Great Northern Oil Co. v. St. Paul Fire & Marine Ins. Co.
Decision Date | 14 March 1975 |
Docket Number | 44749,Nos. 44706,s. 44706 |
Citation | 303 Minn. 267,227 N.W.2d 789 |
Court | Minnesota Supreme Court |
Parties | GREAT NORTHERN OIL CO., n.k.a. Koch Refinery, Appellant-Respondent, v. ST. PAUL FIRE & MARINE INSURANCE CO., et al., Respondents-Appellants. |
Syllabus by the Court
In an action to recover loss of business earnings under a business-interruption clause of an all-risk insurance policy, Held that, although an accident occurring during the construction of an addition to plaintiff's oil refinery caused damage to property insured by the policy, no business interruption within the provisions of the policy resulted, since neither the undamaged existing facility nor the facility as a whole suffered any loss of earnings during the specified suspension period necessary to restore the added facilities under construction to their pre-accident condition.
O'Connor & Hannan and Joe A. Walters and Kenneth B. Jones, Jr., Minneapolis, for Great Northern Oil Co.
Meagher, Geer, Markham, Anderson, Adamson, Flaskamp & Brennan and J. Richard Bland and O. C. Adamson, II, Minneapolis, for St. Paul Fire & Marine Co., and others.
Heard before ROGOSHESKE, KELLY, and YETKA, JJ., and considered and decided by the court en banc.
Action for the recovery of a business-interruption loss allegedly sustained as a result of an accident occurring during the construction of an addition to plaintiff's oil refinery. 1 The jury, answering by special verdict, determined that a 96-day delay in the completion of the expanded facilities had resulted from the accident and assessed the per-day business loss at $9,132.77. Thereafter, the trial judge, adopting the jury's special verdict as to the length of delay and the per-day loss, found as a matter of law that the loss sustained fell within the business-interruption coverage of the insurance contract and ordered judgment against defendants for $776,745.92 plus costs and disbursements.
Defendants' two main issues on appeal are whether the accident resulted in damage to property covered by the insurance policy, and whether the accident resulted in a compensable business-interruption loss. Plaintiff contends that prejudgment interest denied by the trial court should have been awarded and included in the judgment. 2 We hold that the accident did not create an 'interruption of business' within the meaning of the insurance policy and accordingly reverse. It is therefore unnecessary to consider the prejudgment interest issue.
Plaintiff, Great Northern Oil Company, owns and operates an oil refinery and river terminal at Pine Bend, Minnesota, as well as oil terminals in other areas of Minnesota and Wisconsin. The Pine Bend refinery has been in operation since 1955. Between 1955 and 1963, the daily refining output had increased from 23,500 barrels to 56,000 barrels. To insure its various facilities, plaintiff obtained a policy of property damage and business-interruption insurance from defendants. This policy was purchased through plaintiff's insurance agent and placed with defendants. The policy was renewed on August 12, 1964, for a 3-year period ending August 12, 1967. In September 1966, plaintiff decided to increase the capacity of its Pine Bend refinery by about 30 percent, from 56,000 barrels to 72,000 barrels per day. Accordingly, plaintiff entered into a $13.7 million construction contract on February 7, 1967, with The Litwin Corporation, Inc. The new construction was to take place on about 1 acre of land located immediately east of the existing facility. The new facility was to be connected to the existing facility by physically tying the pipes from the new construction to the existing refinery system. The proposed completion date for the new facility was January 1, 1968.
On June 16, 1967, an accident occurred which gave rise to plaintiff's claim for loss of earnings under the business-interruption clause of the insurance policy. On that date, a crane being used in the construction collapsed while lifting into position a 72-ton tank, technically known as the 'primary tower absorber.' The tower fell into the new construction area, causing damage to accessory equipment. There was no damage to the existing facility and it continued its normal operation. By October 15, 1967, the damage caused by the tower collapse had been repaired and the construction was again at the pre-accident stage. The entire project was completed by June 1968, some 6 months after the scheduled completion date for construction of the expansion facilities.
The insurance policy provides in pertinent part:
'(A) All real and personal property owned by or in the custody of Insured while located at places described herein.
'(B) Loss directly resulting from necessary interruption of business caused by insured perils to property described in (A) above.
Plaintiff brought this action to recover the prospective earnings from the expanded plant that would have accrued had no accident occurred. It is argued that, but for the tower's collapse, the expanded facility would have been operational by January 1, 1968. Although earnings attributable to the expanded facility did not commence until June 1968, plaintiff maintains that it is entitled to recover potential lost earnings during the 96-day delay in construction under the business-interruption coverage of its policy.
1. The insurance policy provides coverage for '(l)oss directly resulting from necessary interruption of business caused by insured perils to (insured property).' Defendants argue that the policy did not afford coverage to new construction or property added to the plant subsequent to the issuance of the policy, and since the accident caused damage only to uninsured property, any...
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