an insulation breakdown test, or is being repaired or dried out." The policy bore a use and occupancy endorsement, by which defendant agreed to pay the plaintiff a daily indemnity of $1,000.00 for each day of total prevention of business at its plant caused solely by an accident covered by the policy, and to pay a portion of the daily indemnity for partial prevention of business.

In connection with this character of insurance, defendant maintains a force of trained men who make periodical inspections of the plants insured, these inspections being made approximately every three months. On August 23, 1936, defendant's engineer-inspector Griffin, while making an inspection of plaintiff's machinery, found a ground in the rotor in the Number 1 generator at plaintiff's power plant. The rotor is the revolving member of the generator. It consists of a steel drum or cylinder in the outer edge of which are cut slots about an inch wide and about two inches deep, running lengthwise of the cylinder for its full length. In these slots are placed the copper conductor or strap which constitutes the winding of the rotor. In each slot are several turns of the copper strap making up what is called a coil. In this generator the copper coils contained in each slot were built up of about eighteen turns of the copper strap, each turn insulated from the other and all insulated from the slot in which they were placed. The rotor weighs 4200 pounds and revolves at a speed of 3600 revolutions per minute. The copper strap which constitutes the winding of the rotor is one long continuous strap coiled in one slot and then threaded back through an adjacent slot and so on around the cylinder of the rotor. Each coil, consisting of about eighteen turns of the strap, is secured in its slot by an iron wedge bar which is driven lengthwise into a groove at the top of the slot and holds the coil tightly in place. These wedge bars are pushed in from either end in assembling the rotor and can only be removed by withdrawing them from the slot lengthwise. The wedge bars protrude an inch or so at each end beyond the rotor cylinder. Over the protruding ends of these wedge bars is shrunk a retaining ring, sometimes called an edge ring or shroud ring, which further holds the bars in place.

Griffin immediately reported what he had discovered to Mr. Woodford, who was in charge of the power plant for plaintiff. The chief operating engineer at the plant was absent at the time, and a Mr. Reitz, plaintiff's master mechanic, had general charge of all mechanical operations. He was not at the plant when the ground was discovered. Nothing was done with regard to the generator that day, but on the following day, August 24, 1936, it was started up and ran throughout the day with apparent regularity, except that it was running rough. Sometime during that day, while the generator was being operated, Reitz and others in plaintiff's employ, decided to shut it down and call in the General Electric Company, but it ran until seven o'clock Tuesday morning, August 25th. On Monday, while the generator was still running, defendant got in touch with the General Electric Company at Chicago, and requested that a man be sent out to look at the machine. In response to this request, a Mr. Erickson of the General Electric Company came to Cedar Rapids, arriving there Tuesday morning, after the generator had been shut down. The generator was then dismantled and the rotor taken out and placed on blocks on the floor of the power house. When it was removed from the generator and placed on the floor, it was inspected to ascertain if the weak spot in the insulation, which the megger test had indicated, could be located. At one end of the rotor, just where the copper strap came out of one of the slots on its way to thread back and go into another slot, there was a spot where the insulation was slightly grayish and discolored as though there had been heating there. There was also some indication of heating on the outer edge of the wedge bar at this point. After this preliminary examination, the rotor was subjected to a smoking out or insulation breakdown test. When such test is made upon a machine known to be grounded, as the generator in question was, the machine can not again be operated until repaired. This test disclosed smoke at the point at one end of the rotor where some discoloration had previously been observed.

At the termination of this test, the rotor was crated up for shipment to Chicago, where proper tools for removing the end rings were available. A day or two later, Reitz representing plaintiff, and Griffin and Lee representing defendant, made an inspection of the rotor at Chicago. The retaining ring or end ring of the rotor had been removed and the wedge bar driven out of the slot where the burning had taken place. There was a spot on the side of the wedge bar, an inch or two from the end of the bar, where some copper from the strap which rested just below the bar in the slot had fused to the bar. There was a rupture in the copper strap, and the two ends were fused to the steel rotor. The rotor was installed new in 1924 and would have a normal life of not exceeding thirty-five years. Defendant's last inspection of the rotor was made the week of June 30 to July 3, 1936, when it was passed as being in proper condition.

Plaintiff ordered the rotor completely rewound and that was the only practicable course of repair. Inquiry was made to ascertain if a rotor was available to replace the damaged one while the rewinding was being done, but none was to be had. The rewinding of the rotor at the General Electric shops required a long time, so that the rewound rotor was not shipped to Cedar Rapids until October 3, 1936. Its installation was not completed until October 6th following. During all this period from August 25 to October 6, plaintiff purchased current to replace the current normally provided by the generator from the Iowa Power & Light Company. In this action, plaintiff sought to recover the cost of repairs to the generator and the excess of cost of power purchased over the cost of production had the generator been in use.

Counsel for defendant state in their brief that the principal questions at the trial were: (1) Whether or not the occurrence in question constituted an accident within the meaning of the policy, and (2) whether or not the claim for the cost of power purchased was admissible in any...