660 F.3d 299
8th Cir.2011Background
- KAAPA Ethanol operates a Nebraska ethanol plant insured under an all-risk policy issued by Affiliated FM Insurance.
- Tanks and their ring-wall foundations exhibited significant distress soon after operations began in 2003, including leaning, cracking, and sinking of ring walls.
- KAAPA financed repairs by a year-long KFI repair plan that raised tanks off the infill, replaced infill with lean concrete, and reattached tanks; repairs stabilized sinking but underlying soils remained distressed.
- Affiliated denied coverage in 2005 and again during subsequent claims, leading KAAPA to file suit for breach of contract and bad faith (the latter dismissed at district court and not appealed).
- The district court instructed the jury that collapse is covered; the verdict found some losses caused by excluded perils, some by collapse, and none covered by the ensuing-loss provision; damages and fees were entered.
- On KAAPA’s cross-appeal, the Eighth Circuit ultimately reverses in part and remands for a new trial due to an error in the collapse-definition instruction, while affirming the jury’s finding on collapse and the related coverage analysis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the policy covers collapse caused by an excluded peril | KAAPA | Affiliated | Affiliated not entitled to JML; genuine triable issue on collapse proximate cause |
| Whether the jury instruction properly defined collapse under Nebraska law | KAAPA requested an imminence-focused standard | Affiliated | Instruction error; prejudicial; remand for new trial |
| Whether an abandonment requirement is necessary to prove collapse under Nebraska law | KAAPA | Affiliated | Not required; instruction not reversible error; remand limited to imminence issue |
Key Cases Cited
- Morton v. Travelers Indem. Co., 106 N.W.2d 710 (Neb. 1960) (collapse coverage under Nebraska material-impairment standard)
- Sandalwood Condo. Ass'n v. Wildwood, Inc., 294 F.Supp.2d 1315 (M.D. Fla. 2003) (imminence considerations in collapse coverage (cited by magistrate))
- Vision One, LLC v. Phila. Indem. Ins. Co., 241 P.3d 429 (Wash. Ct. App. 2010) (concept of ensuing-loss coverage after excluded-peril cause)
- Ochsner Med. Found. v. Allendale Mut. Ins. Co., 219 F.3d 501 (5th Cir. 2000) (collapse coverage considerations under policy constructs)
- Jenkins v. U.S. Fire Ins. Co., 347 P.2d 417 (Kan. 1959) (early material-impairment collapse analysis)
- Beach v. Middlesex Mut. Assurance Co., 532 A.2d 1297 (Conn. 1987) (collapse/impairment not strictly requiring abandonment)
- Akridge Co. v. Travelers Cos., 876 F. Supp. 1 (D.D.C. 1995) (collapse coverage and structural impairment discussions)