Grain Dealers Mut. Ins. Co. v. FARMERS U. COOP. E. & S. ASS'N, 8473

• Decision Date: 14 June 1967
• Docket Number: No. 8473,8653.,8473
• Citation: 377 F.2d 672
• Parties: GRAIN DEALERS MUTUAL INSURANCE COMPANY, Appellant, v. The FARMERS UNION COOPERATIVE ELEVATOR AND SHIPPING ASSOCIATION, KIRWIN, KANSAS, Appellee. The FARMERS UNION COOPERATIVE ELEVATOR AND SHIPPING ASSOCIATION, KIRWIN, KANSAS, Appellant, v. GRAIN DEALERS MUTUAL INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

377 F.2d 672 (1967)

GRAIN DEALERS MUTUAL INSURANCE COMPANY, Appellant, v. The FARMERS UNION COOPERATIVE ELEVATOR AND SHIPPING ASSOCIATION, KIRWIN, KANSAS, Appellee.

The FARMERS UNION COOPERATIVE ELEVATOR AND SHIPPING ASSOCIATION, KIRWIN, KANSAS, Appellant, v. GRAIN DEALERS MUTUAL INSURANCE COMPANY, Appellee.

Nos. 8473, 8653.

United States Court of Appeals Tenth Circuit.

May 12, 1967.

Rehearing Denied June 14, 1967.

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J. L. Weigand, Jr., Wichita, Kan. (Weigand, Curfman, Brainerd, Harris & Kaufman, Wichita, Kan., with him on the brief), for Grain Dealers Mut. Ins. Co.

William H. Stowell and Keith G. Sebelius, Norton, Kan. (Stowell & Stowell, Phillipsburg, Kan., with them on the brief), for The Farmers Union Cooperative Elevator and Shipping Assn., Kirwin, Kan.

Before MURRAH, Chief Judge, LEWIS, Circuit Judge, and CHRISTENSEN, District Judge.

Rehearing Denied in No. 8473 June 14, 1967.

CHRISTENSEN, District Judge.

In this diversity action on an insurance policy, Grain Dealers Mutual Insurance Company has appealed from a money judgment on the verdict in favor of The Farmers Union Cooperative Elevator and Shipping Association. Claimed errors on the principal appeal relate to the admission or exclusion of evidence, limitation of cross-examination, failure of the court to grant a directed verdict, judgment notwithstanding the verdict or a new trial, instructions to the jury, and the award of attorney's fees. By cross-appeal the elevator company complains because a larger award of attorney's fees was not made.

The insurance company had issued to the elevator company a policy of insurance which included protection against loss caused by "explosion damage" which was defined in the policy as "* * * direct loss to the property insured hereunder from explosion caused by the rapid combustion of any volatile or combustible substance, except Bi-Sulphide of Carbon."¹

The evidence showed that on the morning of August 15, 1962, the elevator company's Bin 14 was filled to capacity with wheat when the operator began running wheat out of the bin by gravity feed. The operator thereupon left to pick up mail in town. Upon his return after an absence of some fifteen minutes he observed a long vertical crack in the "bellied out" wall of the bin some fifty feet in length. A number of eyewitnesses to the occurrence testified that the cracking was accompanied by a loud noise or bang resembling the sound of an explosion.

The elevator company asserted that the cracking of the bin had resulted from an explosion within the coverage of its insurance policy. The insurance company denied liability and later as plaintiff in the court below brought a declaratory judgment action by which it sought a determination that it was not liable. The elevator company filed an answer and counterclaim praying for judgment under its policy for loss "by reason of an explosion", together with attorney's fees.² The jury returned a verdict for the elevator company in the sum of $6,598.78 and judgment was entered accordingly. Subsequently, the court awarded the elevator company the additional amount of $2,375 as attorney's fees held to be recoverable under state law. The trial court denied the insurance company's motions for a directed verdict and for a judgment N.O.V., as well as its motion for a new trial.

The central issue in the court below was whether the damage to the bin was the result of "explosion caused by the rapid combustion of any volatile or combustible substance", or whether it was the result of weak or insufficient design or construction of the bin, a "bridging over of the wheat" and its sudden release, or some other cause. There was evidence tending to establish these facts, among others: At the time of the occurrence in question there was wheat dust in the bin which was susceptible of combustion and there was foreign material in the wheat capable of producing sparks sufficient to set off a dust explosion under suitable conditions. An explosion of dust in such bins was a recognized hazard in the grain elevator business. The cracking of Bin 14 was accompanied by a sudden and loud noise resembling the sound of a dynamite explosion. At the time of the occurrence there was a sound and feel of rushing air, pieces of concrete from the area of the crack were thrown as far as 35 or 40 feet away from the side of the bin. The circumstances involved sufficient suddenness, violence and noise as to impel persons in the vicinity spontaneously to run from the scene in fear for their safety. There was no careful inspection of the remaining wheat, the inside walls of the bin or the fragments of concrete falling from the side of the bin made by representatives of either party immediately following the occurrence which would have afforded positive assurance that there was no residual evidence of combustion. There was no claim made by either party, nor evidence to suggest, that if there were an explosion of any kind it could have been other than through combustion of dust particles. Aside from explosion the only two possible causes suggested by the insurance company were structural failure or the bridging over of the wheat and its sudden release, and there was substantial credible evidence to the effect that neither of these other causes was likely.

Sampson, a practical construction and business man having considerable experience with grain elevators testified that in his judgment the damage was caused by an explosion of wheat dust. There was also evidence that the field representative of the insurance company, after only a cursory view of the bin, implied a similar judgment. The insurance company produced a well qualified expert, Means, whose conclusions were to the contrary, but some uncertainties and qualifications expressed on cross-examination afforded at least some basis for questioning his opinion on the ultimate issue.

The insurance company argues that the most the evidence showed was loss by "a sudden bursting, noise, sudden cracking, dust" and that this only proved loss or damage and not the cause. It is urged particularly that there was no proof of burnt wheat, no residual odor of burning, no charring or blackening or scorching and no remnants of carbon on the wheat or on the walls of the bin. If, says appellant, there was evidence of an explosion there is no evidence that it was caused by the insured peril, namely, the rapid combustion of any volatile or combustible substance.

We think that properly to weigh this argument in relation to the motion for a directed verdict a distinction must be noted which will prove meaningful also with respect to the claimed errors in instructions. It is certainly true that to warrant recovery under the policy it would have to be shown by competent evidence that damages proximately resulted from an explosion as defined in the policy, that is, one caused by the rapid combustion of some volatile or combustible substance. The damage would not have to be caused, as suggested by appellant's argument, directly by burning even though burning involves combustion, since pressure caused by rapid combustion could be the immediate cause of recoverable damage. Hence, while proof of combustion, either direct or circumstantial, was essential, proof of damage directly caused by combustion or burning was not.

If the jury were bound as a matter of law to accept the testimony of the insurance company's expert that there could be no combustion of wheat dust without leaving visible signs and odors which necessarily would have been observed or noted, there would be considerable force in its position. But the jury did not have to accept these conclusions as a matter of law. Nor would it have been wholly illogical for them not to do so in view of the expert's concession that there could be dust explosions of varying degrees of intensity or size and that the observability of residual evidence would depend upon the severity of the explosion, the position of the explosion with reference to the level of the wheat, the handling of the wheat thereafter, and the degree and nature of subsequent observations. Especially was the testimony of the expert not conclusive in view of the fact that there had been no careful observation of the wheat or of the inside of the bin, or even of the fragments of concrete falling from the outside of the bin by the elevator company or by the insurance company. It is true that the inside of the bin was examined from the top by means of a light and that no odor was detected by employees of the elevator company, but there was evidence also that no special observations were made.

If reasonable minded persons in the exercise of fair, impartial judgment could decide the crucial issue in favor of the elevator company, drawing inferences from the established facts favorable to it and disregarding unfavorable inferences not evidentially compelled, the denial of the motions was not error. Peter Kiewit Sons Company v. Clayton, 366 F.2d 551 (10th Cir. 1966).

In Millers' Nat. Ins. Co., Chicago, Ill. v. Wichita Flour M. Co., 257 F.2d 93, 76 A.L.R.2d 385 (10th Cir. 1958), the facts and issues of which were singularly similar to those here, it was held that the jury was not bound to accept conclusions of experts and that taking a view of the evidence most favorable to the prevailing party there was substantial evidence to support the jury's verdict based upon the theory that the damage was caused by explosion of wheat dust. In some respects the facts in the case at bar more clearly indicate an explosion than the facts in the former case, since here there was evidence strongly negating the possibility of a structural failure and the evidence is less controverted that there was an unusual noise at the time of the break. In the former case, as well as here, "there was no evidence of any flash, odor, burning or charring" and this court there...