Electric Power Systems International, Inc. v. Zurich American Insurance Co.
Opinion
Electric Power Systems International (EPS) appeals the district court’s
1
grant of summary judgment to Zurich American Insurance Company (Zurich). EPS asserts the court erred in concluding that the commercial general liability policy issued by Zurich to EPS did not provide coverage for damage EPS caused to an electrical transformer while working on it. Having jurisdiction under
I.
Louisville Gas and Electric Company (LGE) contracted to purchase a used electrical transformer from American Transmission Company. The transformer was a large piece of electrical equipment, weighing 403,000 pounds. It consisted of “many devices, such as bushings, the radiators, the tank, the core and coil, insulating wards, control panel, CT’s control wiring, monitoring devices, gauges, [and] many components that make up a device that’s able to either step up or step down voltage so electricity can operate in a efficient manner.” LGE is located in Kentucky and the transformer was located in Wisconsin. *1009 In order to relocate the transformer to Kentucky, LGE hired EPS, a Missouri corporation, “to disassemble, transport, reassemble, and test” the transformer. LGE arranged for an internal inspection of the transformer by a third party, but EPS agreed to “assist in the inspection from-the outside of the unit.” As part of its work to disassemble the transformer, EPS was to “remove all parts necessary to relocate the transformer[,] including but not limited to the ... HV, LV & TV bushings.” A bushing is the conduit through which electrical current flows.
The bottom of each bushing was bolted to a lead cable located inside the transformer that in turn was attached to the transformer’s internal core and coil. The top portion of the bushing extended about nine feet above the top of the transformer. To remove a bushing from the transformer, it had to be disconnected from the lead cable, which required someone to go inside the transformer and remove all the bolts that attached the components. In attempting to remove the first bushing, EPS failed to remove one of the bolts connecting the bushing to the lead cable. When EPS. attempted to lift the bushing with a crane, the lead cable was pulled upward, which in turn pulled on the core and coil, damaging it.
After LGE asserted a claim against EPS for the damage to the core and coil, EPS tendered the claim to Zurich. Zurich denied coverage based on three exclusions in EPS’s policy, two of which are relevant here: the j(4) “care, custody, or control” exclusion and the j(6) “particular part” exclusion. EPS sued Zurich in state court on theories of breach of contract, vexatious delay, and bad faith refusal to settle. Zurich removed the case to federal court based on diversity jurisdiction. Concluding that exclusion j(6) precluded coverage, the district court granted summary judgment to Zurich. This appeal followed.
II.
“This court reviews de novo a grant of summary judgment, construing all facts and making all reasonable inferences favorable to the noñmovant.” Spirtas Co. v. Nautilus Ins. Co.,
The parties agree that Missouri law applies in this diversity case. Under Missouri law, “the., interpretation of an insurance contract is generally a question of law, particularly in reference to the question of coverage.” D.R. Sherry Constr., Ltd. v. Am. Family. Mut. Ins. Co.,
Exclusion j(6) of the policy excludes coverage for “property damage” to “[t]hat particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.” Put another way, exclusion j(6) excludes coverage for property damage to a particular part of any property on which EPS performed work if EPS’s work was incorrectly performed on that particular part. See Columbia Mut. Ins. Co. v. Schauf,
EPS argues the district court misapplied Missouri law by including the core and coil as a component of the “particular part” of the transformer on which EPS was working. According to EPS, Missouri law supports a narrow interpretation of the “particular part” exclusion. See
The interpretation urged by EPS is too narrow. In Schauf, a painter subcontracted to paint, stain, or lacquer all interior and exterior surfaces of a newly constructed house.
Similarly here, we conclude that a Missouri court would find that the “particular part” of the transformer on which EPS was working included the core and coil. Disconnecting the bushing from the lead cable and core and coil was the first step of the job of disassembling the bushing, and it was an integral part of the job. See Brake Landscaping & Lawncare, Inc. v. Hawkeye-Sec. Ins. Co.,
III.
Accordingly, we affirm the decision of the district court.
Reference
- Full Case Name
- ELECTRIC POWER SYSTEMS INTERNATIONAL, INC., Plaintiff-Appellant v. ZURICH AMERICAN INSURANCE COMPANY, Defendant-Appellee
- Cited By
- 12 cases
- Status
- Published