St. Joseph Light & Power Co. v. Zurich Ins. Co.

• Decision Date: 24 January 1983
• Docket Number: Nos. 81-2430,81-2431,81-2432 and 82-1034,s. 81-2430
• Parties: ST. JOSEPH LIGHT & POWER COMPANY, Appellant, v. ZURICH INSURANCE COMPANY, et al., Appellees. ZURICH INSURANCE COMPANY, Appellant and Third-Party Plaintiff, v. BLACK & VEATCH, Appellee and Third-Party Defendant. ST. JOSEPH LIGHT & POWER COMPANY, Appellee, v. CONTINENTAL INSURANCE COMPANY, et al., Appellants. ST. JOSEPH LIGHT & POWER COMPANY, Appellant, v. ZURICH INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1351

698 F.2d 1351

ST. JOSEPH LIGHT & POWER COMPANY, Appellant, v. ZURICH INSURANCE COMPANY, et al., Appellees.

ZURICH INSURANCE COMPANY, Appellant and Third-Party Plaintiff, v. BLACK & VEATCH, Appellee and Third-Party Defendant.

ST. JOSEPH LIGHT & POWER COMPANY, Appellee, v. CONTINENTAL INSURANCE COMPANY, et al., Appellants.

ST. JOSEPH LIGHT & POWER COMPANY, Appellant, v. ZURICH INSURANCE COMPANY, Appellee.

Nos. 81-2430, 81-2431, 81-2432 and 82-1034.

United States Court of Appeals,

Eighth Circuit.

Submitted Oct. 11, 1982.

Decided Jan. 24, 1983.

Lawrence L. McMullen, James M. Warden, Allan V. Hallquist, Kansas City, Mo., for third-party defendant-appellee Black & Veatch Consulting Engineers; Blackwell, Sanders, Matheny, Weary & Lombardi, Kansas City, Mo., of counsel.

Richard J. Phelan, William T. Cahill, Terry M. Weyna, Chicago, Ill., James H. Ottman, Kansas City, Mo., for third-party plaintiff-appellant Zurich Insurance Co.; Phelan, Pope & John, Ltd., Chicago, Ill., Shook, Hardy & Bacon, Kansas City, Mo., of counsel.

Robert A. Downing, Stephen C. Carlson, Dennis R. Hansen, Chicago, Ill., for plaintiff-appellant St. Joseph Light & Power Co.; Sidley & Austin, Chicago, Ill., of counsel.

Before BRIGHT and ARNOLD, Circuit Judges, and MEREDITH, ^* Senior District Judge.

BRIGHT, Circuit Judge.

This appeal arises out of a dispute between a public utility, St. Joseph's Light & Power Co. (SJLP), and several insurance companies over liability for damage to one of SJLP's boilers at its power plant in St. Joseph, Missouri. All but one of the parties appeal or cross-appeal from the judgment of the district court. For the reasons outlined below, we affirm in part and reverse in part.

I. Background.

On April 26, 1975, SJLP's Boiler No. 6 at its Lake Road power plant in St. Joseph, Missouri, caught fire and suffered serious damage. As a result, the boiler was inoperative until June 7, 1976, and repair costs totalled $4,623,744.49. In addition, SJLP spent $544,309 during the outage to purchase electricity from Associated Electric Cooperative, in order to have sufficient capacity to meet the needs of its customers.

SJLP carried two types of insurance policies applicable to the boiler. Zurich Insurance Co. (Zurich) provided a policy covering the boiler and other machinery. Zurich's insurance contract provided that Zurich compensate SJLP for the amount SJLP actually expended to repair or replace any property damaged in an accident covered by the policy. Zurich's policy only covered damages resulting from low-water conditions in SJLP's boilers. In a letter to SJLP dated May 12, 1975, Zurich denied coverage for the loss, contending that the damage to the boiler resulted solely from fire.

SJLP also held fire insurance purchased from sixteen insurance companies ¹ (Fire Carriers). These insurance contracts covered SJLP for the cost to repair or replace property lost, damaged, or destroyed by fire. Following the damage to the boiler, the Fire Carriers paid SJLP $1,400,000 to be applied against the portion of the loss, if any, attributable to fire. They denied liability, however, contending that a low-water overheating condition, and not fire, caused the damage. The Fire Carriers made no other payments to SJLP and reserved the right to recoup their $1,400,000 if SJLP was unable to establish that fire caused the damage.

Prior to the events of April 26, 1975, SJLP purchased "extra operating expense" insurance from Great American Insurance Co. (Great American). ² This insurance policy covered any necessary extra expenses SJLP might incur in conducting its business during an outage caused by fire, including the cost of purchasing electricity from other sources. Great American denied liability on the ground that a low-water overheating condition, and not fire, caused the outage.

Confronted by these denials of coverage, SJLP sought a declaratory judgment and other relief in federal district court. SJLP requested that the district court determine whether the boiler damage resulted from a low-water overheating condition, a fire, or both, and, if from both, to determine the amount of loss attributable to each. Zurich, in turn, filed a third-party complaint in subrogation against Black & Veatch, the engineering firm that designed and installed the boiler. Zurich's third-party complaint alleged that if the jury found Zurich liable for any portion of the damage to the boiler, then Zurich would be subrogated to the rights of SJLP against Black & Veatch on a claim of professional negligence in design and installation of the boiler. The district court's jurisdiction was based upon diversity of citizenship between SJLP and all the defendant insurance companies. Rule 14 of the Federal Rules of Civil Procedure authorized the third-party complaint.

At trial, the Fire Carriers contended that a low-water overheating condition caused the loss, while Zurich argued the loss resulted from fire. At the close of SJLP's case against the insurance companies, the trial court directed a verdict in favor of Black & Veatch on Zurich's third-party complaint. The court held that Zurich could not recover in a negligence action against Black & Veatch because SJLP, to whose rights Zurich was subrogated, had been contributorily negligent as a matter of law. Later, at the close of all the evidence, the trial court directed a verdict in favor of SJLP on the issue of coinsurance, holding that the Fire Carriers did not establish a right to contribution to the fire loss from SJLP under the coinsurance clauses contained in the fire policies.

The jury returned a verdict against the Fire Carriers in the amount of $2,507,180.40, against Zurich in the amount of $2,116,564.09 (for a total of $4,623,744.49 for damage to SJLP's Boiler No. 6), and against Great American in the amount of $544,309 (for extra operating expenses during boiler's outage). The trial court deducted certain amounts which, by agreement, were not submitted to the jury in order to avoid possible confusion, and entered final judgment in the amount of $2,483,593.44 against the Fire Carriers, $2,095,151.05 against Zurich, and $494,309 against Great American.

Following the district court's entry of final judgment, SJLP moved to amend the judgment pursuant to Federal Rule of Civil Procedure 59(e) to include prejudgment interest, as authorized by Missouri law, in the amount of $683,857.28 against Zurich and $353,684.88 against the Fire Carriers. Mo.Ann.Stat. Sec. 408.020 (Vernon Supp.1982). Great American and the Fire Carriers both moved for judgment notwithstanding the verdict or, in the alternative, a new trial. Zurich, as third-party plaintiff, moved for a new trial against third-party defendant Black & Veatch. In its posttrial order, the district court denied SJLP's request for prejudgment interest on the ground that the amount of damages for which the Fire Carriers and Zurich were individually responsible was not readily ascertainable prior to the verdict. In addition, the district court: (1) granted Great American's motion for judgment n.o.v. on the question of liability for extra expense on the ground that the extra expense policy applied only to a loss totally caused by fire, which the jury had not so determined; (2) denied the Fire Carriers' motion for a judgment n.o.v. or a new trial, finding little merit to the reasons the Fire Carriers offered in support of their motion; and (3) denied Zurich's motion for a new trial against Black & Veatch, holding that SJLP's contributory negligence barred Zurich's third-party action.

SJLP appeals from the trial court's denial of prejudgment interest, and from the grant of Great American's motion for judgment n.o.v. on the extra expense issue. The Fire Carriers appeal from the trial court's denial of a reduction in SJLP's recovery under the coinsurance provisions. Finally, Zurich appeals the district court's grant of a directed verdict in favor of Black & Veatch.

For the reasons outlined below, we reverse the district court's denial of prejudgment interest and affirm the court's entry of judgment n.o.v. for Great American on the issue of extra expense. In addition, we affirm the district court's grant of a directed verdict in favor of SJLP on the issue of coinsurance. Finally, we reverse the district court's grant of a directed verdict in favor of third-party defendant Black & Veatch and order a new trial on the third-party claim.

II. Discussion.

A. Prejudgment Interest.

SJLP argues that the district court erred in denying prejudgment interest under Mo.Ann.Stat. Sec. 408.020 in the amounts of $683,857.28 against Zurich and $353,684.88 against the Fire Carriers. At the time of SJLP's loss, section 408.020 provided in pertinent part:

Creditors shall be allowed to receive interest at the rate of six percent per annum, when no other rate is agreed upon, for all moneys after they become due and payable, on written contracts, and on accounts after they become due and demand of payment is made[.] ³

The Supreme Court of Missouri has held that section 408.020 requires that prejudgment interest may be awarded whenever the amount due is liquidated, or, although not strictly liquidated, is readily ascertainable by reference to recognized standards. Denton Construction Co. v. Missouri State Highway Commission, 454 S.W.2d 44, 59-60 (Mo.1970). See also Laughlin v. Boatmen's National Bank of St. Louis, 354 Mo. 467, 189 S.W.2d 974, 979 (1945); Herbert & Brooner Construction Co. v. Golden, 499 S.W.2d 541, 553 (Mo.App.1973); and Cannon v. Bingman, 383 S.W.2d 169, 173 (Mo.App.1964). Missouri courts have held that this statute applies to insurance contracts. Schultz v. Queen Insurance Co., 399 S.W.2d 230, 235 (Mo.App.1965); Boenzle v. United States Fidelity & Guaranty Co., 258 S.W.2d 938, 943-44 (Mo.App.1953). Moreover, this court has stated that "the award of prejudgment interest in a case in which [s]ection 408.020 is applicable is not a matter of court...