Elec. Power Sys. Int'l, Inc. v. Zurich Am. Ins. Co., 4:15 CV 1171 CDP
| Decision Date | 19 September 2016 |
| Docket Number | No. 4:15 CV 1171 CDP,4:15 CV 1171 CDP |
| Parties | ELECTRIC POWER SYSTEMS INTERNATIONAL, INC., Plaintiff, v. ZURICH AMERICAN INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Eastern District of Missouri |
In July 2014, plaintiff Electric Power Systems International, Inc. (EPS), made a claim under its commercial general liability insurance policy to defendant Zurich American Insurance Company for damage that occurred to a transformer while EPS was working on it. Zurich denied the claim based on two of the Policy's exclusions. The undisputed evidence shows that the Policy's "your work" exclusion applies to EPS's claim, and so the Policy provides no coverages. I will therefore grant Zurich's motion for summary judgment on all of EPS's claims and will deny EPS's motion. Judgment will be entered in favor of Zurich.
Louisville Gas and Electric Company (LGE) contracted for EPS to remove and crate parts of a transformer so that the transformer could be transported from Wisconsin to Kentucky. During the course of removing one of the transformer's bushings, EPS failed to extract one of the bolts that secured the bushing to an electrical lead from the internal coil of the transformer. As a result, when EPS lifted the bushing from its position on the transformer, the lead that remained bolted to the bushing was likewise lifted and yanked from the internal coil. Because of the damage to the coil, the transformer was rendered useless. EPS made a claim under its commercial general liability policy to its insurance carrier, defendant Zurich. Zurich denied coverage based on the Policy's exclusions.
EPS brought this three-count action against Zurich claiming that Zurich breached the insurance contract by failing to provide coverage for LGE's claim that EPS damaged the transformer; that Zurich acted in bad faith when it failed to effectuate a prompt settlement of LGE's claim; and that Zurich's failure to provide coverage constituted a vexatious refusal to pay. Zurich now moves for summary judgment on all of EPS's claims, arguing that the Policy's exclusions apply to the property damage at issue here, therefore barring any recovery under the Policy which, in turn, precludes recovery on EPS's claims of bad faith failure to settle and vexatious refusal to pay. EPS moves for summary judgment on its breach of contract claim, arguing that the Policy exclusions do not apply in the circumstances of this case.
Summary judgment must be granted when the pleadings and proffer of evidence demonstrate that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). I must view the facts in the light most favorable to the nonmoving party, "but only 'if there is a genuine dispute as to those facts.'" RSA 1 Ltd. P'ship v. Paramount Software Assocs., Inc., 793 F.3d 903, 906 (8th Cir. 2015) (quoting Torgerson, 643 F.3d at 1042).
The parties agree that the relevant facts are not in dispute, but each argues that the law as applied to those facts requires that judgment be entered in their respective favor. For the following reasons, Zurich is entitled to judgment as a matter of law on the undisputed facts of this case.
In July 2014, LGE purchased a used transformer from American Transmission Company (ATC) under a Transformer Sales Agreement that provided for LGE to test the transformer at the ATC site in Wisconsin and then transport the transformer from the ATC site to a power plant site in Kentucky. Under the Agreement, LGE would take title to the transformer upon successful and satisfactory completion of tests, oil removal, and internal inspection.
LGE contracted for EPS to test the transformer, drain the oil, assist in the inspection of the transformer, and remove and crate all parts necessary to relocate the transformer. The parts to be removed and crated included the transformer's bushings. LGE contracted for a separate company, ABB, to conduct the internal inspection.
On July 24 and 25, 2014, EPS conducted the tests, removed the oil, and prepared the transformer for internal inspection. ABB completed the internal inspection the morning of July 29, after which LGE took title to the transformer. EPS then began its disassembly of the external components, beginning with the bushings.
The transformer had a number of bushings to be removed and crated for shipment. Each bushing was attached to the transformer in such a way that the bottom portion was located inside the transformer and the top portion extended about nine feet from the top of the transformer. Each bushing had several connecting bolts, including bolts located on the interior of the transformer as well as others located externally. The bushings here were bottom-bolted bushings, meaning that the lead cable from the winding coil of the internal core of the transformer was bolted to the bottom of the bushing. Therefore, to remove a bushing from the transformer, the lead cable had to be disconnected from it, whichrequired someone to go into the internal components of the transformer and remove the bolts that attached the bushing to the lead. Removing the bushing from the transformer without first disconnecting the coil's lead cable would result in pulling on the interior core of the transformer and pulling out part of the winding coil.
After LGE took title to the transformer on July 29, EPS began the process to remove the bushings. Only EPS employees worked on the transformer at this time.
During the attempted removal of the first bushing, two members of the EPS crew were inside the transformer to remove the bolts and disconnect the coil's lead cable. Two additional members of the crew were outside the transformer: one operated the crane to lift the disconnected bushing from the transformer, and the other was on top of the transformer to guide the bushing as it was being lifted. When the EPS crew thought that all bolts to the bushing had been removed, the crane proceeded to lift the bushing from the transformer. However, EPS had failed to remove an internal bolt that attached the coil's lead cable to the bushing. The lead thus remained attached to the bushing when the crane began to lift the bushing from the transformer.
The crane experienced some resistance in lifting the bushing but continued to pull upward. A final thrust from the crane forcibly yanked the bushing from the transformer, causing the bushing in turn to yank the attached lead cable from thewinding coil, damaging the coil and rendering the transformer useless and beyond repair. The bushing itself was not damaged.
At the time of the incident, a commercial general liability policy of insurance was in effect whereby Zurich agreed to pay sums that EPS was legally obligated to pay as damages "because of 'bodily injury' or 'property damage' to which this insurance applies." (ECF 54-1, EPS Exh. 1 at p. 1.) The Policy further stated:
(Id. at p. 15.)
On July 30, 2014, EPS informed Zurich that damage occurred to the LGE transformer while a team of EPS employees was disassembling it at the ATC site, and it asked that a claim be started. On August 11, Zurich informed EPS that it disclaimed coverage for the incident under Exclusion j(4) of the Policy, that is, the "care, custody or control" exclusion; and Exclusion j(6) of the Policy, the "your work" exclusion. After additional investigation into the incident, Zurich continued to deny EPS's claim based on these exclusions.1
This action followed.
EPS claims that the property damage exclusions invoked by Zurich do not apply to this incident. With respect to Exclusion j(4), EPS argues that the transformer was not in its exclusive care, custody, or control when it was damagedbut was instead under the care, custody, and control of LGE and ATC. With respect to Exclusion j(6), EPS argues that the particular part on which it...
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