880 F.3d 1007
8th Cir.2018Background
- LGE contracted EPS to disassemble, transport, reassemble, and test a 403,000‑lb used electrical transformer located in Wisconsin for relocation to Kentucky.
- EPS’s scope included removing bushings (HV, LV, TV); removing a bushing requires unbolting an internal lead cable attached to the transformer’s core and coil.
- While attempting to lift the first bushing, EPS failed to remove one bolt; lifting pulled the lead cable and damaged the transformer’s core and coil.
- LGE asserted a claim against EPS; EPS tendered the claim to its insurer, Zurich, which denied coverage relying primarily on two policy exclusions (j(4) care/custody/control and j(6) particular part).
- EPS sued Zurich in state court (breach, vexatious delay, bad faith); Zurich removed to federal court. The district court granted summary judgment for Zurich based on exclusion j(6), and EPS appealed.
Issues
| Issue | Plaintiff's Argument (EPS) | Defendant's Argument (Zurich) | Held |
|---|---|---|---|
| Whether the policy’s "particular part" exclusion j(6) bars coverage for damage to the transformer core and coil caused while EPS worked on the bushing | The exclusion should be read narrowly: EPS was working on the bushing only, so damage to separate components (core/coil) should remain covered | The bushing, lead cable, and core/coil constituted the particular part on which EPS performed operations; damage to the coil arose from EPS’s faulty work and thus is excluded | Court affirmed: exclusion j(6) applies because detaching the lead cable/core was an integral step of EPS’s work, so damage to the coil is excluded |
Key Cases Cited
- Spirtas Co. v. Nautilus Ins. Co., 715 F.3d 667 (8th Cir. 2013) (summary judgment standard and coverage/exclusion interpretation principles)
- General Mills Operations, LLC v. Five Star Custom Foods, Ltd., 703 F.3d 1104 (8th Cir. 2013) (summary judgment standard cited)
- D.R. Sherry Constr., Ltd. v. Am. Family Mut. Ins. Co., 316 S.W.3d 899 (Mo. banc 2010) (insurance contract interpretation is a question of law)
- Taylor v. Bar Plan Mut. Ins. Co., 457 S.W.3d 340 (Mo. banc 2015) (insured bears burden to show coverage; insurer bears burden to prove exclusion; exclusions construed against insurer)
- Columbia Mut. Ins. Co. v. Schauf, 967 S.W.2d 74 (Mo. banc 1998) (explains scope of "particular part" exclusion and applies it to the part of property on which operations occurred)
- Brake Landscaping & Lawncare, Inc. v. Hawkeye-Sec. Ins. Co., 625 F.3d 1019 (8th Cir. 2010) (construing same exclusion to preclude coverage where insured’s operations caused damage to the subject of its work)