Iowa-Illinois Gas & Elec. Co. v. Black & Veatch

• Citation: 497 N.W.2d 821
• Decision Date: 24 March 1993
• Docket Number: IOWA-ILLINOIS,No. 91-1300,91-1300
• Parties: GAS & ELECTRIC COMPANY, Iowa Power & Light Company, Interstate Power Company, Plaintiffs, and The Home Insurance Company, Appellant, v. BLACK & VEATCH, Appellee.
• Court: Iowa Supreme Court

Page 821

497 N.W.2d 821

IOWA-ILLINOIS GAS & ELECTRIC COMPANY, Iowa Power & Light Company, Interstate Power Company, Plaintiffs, and The Home Insurance Company, Appellant, v. BLACK & VEATCH, Appellee.

No. 91-1300.

Supreme Court of Iowa.

March 24, 1993.

Larry L. McMullen & James M. Warden of Blackwell Sanders Matheny Weary & Lombardi, Kansas City, MO, and Elliott R. McDonald III of McDonald, Stonebraker & Cepican, P.C., Davenport, for appellee.

Carol A.H. Freeman of Lane & Waterman, Rock Island, IL, and James T. Ferrini and Imelda Terrazino of Clausen Miller Gorman Caffrey & Witous, P.C., Chicago, IL, for appellant.

Considered by McGIVERIN, C.J., and HARRIS, LARSON, LAVORATO, and NEUMAN, JJ.

McGIVERIN, Chief Justice.

Plaintiff Home Insurance Company, as a subrogee, appeals from a judgment entered on a jury verdict finding defendant Black & Veatch had not breached its contract with several power companies. Home contends the trial court erred in admitting challenged evidence and in giving certain jury instructions. Home further contends its motion for a new trial should have been granted because of jury misconduct.

We affirm the district court judgment.

I. Background facts and proceedings. Iowa-Illinois Gas and Electric Company, Iowa Power and Light Company, and Interstate Power Company (referred to collectively as Iowa-Illinois) are co-owners of the Louisa Generating Station in Louisa County. Appellant Home Insurance Company issued a policy of insurance to Iowa-Illinois covering property damage to the Louisa station.

In July 1977, Iowa-Illinois entered into a contract with Black & Veatch consulting engineers (Black) regarding the construction of a new electric generating unit at Louisa. The unit was to generate supplemental electrical energy when needed by Iowa-Illinois. Black was to provide, among other things, engineering and project field management services, and detailed construction plans and specifications for all structural, mechanical, and electrical work. Black agreed to perform the services in accordance with the highest standards of the engineering profession.

A. The MOD switch design. Louisa was released for commercial operation in October 1983. It is a steam electric generating unit intended to be shut down on weekends and holidays or as the demand for electricity required. Therefore, the designers estimated that the Louisa unit would come off-line about 200 times a year.

The Louisa station consists of a main plant and a substation. When the plant is on-line, the electricity produced in the generator first travels into a transformer where the voltage is increased, and then out to the substation. In the substation, the voltage travels to a motor-operated disconnect switch (MOD), identified specifically as MOD 93-947, then through a ring bus, and finally out to an interconnected grid.

The ring bus allows electricity to pass into the grids or overhead power lines. Two circuit breakers at intervals along the ring bus regulate the load current. When the circuit breakers are closed, the flow of electricity is unimpeded along the ring bus. When the breakers are open, the current is interrupted.

The MOD switch is used to isolate equipment and is usually operated remotely from the plant's control room. At Iowa-Illinois' insistence, however, the MOD switch involved here may also be operated locally for maintenance or emergencies, using either an electrical button or a manual crank at the site of the MOD switch. The MOD switch is located away from the control room and has a fence with a locked gate around it. There is also a padlock on the MOD switch itself.

The MOD switch and the two circuit breakers isolate and protect the generator when the plant is off-line. When the MOD switch is open, it acts as a raised drawbridge that keeps the stepped up voltage already in the ring bus from flowing back into the generator while the plant is off-line. When the MOD switch is closed, electricity can travel over it and into the ring bus.

To prevent the reverse flow of electricity back into the generator, called back-energization, when the plant is off-line and in the process of being put back on-line, the circuit breakers must be opened before the MOD switch is closed. Once the MOD switch has been closed and the electricity is again traveling over it and into the ring bus, the circuit breakers are then closed to return the ring bus back to normal operation.

During the planning and design of the Louisa station, Iowa-Illinois expressed to Black its concern that back-energization not occur whenever the plant was being put back on-line. As a result, Black devised an electric interlock scheme that prevented the operators from closing the MOD switch when the breakers were also closed. The interlock protection would activate when the MOD switch was being operated by remote control at the control panel or by the local electrical button. The interlock would not activate, however, when the switch was being manually cranked closed.

In addition, Black provided instructions regarding operation of the MOD switch. These operating rules stated "[c]ontrol of MOD 93-947 can only be accomplished from the main plant control room. Local [manual] control of MOD is only for maintenance use with adjacent breakers open." Another operating rule stated "[b]e sure that the adjacent breakers are open before closing these disconnects [including MOD 93-947]." (Emphasis in original.)

Black apparently did not put any kind of interlock on the manual crank operation of the MOD switch because such a device could cause false trips of the circuit breakers, causing interruptions in service or injury to maintenance personnel working on the breakers. Besides being a potential safety hazard, such a device is also apparently cumbersome.

B. The accident. On July 14, 1984, the Louisa station was removed from service for the weekend. When Tom Sweeney, the afternoon shift supervisor, reported for work he was informed that repair work had been completed and he was to recouple the power to the MOD switch.

Sweeney and an apprentice went to the substation and recoupled the power. Sweeney, operating under the incorrect assumption that the circuit breakers were open, then directed his apprentice to close the MOD switch by pushing the local electrical button. Due to the electric interlock protection system, however, the MOD switch would not close as the circuit breakers were in fact closed. Sweeney then directed the apprentice to manually crank the switch closed. When the apprentice got the MOD switch cranked partially closed, an electrical arc connected first one and then a second phase of the switch. As a result, electricity back-flowed to the generator through the MOD switch, causing the generator to operate as a "motor" for approximately twenty-six seconds.

This back-energization caused approximately $3 million worth of damage to the generator. Under its insurance policy, Home paid Iowa-Illinois for a portion of its property loss and is subrogated to Iowa-Illinois' rights against Black accordingly.

C. The trial and subsequent proceedings. Plaintiffs Iowa-Illinois and Home then filed this breach of contract action against Black. Iowa-Illinois and Home alleged that, pursuant to the written contract, Black had agreed to prepare detailed construction plans, including a safety system to prevent the back-energization, and that Black had breached the contract thereby resulting in the July 14 accident and consequent damage to the generator.

Black raised the affirmative defenses that Iowa-Illinois' negligent acts were the sole proximate cause of the accident and resulting damages, and that Iowa-Illinois had a contractual duty to properly train the operators and implement proper switching procedures.

Plaintiffs filed motions in limine objecting to the introduction of evidence regarding the training and disciplining of Iowa-Illinois employees and Iowa-Illinois switching procedures. The trial court overruled these motions. Plaintiffs renewed their objections on the ground of relevancy throughout the trial but the objections were overruled.

Plaintiffs also objected to the admission of various items of evidence, including their report to the Iowa State Commerce Commission regarding the cause of the accident, an expert witness for the defense, an employee letter to Iowa-Illinois' company president, a memo indicating Home's interest in the accident, Sweeney's misoperation of the MOD switch, and Iowa-Illinois' employee training and implementation of switching procedures. Iowa-Illinois also objected to jury instructions 15 and 18, which contained Black's affirmative defenses.

After a lengthy trial, the jury eventually returned a verdict in favor of Black, finding that Black had not breached its contract. Plaintiffs moved for a new trial asserting numerous errors, including the jury's alleged misconduct in consulting a dictionary for the definitions of certain terms. The district court denied a new trial and entered judgment on the verdict for defendant.

Only appellant Home Insurance Company appealed the final judgment.

II. Breach of contract. Appellant Home contends that Black breached its contract with Iowa-Illinois by not designing a back-energization scheme, in accordance with the highest standards of the engineering profession, which would have prevented Sweeney's accident of July 14, 1984. Home seems to assert that whether Black breached its contract is a legal question that was reserved for the court, and not the jury.

In a breach of contract claim, the complaining party must prove 1) the existence of a contract, 2) the terms and conditions of the contract, 3) that it has performed all of the terms and conditions required under the contract, 4) the defendant's breach of the contract in some particular way, and 5) that plaintiff has suffered damages as a result of the breach. Berryhill v. Hatt, 428 N.W.2d 647, 652 (Iowa 1988).

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