350 F. Supp. 3d 601
E.D. Ky.2018Background
- On Oct. 11, 2015 a tube in Continental Refining Co.’s F-2001 charge heater ruptured, producing a BLEVE-type mechanical explosion followed seconds later by a fire that damaged refractory and brickwork. Continental sought recovery under an Equipment Breakdown Coverage (EBC) policy issued by Hartford Steam Boiler Inspection & Insurance Co. (HSB).
- The EBC policy defined a covered "accident" to include certain non-combustion explosions but expressly excluded "combustion explosion" and "any other explosion, except as specifically provided in A.1.a.(3)." Section A.1.a.3 covers non-combustion explosions only of "steam boilers, steam piping, steam engines or steam turbines."
- Continental does not dispute an "accident" or that an explosion occurred; its expert characterized the event as a BLEVE that directly caused the claimed damage.
- Continental admitted in response to an RFA (Fed. R. Civ. P. 36) that the F-2001 charge heater is not a steam boiler, steam piping, steam engine, or steam turbine; that admission was not withdrawn and is binding on summary judgment.
- HSB moved for summary judgment arguing the plain policy exclusions bar coverage for the mechanical explosion and resulting fire; Continental argued the policy could be reasonably read to allow coverage and invoked reasonable expectations and waiver/estoppel theories.
- The court found the policy language clear and unambiguous, the Rule 36 admission dispositive, HSB preserved its exclusion defenses (no waiver/estoppel), and thus granted summary judgment for HSB.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HSB breached by denying coverage for damage caused by the explosion/fire | Continental: policy can reasonably be read to allow coverage; insureds' reasonable expectations support coverage | HSB: policy unambiguously excludes combustion and "any other" explosions except non-combustion explosions of steam vessels; F-2001 is not a covered steam vessel | Court: policy unambiguous; exclusion applies; no breach (summary judgment for HSB) |
| Whether the F-2001 is within A.1.a.3's "steam boilers, steam piping, steam engines or steam turbines" | Continental: disputes applicability (argues coverage may attach) | HSB: Continental admitted F-2001 is not any of those items (binding under Rule 36) | Court: admission conclusive; F-2001 not a covered steam vessel; exclusion applies |
| Whether HSB waived/excluded defenses or is estopped from asserting exclusions | Continental: claims waiver/estoppel due to HSB's early communications | HSB: consistently reserved rights and gave non-waiver notices; did not waive exclusions | Court: HSB did not waive defenses; estoppel/waiver argument fails |
| Whether factual disputes about sequence (fire then explosion vs. explosion then fire) preclude summary judgment | Continental: factual uncertainty over precise sequence might create ambiguity | HSB: even on Continental’s expert’s sequence (BLEVE then fire), explosion exclusion bars coverage | Court: no genuine dispute material to contract application; exclusion controls; summary judgment appropriate |
Key Cases Cited
- Thiele v. Ky. Growers Ins. Co., 522 S.W.3d 198 (Ky. 2017) (policy interpretation is a question of law; give plain words their ordinary meaning)
- Kemper Nat'l Ins. Cos. v. Heaven Hill Distilleries, Inc., 82 S.W.3d 869 (Ky. 2002) (clear exclusions are enforced as written and are strictly construed against insurers but not strained)
- Nolan v. Nationwide Mut. Ins. Co., 10 S.W.3d 129 (Ky. 1999) (parties’ intent is to be deduced from contract language when possible)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment standards; moving party’s initial burden)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (standard for genuine dispute of material fact)