UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
December 11, 1985
HOME INSURANCE COMPANY OF INDIANA SIMKINS INDUSTRIES, INC. APPELLANT
Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil No. 83-5259), District Judge: Honorable Donald W. VanArtsdalen
BEFORE: ADAMS, GIBBONS and STAPLETON, Circuit Judge
MEMORANDUM OPINION OF THE COURT
STAPLETON, Circuit Judge :
In this appeal we must determine whether the district court erred in finding that an insurance policy did not provide coverage for the type of injury for which claimant seeks to recover under the policy. Because we agree with the district court that the policy was unambiguous and did not provide coverage, we affirm.
Appellant, Simkins Industries, operates a paperboard factory in New Haven, Connecticut. Two large paper processing machines convert paper products into pulp and then into paperboard. The larger of the two machines is supplied electrical power by a steam turbine driven generator.
On December 29, 1982, the turbine suffered damage, causing it to be out of commission for repairs until January 17, 1983. This shutdown caused the manufacturing plant's capacity to be reduced by approximately 60% for that period. Upon inspection, the turbine's manufacturer found that erosion had caused a steam leak in the nozzle block of the steam casing, which had misdirected steam onto the rotor blades, causing them to break free from the rotor, and thereby damaging the turbine.
Appellee Home Insurance Company of Indiana ("Home") issued Simkins Industries an insurance policy covering the turbine which was in effect when the damage occurred. Simkins notified Home on January 7, 1983 of the damage, nine days after the turbine's malfunction. Home denied recovery for both the damage and repair costs of the turbine and for the loss of business revenue that occurred during the turbine's shutdown.
Simkins sued Home for the above items. Both parties moved for summary judgment. The district court found that the insurance policy unambiguously excluded coverage for both the type of damage the turbine suffered, and for the business losses due to such damage, and granted summary judgment for Home Simkins appeals.
Appellant contends that the district court erred by finding that the insurance policy was not ambiguous with regard to its coverage of the type of damage sustained by the turbine and the consequent business losses, and by finding that the policy did not provide coverage for such injuries.
The standard of review regarding such contentions is well settled. "Determination of the proper coverage of an insurance contract when the facts are not in dispute is a question of law. . . . Therefore, our review is plenary. . . . Similarly, whether an insurance policy is ambiguous is a legal question over which are review is plenary." Pacific Indemnity Co. v. Linn, 766 F.2d 754, 760 (3d Cir. 1985) (citations omitted).
Appellant first argues that the policy is ambiguous and as such, should be construed strictly against the insurer. Pacific Indemnity Co. v. Linn, 766 F.2d at 761. However, "[t]he language of a policy may not be tortured . . . to create ambiguities where none exist. . . . Exclusions from coverage . . . will be effective against an insured if they are clearly worded and conspicuously displayed . . . ." Id. (citation omitted). Also, "the principle that ambiguities in policies should be strictly construed against the insurer does not control the situation where large corporations, advised by counsel and having equal bargaining power, are parties to a negotiated policy." Eastern ASsociated Coal v. Aetna Casualty & Surety Co., 632 F.2d 1068, 1075 (3d Cir. 1980), cert. denied, 451 U.S. 986 (1981). If this situation, we must first note that the parties were of equal bargaining power.
Although, as appellant points out, the insurance contract at issue covers twenty-two pages, the provisions relevant here are few. The policy covered "loss from an Accident, as defined herein, occurring during the Policy Period, to an Object, as defined herein . . . subject to the Declarations, to the conditions, to other terms of this policy and to the Schedules and Endorsements issued to form a part thereof . . . ." App. at 10.
The policy defined the term Accident "unless otherwise stated in Schedule or Endorsement [as] a sudden and accidental breakdown of the Object, or a part thereof . . . that necessitates repair or replacement of the Object or part thereof." App. at 13. However, this broad coverage was limited by a schedule that limited the turbine coverage to that prescribed by Section DS3D of the special provision endorsement. DS3D provided "Explosion Coverage" for the turbine. The relevant portion of this provision covers:
[A] sudden and accidental breaking of any spindle, rotor, or shaft of the Object, into two or more separate parts,
but not the breaking of any blade, bucket or vane whether or not it forms a part of such spindle, rotor or shaft of any shroud ring or other fastening . . . .
App. at 29 (emphasis supplied).
Therefore, the policy clearly, unambiguously covers the damage to a rotor or shaft only if it is broken "into two or more separate parts" and specifically excludes coverage for blade damage. Neither accident report in the record mentions the turbine shaft or rotor being broken "into two or more separate parts," but mentions only blade damage, nozzle block damage, and incidental damage to the rotor. See, App. at 66-70. The policy therefore unambiguously excluded the type of damage suffered here, and the district court did not err in so holding.
The policy also contains a "Peril Elimination Endorsement" which appellant argues expanded the basic policy's unambiguous coverage. Initially, it must be noted that one would not expect a "Peril Elimination Endorsement" to expand coverage, and this one did not do so. The endorsement stated that:
In consideration of reduced policy premium . . . loss from the following perils as described in the. . . endorsements are hereby excluded from this policy. . . .
Explosion of any object except the following:
1) Steam boilers, including equipment attached to and forming a part thereof, steam turbines, steam engines, steam pipes interconnecting any of the foregoing.
2) Moving or rotating machinery or parts of same where such loss is caused by centrifugal or mechanical breakdown.
Appellant essentially argues that excluding (1) and (2) above from the exclusions thereby includes all such damage in the policy's coverage. We find this argument unpersuasive.
Endorsement no. 8 means that although explosion generally is eliminated from the policy coverage, explosion coverage under the policy is continued for certain types of machinery expressly including steam turbines and moving or rotating machinery where loss is caused by centrifugal or mechanical breakdown. Thus, explosion loss is not completely eliminated from the policy coverage. The policy, however, expressly limits the definition of a covered accident to a steam turbine to the sudden and accidental [explosive] breaking of the casing of a turbine into two or more separate parts or the breaking of any spindle, rotor or shaft into two or more separate parts, but not the breaking of any blade or vane. As previously set forth, although there may have been an "explosion," it was not an "accident" that was covered under the policy.
In sum, appellant has not pointed to any terms of the policy that are ambiguous. The district court properly found that "[t]he policy and its several endorsements are entirely consistent with each other." App. at 135. The wording clearly excludes coverage here. The district court therefore did not err in finding that the policy was no ambiguous and that the turbine's damage was not covered under the policy.
We next examine the business loss coverage of the policy. As the district court pointed out, the relevant provisions of the policy are clear that business losses resulting form damage to a turbine are not covered. THe "Boiler-Machinery Endorsement Business Interruption" states that business interruption loss will be paid when caused by an "Accident . . . to an object . . . shown in Column 1 below . . . ." App. at 20. "Column 1" lists only "Sch. No. 1, DSIA BLR 1&2." Id. The definition section of the policy shows thatBLR 1&2 refers only to boilers to other steam producing equipment. App. at 30. Appellant argues that the turbine was included in the endorsement's coverage because it connected to the boiler. Br. for appellant at 18. However, the Definitions Endorsement for Boilers, in Section DSIA, also specified in Column 1, includes within its boiler definition various associated piping and similar equipment, but does not include a turbine. App. at 26. In fact, is specifically excludes "any reciprocating or rotting machine," and "electrical apparatus." Id.
The district court therefore did not err in holding that with regard to business interruption loss as a result of the turbine damage, the policy clearly did not provide coverage.
Home also denied Simkins coverage charging that Simkins failed to provide adequate notice of the breakdown as required by the policy. Appellant contends that if the district court erred in granting summary judgment to Home, this Court should find that the notice was adequate, and grant summary judgment in its behalf.
The district court did not reach this issue because it held the policy did not cover the damage on which appellant based its claim. We also do not reach the notice issue for the same reason.
Because the district court did not err in determining the proper coverage of the insurance policy involved here, we will affirm.
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