Daybreak Foods, Inc. v. Western National Mutual Insurance Co.

OPINION

SCHULTZ, Judge.

Appellant Daybreak Foods, Inc. contests a directed verdict for respondent Western National Mutual Insurance Co. that damage caused by an inoperative refrigeration valve was not an “accident” under the policy. We affirm.

FACTS

Daybreak is a wholesaler of raw liquid eggs. In 1990, it purchased a reconditioned ammonia cooling system to refrigerate liquid eggs in silos at its facilities in Long Prairie, Minnesota. Egg product is initially chilled to a temperature below 40 degrees Fahrenheit and then stored in silos where chilled ammonia circulates in wall jackets. It is essential that liquid eggs be stored at temperatures below 40 degrees to prevent spoilage.

On April 4, 1991, an employee discovered that one silo’s temperature had risen to 48 degrees. On April 6, a supervisor noted that the temperature was 40 degrees and accordingly, the affected egg product was rechilled and stored at sub-40 degree temperatures. In the following days, shipments of the affected product passed USDA inspections at the Long Prairie plant and were shipped to various destinations in tanker trucks. On April 9, 10, and 11, 1991, the shipments were rejected at Nebraska and Minnesota destinations by USDA inspectors. Daybreak was able to salvage the product by having it dried, processed, and sold as pet food at a reduced price. The value of the loss to Daybreak was approximately $94,000, plus an additional $16,000 for other consequential damage.

A mechanical engineer subsequently determined that a rubber valve gasket fractured, causing coolant to fail to circulate properly within the system. Daybreak made a claim under the consequential loss endorsement to its boiler and machinery insurance policy issued by Western. Western ultimately denied the claim as nonaccidental under the policy.

After a summary judgment motion, the trial court interpreted the policy to mean that if the valve failure was caused by deterioration or leakage, then no coverage existed under the endorsement. The trial court also determined, however, that the cause of valve failure presented a fact issue for trial. Daybreak’s expert testified at trial that the cause of the valve failure was a sudden fracturing of a section of the rubber valve seal caused by cracks that had developed over a period of time. The trial court then granted Western’s motion for a directed verdict based upon nonaccidental causation.

ISSUE

Did the trial court err in directing a verdict that the failure of the valve was excluded, as a matter of law, from coverage for an “accident”?

ANALYSIS

In an appeal of a directed verdict, we are presented with a legal question as to whether the evidence was sufficient to present a question of fact to the jury. Peterson v. Little-Giant Glencoe Portable Elevator Div. of Dynamics Corp. of America, 366 N.W.2d 111, 115 (Minn.1985). Evidence is evaluated from the viewpoint most favorable to the nonmoving party. Id. Interpretation of an insurance contract is a question of law, subject to de novo review on appeal. Grossman v. American Family Mut. Ins. Co., 461 N.W.2d 489, 493 (Minn.App.1990), pet. for rev. denied (Minn. Dec. 20, 1990).

The boiler and machinery policy provides that “[a] Covered Cause of Loss is an ‘accident’ to an ‘object.’ ” Object includes “any refrigerating or air conditioning vessel” and “[v]alves and fittings.” Accident is “a *233sudden and accidental breakdown of the ‘object’ or a part of the ‘object.’ ” An accident is not “[djepletion, deterioration, corrosion or erosion[, or] wear and tear[, or] or leakage at any valve.” A consequential loss endorsement was in effect and provided coverage for damage “caused solely by an ‘accident’ to an ‘object.’ ”

Daybreak’s case is premised on its expert’s testimony

that a segment or section of the disk broke out suddenly as the result of stresses and forces imposed upon it in the course of operation of that valve which had initiated as small fissures or cracks which had developed to the point where at some instant in time the remaining holding portion of that segment was not sufficient to withstand the stresses associated with the operating forces and the pressures so that a sudden breakout or separation of that fragment occurred.

Daybreak cites cases from various jurisdictions involving occurrences under boiler and machinery policies, most notably Lakeshore Marine, Inc. v. Hartford Accident & Indem. Co., 164 Ga.App. 417, 296 S.E.2d 418 (1982). There, chlorine gas suddenly escaped from a tank. Id., 296 S.E.2d at 420-21. The occurrence was held to be sudden and accidental even though the disintegration of an O-ring was a contributing cause. Id. at 422. The Lakeshore court determined that the escape of gas was sudden and that although deterioration and corrosion were excluded events, the policy failed to expressly state that sudden and accidental damage caused by such factors was excluded.1 Id.

Contrary holdings include Louis Meyers & Sons, Inc. v. Affiliated F M Ins. Co., 424 F.2d 471, 472 (2d Cir.1970) and Resorts Int'l, Inc. v. American Home Assurance Co., 311 So.2d 806, 807 (Fla.Dist.Ct.App.1975) respectively holding that property damage caused by leakage of steam due to corrosion and a failed air conditioning system caused by corrosion were not covered occurrences. See generally, James M. Hoey, The Meaning of “Accident” in Boiler and Machinery Insurance and New Developments in Underwriting, 19 Forum 467, 476 (1984).

Ambiguities in a policy are strictly construed against the insurer; however, courts will not create ambiguities where they do not exist in the plain language of a policy. Bobich v. Oja, 258 Minn. 287, 294, 104 N.W.2d 19, 24 (1960). Under the policy here, an accident to an object is an insured event, but an accident is not “deterioration” or “leakage at any valve.” Thus, under the policy, it is plain that deterioration or leakage to a valve is not an insured event. Moreover, it is also clear that, for coverage for consequential damage to exist, the damage must be “caused solely by an ‘accident.’ ” (Emphasis added.) Accordingly, we find no ambiguity arising from claimed lack of more definite causation language. The trial court correctly interpreted the policy.

Daybreak did not plead or raise the reasonable expectations doctrine2 in the proceedings below and it is not directly considered in this appeal. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn.1988) (issues must be “presented and considered” by the trial court to be reviewed on appeal).

Finally, viewing Daybreak’s expert’s testimony in the light most favorable to Daybreak, the trial eourt did not err in determining that the evidence was insufficient to present a fact question for the jury. Although the breakout of the disk may have been sudden if viewed entirely in isolation, it was undisputedly the final manifestation of a gradual deterioration process. Therefore, the occurrence is clearly excluded as a nonac-cidental risk under the policy.

DECISION

The trial court did not err in directing a verdict that there was no coverage under the policy. ,

Affirmed.

. Under Minnesota law, the cause of an accident need not be sudden; it is sufficient that the breakdown is sudden. City of Detroit Lakes v. Traveler's Indem. Co., 201 Minn. 26, 28, 275 N.W. 371, 372 (1937). Detroit Lakes does not address the exclusions to "accident” at issue here, however.

. See Atwater Creamery Co. v. Western Nat'l Mut. Ins. Co., 366 N.W.2d 271 (Minn. 1985).