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Electric Power Systems International, Inc. v. Zurich American Insurance Co.

United States District Court, E.D. Missouri, Eastern Division

September 19, 2016

ELECTRIC POWER SYSTEMS INTERNATIONAL, INC., Plaintiff,
v.
ZURICH AMERICAN INSURANCE COMPANY, Defendant.

          MEMORANDUM AND ORDER

          CATHERINE D. PERRY UNITED STATES DISTRICT JUDGE

         In July 2014, plaintiff Electric Power Systems International, Inc. (EPS), made a claim under its commercial general liability insurance policy to defendant Zurich American Insurance Company for damage that occurred to a transformer while EPS was working on it. Zurich denied the claim based on two of the Policy's exclusions. The undisputed evidence shows that the Policy's “your work” exclusion applies to EPS's claim, and so the Policy provides no coverages. I will therefore grant Zurich's motion for summary judgment on all of EPS's claims and will deny EPS's motion. Judgment will be entered in favor of Zurich.

         Background

         Louisville Gas and Electric Company (LGE) contracted for EPS to remove and crate parts of a transformer so that the transformer could be transported from Wisconsin to Kentucky. During the course of removing one of the transformer's bushings, EPS failed to extract one of the bolts that secured the bushing to an electrical lead from the internal coil of the transformer. As a result, when EPS lifted the bushing from its position on the transformer, the lead that remained bolted to the bushing was likewise lifted and yanked from the internal coil. Because of the damage to the coil, the transformer was rendered useless. EPS made a claim under its commercial general liability policy to its insurance carrier, defendant Zurich. Zurich denied coverage based on the Policy's exclusions.

         EPS brought this three-count action against Zurich claiming that Zurich breached the insurance contract by failing to provide coverage for LGE's claim that EPS damaged the transformer; that Zurich acted in bad faith when it failed to effectuate a prompt settlement of LGE's claim; and that Zurich's failure to provide coverage constituted a vexatious refusal to pay. Zurich now moves for summary judgment on all of EPS's claims, arguing that the Policy's exclusions apply to the property damage at issue here, therefore barring any recovery under the Policy which, in turn, precludes recovery on EPS's claims of bad faith failure to settle and vexatious refusal to pay. EPS moves for summary judgment on its breach of contract claim, arguing that the Policy exclusions do not apply in the circumstances of this case.

         Summary Judgment Standard

         Summary judgment must be granted when the pleadings and proffer of evidence demonstrate that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). I must view the facts in the light most favorable to the nonmoving party, “but only ‘if there is a genuine dispute as to those facts.'” RSA 1 Ltd. P'ship v. Paramount Software Assocs., Inc., 793 F.3d 903, 906 (8th Cir. 2015) (quoting Torgerson, 643 F.3d at 1042).

         The parties agree that the relevant facts are not in dispute, but each argues that the law as applied to those facts requires that judgment be entered in their respective favor. For the following reasons, Zurich is entitled to judgment as a matter of law on the undisputed facts of this case.

         Evidence before the Court on the Motions

         In July 2014, LGE purchased a used transformer from American Transmission Company (ATC) under a Transformer Sales Agreement that provided for LGE to test the transformer at the ATC site in Wisconsin and then transport the transformer from the ATC site to a power plant site in Kentucky. Under the Agreement, LGE would take title to the transformer upon successful and satisfactory completion of tests, oil removal, and internal inspection.

         LGE contracted for EPS to test the transformer, drain the oil, assist in the inspection of the transformer, and remove and crate all parts necessary to relocate the transformer. The parts to be removed and crated included the transformer's bushings. LGE contracted for a separate company, ABB, to conduct the internal inspection.

         On July 24 and 25, 2014, EPS conducted the tests, removed the oil, and prepared the transformer for internal inspection. ABB completed the internal inspection the morning of July 29, after which LGE took title to the transformer. EPS then began its disassembly of the external components, beginning with the bushings.

         The Bushings

         The transformer had a number of bushings to be removed and crated for shipment. Each bushing was attached to the transformer in such a way that the bottom portion was located inside the transformer and the top portion extended about nine feet from the top of the transformer. Each bushing had several connecting bolts, including bolts located on the interior of the transformer as well as others located externally. The bushings here were bottom-bolted bushings, meaning that the lead cable from the winding coil of the internal core of the transformer was bolted to the bottom of the bushing. Therefore, to remove a bushing from the transformer, the lead cable had to be disconnected from it, which required someone to go into the internal components of the transformer and remove the bolts that attached the bushing to ...


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