1

 The Honorable David R. Hansen stepped down as Chief Judge of the United

States Court of Appeals for the Eighth Circuit at the close of business on March 31,

2003. He has been succeeded by the Honorable James B. Loken.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 02-2119

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Modern Equipment Company, * 

a Nebraska Corporation, * 

* 

Appellant, * 

* Appeal from the United States

v. * District Court for the Southern 

* District of Iowa.

Continental Western Insurance * 

Company, Inc., an Iowa Corporation, * 

* 

Appellee. *

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Submitted: January 16, 2003

Filed: January 28, 2004

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Before HANSEN,1

 Chief Judge, BRIGHT and SMITH, Circuit Judges.

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SMITH, Circuit Judge.
2

 Honorable Robert W. Pratt, United States District Judge for the Southern

District of Iowa.

3

 Modern Equipment is engaged in the business of designing,

manufacturing, and selling various types of storage and shelving equipment, among

other products.

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Modern Equipment Company ("Modern Equipment") appeals from the district

court's2

 grant of summary judgment to Continental Western Insurance Company

("Continental Western") on cross-motions for summary judgment. Modern Equipment

sued Continental Western seeking a declaratory judgment establishing Continental

Western's duty to defend Modern Equipment in an underlying suit brought by

Nebraska Beef Ltd. ("Nebraska Beef") in Nebraska state court. We affirm.

I. Facts

Modern Equipment3

 designed a meat storage-rack system that Nebraska Beef

purchased for use in its refrigerated warehouse. Three months after installation, two

rack sections collapsed. Nebraska Beef was forced to dismantle, remove, and replace

the collapsed rack sections. Within months, two more sections of the Modern

Equipment storage-rack system collapsed. These sections were also dismantled and

removed by Nebraska Beef. Neither collapse caused physical damage to Nebraska

Beef's refrigerated warehouse. However, Nebraska Beef replaced the collapsed rack

sections with smaller racks, which ultimately diminished the amount of beef product

which could be stored in the warehouse. Six sections of the original rack system

remained in place for approximately two years, at which time Nebraska Beef

completely replaced Modern Equipment's rack system with a new storage system. The

new system had a lower total-storage capacity than the Modern Equipment system.

Nebraska Beef sued Modern Equipment in Nebraska state court. In its suit,

Nebraska Beef claimed damages for production and shipping costs, spoilage of
4

 According to Nebraska Beef, the specific damages it incurred are as

follows: (1) $134,609 for the dismantling and removal of the damaged rack system

and the cost of outside cold storage; (2) $194,168 for the purchase and installation of

a new rack system; (3) $871,217 for loss of earnings arising from a diminished

production schedule during the removal and installation periods; (4) $2,420,253 for

decreased production because of reduced cooling capacity; (5) $149,386 for damage

to the product stored on the racks at the time of each collapse; (6) $126,625 for

spoilage of product; (7) $314,434 for loss of sales; 8) $588,196 for increased

production and shipping costs; (9) $834,867 in separate damages incurred by Fidelity

& Guaranty Insurance Company for direct and indirect costs of removal and

replacement of the racks, installation of the replacement racks, and business

interruption; (10) $6,036,853 for the loss of a cattle-processing agreement for sixtysix weeks.

5

 The commercial-liability policy provides for up to $2 million in property

damages, and the commercial-excess policy provides for an additional $5 million in

coverage for the same property damages, after the initial $2 million in coverage is

exhausted.

6

 Continental Western also denied coverage for damages claimed by

Nebraska Beef for Modern Equipment's alleged breach of contract.

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product, decreased cooler capacity, and loss of sales due to the collapsed racks.4

 At

all relevant times, Continental Western insured Modern Equipment under a

commercial general liability policy and a commercial excess policy.5

 After learning

that it had been sued, Modern Equipment tendered its defense to Continental Western

and requested an affirmation of coverage. 

Continental Western agreed to defend Modern Equipment, but did so under a

reservation of rights. Continental Western did not dispute its potential exposure for

damage to Nebraska Beef's product–and the resulting spoilation–due to the collapsed

rack system, but expressed its intent to deny coverage for the remaining disputed

damages.6

 Modern Equipment then brought the instant action–a declaratory-judgment

action seeking a declaration that the Continental Western insurance policies provided
7

 We note the discord between the parties regarding which state's law should

govern this dispute. Continental Western argues that Nebraska law should govern;

Modern Equipment argues that Iowa law should govern. However, we note–and the

parties agree–that the insurance laws of these two states are not substantially

different. If there is not a true conflict between the laws of Nebraska and Iowa on the

pertinent issue, then no choice-of-law is required. Nesladek v. Ford Motor Co., 46

F.3d 734, 736 (8th Cir. 1995). Accordingly, we will not make a choice of law

determination.

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coverage for the disputed damages. Following cross-motions for summary judgment,

the district court concluded that Continental Western properly excluded coverage for

all of the disputed damages and granted summary judgment in its favor.

II. Standard of Review and Legal Standards7

A summary judgment is reviewed de novo. Darby v. Bratch, 287 F.3d 673, 678

(8th Cir. 2002). Summary judgment is inappropriate if there is a genuine dispute

about a material fact. Fed. R. Civ. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 248 (1986). Insurance disputes are particularly well suited for summary

judgment because the proper construction of an insurance contract is always an issue

of law for the court. Iowa Comprehensive Petroleum Underground Storage Tank

Fund Bd. v. Federated Mut. Ins. Co., 596 N.W.2d 546, 550 (Iowa 1999). We do not

apply the rules of construction if an insurance contract is unambiguous. Kirwan v.

Chicago Title Ins. Co., 612 N.W. 2d 515, 523 (Neb. Ct. App. 2000). When the words

of an insurance contract are unambiguous, the intent of the parties is determined by

the language of the policy itself. A.Y. McDonald Indus., Inc. v. Ins. Co. North

America, 842 F.Supp. 1166, 1170 (N.D. Iowa 1993), aff'd 48 F.3d 1223 (8th Cir.

1995). If the terms of an insurance contract are clear, they are to be accorded their

plain and ordinary meaning. Farm Bureau Ins. Co. of Nebraska v. Bierschenk, 548

N.W.2d 322, 324 (1996). These standards apply equally to exclusions. Farm and City

Ins. Co. v. Gilmore, 539 N.W.2d 154, 157 (Iowa 1995).
8

 Both the general liability policy and the excess policy contain the same

exclusion for impaired property or property not physically injured. In the liability

policy it is excluded under part (m); in the excess policy it is excluded under part (l).

9

 "Property damage" is defined in the policy as:

a. Physical injury to tangible property, including all resulting loss

of use of that property. All such loss of use shall be deemed to

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Modern Equipment does not claim, and we do not find, that either the policy's

definitions or its exclusions are ambiguous. Hence, we will not resort to rules of

construction. Farm & City Ins. Co. v. Anderson, 509 N.W.2d 487, 490–91 (Iowa

1993). Accordingly, Modern Equipment is not entitled to have the policy construed

in its favor. Rather, we will attempt to ascertain the intention of the parties from the

plain meaning of the policy. Ploen v. Union Ins. Co., 573 N.W.2d 436, 442 (Neb.

1998).

III. Policy Language

To establish its claim against Continental Western, Modern Equipment has the

initial burden of proving that Nebraska Beef's disputed claims are "comprehended by

the policy's general coverage provisions." A.Y. McDonald, 842 F. Supp. at 1171.

Once this burden is met, Continental Western must in turn prove the "applicability

of any exclusion which allegedly precludes coverage." Id. The burden then shifts back

to Modern Equipment to prove, if applicable, any exception to the exclusion. Id.

To begin our analysis we consider the language contained in the commercial

general liability policy8

 issued by Continental Western. The policy states in relevant

part: 

a. We will pay those sums that the insured becomes legally obligated to

pay as damages because of . . . "property damage"[9] to which this
occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured.

All such loss of use shall be deemed to occur at the time of the

"occurrence" that caused it.

10 "Occurrence" is defined in the policy as "an accident . . . ." 

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insurance applies. We will have the right and duty to defend any "suit"

seeking those damages. We may at our discretion investigate any

"occurrence"[10] and settle any claim or "suit" that may result. 

It is undisputed that physical injury occurred to tangible property (the Nebraska Beef

food products stored on the racks) when several sections of Modern Equipment's

storage-rack system collapsed. Continental Western concedes coverage for that

injury, but does not concede the amount of the damage incurred. Modern Equipment

bases its further coverage claim on the conclusion that the diminished use of

Nebraska Beef's warehouse constitutes property damage within the meaning of the

policy. We agree with this conclusion, and find that Modern Equipment has satisfied

its initial burden of establishing that Nebraska Beef incurred "property damage." The

burden now shifts to Continental Western to establish that a policy exclusion applies.

Continental Western limited its coverage by two relevant exclusions: Exclusion

(k)–titled "Damage to Your Product"–and Exclusion (m)–titled "Damage to Impaired

Property or Property Not Physically Injured." Continental Western bases its coverage

denial on Exclusion (k). Exclusion (k) prohibits recovery for "property damage" to

"'[the insured's] product' arising out of it or any part of it." Essentially, this exclusion

prevents coverage for harm occurring to the rack system itself, because of its own

defects or performance deficiencies. According to the policy, "warranties or

representations made at any time with respect to the fitness, quality, durability,

performance or use of [Modern Equipment's storage-rack system]" are a part of the
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insured's "product." This exclusion also eliminates coverage for any "loss of use" of

the racks.

A separate exclusion–Exclusion (m)–extinguishes coverage for "property

damage to 'impaired property' or property that has not been physically injured arising

out of: (1) A defect, deficiency, inadequacy or dangerous condition" in Modern

Equipment's storage-rack system. However, Exclusion (m) does not apply if the

property damage is a result of "sudden and accidental physical injury to '[the

insured's] product' or '[the insured's] work' after it has been put to its intended use."

Thus, Exclusion (k)'s effect is to exclude coverage for damages to Modern

Equipment's rack system caused by its own defects including any damages for the

loss of use of the rack system. Exclusion (m)'s effect is to exclude damages for the

loss of use of property–other than the insured's product–that is less useful because of

a defect in the insured's product, except when the loss of use is caused by a sudden

accident after the insured's product is put to its intended use. In sum, any damages

flowing from a loss of use of Modern Equipment's storage-rack system are not

covered, but any loss of use of Nebraska Beef's warehouse (attributable to the

collapse of the rack system) is covered. This conclusion is consistent with the purpose

of a commercial general liability policy, which is to provide coverage for tort liability

for physical damage to others, and not to insulate an insured from economic losses

flowing from breach of its contractual duties.

IV. Analysis

Continental Western's duty to defend depends upon the cause of the disputed

damages. If the damages flow from the loss of the use of Modern's rack system due

to the inadequacy of the rack system designed by Modern Equipment then coverage

is excluded. If the claimed damages instead flow from Nebraska Beef's inability to

use the interior space of its warehouse, coverage exists, and Continental must defend

Modern Equipment. Predictably, Continental Western argues that the damages arise
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solely from the failed rack system and are thereby–under the language of Exclusion

(k)–excluded from coverage. Modern Equipment responds that the damages flow

from an impairment to the warehouse, and thus the claim should be analyzed under

Exclusion (m), as opposed to Exclusion (k). Specifically, Modern Equipment argues

that the damages are covered because the Modern Equipment rack system had been

put to its intended use and the warehouse became "impaired property" due to the

"sudden and accidental" fall of several rack sections.

Both parties cite to Ellsworth-Williams Co-op Co. v. United Fire & Cas. Co.,

478 N.W.2d 77 (Iowa App. 1991) as support (or distinction) for their respective

positions. In Ellsworth, coverage was sought–under a substantially similar policy–for

lost revenues resulting from a loss of use of seven grain-storage bins. Four of the bins

and an overhead conveying system–constructed by the insured–failed. The overhead

conveying system was a required operational component of the three preexisting bins,

which were not constructed by the insured. The owner of the bins brought an action

against the insured to recover for losses sustained from the loss of use of the four

negligently-constructed bins and the three preexisting bins.

The Ellsworth court analyzed the damages attributable to the negligent

construction of the four newest bins under a contract provision mirroring Exclusion

(k). The court determined that this exclusion "explicitly exclude[s] liability for

property damage to the insured's products and to work performed by the insured." Id.

at 82. The court, however, concluded that the loss of use damage to the preexisting

grain bins, resulting from their dependence on the defective conveying system, was

covered under language almost identical to the exception language of Exclusion (m).

The court reasoned that 1) the preexisting bins were not built by the insured, and thus

qualified as "other tangible property"; 2) the physical injury to the insured's product

(the overhead conveying system) was "sudden and accidental"; and 3) the injury

occurred after the conveying system had been put to "use by any other person or
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organization other than an insured"–in this case, by Ellsworth. Ellsworth-Williams

Co-op, Co., 478 N.W.2d at 81.

The facts of this case are fundamentally different than those presented in

Ellsworth. First, the storage racks were not an integral component of Nebraska Beef's

freezer and cooler warehouse. Certainly, the analysis would be different if the

insured's product had been an air-conditioning unit or a door seal, the failure of which

would impair the whole of the warehouse by not allowing it to function as a freezer

and a chiller. Second, unlike the preexisting bins in Ellsworth, the Nebraska Beef

warehouse was not rendered inoperable. The racks' collapse did not prohibit the

freezer from operating as a freezer. Third, Nebraska Beef continued to use its

warehouse and much of the Modern Equipment rack system. Modern Equipment

argues that there is "no legally appropriate or correct reasoning" to require that the

warehouse be "totally inoperable." We agree that circumstances could exist where a

"sudden and accidental" event could cause a loss of use so severe that the warehouse

is rendered practically inoperable. For example, in this case, had the racks collapsed

in a position that prohibited ingress or egress from the warehouse area, while not

literally inoperable, we would consider the warehouse to be inoperable in a practical

sense. In such a scenario, the mitigation required for the freezer to once again become

"operable" would presumably be as immediate as the accident causing the loss of use

in the first place. However, in this case the alleged loss of use, i.e., the ability to store

the same amount of beef product in it after the collapse as before the collapse

occurred, was limited, thereby allowing a significant level of use of the majority of

the warehouse space. If we were to consider a marginally less useful warehouse to be

"inoperable," the damages flowing from the "sudden and accidental" failure of a

portion of the shelving unit could accrue at Nebraska Beef's leisure–here, over a time

period in excess of two years.

An examination of the damages claimed by Nebraska Beef illustrate this point.

The majority of the damages that it claims are not attributable to the loss of use of its
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warehouse during the time period that the damaged racks were dismantled and

removed. Instead, the bulk of the damages flow from the diminished shelving

capacity of the freezer–beginning at the date of the first collapse, November of 1995,

and continuing until December of 1997 (when the Modern Equipment system was

finally removed). In our view, had Nebraska Beef's warehouse been "suddenly and

accident[ally]" rendered inoperable (even if only in a practical sense), the exigency

of the circumstances would have required immediate mitigation. Therefore, we

conclude that because Nebraska Beef's warehouse was not rendered inoperable by a

"sudden and accidental" physical injury, the exception to Exclusion (m) does not

apply. In any event, even the limited loss of use of its warehouse allegedly

experienced by Nebraska Beef was due to the loss of the use of Modern Equipment's

rack system, not from the loss of the use of the warehouse's functional freezing and

cooling capacity, nor from a diminution of its available total cold storage cubage.

V. Conclusion

Nebraska Beef did not lose the use of its warehouse space, rather it lost only

the use of a portion of the Modern Equipment rack system. After the racks collapsed,

the dimensions of the warehouse's functioning refrigerator and freezer space remained

precisely the same. The warehouse's storage capacity was reduced because the

shelving system it purchased from Modern Equipment did not perform as promised.

Nebraska Beef acquired replacement racks–and eventually an entirely new

system–which had a claim of maximum-storage capacity less than that of the failed

system. The alleged reduced warehouse capacity resulted from a substitution of

shelving systems because the insured's shelving product did not perform as it had

been warrantied. Thus, Exclusion (k) of the policy precludes any duty on Continental

Western's part to defend Modern Equipment against the disputed claims contained in

Nebraska Beef's lawsuit. Accordingly, the district court's grant of summary judgment

in Continental Western's favor is affirmed.
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BRIGHT, Circuit Judge, concurring. 

I concur in the result.

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