United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 10-1482

___________

Macheca Transport Company, *

doing business as Gateway Cold *

Storage; David Macheca; Starlin *

Macheca, *

*

Appellants, * Appeal from the United States

* District Court for the

v. * Eastern District of Missouri.

*

Philadelphia Indemnity Insurance *

Company, *

*

Appellee. *

___________

Submitted: January 11, 2011

Filed: August 9, 2011

___________

Before MURPHY, BYE, and MELLOY, Circuit Judges.

___________

BYE, Circuit Judge.

Macheca Transport Company and David and Starlin Macheca (Macheca) sued

Philadelphia Indemnity Insurance Company (Philadelphia) seeking insurance

coverage for damages resulting from a pipe rupture in Macheca's refrigerated

warehouse. After we reversed the original grant of summary judgment in favor of

Philadelphia, see Macheca Transp. Co. v. Phila. Indem. Ins. Co., 463 F.3d 827 (8th

Cir. 2006) (Macheca I), the district court granted Philadelphia's renewed motion for
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summary judgment on one of two coverage theories advanced by Macheca, and

dismissed Macheca's vexatious refusal to pay claim. The case proceeded to trial on

the remaining theory of coverage, which a jury resolved in Philadelphia's favor.

Macheca appeals challenging the district court's grant of Philadelphia's motion

for summary judgment on Macheca's first coverage theory and the dismissal of

Macheca's vexatious refusal to pay claim. Macheca also raises several claims of error

with respect to the second theory of coverage submitted to the jury, including a claim

of instructional error. We affirm in part, reverse in part, and remand.

I

Macheca operates a refrigerated warehouse in St. Louis, Missouri. On

November 18, 2001, an ammonia leak occurred on the sixth floor of the warehouse

after a refrigeration pipe ruptured. The pipe ruptured when the ceiling support system,

from which the pipes were suspended, failed. The weight of ice which had

accumulated on the pipe contributed to the failure. The refrigeration pipe fell and

landed on pallets of product inside the warehouse. Ammonia leaked from the ruptured

pipe and caused damage to the warehouse floors and walls, as well as the product

stored inside the warehouse.

Prior to the pipe rupture, Macheca had purchased an all-risk insurance policy

from Philadelphia which provided coverage for damage to the warehouse and its

contents, subject to certain exclusions and limitations. Macheca notified Philadelphia

of the pipe rupture/ammonia leak and made a claim for coverage. Philadelphia hired

an engineer to investigate the claim. Based upon the engineer's report, Philadelphia

denied Macheca's claim. Although the initial denial letter set forth what Philadelphia

referred to as "pertinent sections" of the policy, the letter did not give a specific reason

for the denial, stating only, "[w]e regret to advise that a Covered Cause of Loss has
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not occurred, as defined in the contract, as outlined in the investigative details stated

above."

After receiving the denial letter, Macheca hired attorney John Horvath. In April

2003, Horvath wrote to Philadelphia asking for the engineer's report. Philadelphia did

not respond. Horvath then faxed a letter to Philadelphia requesting a copy of the

engineer's report. Three weeks later, when Philadelphia still had not responded,

Horvath phoned the company requesting a copy of the engineer's report for a third

time. According to Macheca, Philadelphia refused to provide a copy of the engineer's

report, and demanded Macheca put its coverage position in writing.

On June 10, 2003, Horvath put Macheca's coverage position in writing and

requested prompt reconsideration of Philadelphia's denial. After explaining how the

pipe rupture occurred, the letter pointed out a loss was a "Covered Cause of Loss"

unless specifically excluded. The letter noted the policy contained two categories of

exclusions – some of which applied irrespective of whether a covered event

contributed to the loss, and others of which were rendered inapplicable if a covered

event contributed to the loss. Macheca claimed coverage under two policy provisions.

The first was an exception to the exclusions for "specified causes of loss," which

included "weight of snow, ice or sleet." Macheca also claimed the loss was covered

under the additional coverage Macheca purchased for "collapse."

Philadelphia did not respond to the coverage position letter. Horvath again

contacted Philadelphia by phone on June 30, and was informed the matter had been

referred to outside counsel for a coverage opinion. On August 15, 2003, after two

additional letters and a phone call, Philadelphia sent Macheca a letter reiterating its

earlier denial. This letter referred to a limitation on coverage for loss to the "interior

of any building or to personal property in buildings caused by or resulting from . . .

ice," taking the position the limitation referred to the artificial ice generated in the

process of cooling a cold storage facility. Philadelphia also contended, however, the
1

Rule 4-3.7(a) provides:

A lawyer shall not act as advocate at a trial in which the lawyer is likely

to be a necessary witness unless:

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weight of ice referenced in the specified causes of loss was not intended to cover

artificial ice generated in the process of cooling a cold storage facility. The letter also

referred to exclusion 3.c.4 for "Maintenance." In September 2003, one more round

of correspondence took place between Horvath and Philadelphia in which Horvath

accused Philadelphia of bad faith in its handling of Macheca's claim, and Philadelphia

defended its denial. Horvath again requested the engineer's report. Philadelphia

finally provided the engineer's report in a letter dated October 2, 2003.

On December 23, 2003, Macheca filed suit against Philadelphia in the Circuit

Court of the City of St. Louis. The complaint alleged breach of the insurance contract,

and vexatious refusal to pay. The vexatious refusal to pay claim outlined the

correspondence that took place between Philadelphia and Horvath between April 2003

and October 2003. In stating the factual basis for the claim, Macheca alleged in part,

"[t]he ammonia pipe collapsed as a result of the weight of ice on the pipe coupled with

the hidden decay of oakum which held the hangers, supporting the ammonia pipes, in

place." Appellant's App. at 15.

Philadelphia removed the case to federal court. In federal court, Macheca filed

a motion for partial summary judgment on the coverage issue. Macheca relied upon

the same two theories of coverage it had in the letter sent to Philadelphia on June 10,

2003, namely: (1) the specified cause of loss for weight of ice; and (2) the additional

coverage for collapse. Philadelphia filed a cross-motion for summary judgment

contending the loss was not covered. Philadelphia also filed a motion to disqualify

Horvath as Macheca's counsel under Rule 4-3.7 of the Missouri Supreme Court Rules

of Professional Conduct.1

 Philadelphia contended Horvath would be a necessary
(1) the testimony relates to an uncontested issue;

(2) the testimony relates to the nature and value of legal services

rendered in the case; or

(3) disqualification of the lawyer would work substantial hardship

on the client.

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witness for Macheca's vexatious refusal to pay claim, arguing the parties disagreed

upon the matters discussed during the phone calls between Horvath and Philadelphia

during Horvath's attempts to obtain the engineer's report and to get Philadelphia to

explain the bases for its denial.

The district court granted the motion to disqualify Horvath as Macheca's

counsel, concluding Horvath was likely to be a necessary witness because his

communications with Philadelphia were relevant to determining whether

Philadelphia's refusal to pay was willful and without reasonable cause. The district

court also granted Philadelphia's motion for summary judgment, and denied Macheca's

motion for partial summary judgment. In doing so, the district court only addressed

one of Macheca's two arguments in support of coverage – the contention the loss was

covered under the additional coverage for collapse. The district court failed to address

Macheca's claim the loss was covered under the exception to certain exclusions for the

specified cause of loss for weight of ice. With respect to the collapse issue, the district

court determined Missouri law, as interpreted by the Missouri appellate courts, only

recognized a "collapse" when there was an entire "falling or reduction [of a structure]

to a flattened form or rubble." The district court concluded the refrigeration pipes had

not collapsed under this definition and therefore the loss was not covered. Macheca

filed a motion for reconsideration of the district court's order, noting the court failed

to address Macheca's primary argument for coverage, that is, the argument the loss

was caused by weight of ice. The district court denied the motion for reconsideration

without comment.
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Macheca appealed both the district court's order granting Philadelphia's motion

for summary judgment and the order granting the motion to disqualify Horvath as

Macheca's counsel. Macheca argued the district court incorrectly applied Missouri

law with respect to the collapse issue, suggesting the Missouri Supreme Court would

follow the modern trend which recognizes a collapse when there is substantial

impairment to the structural integrity of a building or a part of a building. Macheca

also contended the district court failed to address its weight-of-ice claim. Finally,

Macheca contended the district court erred in disqualifying Horvath as plaintiff's

counsel.

On appeal, we reversed. Macheca I, 463 F.3d at 834. We remanded the case

because the district court failed to address the weight-of-ice claim advanced by

Macheca. Id. at 832. We further held the district court abused its discretion when it

disqualified attorney Horvath without first determining whether he would be the only

witness who could testify to events surrounding the alleged vexatious refusal to pay

claim. Id. at 833-34. In addition, we declined to address the ruling on collapse

coverage, indicating Macheca was free to ask the district court to reconsider its

holding on remand. Id. at 832 n.2.

After the case was remanded, Macheca brought a motion for summary judgment

on two bases. First, Macheca again argued the loss was caused by the weight of ice

and covered as a specified cause of loss under the policy. Second, Macheca renewed

its claim the loss was covered under the policy's additional coverage for collapse.

Philadelphia also brought a motion for partial summary judgment. It asked the district

court for summary judgment on the collapse claim and the vexatious refusal to pay

claim. In addition, Philadelphia renewed its motion to disqualify attorney Horvath as

Macheca's counsel.

The district court granted summary judgment in favor of Philadelphia on both

the collapse issue and the vexatious refusal to pay claim. In addition, because the
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vexatious refusal to pay claim had been dismissed, the district court denied as moot

the motion to disqualify Horvath. With respect to Macheca's motion for summary

judgment on its weight-of-ice claim, the district court denied summary judgment. The

district court determined the weight of ice was not a specified cause of loss because

the policy unambiguously referred to ice as an element of the weather, rather than ice

that formed on pipes as a part of the refrigeration process. In addition, the district

court found there was a genuine factual dispute as to whether any of the policy's

exclusions were triggered, concluding the parties disputed the cause of loss and

whether there was one or more proximate cause of the loss. Macheca brought a

motion to reconsider the denial of its motion for partial summary judgment on the

grounds the weight of ice had been previously admitted by Philadelphia as the cause

of loss. The district court denied the motion to reconsider.

The remaining issues – the proximate cause of loss and the applicability of any

policy exclusions – proceeded to trial before a jury. Macheca presented evidence the

loss was caused by the weight of ice on the refrigeration coils. Philadelphia presented

evidence the loss was caused either by the failure to maintain the pipes which resulted

in the accumulation of ice, or by a discharge of a pollutant (the ammonia), both of

which Philadelphia claimed would trigger policy exclusions. The jury found in

Philadelphia's favor. Macheca brought a motion for a new trial, which was denied.

Macheca then filed a timely appeal, raising nine issues: (1) the district court

erred in ruling that the fall of the ruptured ammonia pipe was not a collapse; (2) the

district court erred in ruling the weight of ice was not a specified cause of loss; (3) the

district court erred in denying Macheca's motion for reconsideration of its motion for

partial summary judgment on the issue of liability on its weight-of-ice claim; (4) the

district court erred in admitting the testimony of one of Philadelphia's experts; (5) the

district court erred in giving certain jury instructions; (6) the district court erred in

granting summary judgment on Macheca's claim for vexatious refusal to pay; (7) the

district court erred in declining to deny Philadelphia's motion to disqualify attorney
2

The policy further provided losses caused by a collapse were covered if they

resulted "only" from one or more of five specific causes, one of which was a collapse

caused by a "specified cause[] of loss." Id.

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Horvath on the basis of the claim's legal insufficiency; (8) the district court erred in

making certain evidentiary rulings at trial; and (9) the district court erred in denying

Macheca's motion for a new trial.

II

A

Macheca first contends the district court erred in granting Philadelphia's motion

for summary judgment on Macheca's claim for coverage under the "collapse"

provisions of the policy. We review the grant of summary judgment de novo. Dayton

Dev. Co. v. Gilman Fin. Servs., Inc., 419 F.3d 852, 855 (8th Cir. 2005). We also

review de novo the district court's interpretation of the insurance policy. Am.

Simmental Ass'n v. Coregis Ins. Co., 282 F.3d 582, 586 (8th Cir. 2002).

The policy's "collapse" provisions generally provided coverage for "'loss'

caused by or resulting from risks of direct physical 'loss' involving collapse of

'buildings' or any part of 'buildings.'" Appellant's App. at 148.2

 The policy broadly

defined "buildings" as any "buildings or structures," id. at 150, and contained an

exhaustive list of items which were included within the meaning of "buildings." The

list included permanently installed fixtures, permanently installed machinery,

permanently installed equipment, outdoor fixtures including awnings, fire

extinguishing equipment, appliances, alarm systems, communication systems,

monitoring systems, underground pipes, fences, retaining walls, and patios, to name

a few. Id. at 118-19. The policy did not further define a "fixture," and Philadelphia

does not claim the ammonia pipes in the refrigerated warehouse were not permanently

installed fixtures within the meaning of the policy. Cf. Stockton v. Tester, 273
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S.W.2d 783, 787 (Mo. Ct. App. 1954) (discussing the permanent or removable nature

of a fixture and holding "if the article is so placed as to make the building itself

peculiarly adapted and more usable for the type of business, then it is not removable").

Thus, the fight is not about whether the ammonia pipes were included within the terms

"buildings or any part of buildings;" rather, the fighting issue is whether there was a

"collapse" of the pipes. The policy did not define the word "collapse." We must

therefore give the term "the meaning that would be reasonably understood by the

average lay person . . . unless it plainly appears that [a] technical meaning [was]

intended." Peters v. Emp'rs Mut. Cas. Co., 853 S.W.2d 300, 303 (Mo. 1993).

The district court held Missouri courts interpret the term "collapse" narrowly

by requiring a structure or building to completely fall or be reduced to a "flattened

form or rubble" before coverage is triggered under the "collapse" provisions of an

insurance policy. Because the Missouri Supreme Court has not addressed the issue

of the meaning of "collapse" when the term is undefined in an insurance policy, the

district court relied on decisions from the Missouri Court of Appeals. See Williams

v. State Farm Fire & Cas. Co., 514 S.W.2d 856, 859 (Mo. Ct. App. 1974) (indicating

the term "collapse" is "not ambiguous and should therefore be given its plain and

commonly understood meaning, namely, a falling or reduction to a flattened form or

rubble") (citing Eaglestein v. Pac. Nat'l Fire Ins. Co., 377 S.W.2d 540, 544 (Mo. Ct.

App. 1964)); see also Heintz v. U.S. Fid. & Guar. Co., 730 S.W.2d 268, 269 (Mo. Ct.

App. 1987) ("There must have been a falling down or collapsing of a part of a

building. A condition of impending collapse is insufficient.").

Macheca cites cases from a number of jurisdictions which have held the

undefined term "collapse" is ambiguous. Those cases have interpreted the term in

favor of insureds to cover any serious impairment of a building's structural integrity.

This approach is clearly the majority approach under the current trend of the law. See,

e.g., Schray v. Fireman's Fund Ins. Co., 402 F. Supp. 2d 1212, 1218 (D. Or. 2005) ("I

conclude that the Oregon Supreme Court would also follow the modern trend and
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apply the collapse coverage if any part of the building sustained substantial

impairment to its structural integrity."); 401 Fourth St., Inc. v. Investors Ins. Grp., 879

A.2d 166, 174 (Pa. 2005) (interpreting identical policy language to find coverage for

a parapet wall that was bowed and leaning inward but had not yet collapsed); Weiner

v. Selective Way Ins. Co., 793 A.2d 434, 443 (Del. Super. Ct. 2002) ("[S]uch a policy

must be taken to cover any serious impairment of structural integrity that connotes

imminent collapse threatening the preservation of the building as a structure or the

health and safety of occupants and passers-by.") (citations omitted); Rankin ex rel.

Rankin v. Generali-U.S. Branch, 986 S.W.2d 237, 238 (Tenn. Ct. App. 1998) ("Thus,

'the clear modern trend is to hold that collapse coverage provisions . . . which define

collapse as not including cracking and settling – provide coverage if there is

substantial impairment of the structural integrity of the building or any part of a

building.'") (quoting Am. Concept Ins. Co. v. Jones, 935 F. Supp. 1220, 1226 (D. Utah

1996)); see also Ercolani v. Excelsior Ins. Co., 830 F.2d 31, 34 (3d Cir. 1987); Ocean

Winds Council of Co-Owners, Inc. v. Auto-Owner Ins. Co., 565 S.E.2d 306, 308 (S.C.

2002); Island Breakers v. Highlands Underwriters Ins. Co., 665 So.2d 1084, 1085-86

(Fla. Dist. Ct. App. 1995) (Cope, J., concurring); Thomasson v. Grain Dealers Mut.

Ins. Co., 405 S.E.2d 808, 810 (N.C. Ct. App. 1991); Beach v. Middlesex Mut.

Assurance Co., 532 A.2d 1297, 1300 (Conn. 1987); Nationwide Mut. Fire Ins. Co. v.

Tomlin, 352 S.E.2d 612, 614-15 (Ga. Ct. App. 1986); United Nuclear Corp. v.

Allendale Mut. Ins. Co., 709 P.2d 649, 652 (N.M. 1985); Gov't Emps. Ins. Co. v.

DeJames, 261 A.2d 747, 751 (Md. 1970).

The fact that several jurisdictions have reached divergent conclusions about the

meaning of the term "collapse" is evidence of the term's ambiguity under Missouri

law. See Harrison v. Tomes, 956 S.W.2d 268, 270 (Mo. 1997) (concluding the terms

"operator" or "operating" were ambiguous in part because of the divergent conclusions

about their meaning reached by several jurisdictions). As a result, we have less

confidence than the district court that the Missouri Supreme Court would follow the

same approach as the Missouri Court of Appeals' decisions. See Weaver v. State
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Farm Mut. Auto. Ins. Co., 936 S.W.2d 818, 819-20 (Mo. 1997) (adopting the "modern

trend" followed by "the majority of cases" in an insurance coverage dispute); see also

Swope v. Siegel-Robert, Inc., 243 F.3d 486, 497 (8th Cir. 2001) (concluding "the

Missouri Supreme Court would follow the compelling logic of the current trend" on

a particular issue notwithstanding a Missouri Court of Appeals' decision to the

contrary).

In the end, however, we need not predict what the Missouri Supreme Court

would decide about the ambiguity of "collapse" in the abstract. Our task is limited to

determining whether the term "collapse" was ambiguous as used in this particular

policy. Under Missouri law, the terms of a policy are "ambiguous when there is

uncertainty in the meaning of words used in the contract, or when the contract terms

are reasonably subject to different interpretations." Am. Home Assurance Co. v.

Pope, 591 F.3d 992, 999 (8th Cir. 2010) (citing Krombach v. Mayflower Ins. Co., 827

S.W.2d 208, 210 (Mo. 1992)). "Language is ambiguous if it is reasonably open to

different constructions and the language used will be viewed in the meaning that

would ordinarily be understood by the layman who bought and paid for the policy."

Krombach, 827 S.W.2d at 210 (citing Robin v. Blue Cross Hosp. Servs., Inc., 637

S.W.2d 695, 698 (Mo. 1982)). "Missouri courts 'follow a construction favorable to

the insured wherever the language of a policy is susceptible of two meanings, one

favorable to the insured, the other to the insurer.'" Pope, 591 F.3d at 999 (quoting

Meyer Jewelry Co. v. Gen. Ins. Co. of Am., 422 S.W.2d 617, 623 (Mo. 1968)). This

rule of construction is followed in part because "as the drafter of the insurance policy,

the insurance company is in the better position to remove ambiguity from the

contract." Krombach, 827 S.W.2d at 211. In addition, we "must give meaning to all

terms and, where possible, harmonize those terms in order to accomplish the intention

of the parties." Henges Mfg., LLC v. Amerisure Ins. Co., 5 S.W.3d 544, 545 (Mo. Ct.

App. 1999).
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In this particular policy, the "collapse" provisions of the policy extended

coverage to "buildings or any part of buildings." The policy then defined the term

"buildings" very expansively to cover a plethora of items, including permanent

fixtures, outdoor fixtures such as awnings, fire extinguishing equipment, appliances,

underground pipes, and patios. When "collapse" is used in this context, the average

lay person would not understand the term to be limited to the definition adopted by

the Missouri Court of Appeals. Rather, we believe the average lay person could

reasonably understand the "collapse" of an awning, for example, to occur without ever

envisioning the awning being flattened or reduced to rubble. Indeed, the terms

"flattened" or "reduced to rubble" would rarely be descriptive of the "collapse" of

many of the items covered by the policy, such as fire extinguishing equipment,

appliances, alarm systems, communication systems, or monitoring systems.

In the context of this policy, defining a "collapse" as any serious impairment of

a building or part of a building's structural integrity – the majority view under the

current trend in the law – is clearly more consistent with what the average lay person

would reasonably understand the term "collapse" to mean when viewed in conjunction

with items included in this policy's definition of "buildings." We therefore conclude

the district court erred in adopting the restrictive definition of "collapse" discussed by

the Missouri Court of Appeals in Williams, Eaglestein, and Heintz, because none of

those cases addressed the meaning of the term "collapse" when used in conjunction
3

We are not swayed by Philadelphia's reliance on Council Tower Ass'n v. Axis

Specialty Insurance Co., 630 F.3d 725 (8th Cir. 2011), which recently addressed the

meaning of "collapse" under Missouri law. Council Tower initially applied the

restrictive definition of "collapse" adopted by the Missouri appellate courts only

because "both parties treated the Missouri Court of Appeals decisions as controlling

in their cross-motions for summary judgment, as did the district court." Id. at 728.

Ultimately, however, the court applied the broader definition of "collapse" as an

impairment of the structural integrity of a part of a building, and affirmed the district

court on that basis. Id. at 729-30. Thus, the actual holding in Council Tower turns on

the broader definition we apply here, rather than the restrictive definition used by the

Missouri appellate courts. In any event, our decision turns upon the need to

harmonize the term "collapse" with the expansive definition of "buildings" used in this

particular policy, an issue Council Tower did not address.

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with the expansive definition of the term "buildings" used in this policy.3

 As a result,

the district court erred in granting Philadelphia's motion for summary judgment.

B

Macheca next contends the district court erred when it determined the weight

of ice on the refrigerated pipes could not be considered a "specified cause of loss"

under the terms of the policy. Whether a loss is a "specified cause of loss" under the

policy is relevant to Macheca's second coverage claim because an exception to the

pollutant exclusion relied upon by Philadelphia applies when loss resulting from the

discharge, release or escape of a pollutant is caused by a "specified cause of loss."

Appellant's App. at 145. Whether the weight of ice was a "specified cause of loss" is

also relevant to Macheca's claim for "collapse" coverage because loss caused by a

"specified cause of loss" is one of five types of causes of loss covered by the

"collapse" provisions of the policy. Id. at 148. We review de novo the district court's

interpretation of the insurance policy. American Simmental, 282 F.3d at 586.

The "specified causes of loss" are set forth in paragraph 11 of section F of the

policy, which is the Definitions section. That paragraph provides:
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"Specified Causes of Loss" means the following: fire, lightning,

explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil

commotion; vandalism; leakage from fire extinguishing equipment;

sinkhole collapse; volcanic action; falling objects; weight of snow, ice

or sleet; water damage.

Appellant's App. at 152. Three subparts of the paragraph further define or limit three

of the nineteen items listed as specified causes of loss. Id. The three items further

defined are sinkhole collapse, falling objects, and water damage. The disputed item

here – the weight of ice – is not further limited, described, or defined by the policy.

The other two specified causes of loss which have as a common element "weight" –

the weight of snow and the weight of sleet – are also not further limited, described, or

defined by the policy.

The district court concluded Paragraph F.11 unambiguously referred to ice as

an element of the weather, and found "as a matter of law, ice accumulating as a result

of the refrigeration process is not a specified cause of loss under the policy." Id. at

1478. The district court initially observed the word ice "could refer both to ice as an

element of the weather, or to ice caused by forces other than the weather." Id.

Ultimately, however, the district court determined "ice" was used unambiguously in

this policy because it was used in "close proximity to 'sleet' and 'snow'" both of which

only refer to elements of the weather. Id. Macheca contends the district court erred

when it concluded the word "ice" was unambiguous as used in this policy. We agree.

To determine whether Paragraph F.11's reference to "ice" is reasonably subject

to an interpretation favorable to Macheca, we start (again) from the premise that we

"must give meaning to all terms [of the policy] and, where possible, harmonize those

terms in order to accomplish the intention of the parties." Henges, 5 S.W.3d at 545.

We begin by examining how the term "ice" was used in other parts of the policy in

order to compare those policy provisions with the use of the term "ice" in Paragraph
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F.11. Cf. Williams v. N. River Ins. Co., 579 S.W.2d 410, 412 (Mo. Ct. App. 1979)

(comparing a term's use in one phrase of a policy with its absence in another).

As discussed in Macheca I, the term "ice" was also used in this policy in a

limitation on coverage. 463 F.3d at 832. Section C.1.c of the policy negated coverage

for loss to the interior of buildings or personal property in buildings caused by or

resulting from ice. Appellant's App. at 148. In the limitation on coverage, "ice"

appeared in a list with five other weather-related items – "rain, snow, sleet, ice, sand

or dust, whether driven by wind or not." Id. We noted the "district court determined

'ice' as used in the coverage limitation referred only to ice as an element of the

weather." Macheca I, 463 F.3d at 831-32. The parties do not dispute that conclusion.

In contrast, when used in Paragraph F.11, the phrase "weight of ice" does not

appear in a list limited to weather-related items. Instead, the term appears in a list of

nineteen items, some of which only refer to elements of the weather or naturally

occurring events (i.e., lightning, windstorm or hail, volcanic action, weight of snow,

and weight of sleet) and some of which are man-made conditions (i.e., explosion,

aircraft or vehicles, riot or civil commotion, vandalism, and leakage from fire

extinguishing equipment). Appellant's App. at 152. In addition, Paragraph F.11

includes six items which could either be weather related or refer to a man-made

condition (i.e., fire, smoke, sinkhole collapse, falling objects, weight of ice, and water

damage). Id.

As to the six items which could either be weather-related or man-made

conditions, Paragraph F.11 specifically delineates between weather-related loss and

man-made loss with respect to two of those six items – sinkhole collapse and water

damage. In further defining the term "sinkhole collapse," the policy expressly

indicates the term only includes loss caused by naturally occurring sinkholes rather

than sinkholes created by a man-made condition. See id. ("Sinkhole collapse means

the sudden sinking or collapse of land into underground empty spaces created by the
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action of water on limestone or dolomite [but] does not include . . . [s]inking or

collapse of man-made underground cavities."). In further defining the term "water

damage," the distinction between a man-made and weather-related condition is

resolved exactly the opposite – the policy expressly states "water damage" refers to

water from within a man-made item rather than water resulting from an element of the

weather. See id. ("Water damage means accidental discharge or leakage of water or

steam as the direct result of the breaking or cracking of any part of a system or

appliance containing water or steam.").

Significantly, the policy does not further clarify whether the other four items

which could be either weather-related or man-made conditions (i.e., fire, smoke,

falling objects, and the weight of ice) are limited solely to one type of condition or

another. As a result, loss resulting from weather-related fire or smoke (such as that

caused by a forest fire) is arguably a specified cause of loss under the policy, but so

is loss resulting from a man-made fire or smoke (such as that caused by an electrical

short). Similarly, the loss caused by a meteorite (a naturally occurring event) is

arguably a specified cause of loss under the term "falling objects," but the loss caused

by a large object dropped on the building by a construction crane (a man-made event)

would also be a specified cause of loss.

Philadelphia urges us to look only to the sublist of three items in which the term

"ice" appears (i.e., "weight of snow, ice or sleet"). The insurer contends the fact that

weight of snow and weight of sleet are both solely weather-related events resolves any

alleged ambiguity with respect to the term "ice." We disagree. It is equally

reasonable to conclude the three items of the sublist are grouped together because of

the common element which triggers coverage under the policy, i.e., a loss caused by

the "weight" of the items. The grouping of the three items does not necessarily lead

to the conclusion the three items were grouped together to limit coverage to naturallyoccurring elements of the weather, particularly in light of the mixture of the three

types of terms used by the policy to define specified causes of loss: (1) those which
-17-

could only refer to naturally-occurring conditions, (2) those which could only refer to

man-made conditions; and (3) those which could refer to either man-made or

naturally-occurring conditions.

When considering Paragraph F.11 in its entirety, we conclude its use of the term

"ice" is reasonably subject to two different interpretations, one which refers to ice

exclusively as an element of the weather, and another which refers to ice in either its

natural condition or as a man-made occurrence. Philadelphia chose to further define

two of the six items listed in Paragraph F.11 to indicate specifically whether those

items referred to weather-related or man-made conditions, but did not do so with

respect to four other items, including the "weight of ice." The absence of any

limitation on some items which could be both weather-related or man-made, coupled

with the policy's specific clarification of other like items, strongly suggests an intent

to include within the specified causes of loss both forms of the four items which could

occur either naturally or at the hand of man. At a minimum, Philadelphia's failure to

indicate which form of ice was covered and which was not renders the term

ambiguous, and requires us to adopt the meaning which is favorable to the insured.

See Oak River Ins. Co. v. Truitt, 390 F.3d 554, 558 (8th Cir. 2004) (citing Peters, 853

S.W.2d at 302). We therefore conclude the district court erred when it determined the

weight of ice on the refrigerated pipes did not constitute a specified cause of loss

under the terms of the policy.

C

Our conclusion the weight of ice was a specified cause of loss makes it

unnecessary to address the claims Macheca appealed with respect to alleged trial

errors, because the only theory of coverage submitted to the jury was Macheca's

"weight of ice" coverage claim, and Macheca was entitled to partial summary

judgment on the issue of liability under that theory.
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To explain why Macheca was entitled to partial summary judgment on the issue

of liability under its "weight of ice" claim, we begin by summarizing the undisputed

facts regarding the manner in which the pipe rupture occurred. The parties do not

dispute that ammonia leaked from the pipe after the pipe collapsed, or that the leaking

ammonia caused the resulting damage to the warehouse floors and walls, as well as

the product stored inside the warehouse. The parties also do not dispute the ammonia

leak constituted a release or escape of a pollutant within the terms of the policy.

Furthermore, and most significantly, the parties do not dispute the collapse of

the refrigeration pipe – which preceded and led to the ammonia leak – was caused by

the weight of ice accumulating on the pipes. As the district court noted, "[t]he parties'

experts uniformly agreed that the weight of ice was a cause of the pipe falling, but

they did not agree that the weight of ice was the sole cause." Appellant's App. at

1483. Both of Philadelphia's experts, Thomas Richardson and John Turner, indicated

the weight of ice was a cause of the pipe falling. Richardson "opined that the weight

of the piping in combination with the weight of ice buildup likely caused the

attachments that suspended the supporting pipes from the ceiling to gradually fail over

a period of time." Id. at 1484 n.5. Similarly, Turner "opined that the cause of loss

was that the weight of ice overwhelmed the plugs, causing them to detach from the

ceiling, upon which the pipe fell and leaked." Id. Indeed, Philadelphia's counsel

conceded during oral argument: "It was agreed that it was the weight of this

accumulated frost that overwhelmed those hangers and caused that system to fall."

"Under an all-risk insurance policy, recovery will be allowed for all fortuitous

losses, unless the policy contains a specific provision expressly excluding the loss

from coverage." Pakmark Corp. v. Liberty Mut. Ins. Co., 943 S.W.2d 256, 259 (Mo.

Ct. App. 1997). Thus, we next look to whether there is a specific provision in this

policy excluding the loss caused by the pipe rupture. As the district court explained,

this policy contained three categories of exclusions. One category of exclusions (the

B.1 exclusions) precluded coverage "regardless of any other cause or event that
4

Similary, the maintenance exclusion was a B.3 exclusion, and likewise would

not preclude coverage as long as a covered cause of loss was a cause of the pipe

rupture and ammonia leak.

-19-

contributes concurrently or in any sequence to the 'loss.'" Appellant's App. at 142.

In contrast, the other two categories (the B.2 and B.3 exclusions) lacked such

language, and, therefore, only precluded coverage if the excluded event was the sole

cause of loss. As a consequence, if a covered cause of loss was a cause of loss, the

B.2 and B.3 exclusions did not preclude coverage. See Pace Props., Inc. v. Am. Mfrs.

Mut. Ins. Co., 918 S.W.2d 883, 886 (Mo. Ct. App. 1996) (explaining the relationship

between the three relevant categories of exclusions and the concept of proximate

cause).

In this policy, the pollutant exclusion was a B.2 exclusion. Specifically, the

pollutant exclusion was found at B.2.j of the policy and provided the policy would not

cover loss "caused by or resulting from . . . [d]ischarge, dispersal, seepage, migration,

release or escape of 'pollutants.'" Appellant's App. at 145. Importantly, however, the

pollutant exclusion contained an exception which stated: "But we will pay for

resulting 'loss' to Covered Property when the discharge, dispersal, seepage, migration,

release of escape of 'pollutants' is caused by any of the 'specified causes of loss.'" Id.

Thus, if a "specified cause of loss" was a cause of the escape or release of a pollutant,

this policy provided coverage because the pollutant exclusion was a B.2 exclusion

rather than a B.1 exclusion.4

 Indeed, Philadelphia's counsel conceded during oral

argument: "If there was a covered event that caused the release of pollutants, then that

would be covered." It is undisputed the weight of ice accumulating on the

refrigeration pipe was a cause of the pipe's rupture, which in turn caused the release

of the ammonia. Macheca was therefore entitled to partial summary judgment on
5

Despite our conclusion Macheca was entitled to partial summary judgment on

liability on its weight-of-ice claim, we addressed the propriety of granting

Philadelphia's motion for summary judgment on Macheca's separate claim for collapse

because the parties did not advise us on appeal whether the scope of damages under

the additional coverage for "collapse" is identical to the scope of damages covered

under Macheca's weight-of-ice claim. In addition, our opinion is limited to reversing

the district court's grant of summary judgment in favor of Philadelphia on the

"collapse" issue because the district court erred in adopting a restrictive definition of

the meaning of "collapse." We express no opinion on whether Macheca is entitled to

summary judgment on its claim for coverage under the "collapse" provisions of the

policy.

-20-

liability under its weight-of-ice claim because the weight of ice was a specified cause

of loss.5

D

Finally, Macheca contends the district court erred in granting summary

judgment on its vexatious refusal to pay claim. We review the grant of summary

judgment de novo. Dayton, 419 F.3d at 855.

To establish a claim for vexatious refusal to pay, Macheca had to prove: (1) it

had an insurance policy with the insurer; (2) the insured refused to pay; and (3) the

insurer's refusal to pay was without reasonable cause or excuse. Dhyne v. State Farm

Fire & Cas. Co., 188 S.W.3d 454, 457 (Mo. 2006). There is no vexatious refusal

when the insurer has reasonable cause to believe and does believe there is no liability

under its policy and that it has a meritorious defense. Wood v. Safeco Ins. Co. of

Am., 980 S.W.2d 43, 55 (Mo. Ct. App. 1998). In addition, an insurer may insist upon

a judicial determination of open questions of law or fact without being penalized.

Watters v. Travel Guard Int'l, 136 S.W.3d 100, 109 (Mo. Ct. App. 2004). When no

Missouri case directly addresses a coverage issue, a litigable issue exists. Hocker Oil

Co. v. Barker-Phillips-Jackson, Inc., 997 S.W.2d 510, 523 (Mo. Ct. App. 1999).
6

Because the district court correctly dismissed the vexatious refusal to pay

claim, it also correctly denied as moot Philadelphia's motion to disqualify attorney

Horvath, as the disqualification motion only pertained to the vexatious refusal to pay

claim.

-21-

After a general survey of all the facts and circumstances in this case, see Russell

v. Farmers & Merchants Ins. Co., 834 S.W.2d 209, 221 (Mo. Ct. App. 1992), we

conclude the record shows Philadelphia reasonably believed it had a meritorious

defense to insurance coverage. Philadelphia's representatives reviewed the reports of

the independent adjuster and engineer who investigated the ammonia leak. Based

upon their investigation and findings, Philadelphia concluded there was no coverage

for the incident. In addition, at the time of each of Philadelphia's denials, Missouri

law denied coverage for a "collapse" in the absence of a falling or reduction to a

flattened form or rubble. Although we now conclude the more restrictive definition

adopted by the Missouri Court of Appeals does not control with respect to this

particular policy, the absence of a controlling decision from the Missouri Supreme

Court coupled with Missouri appellate decisions favoring Philadelphia created a

litigable issue which entitled Philadelphia to seek a judicial determination. Similarly,

a litigable issue existed with respect to whether the weight of ice was a specified cause

of loss under this policy. The district court correctly determined that Philadelphia

could insist upon a judicial determination of those questions without being penalized

for a vexatious refusal to pay claim. See Watters, 136 S.W.3d at 108-10; Wood, 980

S.W.2d at 55. We therefore affirm the district court's grant of summary judgment on

the vexatious refusal to play claim.6

III

We affirm the district court's dismissal of Macheca's vexatious refusal to pay

claim. We reverse the district court's grant of summary judgment in favor of

Philadelphia on Macheca's claim for coverage under the "collapse" provisions of the

policy. We also reverse the district court's determination that the weight of ice on the
-22-

refrigeration pipes was not a "specified cause of loss" under the policy, and determine

Macheca was entitled to partial summary judgment on liability on its "weight of ice"

claim. Thus, we reverse the jury verdict in favor of Philadelphia and remand this case

for further proceedings consistent with this opinion.

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