Hartford Steam Boiler Inspection & Ins. Co. v. Pabst Brewing Co.

Decision Date15 October 1912
Docket Number1,850.
Citation201 F. 617
CourtU.S. Court of Appeals — Seventh Circuit

The defendant in error, Pabst Brewing Company, was the plaintiff below in a suit against the plaintiff in error, Hartford Steam Boiler Inspection &amp Insurance Company (as defendant), to recover damages caused by explosions (averred to be several) of steam boilers in plaintiff's great plant in Milwaukee.

The plaintiff's complaint embraces two alleged causes of action: One in tort, charging negligence on the part of the defendant in inspection of the boilers prior to the explosion, and the other for indemnity under a policy of insurance written by the defendant.

For the first cause of action the complaint (as amended), aside from formal matters, avers, as follows, in substance: The defendant for many years has been engaged in the business of insurance on steam boilers and of inspecting such boilers and promptly reporting the results of such inspection to the insured. It represented and held itself out to the party as skilled in such examinations, for which special knowledge experience, and skill were required. Prior to July 28, 1908 the date of the insurance policy involved herein, the defendant represented and held out to the plaintiff that it was skilled and expert in such examinations of water tube steam boilers, and solicited and requested plaintiff to enter into a contract of insurance with it on six certain water tube boilers, resulting in the issuance of such policy. The policy so issued contained a provision whereby the plaintiff covenanted and agreed with the defendant to allow the latter to enter upon its premises at all reasonable times and inspect and examine said boilers to determine their condition and safety. The defendant then and there represented that, if the plaintiff entered into the insurance contract, such inspections would be made skillfully, carefully, and at such intervals as might be necessary to determine the safety and condition of the boilers; that upwards of 40 per cent. of the premium to be paid on the policy would be expended in making such inspection; that the results of such inspections would be promptly and truly reported, and the plaintiff kept continuously and accurately informed as to the condition and safety of the boilers. It further avers that the defendant knew that the plaintiff was not skilled, experienced, or expert in making such examinations, and would and did rely on the representations, agreements, and reports of the defendant; that thereupon the plaintiff, relying on such representations, entered into the contract before mentioned, and paid to the defendant the consideration named by it for the making of such inspection and reports, and for the said policy of insurance. Thereupon and thereafter the defendant entered upon the performance of the promises and representations referred to, and visited the premises of plaintiff from time to time for making such inspections up to October 9, 1909, inspecting and examining the boilers and reporting to the plaintiff the results of examinations, pretending and undertaking to keep the plaintiff continuously informed as to their condition and safety. Relying upon the representations, reports, and inspections of the defendant, the plaintiff refrained from making or having made any other expert examinations or inspections, and depended wholly upon the defendant therefor. It further avers that it thereby became the duty of the defendant at all times between July 28, 1908, and October 26, 1909, truly, carefully, and accurately to report and keep the plaintiff informed as to the condition of the boilers, and report to and advise it of any and all defects or conditions which might cause them to be dangerous or unsafe for the use to which they were applied; that on and prior to September 4, 1909, dangerous defects and conditions existed in the boilers rendering them unsafe and dangerous for such use, which defects and dangerous conditions were so obvious to any one having special knowledge, skill, and experience that the defendant ought, in the exercise of ordinary care, prudence, and skill, to have discovered them prior to October 25, 1909; that on and between September 4 and October 9, 1909, the defendant, pursuant to its agreement, examined and inspected each and all of the six boilers, and reported to the plaintiff that each and all were free from any and all dangerous defects, and were in good condition, and failed and neglected to inform the plaintiff of the dangerous and defective conditions above mentioned; that the defendant was careless, reckless, and negligent in making inspections, in that, among other things, it failed and neglected to discover and observe the dangerous defects referred to, and failed and neglected to make reasonable and careful and thorough examinations of the drums of the boilers; that it made merely hasty, imperfect, and superficial examinations thereof; that it wrongfully and negligently failed to inform the plaintiff of the true condition of the boilers on and prior to October 25, 1909, and wrongfully and negligently informed and advised the plaintiff that the same were safe, in good condition, and free from dangerous defects. It further avers that the plaintiff, relying upon such undertakings of the defendant, continued to use the boilers in ignorance of their true condition, by reason whereof on October 25, 1909, three of them burst and exploded. The averments as to damages do not require mention.

For the second cause of action, the complaint alleges the making and entering into the contract of insurance on July 28, 1908, under its policy of insurance numbered 57996, as described therein, and that the defendant thereby agreed to pay the plaintiff any loss which might be occasioned to said property by any bursting, explosion, or rupture of the said boilers, or either of them, not to exceed the sum of $150,000 for and during the term mentioned therein. It further avers that on October 25, 1909, during the term thereof, three of the water tube steam boilers thereby insured 'burst by three separate and distinct explosions, by the force of which explosions the said boilers and the buildings adjacent thereto, belonging to this plaintiff, were destroyed. ' The damages are described alike with the first cause of action, and the complaint concludes with a prayer for recovery of such damages.

The defendant interposed demurrer, alleging as ground thereof that several causes of action were improperly united, and the demurrer was overruled, under an opinion filed, stating that 'each cause of action arises out of a separate contract and the two contracts arose from a single negotiation or transaction between' the parties, and that they were thus properly united under the Wisconsin practice. Answers were thereupon filed, raising the various issues of law and fact submitted at the trial; and the defendant further served an offer (pursuant to sec. 2789, Wis. R.S.) 'to allow judgment to be taken against it' for $50,000 with interest (as specified) and costs. The insurance policy, in so far as material, reads as follows:

'No. 65978.

$150,000.00 on the six (6) Munoz W.T. steam boilers contained in the premises occupied by assured, as brewery, 'New House,' situate Milwaukee, Milwaukee Co., Wis., and described in the application of the assured, No. 57995; and on the property of the assured, and the property of others for which the assured may be liable, wherever located, against loss or damage, except by fire, caused by the explosion, collapse or rupture of the said steam boiler or boilers, or any of them; also against loss or damage to the assured resulting from the loss of life or personal injury of any person or persons caused by the explosion, collapse, or rupture of said steam boiler, or boilers, or any of them, and not contingent upon a judgment of liability against the assured; but the liability of the company for loss of life or injury to any one person shall not exceed the sum of five thousand dollars.

It is further provided, that in case of loss under this policy, the loss or damage to property as described herein shall be the first claim for settlement, and that the portion of the policy then remaining shall be the only amount applicable to loss of life or injury to persons; also, that the total liability of the company for loss or damage resulting from any one explosion shall not exceed the sum of fifty thousand dollars; and in case of more than one explosion the entire liability of the company shall not exceed the sum insured by this policy, viz., $150,000.00.

(Rider xxA for Policy 99B. Attached to and forms part of Policy No. 65978.)

Hartford Steam Boiler Inspection & Insurance Co.,

H. M. Lemon, Manager.

'- Prevention of steam boiler explosions being one of the objects of this company, it is hereby agreed that the inspectors of this company shall at all reasonable times have access to said boiler or boilers, and the machinery connected therewith, on which safety depends; and ample facilities shall be afforded to such inspectors, whenever this company shall desire it, for a thorough examination of said boiler or boilers; and should any inspector at any time discover any defect affecting the safety of said boiler or boilers or the apparatus connected therewith, the assured shall be notified and insurance by this policy shall thereupon, in respect to the defective boiler or boilers, become void, unless the use of the said boiler or boilers shall cease until the defect is thoroughly repaired by the assured; notice of defect and suspension of insurance, also the reinstatement of insurance after repairs are made, to be in writing, delivered or mailed...

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