Court Opinion

ID: 8917275
Source: CourtListenerOpinion
Date Created: 2022-11-27 05:36:26.585354+00
Date Added: 2024-06-11T17:09:06.379621
License: Public Domain

WEIS, Circuit Judge,
concurring and dissenting.
Although I join parts I, IIB, and IIC of the majority opinion, I must dissent from the result reached in part IIA. In my view, the expenses claimed as business interruption loss are within the coverage of the policy and not barred by the clause excluding the insured’s products.
Alan Wood claimed damages from McDowell for injuries to the steel plant. These injuries may be subdivided into three general categories — the physical damage to the ore bridge, the physical injury to the hydraulic building and trestle, and at issue here, the intangible injury to the steel plant as a whole.
McDowell concedes that the policy does not provide coverage for the physical damage to the ore bridge because of the product exclusion clause. Hartford admits that it must pay for the damage to the hydraulic building and trestle. The insurer makes this concession even though the ore bridge, which is within the exclusion, directly caused the damage to these structures. Thus, even though it is not required to pay the cost of repairing the ore bridge, Hartford does not deny its responsibility to pay for damages directly caused by the collapse of the bridge.
The majority and I agree that the term “property damage” as used in this policy “does not require actual physical damage but can include intangible damage such as the diminution in value of tangible property.” Maj.Op. at 525 n. 7. The Supreme Court of Wisconsin reached a similar conclusion in Sola Basic Industries v. United States Fidelity & Guaranty Co., 90 Wis.2d 641, 280 N.W.2d 211 (1979). The court, interpreting the same insurance clauses at issue here, held that there was property damage when tangible property is diminished in value or “made useless.” Id. at 653, 280 N.W.2d at 217; see also W. Obrist, “The New Comprehensive General Liability Insurance Policy: A Coverage Analysis” 7 (Defense Research Institute Monograph 1966) (“The National Bureau [of Casualty Underwriters] states that the policy ... applies even though the tangible property is not physically damaged but is made useless by the act of an insured.”)
In this case, the furnaces became useless as steel production facilities for two reasons. First, there was the immediate impact of debris from the bridge preventing the use of one furnace for ten days. In the longer range, neither furnace could produce steel unless supplied with the raw materials formerly delivered by the ore bridge. To the extent that steel could not be produced, the economic value of the plant was reduced. There is no need for expert testimony to establish that an inoperable plant is not as valuable as a functional one.
The steel company met its duty to mitigate loss and avert further harm by continuing production through the use of another, but more expensive, method of supplying materials to the furnaces. The economic value of the steel-making plant was thus maintained and significant loss of use damages averted, but at a cost sought as a business interruption loss. Hartford has not disputed the reasonableness of this expense; nor has it asserted that the reduction in value of the plant after the bridge collapsed was less than the amount expended by the steel company.
The policy at issue covers damages for diminution in value and loss of use of the *530steel plant. It follows necessarily that the cost of mitigating or averting such damages is also covered. It can be contended that the economic value of the plant was restored upon the repair of the bridge and that the furnaces were in fact used while the bridge was inoperable. That argument, however, does not address the cost of preventing the intangible damage to the plant that was certain to occur but for the remedial measures taken.
This case is similar to Sola Basic Industries, supra, where a transformer negligently maintained by the insured had to be removed for repairs from a manufacturing plant. As a result, the machinery in the plant became “useless” and the manufacturer was required to incur additional expense in order to continue operations. The court found that the liability insurance carrier was liable for these added costs despite an exclusion identical to the one in the case at hand.
Hartford arrives at its position by interpreting the claim as if it were for loss of use of the ore bridge. This narrow approach is not required by the policy language. Nor does it square with the purpose underlying the policy and the exclusion at issue, namely, the protection of the insured against harm whose “happenstance and extent ... is entirely unpredictable,” Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, —, 405 A.2d 788, 792 (1979). The damage claim of the steel company is much broader than the characterization adopted by the insurer. The claim is for loss of use of the plant itself, and the measure of damage is the expenditure to avert that loss. Since Hartford is liable for the loss of use of the plant, surely it is responsible for the smaller sum spent to avoid that expense.
In Todd Shipyards Corp. v. Turbine Service, Inc., 674 F.2d 401 (5th Cir.1982), cert. denied, — U.S. —, 103 S.Ct. 447, 74 L.Ed.2d 602 (1982), an insured that had negligently repaired a turbine in a ship was held responsible for loss of use of the vessel. In turn, the insurance carrier was required to indemnify the insured despite an exclusion similar to the one at issue here. The court held that “since the [ship] is indisput-edly property other than the insured work product, any damages attributable to its ‘down time’ are not [within the exclusion].” Id. at 423. Similarly, the steel plant in the case at hand faced the prospect of “down time.” Expenses to eliminate that loss are within the coverage of the policy because, as in Todd Shipyards, they relate to property other than the insured’s product.
We should not distort the language of a policy to find coverage, but when the wording is ambiguous it must be construed against the carrier that drafted it. Applying that basic rule of construction, I would enter judgment in favor of the plaintiff on the claim for indemnification on the business interruption loss.