City of Burlington v. Hartford Steam Boiler

Decision Date06 March 2002
Docket NumberNo. 1:00-CV-170.,1:00-CV-170.
Citation190 F.Supp.2d 663
PartiesCITY OF BURLINGTON, Plaintiff, v. HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY, Factory Mutual Insurance Company, Indemnity Insurance Company of North America, the Home Insurance Company, and Allianz Insurance Company, Defendants.
CourtU.S. District Court — District of Vermont

William F. Ellis, Esq., McNeil, Leddy & Sheahan, P.C., Burlington, VT, for Plaintiff.

Kathleen D. Monnes, Esq., Day, Berry & Howard, Hartford, CT, James W. Spink, Esq., Spink & Miller, PLC, Burlington, VT, Samuel Hoar, Jr., Esq., Dinse, Knapp & McAndrew, P.C., Burlington, VT, Stephen L. Coco, Esq., Robins, Kaplan, Miller & Ciresi, Boston, MA, Andrew S. Granzow, Esq., Hecker, Brown, Sherry & Johnson, Philadelphia, PA, Bret P. Powell, Esq., Unsworth & Barra, PLC, Essex Jct., VT, Douglas C. Pierson, Esq., Pierson, Wadhams, Quinn & Yates, Burlington, VT, for Defendants.

OPINION AND ORDER

(Papers 90 & 122; 92 & 124; 119 & 141; 137 & 166; 130 & 153)

MURTHA, Chief Judge.

Plaintiff, City of Burlington, Vermont ("the City"), brings a breach of contract claim against five insurance companies seeking declaratory judgment. The City alleges that the companies have failed to reimburse the City for repair costs and consequential damages resulting from physical damage experienced in the boiler unit of a City-owned electric energy generating facility. The DefendantsFactory Mutual Insurance Company ("Factory Mutual"), Allianz Insurance Company ("Allianz"), The Home Insurance Company ("HIC"), Indemnity Insurance Company of North America ("Indemnity"), and Hartford Steam Boiler Inspection and Insurance Company ("Hartford") — each move for summary judgment on all respective counts,1 and the City files cross-motions for summary judgment against each Defendant.2 For the reasons set forth below, the Court GRANTS all of the Defendants' motions, and DENIES all of the City's motions.

I. Background
A. The Faulty Shop Welds

In 1982, the City contracted with Zurn Industries, Inc. ("Zurn"), to design, engineer, and construct a wood-fired steam electric energy generator to be installed at the newly-constructed Joseph C. McNeil Generating Station in Burlington, Vermont. The boiler portion of the generator includes an economizer which consists of metal tubes welded together.3 The welds are appropriately called "shop welds" since they are performed at a shop or manufacturing facility on a piece of equipment prior to it being shipped and installed. The shop welds were made by Zurn at its manufacturing facility between April and August of 1982, and the completed economizers were later delivered and installed at the McNeil Station.

On April 20, 1983, pursuant to the City's contract with Zurn and in accordance with standards set by the American Society of Mechanical Engineers ("ASME") Boiler Code, the newly installed boiler was hydrostatically tested. See Paper 167, Ex. 13. Because none of the boiler welds showed leaks, the City concluded that the test was "an unqualified success." Id. The generator first began operating in March of 1984.

During 1987 and 1988, the City requested maintenance on the boiler due to the discovery of two isolated leaks in the lower section of the economizer. Though maintenance reports prepared following the weld repairs indicated that the two leaks were found at the shop welds, the welding contractors did not conclude that the leaks were caused by pervasive manufacturing defects. See Paper 95, Exs. L & M; Paper 165, Ex. F, at 32. Nor did the City, during that time, know the underlying cause of the two weld leaks. See Paper 165, Ex. F, at 33-34. In the opinion of the City's own metallurgical expert, the limited number of weld leaks occurring during the late 1980's would not have raised a reasonable suspicion that pervasive manufacturing defects were the cause of the damage experienced in the welds. See Paper 95, Ex. N, at ¶¶ 6-7. After 1988, no weld failures were discovered until April of 1995. Between April 1995 and August 1999, more than 30 leaks were discovered and repaired in the lower economizer section of the boiler unit by City-hired welding contractors. See Paper 95, Ex. K, at 18-19.

There is no evidence that during the course of these repairs — which typically included some inspection of the failed welds by certified welding contractors hired by the City — the City learned the underlying cause of the weld failures. By the winter of 1998, because of an increase in weld failures, the City became concerned that the failures were out of the ordinary. See Paper 167, Ex. 14, at 67-68.

The City therefore hired David N. French ("French") to study the economizer and determine the cause of the leaks. French performed a radiographic/metallographic analysis on two weld samples that had been cut out and removed from the lower section of the economizer by welding contractors during a planned plant shut down. See Paper 95, Ex. J, at 1-2.

In March of 1999, French completed an expert report containing the following conclusions:

The original circumferential weld is generally of poor quality. There is a lack of full penetration which means the weld does not comply with ASME Boiler Code requirements. However, the weld metal itself is sound. Water-side pitting and corrosion are trivial with the deepest pits noted less than 4 mils deep.

Id. at 1.

Also in March of 1999, another City contractor, Power Specialist Associates, Inc. ("PSA"), performed ultrasonic thickness testing using immersion technology on selected areas of the economizer. PSA's report, dated March 14, 1999, concluded that:

All of the tubes tested during this outage appeared to be in good condition. Tube failures were reported by plant personnel to be in the butt welds attaching the bend to the straight section of the tube. Upon visual inspection of the bends, it appeared that the failure was caused by a lack of root weld penetration which would cause a relatively weak area in the tube.

Paper 95, Ex. J (emphasis added).

In October of 1999, having previously sought only to repair weld leaks as they were found, the City contracted with Bremco, Inc. to remove and replace all existing shop welds in the lower section of the economizer, including those that had shown no signs of leaking. In a report dated December 16, 1999, Bremco made the following finding:

Careful inspection of the removed welds revealed incomplete penetration at every joint.... The starting and stopping point of each arc in the welded joint root exhibited concavity. This is called "suck back" and as the name implies, the root is pulled back into the joint. When joints are fashioned in this manner, it will lead to premature failure as the wall thickness is drastically reduced. Common internal corrosion, coupled with a reduced wall thickness and root contamination for the arc strike in the beginning of the weld has set the stage for tube wall leaks.

Id.

In the spring of 2000, the City contracted with Vermont Nondestructive Testing ("VNT") to perform a radiographic inspection of the center and upper tube banks of the economizer. VNT's conclusion, dated April 10, 2000, stated as follows:

Upper Economizer Radiograph 36 is acceptable, however, 1-35 and 37 were found to have inadequate penetration at the root. Center Economizer Radiograph 19, 35 and 36 are acceptable, however, 1-18, 2-24 and 37 were found to have inadequate penetration at the root.

Paper 95, Ex. O.

On November 1, 2000, the City submitted to the Defendants another report by French, dated March 28, 2000, in compliance with its duty to disclose the bases for the opinion of its expert under Federal Rule of Civil Procedure 26(a)(2). See Paper 95, Ex. J. Citing the previous French report, the PSA report, the Bremco report, as well as visual inspection of additional removed weld samples from the lower economizer, this second French Report concluded:

The shop welds in the economizer do not meet the ASME code requirements for such welds. The economizer leaks were only at the welds, and the poor quality and lack of full penetration at the root are the fundamental cause of the many leaks.

Paper 95, Ex. J.

Hartford's expert, upon examining the economizer, concluded (and the City later agreed) that the defective welds created by Zurn "would have begun to accumulate at some time during day one [of boiler operation] until [the weld] was removed from service...." Paper 154, at ¶ 9.

B. Procedural History

Each Defendant insured the City's boiler unit at some time period between 1982 and 1999. On October 15, 1999, the City, through its insurance broker, Global Risk Associates, Inc., sent each Defendant a notice of a claim in connection with the faulty economizer. On May 24, 2000, the City filed this lawsuit, seeking reimbursement for: (1) costs incurred during 1995 to 1999 to repair 34 weld leaks in the lower section of the economizer; (2) costs incurred to hire Bremco to remove and replace all the welds in the lower section of the economizer; (3) consequential damages associated with the extended mandatory shutdown of the plant for repairs by Bremco, including costs to secure replacement power and lost opportunity sales of electric energy; (4) costs to re-fire the boiler after each repair job; (5) expected damages to remove and replace all allegedly defective welds in the upper and middle portions of the economizer; and (5) prejudgment interest.4

II. Standard for Summary Judgment

Summary judgment is appropriate when there is no genuine issue as to any material fact, and the moving party is entitled to a judgment as a matter of law. See Pinto v. Allstate Ins. Co., 221 F.3d 394, 398 (2d Cir.2000) (citing Fed.R.Civ.P. 56(c), and Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). "The trial court's function in deciding such a motion is not to weigh the evidence or resolve the issues of fact, but to decide instead...

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