Bigelow-Liptak Corp. v. Continental Ins. Co., Civ. No. 36876.
| Decision Date | 30 July 1976 |
| Docket Number | Civ. No. 36876. |
| Citation | 417 F. Supp. 1276 |
| Parties | BIGELOW-LIPTAK CORPORATION, a Michigan Corporation, Plaintiff, v. The CONTINENTAL INSURANCE COMPANY, a New York Corporation, Defendant. |
| Court | U.S. District Court — Western District of Michigan |
Bruce D. Carey, Detroit, Mich., for plaintiff.
David J. Lanctot, Detroit, Mich., for defendant.
This litigation involves the construction of exclusionary language contained in a policy of insurance issued by defendant (hereinafter referred to as Continental) to the plaintiff, Bigelow-Liptak Corporation (hereinafter referred to as Bigelow). This was a bench trial in which the issues were submitted to the court primarily on the basis of seven depositions which were a part of the court file. The testimony presented at trial was very limited and was basically duplicative of that contained in the depositions with the exception of testimony presented on the issue of damages sustained by the plaintiff in connection with the settlement of the claims against him.1
Bigelow is in the refractory construction business (B-3). They work with refractory installation and repair in connection with kilns, boilers and other types of industrial heat enclosures. Continental is a general insurance carrier who in this case issued to Bigelow a policy of comprehensive general liability insurance (Exhibit 2). The incidents which give rise to this litigation concern two separate and distinct contracts entered into by Bigelow for refractory work. The first was as a subcontractor for the Nooter Corporation for work to be performed on property owned by the Humble Oil Company in Linden, New Jersey. The second contract involves refractory work to be done for Charmin Paper Products Company in Pennsylvania. It is, thus, necessary to set forth the facts concerning the two contracts separately.
Humble Oil Company awarded a general contract to the Ralph M. Parsons Company for the construction of a refinery facility. The general contract required the construction of five spherical reactors, or pressure vessels, as part of the refinery facility. Parsons awarded a subcontract to the Nooter Corporation for the construction of the five pressure vessels. Due to the size and weight of these vessels, they were made by Nooter in subassemblies at its plant in St. Louis, Missouri, and shipped disassembled for construction on the New Jersey site. The subcontract between Parsons and Nooter called for each of these pressure vessels to be lined with refractory material four and one-half (4 ½") inches in thickness. Rather than do this work themselves, Nooter subcontracted the refractory work to Bigelow.
When the pressure vessels were assembled, they were bolted down with anchor bolts through a concrete structure approximately 25 feet wide, 150 feet long, and 20 feet above grade (A-10). The full operating weight of an individual pressure vessel was 392,300 pounds (C-49). The concrete foundation to which the pressure vessels were attached was in turn firmly affixed to the real estate owned by the Humble Oil Company.
When Nooter completed the assembling of the first of the pressure vessels, it informed Bigelow that its workmen could then enter the vessel and begin to apply the refractory material which, in this instance, was gunnite, a type of liquid concrete which is sprayed under pressure onto a surface and then hardens. The installation of the refractory lining in the first pressure vessel was uneventful. However, when the work was completed, inspectors from Humble Oil and Parsons discovered that in some places the gunnite did not measure the four and one-half inches in thickness that was required by the contract specifications (A-14). Inspectors and other personnel from Humble, Parsons and Nooter were present both in and outside the pressure vessel at various times during which Bigelow was performing its work. Upon learning of the variance from contract specifications, Nooter ordered Bigelow to remove that portion of the lining which was not of the required thickness and to reinstall refractory lining of a correct thickness.
The only way to remove the refractory material at this time was through the use of air hammers and chisels (C-8 and C-48). In the course of removing the refractory material, the outside shell of the pressure vessel was damaged, such damage consisting of gouging and scarring, in some instances the gouges being up to one-quarter of an inch deep (A-19).
Upon examination of the damage, it was the consensus of Humble, Parsons and Nooter (A-19) that the scars and gouges would have to be repaired or else there could conceivably be a later failure of the vessel. The repair work consisted of cleaning up the area of the gouge, grinding and brushing the shell, building up the deeper gouges with welded metal, and ultimately putting the entire vessel to a hydrostatic test before Bigelow could be allowed to replace the lining (A-20). Since Bigelow did not do this type of work, the actual repair work was done by Nooter. Nooter subsequently presented a bill to Bigelow for this work in the amount of $35,158.69. Bigelow presented this bill in the form of a claim to Continental who declined coverage claiming the benefit of policy exclusions which will be discussed infra. Bigelow ultimately compromised the claim with Nooter for $31,698.72, which amount Bigelow has paid.
There is no dispute that the site in question was completely controlled from a physical standpoint by Humble Oil. The site was fenced, there were security guards on duty at all times, and entry was completely controlled. Persons entering the job site would enter through a main gate and would have to sign up and be given a badge or car pass. In general, workmen were brought to the site by car or bus, and the Bigelow crew was transported to the job site by one of the Bigelow supervisors (C-37).
The facts surrounding the Charmin claim are similar in many respects. Bigelow had been hired by Charmin to take off the old refractory and install new refractory in a large boiler that was used by Charmin to burn up the excessive alcohol which was a by-product from the wood that they processed at their plant (B-4). The boiler in question was housed on the second floor of the Charmin plant (B-5), and was approximately ten feet by twenty feet, and twenty feet in height (B-90). The boiler was part of the superstructure of the building. It was completely attached to the building. There was a common series of beams that held the boiler and the floor (B-107). Bigelow was to perform two functions within the boiler. First, they were to build a new brick front firewall, and secondly, they were to cover the "tubewall" with a type of plastic coated refractory material (B-90-91). In connection with putting the new refractory material on the tubewall, it was necessary to first take the old refractory material off. The removal of the old refractory material from the tubes was accomplished by the use of an air pressure operated blunt chisel (B-8). The tools used in connection with the removal of this refractory material were similar to tools used on other jobs of this nature (B-8). Employees of the Charmin Paper Company at all times exercised over-all supervision over the work as it progressed, and daily meetings were held in order to discuss the progress made that day and what was contemplated for the next day (B-12).
During the course of the work, and as a result of one of the regular inspections made of the work by the Charmin personnel, it was discovered that some of the boiler tubes had been "scratched" in connection with the removal of the refractory material (B-13). The discovery of the apparent damage to the tubes occasioned further investigation and testing by Charmin employees who ultimately circled those indentations or gouges which were going to have to be repaired (B-15). Since Bigelow did not have the expertise necessary to do the repair work, the repair work was done on behalf of Charmin by others, and the cost of such repair work, in the amount of $2,603.01, was deducted by Charmin from amounts owing on the contract to Bigelow. Employees of Bigelow who inspected the damage and repair work were of the opinion that the charge made for the repair work was very reasonable. The branch construction manager for Bigelow, William Humphreys, stated in his deposition that, "I thought it was going to be twice that."
Bigelow again presented a claim for payment to Continental in the amount of $2,603.01, which claim was denied by Continental due to policy exclusions.
As was the case at the New Jersey site, there is no dispute as to the fact that the Charmin premises, in general, were entirely controlled by Charmin personnel. The plant site was fenced, and in order to get in, one had to go through guards and had to be expected by the guards in order to gain entry (B-5). Due to the security involved, Bigelow employees were brought in and taken out of work daily by a Bigelow supervisor.
One additional relevant point concerns the lighting inside the boiler. The lighting was deemed by employees of Bigelow to be very poor (B-7). The lighting was dictated by Charmin who would not allow any lighting inside the boiler other than "five volt lighting." At one point, employees of Bigelow "bootlegged" their own light into the boiler, but the Charmin people came in and took it out because it was against their policy to have this type of lighting inside the boiler (B-63).
After the denial of the claims by Continental, Bigelow ultimately instituted this lawsuit. In its answer to Bigelow's complaint, defendant Continental relied upon three exclusions in the policy of insurance which it claims relieves them from any liability in this matter. These provisions are as follows:
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