Dansico Ingredients, Usa, Inc. v. Kansas City Power & Light Co., WD55347

CourtCourt of Appeal of Missouri (US)
Writing for the CourtMaynard
Citation999 S.W.2d 326
Docket NumberWD55347
Decision Date14 September 1999
PartiesDanisco Ingredients USA, Inc., Plaintiff-Respondent, v. Kansas City Power & Light Company, Defendant-Appellant. WD55347 Missouri Court of Appeals Western District 0

Danisco Ingredients USA, Inc., Plaintiff-Respondent,
v.
Kansas City Power & Light Company, Defendant-Appellant.

WD55347

Missouri Court of Appeals Western District

09/14/99

Appeal From: Circuit Court of Jackson County, Hon. Justine E. Del Muro

Counsel for Appellant: Robert P. Gingrich, Jr.

Counsel for Respondent: Jeremiah D. Finnegan

Opinion Summary: Defendant-Appellant KCP&L appeals the trial court's grant of summary judgment to Plaintiff-Respondent Danisco Ingredients USA, Inc., on Danisco's claim against KCP&L for damages arising out of Danisco's loss of electrical power on three separate occasions. The trial court found that the disclaimers in KCP&L's rules, adopted as part of its tariff filed with the Kansas Corporation Commission (KCC), which purported to relieve KCP&L of all liability for losses caused by KCP&L's negligence or by its gross negligence or willful and wanton misconduct, were unenforceable as against public policy and that KCP&L could be held liable for damages caused by KCP&L's negligence or willful misconduct. KCP&L appealed, arguing that the limitations of liability contained in its tariff were valid. This court certified two questions concerning the validity of the limitations in KCP&L's tariff to the Kansas Supreme Court.

Division II holds: In accordance with the Kansas Supreme Court's response to our certified questions, this court holds the trial court did not err insofar as it held invalid KCP&L's purported disclaimer of its liability for willful and wanton misconduct. The portions of the rules contained in the KCP&L's tariffs that purported to limit KCP&L's liability for its own willful and wanton misconduct were overreaching attempts to insulate itself from its own willful or wanton activity and are void as against public policy.

The Kansas Supreme Court also held that a provision in a tariff disclaiming liability for ordinary negligence is valid. It found that, generally, rules promulgated by public utilities which absolve them from liability for simple negligence in the delivery of their services are viewed as reasonable because a public utility's liability exposure has a direct effect on its rates. Therefore, the limitation of ordinary liability in order for KCP&L to provide services at reasonable rates is a reasonable and sound policy, and the KCP&L tariff should be given effect to the extent that it relates to a limitation of ordinary negligence. To the extent the decision in Forte Hotels, Inc. v. Kansas City Power & Light Co., 913 S.W.2d 803 (Mo.Ap.. 1995), holds to the contrary, it is no longer to be followed.

Accordingly, this court reverses summary judgment on Danisco's claims against KCP&L on its claims for simple negligence, and on remand, the circuit court is instructed to enter judgment in favor of KCP&L on those ordinary negligence claims. Summary judgment is also reversed on Danisco's claims against KCP&L for willful and wanton misconduct and remanded for further proceedings on the issue of whether either party is entitled to judgment on this claim.

Ulrich, J., and Riederer, P.J., concur.

Laura Denvir Stith, Judge

Defendant-Appellant KCP&L appeals the trial court's grant of summary judgment to Plaintiff-Respondent Danisco Ingredients USA, Inc., on Danisco's claim against KCP&L for damages arising out of Danisco's loss of electrical power on three separate occasions. The trial court recognized that Rules 7.06 and 7.12 of KCP&L's General Rules and Regulations Applying to Electric Service, adopted as part of its tariff filed with and allowed to become effective by the Kansas Corporation Commission (KCC), purported to relieve KCP&L of all liability for losses caused by KCP&L's negligence or by its gross negligence or willful and wanton misconduct. The court found these disclaimers to be unenforceable as against public policy, however, and that KCP&L therefore could be held liable for Danisco's damages caused by KCP&L's negligence or willful misconduct.

KCP&L appealed, arguing that the limitations of liability contained in its tariff were valid. Because the law of Kansas is determinative of the issues pending before this Court and no controlling precedent then existed within the existing corpus of Kansas law, we certified two questions concerning the validity of these limitations to the Kansas Supreme Court under K.S.A. Section 60-3201. That Court ruled that the portions of Rules 7.06 and 7.12 contained in KCP&L's tariffs which purport to limit KCP&L's liability for its own willful and wanton misconduct are void and unenforceable as a matter of public policy, but that the rules are effective and enforceable to the extent that they limit KCP&L's liability for simple negligence. Accordingly, we reverse summary judgment for Danisco on its claim against KCP&L in Count I for simple negligence, and remand for entry of judgment in favor of KCP&L on those claims. We reverse summary judgment for Danisco on its claim against KCP&L in Count II for willful and wanton misconduct, and remand for further proceedings in the trial court on the issue whether either party is entitled to judgment on that claim under the principles set out in this opinion.

I. FACTUAL Background of Power Outages


KCP&L is an electric public utility doing business in Missouri and Kansas. Danisco manufactures food additives at a production facility located in the New Century Airport, near Gardner, Kansas, and Danisco is one of KCP&L's Kansas electric customers. Danisco's production facility uses a high vacuum process which cannot tolerate even the briefest interruption of power. Danisco sued KCP&L to recover economic damages related to three power outages which occurred in 1993.

The first power outage occurred on September 2, 1993. An underground power cable failure caused a substation circuit breaker to instantly open and close, causing a "momentary" interruption.(FN1) KCP&L claims the reason for the underground cable failure is unknown. The second power interruption occurred on September 27, 1993. This outage was preceded by a low-voltage report from Danisco. In an effort to increase the voltage on the circuit serving Danisco's facility, KCP&L linemen undertook switching procedures to reconfigure the circuit providing service to Danisco. During these procedures, a line switch failed in one location, and at or near the same time power monitoring equipment failed in another location. These two equipment failures resulted in an interruption in the supply of power to Danisco which lasted approximately five hours. As a result of this outage, Danisco was not able to operate its production facility for up to 80 hours.

The third interruption occurred on November 24, 1993. On that day, KCP&L claims a substation circuit breaker opened and closed for some unknown reason. Substation circuit breakers will open and close due to storms, lightning, varmints on the wires, or when electrical devices or equipment somewhere on the circuit fail.

II. PROCEDURAL HISTORY AND CERTIFICATION PROCEEDINGS A. Procedural History in Trial Court.

In an attempt to recover for economic loss and property damage caused by the interruption of its power supply, Danisco filed suit against KCP&L, claiming damages based on a "lost opportunity" to produce food additives for the periods during which the power outages occurred, and during the time period it took to restore Danisco's production line back to full operation after a power interruption. In Count I of its Petition, Danisco claimed that these damages were caused by KCP&L's negligence. In Count II of its Petition, Danisco claimed that KCP&L knew that Danisco would suffer unavoidable damages if it lost power, but willfully failed to inform it of the danger of a power outage or to protect it from such an outage.

The parties filed cross-motions for summary judgment. KCP&L argued that it had validly disclaimed liability for damages resulting from its own negligence or willful misconduct in Rules 7.06 and 7.12 of its "General Rules and Regulations Applying To Electric Service." These rules are a part of its tariff and the tariff was allowed to become effective by the KCC under the power and authority the Kansas legislature gave the KCC to approve just and reasonable rates.

Rule 7.06 determines KCP&L's duty to supply continuous electrical energy to customers. It purports to absolve KCP&L from liability for any failure to continuously supply electrical energy, even if that failure resulted from its own negligence, for it states:

The Company will use reasonable diligence to supply continuous electric service to the customer but does not guarantee the supply of electric service against irregularities or interruptions. The Company shall not be considered in default of its service agreement with the customer and shall not otherwise be liable for any damages occasioned by any irregularity or interruption of electric service.

Rule 7.12 determines KCP&L's liability to its customers generally. Similarly to Rule 7.06, it purports to protect KCP&L from liability for any failure to perform its obligations to deliver electric service, stating:

The Company shall not be considered in default of its service agreement and shall not be liable on account of any failure by the Company to perform any obligation if prevented from fulfilling such obligation by reason of any delivery delay, breakdown, or failure of or damage to facilities, an electric disturbance originating on or transmitted through electric systems with which the Company's system is interconnected, act of God or public enemy, strike, or other labor disturbance involving the Company or the Customer, civil, military, or governmental authority, or any cause beyond the control of the Company.

KCP&L argued that these rules were dispositive, that the courts had no right to second guess the KCC's determination to allow these rules to become part of its tariff, and that it was entitled to judgment on all of...

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