In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 03-1887

COMMONWEALTH INSURANCE COMPANY, HARTFORD

FIRE INSURANCE COMPANY, NAVIGATORS INSURANCE

COMPANY, EMPLOYERS INSURANCE OF WAUSAU, and

NEW YORK MARINE & GENERAL INSURANCE COMPANY,

Plaintiffs,

v.

STONE CONTAINER CORPORATION,

Defendant-Counterclaim Plaintiff-Appellant,

v.

INDUSTRIAL RISK INSURERS,

Counterclaim Defendant-Appellee.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 99 C 8471—Charles P. Kocoras, Chief Judge.

____________

ARGUED OCTOBER 21, 2003—DECIDED DECEMBER 9, 2003

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Before BAUER, DIANE P. WOOD, and EVANS, Circuit

Judges.
2 No. 03-1887

1 Not only is this the third time we examine Stone’s explosion,

but, we note, Stone’s suit against all-risk insurers Commonwealth

Insurance Company, Hartford Fire Insurance Company, Navigators Insurance Company, Employers Insurance of Wausau, and

New York Marine & General Insurance Company remain before

the district court.

EVANS, Circuit Judge. This insurance dispute leads us

into familiar territory—the question of who is responsible

for over $80 million in losses the Stone Container Corporation incurred when one of its pulp and paper plants exploded. This is the third time claims stemming from that

event have reached our court. See Stone Container Corp. v.

Hartford Steam Boiler, 165 F.3d 1157 (7th Cir. 1999);

Commonwealth Ins. Co. v. Stone Container Corp., 323

F.3d 507 (7th Cir. 2003) (Stone 1 and Stone 2). In this case,

Stone argues that the “all-risk” insurance policy it purchased from Industrial Risk Insurers (IRI) covers its losses.

Based upon an exclusion in the policy for ruptures of

pressure vessels, however, the district court granted IRI

summary judgment. 2001 U.S. Dist. LEXIS 24064 (N.D. Ill.

2002). Stone appeals.

Like our previous forays into issues surrounding the plant

explosion, this case, too, is but “a small part of a much

larger dispute.” Stone 2, 323 F.3d at 508.1

 Thus, before

addressing the claims here, we briefly examine the history

of Stone’s insurance coverage and the litigation that

preceded this case.

Stone manufactures paper products. It makes pulp in

huge steel tanks called “pulp digesters.” Wood chips and

chemicals are placed in the tank, which is then sealed and

subjected to heat and pressure from piped in steam. The

chips then decompose into pulp fiber.

Between 1991 and 1993, Stone had property damage

and business interruption insurance coverage in place for
No. 03-1887 3

losses in excess of $20 million. Arkwright Mutual Insurance

Company issued the single all-risk insurance policy, which

included boiler and machinery (B&M) coverage.

Because of its poor loss history, however, in 1994 Stone

was unable to purchase a similar all-risk policy. Specifically, many insurers were not willing to write B&M coverage for the company. Thus, Stone had a patchwork of

coverage. IRI and other “all-risk” insurers provided all-risk

property insurance in the layer excess of $20 million,

subject to a B&M exclusion. Hartford Steam Boiler (HSB)

provided B&M coverage in that layer.

On April 13, 1994, a thin area of steel shell in one of

Stone’s tanks ruptured. Within milliseconds, the tank

exploded and launched a 28-ton piece of the tank over 200

feet. Besides much property damage, several workers were

killed. The company incurred over $80 million of losses.

Following the loss, all-risk insurers—Commonwealth

Insurance Company, Hartford Fire Insurance Company,

Navigators Insurance Company, Employers Insurance of

Wausau, and New York Marine & General Insurance

Company—filed a lawsuit seeking a declaratory judgment

that their policies did not provide coverage. This suit was

dismissed without prejudice so that Stone could pursue an

action against HSB, whose policy covered “accidents to

objects,” including pressure vessels. There was, however, an

exclusion for explosions, which HSB relied on to deny coverage. The district court granted Stone summary judgment,

holding that the event did not constitute an explosion. Stone

Container Corp. v. Hartford Steam Boiler Inspection Co.,

936 F. Supp. 487 (N.D. Ill. 1996).

We reversed, finding that “[o]ne of the tanks in one of

Stone’s plants exploded when a thin area of steel shell

ruptured during the high-pressure operation of the tank.”

Stone 1, 165 F.3d at 1160 (emphasis added). We further

noted that “it is the digester itself that, as a result of the
4 No. 03-1887

rupture in its wall, blew up.” Id. at 1159-60. Thus, because

Stone’s loss constituted an explosion of equipment other

than the specially identified types of equipment covered

against explosion by HSB, HSB’s policy did not cover the

loss. Id. at 1160.

Our decision in Stone 1 led the all-risk insurers to reinstate their declaratory judgment action. Stone answered

and asserted third-party claims against Aon Risk Services,

Inc., its insurance broker, for breach of contract, negligence,

and breach of fiduciary duty for failing to obtain adequate

insurance coverage for Stone, and against IRI. The district

court granted summary judgment for Aon on the ground

that Stone’s claims were time-barred. We affirmed in Stone

2.

The district court in this case granted summary judgment

to IRI after concluding that its policy excluded coverage for

losses based on the “rupture” of pressure vessels. Since the

evidence established that the explosion and resulting

damage was caused by a rupture, as we held in Stone 1,

there was no coverage under the IRI policy.

Because this is a diversity case, we apply Illinois law.

That law, with regard to interpreting insurance policies,

provides:

The primary objective in construing the language of the

policy is to ascertain and give effect to the intentions of

the parties as expressed in their agreement. If the

terms of the policy are clear and unambiguous, they

must be given their plain and ordinary meaning, but if

the terms are susceptible to more than one meaning,

they are considered ambiguous and will be construed

strictly against the insurer who drafted the policy.

Courts will not strain to find ambiguity in an insurance

policy where none exists.

McKinney v. Allstate Insurance Co., 188 Ill. 2d 493, 497

(1999) (internal citations omitted). Thus, our first task is to
No. 03-1887 5

determine whether the language of the policy is ambiguous.

Exclusion H of IRI’s C-AR (comprehensive all-risk) policy

reads:

H. BOILER AND MACHINERY EXCLUSIONS—

Unless endorsed hereon, this policy does not insure

against:

1. explosion in or of the following property owned, operated or controlled by the Insured: steam boilers,

including equipment attached to and forming a part

thereof; steam turbines; steam engines; steam pipes

interconnecting any of the foregoing; or gas turbines; except that liability is specifically assumed

for loss resulting from Explosion of accumulated

gases or unconsumed fuel within the firebox (or the

combustion chamber) of any fired vessel, other than

gas turbines, or with the flues or passages which

conduct the gases of combustion therefrom;

2. rupture, bursting, cracking, burning or bulging

of . . . pressure vessels, including equipment attached to and forming a part thereof . . . .

* * *

nor does this policy insure against resulting damage to property caused by such Occurrences except

damage from a . . . combustion Explosion . . . .

We think the policy exclusion is unambiguous. “A policy

provision is ambiguous only if it is subject to more than one

reasonable interpretation.” Lapham-Hickory Steel Corp. v.

Protection Mut., 166 Ill. 2d 520, 529 (1995). Exclusion H2

clearly establishes that IRI does not insure against the

“rupture . . . of . . . pressure vessels.”

This exclusion, moreover, is clearly applicable since

Stone’s losses were caused by a rupture. In Stone 1, we

noted that “[o]ne of the tanks in one of Stone’s plants ex-
6 No. 03-1887

ploded when a thin area of its steel shell ruptured during

the high-pressure operation of the tank.” 165 F.3d at 1159

(emphasis added). That conclusion, moreover, is amply

supported by the record. After the explosion, Stone retained

Packer Engineering to perform an independent investigation of the cause of the digester failure. Packer’s report

concluded that the cause was a “rupture.” Furthermore,

Stone’s agents consistently referred to the loss as being

caused by a rupture. In describing the event to its employees, Stone, in a press release approved by Jim Heider, who

was in charge of Stone’s Mill Division at the time of the

explosion, stated that “one (1) of 22 batch digesters ruptured . . . .” In a letter from one of its attorneys, Stone

referred to the event as a “catastrophic rupture.” In its filing

with the SEC, Stone reported that it paid fines to OSHA

resulting from “the April 13, 1994, digester vessel rupture

at the company’s Panama City, Florida pulp and paperboard mill . . . .” And, in its prior litigation against HSB

before this court, Stone argued that “[t]he No. 15 pulp

digester at the Stone Container Paper Mill . . . ruptured

catastrophically . . . .”

This does not, however, completely resolve the issue. The

rupture itself led to an explosion. Stone 1, 165 F.3d at 1159.

Based on this, Stone argues that H1, which excludes from

coverage explosions of certain property, not H2, is

the critical policy language we should look to. Under H1,

explosions of pressure vessels, unlike other listed property,

are not expressly excluded. Thus, by inference, they are

covered. See National Union Fire Ins. Co. v. Glenview Park

Dist., 158 Ill. 2d 116, 123 (1994) (exclusions will not be applied unless they are “clear, definite and explicit”).

If Stone is correct, under H2, coverage would be excluded

for the damage the rupture caused, but under H1 the company could recover for the losses that resulted from the

explosion. Since the two occurrences happened virtually
No. 03-1887 7

2 Stone argues that the term “damages” [sic] in this clause refers

only to “money lost,” not resulting physical harm. This interpretation is flawed. Stone ignores the exception to the exclusion for

damage resulting from a “combustion Explosion.” By including

this language, it is clear that under exclusion H an explosion,

other than a combustion explosion, is considered a “resulting

damage.”

simultaneously, within milliseconds, determining causation

and thus apportioning damages between the covered event

and the non-covered event would be extremely challenging.

At a minimum, we would be required to examine Illinois

law with regard to dual or concurrent causation. See

Transamerica Ins. Co. v. South, 975 F.2d 321, 330 (7th Cir.

1992) (discussing Illinois law regarding dual causation).

Such an analysis is not necessary. The language of

Stone’s policy itself is clear. The last part of exclusion H2

states that the policy does not insure against “resulting

damage . . . caused by such Occurrences [rupture, bursting,

cracking, burning or bulging] except damage from a . . .

combustion Explosion . . . .” By its terms, then, the policy

excludes explosions (“damage”) that results from ruptures,

unless the resulting explosion is a “combustion Explosion”

(which neither party claims this was).2

 Because the language in exclusion H is unambiguous in barring coverage,

there is no need to examine any extrinsic evidence. See

Alpine State Bank v. Ohio Cas. Ins. Co., 941 F.2d 554, 559

(7th Cir. 1991) (holding that the trial court erred when it

allowed extrinsic evidence to interpret unambiguous policy

language); Mank v. West American Ins. Co., 249 Ill. 3d 827,

830 (Ill. App. Ct. 5th Dist. 1993) (“No extrinsic evidence of

the party’s intent needs to be considered where the contract

is determined to be unambiguous.”).

The district judge also properly granted IRI summary

judgment on Stone’s claim that IRI violated the Illinois
8 No. 03-1887

Consumer Fraud and Deceptive Business Practices Act, 18

ILCS 505/2, 505/10a. Stone claims that IRI misrepresented

the scope of its insurance coverage in one of its publications

and failed to disclose the gap that existed between IRI’s and

HSB’s insurance policies.

To begin, Stone cannot establish that IRI acted deceptively. See Oliveira v. Amoco Oil Co., 201 Ill. 2d 134, 149

(2002) (stating the elements necessary to sustain a cause of

action under the Illinois Consumer Fraud statute). The

publication Stone relies on states that the “major hazard”

with digesters is “explosion from vessel failure.” It does not,

however, make any representations concerning insurance

coverage for such explosions.

Nor is there evidence that IRI issued the publication

intending for Stone to rely on it to determine the scope of

coverage. See id. Dobosz v. State Farm Fire & Cas. Co., 120

Ill. App. 3d 674 (Ill. App. Ct. 2d Dist. 1983), cited by Stone,

is not applicable. There, the court treated a brochure as

part of the insurance contract between the parties when

State Farm’s agent sent Dobosz a copy of the company’s

brochure and indicated that it described the available

coverage. Id. at 677. The agent further told Dobosz it would

take a long time to explain the policy itself and stated that

the brochure showed what the policy covered. Id. Dobosz

testified, moreover, that he relied on the brochure to

indicate the risks against which his home would be insured.

Id. In contrast, here, Stone is a large corporate entity which

hired a professional corporate insurance broker. There is no

evidence that IRI told Stone to depend on the publication,

and Stone fails to establish that it relied on the brochure in

lieu of, for example, reading the language of the insurance

policy.

Finally, IRI did not have a duty to disclose the existence

of a gap in coverage to Stone. See, e.g., Nielson v. United

Servs. Auto. Ass’n, 244 Ill. App. 3d 658, 663 (Ill. App. Ct. 2d
No. 03-1887 9

1993). Insured parties have the burden of knowing the

contents of their insurance policies. An insurer “does not

have the duty of reviewing the adequacy of an insured’s

coverage, even when it knows of facts that indicate that the

coverage is inadequate.” Lazzara v. Howard A. Esser, Inc.,

802 F.2d 260, 274 (7th Cir. 1986); Nielson, 244 Ill. App. 3d

at 663. Thus, such a nondisclosure does not provide a basis

for liability under the Consumer Fraud Act. 

The judgment of the district court is AFFIRMED.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—12-09-03