Hartford Steam Boiler Inspection And Ins. Co. v. Collective, No. 30162.

• Decision Date: 11 May 2010
• Docket Number: No. 30162.
• Citation: 121 Conn.App. 31,994 A.2d 262
• Court: Connecticut Court of Appeals
• Parties: HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANYv.UNDERWRITERS AT LLOYD'S AND COMPANIES COLLECTIVE et al.

121 Conn.App. 31

994 A.2d 262

HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANYv.UNDERWRITERS AT LLOYD'S AND COMPANIES COLLECTIVE et al.

No. 30162.

Appellate Court of Connecticut.

Argued Jan. 11, 2010.

Decided May 11, 2010.

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Paul K. Stockman, Pittsburgh, PA, pro hac vice, with whom were Maurice T. FitzMaurice and, on the brief, Robert J. Durbin, Hartford, CT, and Thomas E. Birsic, Pittsburgh, PA, pro hac vice, for the appellant (plaintiff).

Jeffrey J. White, with whom were Linda L. Morkan and, on the brief, Hartford, CT, Matthew P. Jasinski and Clayton H. Farnham, Atlanta, GA, pro hac vice, for the appellees (defendants).

DiPENTIMA, GRUENDEL and LAVINE, Js.^*

GRUENDEL, J.

This appeal concerns a dispute between insurance providers. The plaintiff, Hartford Steam Boiler Inspection and Insurance Company appeals from the judgment of the trial court confirming an arbitration award and awarding certain prejudgment and postjudgment interest to the defendants, Underwriters at Lloyd's and Companies Collective, National Union Fire Insurance Company, International Fire Insurance Company, Aetna Casualty and Surety Company, Home Insurance Company and Zurich Insurance Company. On appeal, the plaintiff contends that the court (1) improperly remanded the matter to the arbitration panel for clarification of its award, (2) improperly confirmed the arbitration award as clarified and (3) abused its discretion in awarding prejudgment and post-judgment interest. We affirm the judgment of the trial court.

The present dispute arises from a catastrophic explosion on August 11, 1993, at Independence Steam Electric Station Unit Two (facility), a coal fired electrical generating facility located near Newark, Arkansas. The explosion caused more than $28 million in damage. The owners of the facility, Arkansas Power and Light Company and others (collectively referred to as the insureds), submitted claims to their insurance providers, the parties to this appeal. The plaintiff provided a policy of boiler and machinery insurance, while the defendants provided “all risks” property insurance for the insureds. After investigating the loss, both the plaintiff and the defendants denied coverage under their respective policies. The plaintiff claimed that the cause of the loss was an explosion of gas or unconsumed fuel, a peril excluded from its coverage and covered under the all risks policy. The defendants contrarily contended that the loss was caused by the breakdown of a fired vessel, excluded from the coverage provided by the all risks policy because the event did not involve a combustion explosion that would otherwise render it, in whole or in part, a covered loss. Faced with those reciprocal denials, the insureds invoked the “Loss Adjustment Endorsements” provisions contained in both policies, which enabled the insureds to recover the total losses caused by the explosion by collecting one half of the amount in dispute from each insurance provider company. Pursuant thereto, the insureds recovered $10,933,435.86 from the plaintiff and $11,880,525.33 from the defendants. ¹

The loss adjustment endorsements also contained a provision enabling the parties, after payment to the insureds, to submit any dispute as to respective liability to arbitration. As a result, the coverage dispute between the plaintiff and the defendants was submitted to a panel of three arbitrators. The defendants appointed Edwin W. Whitmore to the panel; the plaintiff appointed Larry E. Gordon. Whitmore and Gordon jointly selected Frank W. Ockerby to serve as the third arbitrator and umpire.

The initial arbitration, referred to by the parties as phase I, commenced in Memphis, Tennessee, in 1996, and was governed by procedures agreed to by the parties. That proceeding focused on the causes of the August 11, 1993 loss and on various factual questions regarding application of certain policy language to certain technical design aspects of the facility. At the request of the arbitrators, the parties stipulated to an October 25, 1996 “joint statement of issues,” to be addressed by the arbitrators in their award. On January 9, 1997, the arbitration panel issued an interim award and thereafter issued a supplemental clarified decision in response to the parties' questions as to the meaning of the initial award. In light of those decisions, the parties agreed that each of their policies covered a portion of the losses but disagreed as to the apportionment of their respective liability.

That disagreement led the parties to resubmit the matter to the arbitration panel for resolution thereof, thereby commencing phase II of the arbitration. The parties stipulated to a statement of issues, which was limited to a determination of “(i) which costs are directly attributable to the collapse of the coutant support structure (i.e., the ‘bottom’ costs); (ii) which costs are directly attributable to explosion and/or overpressurization associated with [the facility] (i.e., the ‘top’ costs); (iii) which costs are directly attributable to fire, firefighting, or the explosion in D Mill; (iv) which costs are common or general project costs that are not allocable into categories (i), (ii) or (iii); and (v) any costs whose purpose or allocation cannot be determined from available evidence, or that do not otherwise fall within categories (i), (ii) or (iii).” The statement of issues further called on the panel to “resolve all liability and allocation issues with respect to each category of costs identified in Paragraph (a), including, without limitation, all coverage issues.” In addition, the parties agreed to a revised set of general procedures that would govern phase II of the arbitration. Among those procedures, the parties agreed that “[t]he arbitration award shall be in writing and shall contain findings of fact and conclusions regarding the interpretation of the insurance policies that are the subject of this arbitration as necessary to support the award.” In addition, the procedures stated that “[t]here shall be no ex parte communications related to this arbitration between the counsel, parties or arbitrators and the umpire except for routine matters such as addresses dates, expenses, etc. The parties shall be permitted to contact the umpire for the purposes of setting the dates for the arbitration and other procedural matters. Copies of any communication from the parties or arbitrators to the umpire shall be disclosed to all parties and all arbitrators.”

A hearing in Windsor Locks followed on June 28 and 29, 2001. The arbitration panel issued a decision on January 24, 2002, that responded to each question set forth in the stipulated statement of issues. With respect to the first five issues, the panel presented dollar amounts reflecting the allocation of costs corresponding to each question. The panel further determined that “[t]he allocation of $21,182,561.13 paid under the Joint Loss Agreement has been resolved in accordance with policy coverages as follows:

Boiler & Machinery-$14,489,833.52

All Risk-$7,375,012.59

Total-$21,864,846.11.”

On February 22, 2002, the plaintiff filed an application to vacate the arbitration award with the Superior Court. In response, the defendants filed their “reply to plaintiff's application to vacate arbitration award, and application to confirm arbitration award, or, in the alternative, to refer to arbitrators for clarification.” The court Hon. Richard M. Rittenband, judge trial referee, held a hearing on those applications on May 22, 2002. At that hearing, the plaintiff's primary contention was that the arbitrators should have been more specific in rendering their decision. In its July 31, 2002 memorandum of decision, the court agreed, concluding that “[t]he findings are not sufficiently specific or comprehensive to comply with the requirement that all liability and allocation issues and all coverage issues be resolved, nor do the findings contain sufficient findings of fact and conclusions regarding the interpretation of the insurance policies that are the subject of this arbitration as necessary to support the award.” In fashioning a proper remedy, the court noted its reluctance “to vacate the award because that would mean starting over again, and the parties would lose all the work, effort, etc., that covered six years of this arbitration. In the interest of economy of the parties, the panel and judicial economy, it would appear that a remand to the arbitrators would be more practical and a better remedy than vacating the awards.” Accordingly, the court remanded the matter to the arbitration panel for a rehearing to clarify the award so as to include the findings of fact and interpretations of the policies required by the governing procedures.

From that judgment, the plaintiff appealed. In resolving that appeal, our Supreme Court first concluded, after ample discussion of federal law and precedent, that the trial court possessed the legal authority to remand the matter to the arbitration panel “for clarification purposes without vacating the award.” Hartford Steam Boiler Inspection & Ins. Co. v. Underwriters at Lloyd's & Cos. Collective, 271 Conn. 474, 493, 857 A.2d 893 (2004), cert. denied, 544 U.S. 974, 125 S.Ct. 1826, 161 L.Ed.2d 723 (2005) (Hartford Steam Boiler). In so doing, the court emphasized that “when a court remands an arbitration award for clarification ... there is no opportunity for redetermination on the merits of what has already been decided.... On remand, the arbitrator is limited in his review to the specific matter remanded for clarification and may not rehear and redetermine those matters not in question.” (Citation omitted; internal quotation marks omitted.) Id., at 486, 857 A.2d 893. The court further determined that “the trial court's order for a rehearing to clarify the arbitrators' allocation award does not constitute...