United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 10-1482
___________
Macheca Transport Company, *
doing business as Gateway Cold *
Storage; David Macheca; Starlin *
Macheca, *
*
Appellants, * Appeal from the United States
* District Court for the
v. * Eastern District of Missouri.
*
Philadelphia Indemnity Insurance *
Company, *
*
Appellee. *
___________
Submitted: January 11, 2011
Filed: August 9, 2011
___________
Before MURPHY, BYE, and MELLOY, Circuit Judges.
___________
BYE, Circuit Judge.
Macheca Transport Company and David and Starlin Macheca (Macheca) sued
Philadelphia Indemnity Insurance Company (Philadelphia) seeking insurance
coverage for damages resulting from a pipe rupture in Macheca's refrigerated
warehouse. After we reversed the original grant of summary judgment in favor of
Philadelphia, see Macheca Transp. Co. v. Phila. Indem. Ins. Co., 463 F.3d 827 (8th
Cir. 2006) (Macheca I), the district court granted Philadelphia's renewed motion for
summary judgment on one of two coverage theories advanced by Macheca, and
dismissed Macheca's vexatious refusal to pay claim. The case proceeded to trial on
the remaining theory of coverage, which a jury resolved in Philadelphia's favor.
Macheca appeals challenging the district court's grant of Philadelphia's motion
for summary judgment on Macheca's first coverage theory and the dismissal of
Macheca's vexatious refusal to pay claim. Macheca also raises several claims of error
with respect to the second theory of coverage submitted to the jury, including a claim
of instructional error. We affirm in part, reverse in part, and remand.
I
Macheca operates a refrigerated warehouse in St. Louis, Missouri. On
November 18, 2001, an ammonia leak occurred on the sixth floor of the warehouse
after a refrigeration pipe ruptured. The pipe ruptured when the ceiling support system,
from which the pipes were suspended, failed. The weight of ice which had
accumulated on the pipe contributed to the failure. The refrigeration pipe fell and
landed on pallets of product inside the warehouse. Ammonia leaked from the ruptured
pipe and caused damage to the warehouse floors and walls, as well as the product
stored inside the warehouse.
Prior to the pipe rupture, Macheca had purchased an all-risk insurance policy
from Philadelphia which provided coverage for damage to the warehouse and its
contents, subject to certain exclusions and limitations. Macheca notified Philadelphia
of the pipe rupture/ammonia leak and made a claim for coverage. Philadelphia hired
an engineer to investigate the claim. Based upon the engineer's report, Philadelphia
denied Macheca's claim. Although the initial denial letter set forth what Philadelphia
referred to as "pertinent sections" of the policy, the letter did not give a specific reason
for the denial, stating only, "[w]e regret to advise that a Covered Cause of Loss has
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not occurred, as defined in the contract, as outlined in the investigative details stated
above."
After receiving the denial letter, Macheca hired attorney John Horvath. In April
2003, Horvath wrote to Philadelphia asking for the engineer's report. Philadelphia did
not respond. Horvath then faxed a letter to Philadelphia requesting a copy of the
engineer's report. Three weeks later, when Philadelphia still had not responded,
Horvath phoned the company requesting a copy of the engineer's report for a third
time. According to Macheca, Philadelphia refused to provide a copy of the engineer's
report, and demanded Macheca put its coverage position in writing.
On June 10, 2003, Horvath put Macheca's coverage position in writing and
requested prompt reconsideration of Philadelphia's denial. After explaining how the
pipe rupture occurred, the letter pointed out a loss was a "Covered Cause of Loss"
unless specifically excluded. The letter noted the policy contained two categories of
exclusions – some of which applied irrespective of whether a covered event
contributed to the loss, and others of which were rendered inapplicable if a covered
event contributed to the loss. Macheca claimed coverage under two policy provisions.
The first was an exception to the exclusions for "specified causes of loss," which
included "weight of snow, ice or sleet." Macheca also claimed the loss was covered
under the additional coverage Macheca purchased for "collapse."
Philadelphia did not respond to the coverage position letter. Horvath again
contacted Philadelphia by phone on June 30, and was informed the matter had been
referred to outside counsel for a coverage opinion. On August 15, 2003, after two
additional letters and a phone call, Philadelphia sent Macheca a letter reiterating its
earlier denial. This letter referred to a limitation on coverage for loss to the "interior
of any building or to personal property in buildings caused by or resulting from . . .
ice," taking the position the limitation referred to the artificial ice generated in the
process of cooling a cold storage facility. Philadelphia also contended, however, the
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weight of ice referenced in the specified causes of loss was not intended to cover
artificial ice generated in the process of cooling a cold storage facility. The letter also
referred to exclusion 3.c.4 for "Maintenance." In September 2003, one more round
of correspondence took place between Horvath and Philadelphia in which Horvath
accused Philadelphia of bad faith in its handling of Macheca's claim, and Philadelphia
defended its denial. Horvath again requested the engineer's report. Philadelphia
finally provided the engineer's report in a letter dated October 2, 2003.
On December 23, 2003, Macheca filed suit against Philadelphia in the Circuit
Court of the City of St. Louis. The complaint alleged breach of the insurance contract,
and vexatious refusal to pay. The vexatious refusal to pay claim outlined the
correspondence that took place between Philadelphia and Horvath between April 2003
and October 2003. In stating the factual basis for the claim, Macheca alleged in part,
"[t]he ammonia pipe collapsed as a result of the weight of ice on the pipe coupled with
the hidden decay of oakum which held the hangers, supporting the ammonia pipes, in
place." Appellant's App. at 15.
Philadelphia removed the case to federal court. In federal court, Macheca filed
a motion for partial summary judgment on the coverage issue. Macheca relied upon
the same two theories of coverage it had in the letter sent to Philadelphia on June 10,
2003, namely: (1) the specified cause of loss for weight of ice; and (2) the additional
coverage for collapse. Philadelphia filed a cross-motion for summary judgment
contending the loss was not covered. Philadelphia also filed a motion to disqualify
Horvath as Macheca's counsel under Rule 4-3.7 of the Missouri Supreme Court Rules
of Professional Conduct.1 Philadelphia contended Horvath would be a necessary
1
Rule 4-3.7(a) provides:
A lawyer shall not act as advocate at a trial in which the lawyer is likely
to be a necessary witness unless:
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witness for Macheca's vexatious refusal to pay claim, arguing the parties disagreed
upon the matters discussed during the phone calls between Horvath and Philadelphia
during Horvath's attempts to obtain the engineer's report and to get Philadelphia to
explain the bases for its denial.
The district court granted the motion to disqualify Horvath as Macheca's
counsel, concluding Horvath was likely to be a necessary witness because his
communications with Philadelphia were relevant to determining whether
Philadelphia's refusal to pay was willful and without reasonable cause. The district
court also granted Philadelphia's motion for summary judgment, and denied Macheca's
motion for partial summary judgment. In doing so, the district court only addressed
one of Macheca's two arguments in support of coverage – the contention the loss was
covered under the additional coverage for collapse. The district court failed to address
Macheca's claim the loss was covered under the exception to certain exclusions for the
specified cause of loss for weight of ice. With respect to the collapse issue, the district
court determined Missouri law, as interpreted by the Missouri appellate courts, only
recognized a "collapse" when there was an entire "falling or reduction [of a structure]
to a flattened form or rubble." The district court concluded the refrigeration pipes had
not collapsed under this definition and therefore the loss was not covered. Macheca
filed a motion for reconsideration of the district court's order, noting the court failed
to address Macheca's primary argument for coverage, that is, the argument the loss
was caused by weight of ice. The district court denied the motion for reconsideration
without comment.
(1) the testimony relates to an uncontested issue;
(2) the testimony relates to the nature and value of legal services
rendered in the case; or
(3) disqualification of the lawyer would work substantial hardship
on the client.
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Macheca appealed both the district court's order granting Philadelphia's motion
for summary judgment and the order granting the motion to disqualify Horvath as
Macheca's counsel. Macheca argued the district court incorrectly applied Missouri
law with respect to the collapse issue, suggesting the Missouri Supreme Court would
follow the modern trend which recognizes a collapse when there is substantial
impairment to the structural integrity of a building or a part of a building. Macheca
also contended the district court failed to address its weight-of-ice claim. Finally,
Macheca contended the district court erred in disqualifying Horvath as plaintiff's
counsel.
On appeal, we reversed. Macheca I, 463 F.3d at 834. We remanded the case
because the district court failed to address the weight-of-ice claim advanced by
Macheca. Id. at 832. We further held the district court abused its discretion when it
disqualified attorney Horvath without first determining whether he would be the only
witness who could testify to events surrounding the alleged vexatious refusal to pay
claim. Id. at 833-34. In addition, we declined to address the ruling on collapse
coverage, indicating Macheca was free to ask the district court to reconsider its
holding on remand. Id. at 832 n.2.
After the case was remanded, Macheca brought a motion for summary judgment
on two bases. First, Macheca again argued the loss was caused by the weight of ice
and covered as a specified cause of loss under the policy. Second, Macheca renewed
its claim the loss was covered under the policy's additional coverage for collapse.
Philadelphia also brought a motion for partial summary judgment. It asked the district
court for summary judgment on the collapse claim and the vexatious refusal to pay
claim. In addition, Philadelphia renewed its motion to disqualify attorney Horvath as
Macheca's counsel.
The district court granted summary judgment in favor of Philadelphia on both
the collapse issue and the vexatious refusal to pay claim. In addition, because the
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vexatious refusal to pay claim had been dismissed, the district court denied as moot
the motion to disqualify Horvath. With respect to Macheca's motion for summary
judgment on its weight-of-ice claim, the district court denied summary judgment. The
district court determined the weight of ice was not a specified cause of loss because
the policy unambiguously referred to ice as an element of the weather, rather than ice
that formed on pipes as a part of the refrigeration process. In addition, the district
court found there was a genuine factual dispute as to whether any of the policy's
exclusions were triggered, concluding the parties disputed the cause of loss and
whether there was one or more proximate cause of the loss. Macheca brought a
motion to reconsider the denial of its motion for partial summary judgment on the
grounds the weight of ice had been previously admitted by Philadelphia as the cause
of loss. The district court denied the motion to reconsider.
The remaining issues – the proximate cause of loss and the applicability of any
policy exclusions – proceeded to trial before a jury. Macheca presented evidence the
loss was caused by the weight of ice on the refrigeration coils. Philadelphia presented
evidence the loss was caused either by the failure to maintain the pipes which resulted
in the accumulation of ice, or by a discharge of a pollutant (the ammonia), both of
which Philadelphia claimed would trigger policy exclusions. The jury found in
Philadelphia's favor. Macheca brought a motion for a new trial, which was denied.
Macheca then filed a timely appeal, raising nine issues: (1) the district court
erred in ruling that the fall of the ruptured ammonia pipe was not a collapse; (2) the
district court erred in ruling the weight of ice was not a specified cause of loss; (3) the
district court erred in denying Macheca's motion for reconsideration of its motion for
partial summary judgment on the issue of liability on its weight-of-ice claim; (4) the
district court erred in admitting the testimony of one of Philadelphia's experts; (5) the
district court erred in giving certain jury instructions; (6) the district court erred in
granting summary judgment on Macheca's claim for vexatious refusal to pay; (7) the
district court erred in declining to deny Philadelphia's motion to disqualify attorney
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Horvath on the basis of the claim's legal insufficiency; (8) the district court erred in
making certain evidentiary rulings at trial; and (9) the district court erred in denying
Macheca's motion for a new trial.
II
A
Macheca first contends the district court erred in granting Philadelphia's motion
for summary judgment on Macheca's claim for coverage under the "collapse"
provisions of the policy. We review the grant of summary judgment de novo. Dayton
Dev. Co. v. Gilman Fin. Servs., Inc., 419 F.3d 852, 855 (8th Cir. 2005). We also
review de novo the district court's interpretation of the insurance policy. Am.
Simmental Ass'n v. Coregis Ins. Co., 282 F.3d 582, 586 (8th Cir. 2002).
The policy's "collapse" provisions generally provided coverage for "'loss'
caused by or resulting from risks of direct physical 'loss' involving collapse of
'buildings' or any part of 'buildings.'" Appellant's App. at 148.2 The policy broadly
defined "buildings" as any "buildings or structures," id. at 150, and contained an
exhaustive list of items which were included within the meaning of "buildings." The
list included permanently installed fixtures, permanently installed machinery,
permanently installed equipment, outdoor fixtures including awnings, fire
extinguishing equipment, appliances, alarm systems, communication systems,
monitoring systems, underground pipes, fences, retaining walls, and patios, to name
a few. Id. at 118-19. The policy did not further define a "fixture," and Philadelphia
does not claim the ammonia pipes in the refrigerated warehouse were not permanently
installed fixtures within the meaning of the policy. Cf. Stockton v. Tester, 273
2
The policy further provided losses caused by a collapse were covered if they
resulted "only" from one or more of five specific causes, one of which was a collapse
caused by a "specified cause[] of loss." Id.
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S.W.2d 783, 787 (Mo. Ct. App. 1954) (discussing the permanent or removable nature
of a fixture and holding "if the article is so placed as to make the building itself
peculiarly adapted and more usable for the type of business, then it is not removable").
Thus, the fight is not about whether the ammonia pipes were included within the terms
"buildings or any part of buildings;" rather, the fighting issue is whether there was a
"collapse" of the pipes. The policy did not define the word "collapse." We must
therefore give the term "the meaning that would be reasonably understood by the
average lay person . . . unless it plainly appears that [a] technical meaning [was]
intended." Peters v. Emp'rs Mut. Cas. Co., 853 S.W.2d 300, 303 (Mo. 1993).
The district court held Missouri courts interpret the term "collapse" narrowly
by requiring a structure or building to completely fall or be reduced to a "flattened
form or rubble" before coverage is triggered under the "collapse" provisions of an
insurance policy. Because the Missouri Supreme Court has not addressed the issue
of the meaning of "collapse" when the term is undefined in an insurance policy, the
district court relied on decisions from the Missouri Court of Appeals. See Williams
v. State Farm Fire & Cas. Co., 514 S.W.2d 856, 859 (Mo. Ct. App. 1974) (indicating
the term "collapse" is "not ambiguous and should therefore be given its plain and
commonly understood meaning, namely, a falling or reduction to a flattened form or
rubble") (citing Eaglestein v. Pac. Nat'l Fire Ins. Co., 377 S.W.2d 540, 544 (Mo. Ct.
App. 1964)); see also Heintz v. U.S. Fid. & Guar. Co., 730 S.W.2d 268, 269 (Mo. Ct.
App. 1987) ("There must have been a falling down or collapsing of a part of a
building. A condition of impending collapse is insufficient.").
Macheca cites cases from a number of jurisdictions which have held the
undefined term "collapse" is ambiguous. Those cases have interpreted the term in
favor of insureds to cover any serious impairment of a building's structural integrity.
This approach is clearly the majority approach under the current trend of the law. See,
e.g., Schray v. Fireman's Fund Ins. Co., 402 F. Supp. 2d 1212, 1218 (D. Or. 2005) ("I
conclude that the Oregon Supreme Court would also follow the modern trend and
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apply the collapse coverage if any part of the building sustained substantial
impairment to its structural integrity."); 401 Fourth St., Inc. v. Investors Ins. Grp., 879
A.2d 166, 174 (Pa. 2005) (interpreting identical policy language to find coverage for
a parapet wall that was bowed and leaning inward but had not yet collapsed); Weiner
v. Selective Way Ins. Co., 793 A.2d 434, 443 (Del. Super. Ct. 2002) ("[S]uch a policy
must be taken to cover any serious impairment of structural integrity that connotes
imminent collapse threatening the preservation of the building as a structure or the
health and safety of occupants and passers-by.") (citations omitted); Rankin ex rel.
Rankin v. Generali-U.S. Branch, 986 S.W.2d 237, 238 (Tenn. Ct. App. 1998) ("Thus,
'the clear modern trend is to hold that collapse coverage provisions . . . which define
collapse as not including cracking and settling – provide coverage if there is
substantial impairment of the structural integrity of the building or any part of a
building.'") (quoting Am. Concept Ins. Co. v. Jones, 935 F. Supp. 1220, 1226 (D. Utah
1996)); see also Ercolani v. Excelsior Ins. Co., 830 F.2d 31, 34 (3d Cir. 1987); Ocean
Winds Council of Co-Owners, Inc. v. Auto-Owner Ins. Co., 565 S.E.2d 306, 308 (S.C.
2002); Island Breakers v. Highlands Underwriters Ins. Co., 665 So.2d 1084, 1085-86
(Fla. Dist. Ct. App. 1995) (Cope, J., concurring); Thomasson v. Grain Dealers Mut.
Ins. Co., 405 S.E.2d 808, 810 (N.C. Ct. App. 1991); Beach v. Middlesex Mut.
Assurance Co., 532 A.2d 1297, 1300 (Conn. 1987); Nationwide Mut. Fire Ins. Co. v.
Tomlin, 352 S.E.2d 612, 614-15 (Ga. Ct. App. 1986); United Nuclear Corp. v.
Allendale Mut. Ins. Co., 709 P.2d 649, 652 (N.M. 1985); Gov't Emps. Ins. Co. v.
DeJames, 261 A.2d 747, 751 (Md. 1970).
The fact that several jurisdictions have reached divergent conclusions about the
meaning of the term "collapse" is evidence of the term's ambiguity under Missouri
law. See Harrison v. Tomes, 956 S.W.2d 268, 270 (Mo. 1997) (concluding the terms
"operator" or "operating" were ambiguous in part because of the divergent conclusions
about their meaning reached by several jurisdictions). As a result, we have less
confidence than the district court that the Missouri Supreme Court would follow the
same approach as the Missouri Court of Appeals' decisions. See Weaver v. State
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Farm Mut. Auto. Ins. Co., 936 S.W.2d 818, 819-20 (Mo. 1997) (adopting the "modern
trend" followed by "the majority of cases" in an insurance coverage dispute); see also
Swope v. Siegel-Robert, Inc., 243 F.3d 486, 497 (8th Cir. 2001) (concluding "the
Missouri Supreme Court would follow the compelling logic of the current trend" on
a particular issue notwithstanding a Missouri Court of Appeals' decision to the
contrary).
In the end, however, we need not predict what the Missouri Supreme Court
would decide about the ambiguity of "collapse" in the abstract. Our task is limited to
determining whether the term "collapse" was ambiguous as used in this particular
policy. Under Missouri law, the terms of a policy are "ambiguous when there is
uncertainty in the meaning of words used in the contract, or when the contract terms
are reasonably subject to different interpretations." Am. Home Assurance Co. v.
Pope, 591 F.3d 992, 999 (8th Cir. 2010) (citing Krombach v. Mayflower Ins. Co., 827
S.W.2d 208, 210 (Mo. 1992)). "Language is ambiguous if it is reasonably open to
different constructions and the language used will be viewed in the meaning that
would ordinarily be understood by the layman who bought and paid for the policy."
Krombach, 827 S.W.2d at 210 (citing Robin v. Blue Cross Hosp. Servs., Inc., 637
S.W.2d 695, 698 (Mo. 1982)). "Missouri courts 'follow a construction favorable to
the insured wherever the language of a policy is susceptible of two meanings, one
favorable to the insured, the other to the insurer.'" Pope, 591 F.3d at 999 (quoting
Meyer Jewelry Co. v. Gen. Ins. Co. of Am., 422 S.W.2d 617, 623 (Mo. 1968)). This
rule of construction is followed in part because "as the drafter of the insurance policy,
the insurance company is in the better position to remove ambiguity from the
contract." Krombach, 827 S.W.2d at 211. In addition, we "must give meaning to all
terms and, where possible, harmonize those terms in order to accomplish the intention
of the parties." Henges Mfg., LLC v. Amerisure Ins. Co., 5 S.W.3d 544, 545 (Mo. Ct.
App. 1999).
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In this particular policy, the "collapse" provisions of the policy extended
coverage to "buildings or any part of buildings." The policy then defined the term
"buildings" very expansively to cover a plethora of items, including permanent
fixtures, outdoor fixtures such as awnings, fire extinguishing equipment, appliances,
underground pipes, and patios. When "collapse" is used in this context, the average
lay person would not understand the term to be limited to the definition adopted by
the Missouri Court of Appeals. Rather, we believe the average lay person could
reasonably understand the "collapse" of an awning, for example, to occur without ever
envisioning the awning being flattened or reduced to rubble. Indeed, the terms
"flattened" or "reduced to rubble" would rarely be descriptive of the "collapse" of
many of the items covered by the policy, such as fire extinguishing equipment,
appliances, alarm systems, communication systems, or monitoring systems.
In the context of this policy, defining a "collapse" as any serious impairment of
a building or part of a building's structural integrity – the majority view under the
current trend in the law – is clearly more consistent with what the average lay person
would reasonably understand the term "collapse" to mean when viewed in conjunction
with items included in this policy's definition of "buildings." We therefore conclude
the district court erred in adopting the restrictive definition of "collapse" discussed by
the Missouri Court of Appeals in Williams, Eaglestein, and Heintz, because none of
those cases addressed the meaning of the term "collapse" when used in conjunction
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with the expansive definition of the term "buildings" used in this policy.3 As a result,
the district court erred in granting Philadelphia's motion for summary judgment.
B
Macheca next contends the district court erred when it determined the weight
of ice on the refrigerated pipes could not be considered a "specified cause of loss"
under the terms of the policy. Whether a loss is a "specified cause of loss" under the
policy is relevant to Macheca's second coverage claim because an exception to the
pollutant exclusion relied upon by Philadelphia applies when loss resulting from the
discharge, release or escape of a pollutant is caused by a "specified cause of loss."
Appellant's App. at 145. Whether the weight of ice was a "specified cause of loss" is
also relevant to Macheca's claim for "collapse" coverage because loss caused by a
"specified cause of loss" is one of five types of causes of loss covered by the
"collapse" provisions of the policy. Id. at 148. We review de novo the district court's
interpretation of the insurance policy. American Simmental, 282 F.3d at 586.
The "specified causes of loss" are set forth in paragraph 11 of section F of the
policy, which is the Definitions section. That paragraph provides:
3
We are not swayed by Philadelphia's reliance on Council Tower Ass'n v. Axis
Specialty Insurance Co., 630 F.3d 725 (8th Cir. 2011), which recently addressed the
meaning of "collapse" under Missouri law. Council Tower initially applied the
restrictive definition of "collapse" adopted by the Missouri appellate courts only
because "both parties treated the Missouri Court of Appeals decisions as controlling
in their cross-motions for summary judgment, as did the district court." Id. at 728.
Ultimately, however, the court applied the broader definition of "collapse" as an
impairment of the structural integrity of a part of a building, and affirmed the district
court on that basis. Id. at 729-30. Thus, the actual holding in Council Tower turns on
the broader definition we apply here, rather than the restrictive definition used by the
Missouri appellate courts. In any event, our decision turns upon the need to
harmonize the term "collapse" with the expansive definition of "buildings" used in this
particular policy, an issue Council Tower did not address.
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"Specified Causes of Loss" means the following: fire, lightning,
explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil
commotion; vandalism; leakage from fire extinguishing equipment;
sinkhole collapse; volcanic action; falling objects; weight of snow, ice
or sleet; water damage.
Appellant's App. at 152. Three subparts of the paragraph further define or limit three
of the nineteen items listed as specified causes of loss. Id. The three items further
defined are sinkhole collapse, falling objects, and water damage. The disputed item
here – the weight of ice – is not further limited, described, or defined by the policy.
The other two specified causes of loss which have as a common element "weight" –
the weight of snow and the weight of sleet – are also not further limited, described, or
defined by the policy.
The district court concluded Paragraph F.11 unambiguously referred to ice as
an element of the weather, and found "as a matter of law, ice accumulating as a result
of the refrigeration process is not a specified cause of loss under the policy." Id. at
1478. The district court initially observed the word ice "could refer both to ice as an
element of the weather, or to ice caused by forces other than the weather." Id.
Ultimately, however, the district court determined "ice" was used unambiguously in
this policy because it was used in "close proximity to 'sleet' and 'snow'" both of which
only refer to elements of the weather. Id. Macheca contends the district court erred
when it concluded the word "ice" was unambiguous as used in this policy. We agree.
To determine whether Paragraph F.11's reference to "ice" is reasonably subject
to an interpretation favorable to Macheca, we start (again) from the premise that we
"must give meaning to all terms [of the policy] and, where possible, harmonize those
terms in order to accomplish the intention of the parties." Henges, 5 S.W.3d at 545.
We begin by examining how the term "ice" was used in other parts of the policy in
order to compare those policy provisions with the use of the term "ice" in Paragraph
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F.11. Cf. Williams v. N. River Ins. Co., 579 S.W.2d 410, 412 (Mo. Ct. App. 1979)
(comparing a term's use in one phrase of a policy with its absence in another).
As discussed in Macheca I, the term "ice" was also used in this policy in a
limitation on coverage. 463 F.3d at 832. Section C.1.c of the policy negated coverage
for loss to the interior of buildings or personal property in buildings caused by or
resulting from ice. Appellant's App. at 148. In the limitation on coverage, "ice"
appeared in a list with five other weather-related items – "rain, snow, sleet, ice, sand
or dust, whether driven by wind or not." Id. We noted the "district court determined
'ice' as used in the coverage limitation referred only to ice as an element of the
weather." Macheca I, 463 F.3d at 831-32. The parties do not dispute that conclusion.
In contrast, when used in Paragraph F.11, the phrase "weight of ice" does not
appear in a list limited to weather-related items. Instead, the term appears in a list of
nineteen items, some of which only refer to elements of the weather or naturally
occurring events (i.e., lightning, windstorm or hail, volcanic action, weight of snow,
and weight of sleet) and some of which are man-made conditions (i.e., explosion,
aircraft or vehicles, riot or civil commotion, vandalism, and leakage from fire
extinguishing equipment). Appellant's App. at 152. In addition, Paragraph F.11
includes six items which could either be weather related or refer to a man-made
condition (i.e., fire, smoke, sinkhole collapse, falling objects, weight of ice, and water
damage). Id.
As to the six items which could either be weather-related or man-made
conditions, Paragraph F.11 specifically delineates between weather-related loss and
man-made loss with respect to two of those six items – sinkhole collapse and water
damage. In further defining the term "sinkhole collapse," the policy expressly
indicates the term only includes loss caused by naturally occurring sinkholes rather
than sinkholes created by a man-made condition. See id. ("Sinkhole collapse means
the sudden sinking or collapse of land into underground empty spaces created by the
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action of water on limestone or dolomite [but] does not include . . . [s]inking or
collapse of man-made underground cavities."). In further defining the term "water
damage," the distinction between a man-made and weather-related condition is
resolved exactly the opposite – the policy expressly states "water damage" refers to
water from within a man-made item rather than water resulting from an element of the
weather. See id. ("Water damage means accidental discharge or leakage of water or
steam as the direct result of the breaking or cracking of any part of a system or
appliance containing water or steam.").
Significantly, the policy does not further clarify whether the other four items
which could be either weather-related or man-made conditions (i.e., fire, smoke,
falling objects, and the weight of ice) are limited solely to one type of condition or
another. As a result, loss resulting from weather-related fire or smoke (such as that
caused by a forest fire) is arguably a specified cause of loss under the policy, but so
is loss resulting from a man-made fire or smoke (such as that caused by an electrical
short). Similarly, the loss caused by a meteorite (a naturally occurring event) is
arguably a specified cause of loss under the term "falling objects," but the loss caused
by a large object dropped on the building by a construction crane (a man-made event)
would also be a specified cause of loss.
Philadelphia urges us to look only to the sublist of three items in which the term
"ice" appears (i.e., "weight of snow, ice or sleet"). The insurer contends the fact that
weight of snow and weight of sleet are both solely weather-related events resolves any
alleged ambiguity with respect to the term "ice." We disagree. It is equally
reasonable to conclude the three items of the sublist are grouped together because of
the common element which triggers coverage under the policy, i.e., a loss caused by
the "weight" of the items. The grouping of the three items does not necessarily lead
to the conclusion the three items were grouped together to limit coverage to naturally-
occurring elements of the weather, particularly in light of the mixture of the three
types of terms used by the policy to define specified causes of loss: (1) those which
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could only refer to naturally-occurring conditions, (2) those which could only refer to
man-made conditions; and (3) those which could refer to either man-made or
naturally-occurring conditions.
When considering Paragraph F.11 in its entirety, we conclude its use of the term
"ice" is reasonably subject to two different interpretations, one which refers to ice
exclusively as an element of the weather, and another which refers to ice in either its
natural condition or as a man-made occurrence. Philadelphia chose to further define
two of the six items listed in Paragraph F.11 to indicate specifically whether those
items referred to weather-related or man-made conditions, but did not do so with
respect to four other items, including the "weight of ice." The absence of any
limitation on some items which could be both weather-related or man-made, coupled
with the policy's specific clarification of other like items, strongly suggests an intent
to include within the specified causes of loss both forms of the four items which could
occur either naturally or at the hand of man. At a minimum, Philadelphia's failure to
indicate which form of ice was covered and which was not renders the term
ambiguous, and requires us to adopt the meaning which is favorable to the insured.
See Oak River Ins. Co. v. Truitt, 390 F.3d 554, 558 (8th Cir. 2004) (citing Peters, 853
S.W.2d at 302). We therefore conclude the district court erred when it determined the
weight of ice on the refrigerated pipes did not constitute a specified cause of loss
under the terms of the policy.
C
Our conclusion the weight of ice was a specified cause of loss makes it
unnecessary to address the claims Macheca appealed with respect to alleged trial
errors, because the only theory of coverage submitted to the jury was Macheca's
"weight of ice" coverage claim, and Macheca was entitled to partial summary
judgment on the issue of liability under that theory.
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To explain why Macheca was entitled to partial summary judgment on the issue
of liability under its "weight of ice" claim, we begin by summarizing the undisputed
facts regarding the manner in which the pipe rupture occurred. The parties do not
dispute that ammonia leaked from the pipe after the pipe collapsed, or that the leaking
ammonia caused the resulting damage to the warehouse floors and walls, as well as
the product stored inside the warehouse. The parties also do not dispute the ammonia
leak constituted a release or escape of a pollutant within the terms of the policy.
Furthermore, and most significantly, the parties do not dispute the collapse of
the refrigeration pipe – which preceded and led to the ammonia leak – was caused by
the weight of ice accumulating on the pipes. As the district court noted, "[t]he parties'
experts uniformly agreed that the weight of ice was a cause of the pipe falling, but
they did not agree that the weight of ice was the sole cause." Appellant's App. at
1483. Both of Philadelphia's experts, Thomas Richardson and John Turner, indicated
the weight of ice was a cause of the pipe falling. Richardson "opined that the weight
of the piping in combination with the weight of ice buildup likely caused the
attachments that suspended the supporting pipes from the ceiling to gradually fail over
a period of time." Id. at 1484 n.5. Similarly, Turner "opined that the cause of loss
was that the weight of ice overwhelmed the plugs, causing them to detach from the
ceiling, upon which the pipe fell and leaked." Id. Indeed, Philadelphia's counsel
conceded during oral argument: "It was agreed that it was the weight of this
accumulated frost that overwhelmed those hangers and caused that system to fall."
"Under an all-risk insurance policy, recovery will be allowed for all fortuitous
losses, unless the policy contains a specific provision expressly excluding the loss
from coverage." Pakmark Corp. v. Liberty Mut. Ins. Co., 943 S.W.2d 256, 259 (Mo.
Ct. App. 1997). Thus, we next look to whether there is a specific provision in this
policy excluding the loss caused by the pipe rupture. As the district court explained,
this policy contained three categories of exclusions. One category of exclusions (the
B.1 exclusions) precluded coverage "regardless of any other cause or event that
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contributes concurrently or in any sequence to the 'loss.'" Appellant's App. at 142.
In contrast, the other two categories (the B.2 and B.3 exclusions) lacked such
language, and, therefore, only precluded coverage if the excluded event was the sole
cause of loss. As a consequence, if a covered cause of loss was a cause of loss, the
B.2 and B.3 exclusions did not preclude coverage. See Pace Props., Inc. v. Am. Mfrs.
Mut. Ins. Co., 918 S.W.2d 883, 886 (Mo. Ct. App. 1996) (explaining the relationship
between the three relevant categories of exclusions and the concept of proximate
cause).
In this policy, the pollutant exclusion was a B.2 exclusion. Specifically, the
pollutant exclusion was found at B.2.j of the policy and provided the policy would not
cover loss "caused by or resulting from . . . [d]ischarge, dispersal, seepage, migration,
release or escape of 'pollutants.'" Appellant's App. at 145. Importantly, however, the
pollutant exclusion contained an exception which stated: "But we will pay for
resulting 'loss' to Covered Property when the discharge, dispersal, seepage, migration,
release of escape of 'pollutants' is caused by any of the 'specified causes of loss.'" Id.
Thus, if a "specified cause of loss" was a cause of the escape or release of a pollutant,
this policy provided coverage because the pollutant exclusion was a B.2 exclusion
rather than a B.1 exclusion.4 Indeed, Philadelphia's counsel conceded during oral
argument: "If there was a covered event that caused the release of pollutants, then that
would be covered." It is undisputed the weight of ice accumulating on the
refrigeration pipe was a cause of the pipe's rupture, which in turn caused the release
of the ammonia. Macheca was therefore entitled to partial summary judgment on
4
Similary, the maintenance exclusion was a B.3 exclusion, and likewise would
not preclude coverage as long as a covered cause of loss was a cause of the pipe
rupture and ammonia leak.
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liability under its weight-of-ice claim because the weight of ice was a specified cause
of loss.5
D
Finally, Macheca contends the district court erred in granting summary
judgment on its vexatious refusal to pay claim. We review the grant of summary
judgment de novo. Dayton, 419 F.3d at 855.
To establish a claim for vexatious refusal to pay, Macheca had to prove: (1) it
had an insurance policy with the insurer; (2) the insured refused to pay; and (3) the
insurer's refusal to pay was without reasonable cause or excuse. Dhyne v. State Farm
Fire & Cas. Co., 188 S.W.3d 454, 457 (Mo. 2006). There is no vexatious refusal
when the insurer has reasonable cause to believe and does believe there is no liability
under its policy and that it has a meritorious defense. Wood v. Safeco Ins. Co. of
Am., 980 S.W.2d 43, 55 (Mo. Ct. App. 1998). In addition, an insurer may insist upon
a judicial determination of open questions of law or fact without being penalized.
Watters v. Travel Guard Int'l, 136 S.W.3d 100, 109 (Mo. Ct. App. 2004). When no
Missouri case directly addresses a coverage issue, a litigable issue exists. Hocker Oil
Co. v. Barker-Phillips-Jackson, Inc., 997 S.W.2d 510, 523 (Mo. Ct. App. 1999).
5
Despite our conclusion Macheca was entitled to partial summary judgment on
liability on its weight-of-ice claim, we addressed the propriety of granting
Philadelphia's motion for summary judgment on Macheca's separate claim for collapse
because the parties did not advise us on appeal whether the scope of damages under
the additional coverage for "collapse" is identical to the scope of damages covered
under Macheca's weight-of-ice claim. In addition, our opinion is limited to reversing
the district court's grant of summary judgment in favor of Philadelphia on the
"collapse" issue because the district court erred in adopting a restrictive definition of
the meaning of "collapse." We express no opinion on whether Macheca is entitled to
summary judgment on its claim for coverage under the "collapse" provisions of the
policy.
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After a general survey of all the facts and circumstances in this case, see Russell
v. Farmers & Merchants Ins. Co., 834 S.W.2d 209, 221 (Mo. Ct. App. 1992), we
conclude the record shows Philadelphia reasonably believed it had a meritorious
defense to insurance coverage. Philadelphia's representatives reviewed the reports of
the independent adjuster and engineer who investigated the ammonia leak. Based
upon their investigation and findings, Philadelphia concluded there was no coverage
for the incident. In addition, at the time of each of Philadelphia's denials, Missouri
law denied coverage for a "collapse" in the absence of a falling or reduction to a
flattened form or rubble. Although we now conclude the more restrictive definition
adopted by the Missouri Court of Appeals does not control with respect to this
particular policy, the absence of a controlling decision from the Missouri Supreme
Court coupled with Missouri appellate decisions favoring Philadelphia created a
litigable issue which entitled Philadelphia to seek a judicial determination. Similarly,
a litigable issue existed with respect to whether the weight of ice was a specified cause
of loss under this policy. The district court correctly determined that Philadelphia
could insist upon a judicial determination of those questions without being penalized
for a vexatious refusal to pay claim. See Watters, 136 S.W.3d at 108-10; Wood, 980
S.W.2d at 55. We therefore affirm the district court's grant of summary judgment on
the vexatious refusal to play claim.6
III
We affirm the district court's dismissal of Macheca's vexatious refusal to pay
claim. We reverse the district court's grant of summary judgment in favor of
Philadelphia on Macheca's claim for coverage under the "collapse" provisions of the
policy. We also reverse the district court's determination that the weight of ice on the
6
Because the district court correctly dismissed the vexatious refusal to pay
claim, it also correctly denied as moot Philadelphia's motion to disqualify attorney
Horvath, as the disqualification motion only pertained to the vexatious refusal to pay
claim.
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refrigeration pipes was not a "specified cause of loss" under the policy, and determine
Macheca was entitled to partial summary judgment on liability on its "weight of ice"
claim. Thus, we reverse the jury verdict in favor of Philadelphia and remand this case
for further proceedings consistent with this opinion.
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