American Cas. Co. of Reading, Pa. v. Minnesota FBS Co.

• Decision Date: 14 October 1959
• Docket Number: No. 16199.,16199.
• Citation: 270 F.2d 686
• Parties: AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA, a Pennsylvania corporation, Appellant, v. MINNESOTA FARM BUREAU SERVICE CO., a Minnesota corporation, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

270 F.2d 686 (1959)

AMERICAN CASUALTY COMPANY OF READING, PENNSYLVANIA, a Pennsylvania corporation, Appellant, v. MINNESOTA FARM BUREAU SERVICE CO., a Minnesota corporation, Appellee.

No. 16199.

United States Court of Appeals Eighth Circuit.

October 14, 1959.

Frank X. Cronan, Minneapolis, Minn. (Harold J. Carroll, and Carroll, Thorson, Anderson & Cronan, Minneapolis, Minn., on the brief), for appellant.

Bernard P. Friel, St. Paul, Minn. (Richard E. Kyle and Briggs, Gilbert, Morton, Kyle & Macartney, St. Paul, Minn., on the brief), for appellee.

Before GARDNER and VOGEL, Circuit Judges, and MICKELSON, District Judge.

VOGEL, Circuit Judge.

Minnesota Farm Bureau Service Company, appellee, hereinafter referred to as plaintiff, brought this action against the American Casualty Company of Reading, Pennsylvania, hereinafter referred to as defendant. The action was based upon certain comprehensive liability policies of insurance issued by the defendant to the plaintiff during the years 1948 through February 1, 1955. The case was tried to the court without a jury and resulted in findings, conclusions and an order for judgment in favor of the plaintiff in the sum of $19,404.28. In appealing to this court, the defendant complains generally that:

1. The trial court erred in finding that the plaintiff had not violated the terms of the policies with respect to notice and that the defendant was not prejudiced in any way by the fact that the trials of state court actions against plaintiff were scheduled to begin one week after defendant received notice of claims.

2. The court erred in finding that the defendant, in denying liability on the grounds that the claims were not within the coverage of the policies, waived the provisions of the policies requiring notice.

3. The trial court erred in making finding of fact No. 16 to the effect that the damages, which were the basis of the claims made against the plaintiff by others, were the unintended and unforeseen results of plaintiff\'s manufacturing operations and were within the coverage afforded by the comprehensive general liability policies issued by the defendant to the plaintiff, because such finding is contrary to the evidence herein and contrary to applicable law.

We shall deal first with alleged error No. 3.

The policies issued by the defendant to the plaintiff for the years prior to February 1, 1954, carried the following pertinent insuring clause:

"To pay on or behalf of the Insured all sums which the Insured shall become obligated to pay by reason of the liability imposed upon him by law, * * * for damages because of injury to or destruction of property, including the loss of use thereof, arising out of such of the coverages hereinafter defined as are indicated by specific premium in Item 3 of the declarations; * * * Coverage D — Property Damage Liability other than Automobile arising out of an accident or accidents. Any property damage hazard not otherwise excluded in the policy that does not come within Coverage C." (Emphasis supplied.)

The policy issued by the defendant to the plaintiff for the year subsequent to February 1, 1954, carries the following insuring clause:

"Coverage D — Property Damage Liability — Except Automobile.

To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by accident." (Emphasis supplied.)

We find no distinction between the insuring clauses of the policies and agree with the trial court that:

"The policies obligated the defendant to pay on behalf of the insured all sums which the insured should become legally liable to pay as damages because of injury to or the destruction of property including the loss of use caused by accident." (Emphasis supplied.) Minnesota Farm Bureau Service Co. v. American Casualty Co., D.C.Minn. 1958, 167 F.Supp. 315, 317.

And:

"By their terms the various insurance policies extend coverage to the plaintiff for property damage by reason of the liability imposed on the plaintiff by law arising out of accidents." (Emphasis supplied.) 167 F.Supp. at page 320.

The question thus presented under claimed error No. 3 is whether or not the trial court was correct in concluding that the liability for damages imposed upon plaintiff arose out of an accident or accidents within the terms of the policies. A recitation of the facts is necessary to a proper determination of the correctness of the trial court's conclusion.

Plaintiff is a Minnesota corporation engaged in the manufacture and sale of inorganic fertilizer composed of phosphate, potash and liquid nitrogen (ammonia) in varying proportions. Plaintiff's manufacturing plant is located in St. Paul, Minnesota. Plaintiff commenced production in its plant in July of 1945 and in that year manufactured approximately 9,575 tons of fertilizer. Production in each year thereafter increased until in 1954 plaintiff produced a total of 61,379 tons.

Defendant is a corporation engaged in the business of writing casualty and liability insurance and issued its policies to the plaintiff as referred to heretofore.

In the spring of 1954 some residents living in the vicinity of the plaintiff's plant made verbal complaints to employees of the plaintiff with respect to vibrations, ammonia fumes and powder or dust which it was claimed emanated from the plaintiff's premises and which it was further claimed caused damage to the property of the complainants and injury and discomfort to their persons and their families. On June 3, 1954, an attorney representing some of the persons residing in the vicinity of the plaintiff's plant wrote to plaintiff, demanding that the plaintiff abate the alleged nuisance claimed to exist at its plant. Plaintiff referred the letter to its regular attorneys, who conferred with the attorney for the complaining residents concerning the claims. Such conferences were unavailing and on July 8, 1954, actions were commenced in state district court against the plaintiff for damages and for injunctive relief. The complaints in each of the cases were identical and included the following allegation:

"That the Defendant has created and maintained a nuisance on its premises, with frequent detonations of powerful explosives thereon, causing disturbing noise and the vibration of land owned by plaintiffs, and shaking the buildings thereon, causing the masonry and plaster and other parts of the buildings to crack, loosen and fall, weakening the structures and causing rapid deterioration, frightening the occupants and impairing its value; that it has and is violating the ordinances of the City of St. Paul and the laws of the State of Minnesota, in its said activities;

The noxious odors, fumes, gases, and powders, in great volume, emanate from the Defendant\'s said property, particularly, but without limiting the foregoing, during the handling and manufacture of fertilizer, and that these are nauseating to the occupants of Plaintiffs\' premises, deleterious to their health, and disruptive to their peace of mind and injurious to their welfare, as well as damaging the plant life on their said property and even killing the same, and befouling the buildings and personal property and further impairing the value of the Plaintiffs\' property, both real and personal;

That by reason of the close location of Defendant\'s property and the said nuisance to Plaintiffs\' property, their damage has been particular, special and substantial."

The state court found in favor of all claimants for substantial amounts and determined that the claimants had sustained property damages covering the period from July 8, 1948, to January 26, 1955. (Insofar as two of the claimants were concerned, the period was slightly shorter.)

In addition to the District Court's findings, including finding No. 16, which is herein specifically attacked, the parties in the court below stipulated, among other things, as follows:

"The unprocessed potash and phosphate (used by the defendant in manufacturing fertilizer) are in powder form. During storage these ingredients, because of their chemical composition, have tendency to harden, making it difficult to shovel the materials out of the bins for use in the manufacturing process. In order to loosen the materials, explosives are used to blast the solidified material and make it easier to handle.

"At the trial of the State Court actions it was testified that on occasion as many as 12 sticks of explosive, known as agritol, which is similar to dynamite, were used in freeing the above-described materials, each stick of the said explosive weighing a half pound. Thereafter, in February of 1955, the Service Company limited the number of sticks of agritol to be exploded in any one place to eight, and, thereafter, in September of 1955, the Service Company limited the number of sticks of agritol to be exploded in any one place of the Service Company to four sticks.

"The dry materials so loosened are taken from the storage bins by tractor to a hopper, from which it is carried by conveyor belt to an `ammoniator.\' The liquid nitrogen is brought by pipe from the storage tank to the ammoniator and is there combined with the dry materials to make the finished product. This finished product in moist form is then carried by conveyor belt from the ammoniator to storage bins for drying and curing. While so stored, the hardening process re-occurs, although to a lesser extent than when the powder is in its natural state. As a consequence, some explosives must be used to free the product so that it can be carried by conveyor for sacking and ultimate shipment. Some of the finished product was carried to a hopper, from which it was unloaded out the side into bulk trucks.

"In the spring of 1954 some of the residents

...