Court Opinion

ID: 9580038
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:01:13.718183+00
Date Added: 2024-06-11T13:35:59.426245
License: Public Domain

BEAM, Circuit Judge,
dissenting.
Lovegreen contracted with Flint Hills Resources (FHR or Flint Hills) to be “responsible for the disassembly, cleaning, inspection, repairs as necessary [of the compressor] and reassembly of the compressor ... [and] inspection of the gear box.” This was the “work” agreed upon and was “Your [Lovegreen’s] Work” as defined in the coverage clauses of the insurance policy at issue here. In completing this work (and it was clearly a completed operation contemplated by the insurance contract language), Lovegreen negligently left a cleaning rag inside the compressor which act led to property damage, i.e., loss of use of the compressor, a covered loss. The court majority’s conclusion to the contrary is error. Thus, I dissent.
Under Endorsement No. 12, Appendix at 39, Lovegreen was a named insured under the insurance policy in force here. Liberty Mutual was the primary underwriter under the contract. A six-member syndicate organized by Lloyd’s of London provided bumbershoot (umbrella) coverage above the limits of the primary policy, which limits were exceeded in this case. There can be no dispute that Lovegreen was negligent and that the loss was in excess of $6.5 million. Liberty Mutual and five of the six members of the syndicate recognized their coverage obligations and agreed to pay a contractually designated share of the loss. Tonicstar, on the other hand, refused to do so and now mounts a convoluted and unsupportable coverage defense involving unrelated and incongruent portions of the policy, which defense the district court and the court majority adopt, at least in part.
Liberated from Tonicstar’s misdirecting hyperbole, the policy language applicable to this loss is relatively straightforward.2 In consideration of the premium paid, Lo-vegreen purchased “Products-Completed Operations Hazard” coverage under the policy. Item 3, Limits of Insurance, Appendix at 52. The Products-Completed Operations Hazard
includes all Bodily Injury and Property Damage occurring away from premises you own or rent and arising out of Your Product or Your Work except:
a. products that are still in your physical possession; or
b. work that has not yet been completed or abandoned.
Policy, § IV.J.l.a-b. Neither a. nor b. above are pertinent to the facts of this case.
“Your Work,” in turn, is defined, in relevant part, as
1. Work or operations performed by [Lovegreen] or on [Lovegreen’s] behalf; and
2. Materials, parts or equipment furnished in connection with such work or operations.
Policy, § IV.N.1-2.3 In this environment, this can only mean, as the contract speci-*796fíes, the disassembly, cleaning, inspection, repair and reassembly of the compressor or furnishing materials, parts or equipment in connection with these specified obligations. By clear language and any reasonable implication therefrom, the agreed upon work did not include negligently leaving a cleaning rag alien to the effective use of the compressor within the machine. One strains to understand how an exotic item such as this piece of cloth can possibly be defined as “materials, parts or equipment furnished [to Flint Hills] in connection with such [contract-specific] work or operations.”
“Property Damage” is
1. Physical injury to tangible property [the compressor], including all resulting loss of use of that property [the compressor] ....; or
2. Loss of use of tangible property that is not physically injured.
Policy, § IV.K. 1-2. Accordingly, absent other policy language to the contrary, Lo-vegreen’s negligence in completing its work led to loss of use of the compressor, a species of property damage insured under the Products-Completed Operations Hazard.
But, posits Tonicstar,
This hazard does not include Bodily Injury or Property Damage arising out of:
a. the transportation of property, unless the injury or damage arises out of a condition in or on a vehicle created by the loading or unloading of it;
b. the existence of tools, uninstalled equipment or abandoned or unused materials.
Policy, § IV.J.3.a-b.
Tonicstar and the court majority contend the above J.3.b. language excludes the loss of use damages claimed by Flint Hills from the completed operations coverage because the errant cleaning rag was “abandoned or unused material ].”
The problem with this slippery slope is that the lost rag was not “abandoned or unused material ],” and the language of b. and case precedent establish such an interpretation.
The majority cites in support of its contentions U.S. Sanitary Specialties Corp. v. Globe Indemnity. Co., 204 F.2d 774 (7th Cir.1953). This particular case, however, runs almost wholly in the opposite direction.
A Sanitary Specialties salesman had placed, but did not remove, a circle of wax on the courthouse floor as a sales tool to be used in selling Sanitary’s floor wax to county officials. The next day after the sale, Annie Peek slipped on this spot and fell. Peek sued Sanitary and its salesman for damages and Sanitary tendered the claim to Globe Indemnity who denied coverage. Sanitary brought suit against Globe seeking a determination of coverage under the policy. The district court and the Seventh Circuit first determined that the underlying allegations fell within the Products-Completed Operations Hazard in Globe’s policy. Id. at 776. But then, the courts further determined that Sanitary Specialties had not purchased such coverage. Id. at 777. On appeal, Sanitary argued that the exclusion announced in J.3.b., (i.e., that “‘the existence of tools, uninstalled equipment and abandoned or unused materials’ ” was “except[ed]” from Globe’s Products-Completed Operations Hazard) permitted it to seek coverage under another hazard in Globe’s policy that it had purchased. Id. at 776-77. The Seventh Circuit rejected this contention. In doing so, it noted that the “exception to completed operations” articulated by Sanitary “refers only to tools, equipment and *797materials which on completion of an operation should have been removed by [Sanitary] from the premises where the operation occurred but which, instead, were abandoned there by [Sanitary] and later were instrumental in causing an accident.” Id. at 777 (emphasis added). The court noted that the wax was not abandoned and unused material. Neither was Lovegreen’s cloth, and while it gradually caused the compressor to malfunction, it did not cause a later premises accident involving FHR or anyone else. Had the used cleaning rag at issue here been left on the floor by Lovegreen, later causing a slip, trip or fall, actionable damages arising from this act would have been excluded under the Products-Completed Operations Hazard under the Seventh Circuit’s interpretation. The occurrence activating Lo-vegreen’s completed operations coverage was the negligent act of leaving the rag inside the compressor when completing the work it was hired to do. And, of course, Lovegreen was not hired to leave a deviant piece of cloth inside the compressor it was employed to service.
The other cases cited by the court are likewise unhelpful, indeed they reenforce the proper interpretation of the exclusion from the Products-Completed Operations Hazard. Liberty Mutual Insurance Co. v. American Home Assurance Co., Inc., 368 Ill.App.3d 948, 306 Ill.Dec. 733, 858 N.E.2d 530, 533 (2006), involved a temporary ramp the insured left at the work site over which Ms. Palcowski, the underlying claimant, tripped and fell. Shelter Mutual Insurance Co. v. DeShazo, 955 S.W.2d 234 (Mo. Ct.App.1997) (per curiam), dealt with a dispute over the collapse of a deck DeSha-zo had earlier completed at a residence in Christian County, Missouri. The case proves nothing about whether a negligently placed cleaning rag can serve to displace completed operations coverage. Like Sanitary Specialties, DeShazo did not purchase completed operations coverage and, as a result, attempted to place the deck collapse outside that particular hazard. In support, DeShazo’s expert engineers opined that two pieces of uninstalled equipment caused the collapse, arguing that this was the “uninstalled equipment” mentioned in the J.3.b. clause set forth above. Id. at 237. The Missouri Court rejected this argument, adopting the Sanitary Specialties definition and finding the loss to be within the Products-Completed Operations Hazard that had not been purchased by DeShazo. Id.
Finally, Tonicstar argues that a general exclusion found in section V.D., Appendix 62, as modified by Endorsement No. 9, Appendix at 43, removes Flint Hills’ property damage from coverage. The cited policy language says V. Exclusions
This insurance does not apply to:
D. 2. Property Damage to
f. That particular part of any property that must be restored, repaired or replaced because Your Work was incorrectly performed on it.
Appendix at 43, 62. Unfortunately for Tonicstar, the Endorsement further states “paragraph f. does not apply to Property Damage included in the Products-Completed Operations Hazard.” And, of course, Flint Hills’ property damage (loss of use in this case) fell within the Products-Completed Operations Hazard purchased by Lovegreen. Tonicstar’s fellow syndicate members were correct. The property damage sustained by Flint Hills represents a covered loss under the insurance policy. The court’s determination to the contrary is error. Indeed, if the Products-Completed Operations Hazard does not provide risk abatement under the facts *798and circumstances of this case, it is difficult to envision what benefit an insured receives in return for the substantial premium that insurers such as Tonicstar collect for their purported coverage.
The district court should be reversed. Accordingly, I dissent.

. If ambiguous, "it [should] be construed against [Tonicstar], as drafter of the contract.” Progressive Specialty Ins. Co. v. Widness, 635 N.W.2d 516, 518 (Minn.2001) (citing Current Tech. Concepts, Inc. v. Irie Enters., Inc. 530 N.W.2d 539, 543 (Minn. 1995)).

. A policy endorsement provides an additional "Your Work” definition that states that work is "the various separately identifiable parts required to be furnished under the contract documents.” Endorsement No. 1. This, of course, would not place an errant cleaning *796rag among the parts required by the work agreement.