Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-05-02539/USCOURTS-ca8-05-02539-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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1

The Honorable Thomas D. Thalken, United States Magistrate Judge for the

District of Nebraska, presiding by consent of the parties pursuant to 28 U.S.C. §

636(c). 

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 05-2539

___________

Royal Insurance Company of *

America, *

*

Plaintiff - Appellant, *

* Appeal from the United States 

v. * District Court for the District of 

* Nebraska.

Duhamel Broadcasting Enterprises, *

Inc., * [UNPUBLISHED]

*

Defendant - Appellee. *

___________

Submitted: December 14, 2005

Filed: March 13, 2006

___________

Before BYE, BOWMAN, and GRUENDER, Circuit Judges.

___________

PER CURIAM.

This declaratory judgment action involves the interpretation of an insurance

policy issued by Royal Insurance to Duhamel Broadcasting Enterprises, Inc. (DBE),

covering a television tower located near Hemingford, Nebraska, which fell down on

September 24, 2002. Following a bench trial, the district court1

 held the policy was

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unambiguous and Royal had no duty to indemnify DBE for the collapse of the tower.

The district court also denied DBE's counterclaims based on promissory estoppel,

reformation and negligence. We affirm. 

DBE is in the business of radio and television broadcasting. It owns

approximately fifteen radio/television towers, including the 1,965-foot tower involved

in this action. In early 2002, DBE undertook to add additional reinforcements to the

tower in anticipation of adding an HDTV antenna. Among other changes, DBE's

engineering consultant recommended replacing eighteen diagonal braces with stronger

braces. On September 24, 2002, a construction crew was onsite replacing the braces.

Workers removed two of the braces but failed to put in place temporary braces to

support the structure while the reconstruction was underway. As a result, the tower

fell down.

Also in early 2002, DBE was notified by its insurance carrier it would no longer

be insuring radio/television towers. DBE contacted Dave Schmidt Insurance Agency

and requested assistance in securing a new carrier. Schmidt submitted an application

to Royal seeking coverage for all of DBE's towers. As part of the application

disclosure, DBE advised Royal it was in the process of modifying the Hemingford

tower and expected the work to be completed by late fall. Royal's underwriter sent a

letter to Schmidt requesting additional information, including certificates from the

contractors performing the upgrades confirming they carried insurance containing

adequate policy limits and listed DBE as an additional insured. Thereafter, Royal sent

a twenty-five-page proposal responding to DBE's request for coverage. The proposal

only listed exclusions for acts of war and terrorism, but at the bottom of each page

advised DBE the policy, not the "descriptive proposal," would dictate the terms of

coverage. DBE accepted the proposal, and the policy covering the Hemingford tower

was delivered September 17, 2002. It is undisputed DBE did not read the policy

during the next seven days when the tower collapsed.

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DBE submitted a claim to Royal and it denied coverage. Royal based its denial

on several exclusions not included in the proposal – only two of which are relevant

to this appeal. First, Royal's policy excluded coverage for towers "undergoing . . .

alteration . . . if the loss or damage is caused by or results from the . . . alteration.

Second, Royal denied coverage based on an exclusion excepting from coverage "loss

or damage caused by or resulting from . . . faulty, inadequate or defective . . .

workmanship." Royal filed this declaratory judgment action asking the court to

declare the rights and obligations of the parties to the contract. DBE answered

arguing the exclusions did not apply. Additionally, DBE counterclaimed arguing

Royal was estopped from denying coverage because the exclusions were not included

in the proposal. Alternatively, DBE argued the insurance contract should be reformed

to reflect the mutual intent of the parties or Royal was negligent in failing to provide

the coverage requested.

At trial, Royal argued there was no coverage because the tower was undergoing

alterations at the time of its collapse and the alterations caused the tower to fail. DBE

argued the term "alteration" implied action more extensive than swapping out eighteen

of the 1000 plus diagonal braces. Alternatively, DBE argued alteration did not include

the "process" of altering the tower. Instead, alteration was used as a noun and the

exclusion did not apply because it was the negligence of the contractors in performing

the work necessary to alter the tower – not the completed alteration – that caused the

collapse.

 

Royal also argued there was no coverage as the loss or damage was caused by

faulty workmanship, i.e., the negligence of the construction crew. DBE argued the

exclusion did not apply because faulty workmanship did not include contractor

negligence. Rather, faulty workmanship referred only to flaws in the finished product,

not the construction process which brought it about.

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The district court found the policy language unambiguous and interpreted

alteration to include replacing the diagonal braces to change the weight bearing

characteristics of the tower. Additionally, the court rejected DBE's argument that

"alteration" was used only as a noun and did not include the process of altering the

tower.

Next, the district court recognized "workmanship" could describe the process

of producing something as well as the finished product. It concluded, however, the

distinction in this case was meaningless because the different definitions could be read

consistently and did not render the contract language ambiguous. 

The district court also considered and rejected each of DBE's counterclaims.

First, the district court found promissory estoppel inapplicable because there was no

express promise by Royal to provide coverage for the Hemingford tower without

coverage exceptions. Rather, the proposal repeatedly stated any discrepancies

between the proposal and the policy would be resolved by the wording contained in

the policy. Moreover, because the alleged promise was followed by a written contract

which clearly set forth the rights and obligations of the parties, no injustice would be

occasioned by holding the parties to the contract terms. 

Similarly, the district court refused to reform the contract because there was no

"clear, convincing, and satisfactory evidence" the agreement did not express the true

intent of the parties. Royal was aware of the ongoing alterations to the tower before

it issued the policy and requested proof the contractors performing the work carried

insurance containing adequate coverage limits, thereby suggesting it did not intend to

insure the work process itself. Accordingly, the court concluded the evidence was of

insufficient quality to demonstrate the parties ever clearly communicated on the issue

of whether the alterations to the tower would be a covered risk.

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On appeal, DBE argues the district court erred in rejecting its interpretation of

the contract terms "alteration" and "workmanship." Alternatively, it argues the district

court improperly dismissed its counterclaims based on promissory estoppel and

reformation.

After carefully reviewing the record on appeal, we affirm the order and

judgment of the district court. Because an extended discussion would add nothing to

the well-reasoned order of the district court, we affirm by virtue of 8th Cir. R. 47B.

______________________________

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