Continental Materials Corporation v. Affiliated FM Insurance Company

Filing 113

Order Granting in Part and Denying in Part Defendant's Motion for Summary Judgment 74 , Accelerating Date for Submitting Proposed Jury Instructions, and for Amended Pretrial Order. Amended Pretrial Order due on or before 12/14/2012, by Judge John L. Kane on 11/7/12.(sgrim)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge John L. Kane
Civil Action No. 10-cv-02900-JLK-KLM
CONTINENTAL MATERIALS CORPORATION,
Plaintiff,
v.
AFFILIATED FM INSURANCE COMPANY,
Defendant.

ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANT’S MOTION FOR SUMMARY JUDGMENT (DOC. 74),
ACCELERATING DATE FOR SUBMITTING PROPOSED JURY
INSTRUCTIONS, AND FOR AMENDED PRETRIAL ORDER
Kane, J.
This insurance coverage dispute arose after a landslide damaged a limestone
quarry owned by Plaintiff Continental Material Corporation (“Continental”). Continental
seeks coverage under the “all risk” insurance policy provided by defendant Affiliated FM
Insurance (“Affiliated”) for a new reclamation plan; for the replacement value of unmined
limestone that remains in the ground; and for business interruption costs that have
accrued since the quarry was closed by the Mine Safety and Health Administration.
Affiliated moves for summary judgment.
Having already addressed many of the issues raised by Affiliated in my Order
Denying Continental’s Motion for Partial Summary Judgment (Doc. 109) and finding
them inappropriate for summary disposition, I ordered the case set for trial for two weeks

commencing February 4, 2013. I have now carefully reviewed Affiliated’s Motion for
Summary Judgment, and the extensive documents submitted in support and in opposition
to it, and remain of the view that this case should either be settled or tried. I circumscribe
my summary judgment rulings accordingly. As a matter of law and under the policy, unmined limestone is not personal property/“raw materials” compensable at fair market
replacement cost. I therefore GRANT Affiliated’s Motion for Summary Judgment on
Continental’s claim for the replacement value of un-mined limestone at the quarry,
whether that limestone was rendered inaccessible by the landslide or because of the
quarry’s closure by mine safety authorities. I DENY Affiliated’s Motion for Summary
Judgment on its remaining assertions, namely, that the quarry is an “Unnamed Location”
under the policy excluded from earth movement coverage otherwise available at 7250
Allegheny Drive; that the quarry is “land” and therefore subject to the policy’s “land”
exclusion from coverage; and that Continental has failed to marshal sufficient facts to
allow its bad faith insurance claim to survive summary judgment.
7250 Allegheny Drive
Affiliated’s initial argument raises the specter of mistaken identity, i.e., that the
Pikeview Quarry is not actually located at the 7250 Allegheny Drive address listed as a
“Named Location” under the policy. Because earth movement coverage is limited to
“Named Locations” rather than “Unnamed Locations” under the policy, Affiliated
contends it is entitled to summary judgment. The question of whether “7250 Allegheny
Drive” is or was intended to serve as the address for both the office building at that
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location and the Quarry is genuinely disputed and one for the jury. In fact, Magistrate
Judge Mix denied Affiliated’s motion to strike the declarations/affidavits of Joseph Sum
and Ronda Larson attesting to the fact that the “7250 Allegheny Drive” address includes
the 90 acre parcel of land that is the Quarry, see Order (Doc. 110), and the issue is
inappropriate for summary disposition.
Land Exclusion
Next Affiliated argues that damage to the quarry is not compensable because the
quarry is “land” as contemplated by the policy and defined in the dictionary and is
therefore within the policy’s “land exclusion.” The policy specifically excludes “[l]and,
water, or any substance in or on land . . .” from the definition of covered property. Citing
various dictionary definitions of “land,” Affiliated argues mountainside from which the
quarry was excavated and formed was land “prior to Plaintiff’s mining activities” and that
the “benches” that are left after that mountainside is excavated are the underlying earth
and also land. While Affiliated’s argument is semantically defensible and arguable as a
question of the parties’ intent under the policy, the opposite is also true. Because the land
exclusion can also be read to exclude only land in its natural condition, which quarry
benches and reclaimed land are not, the issue is inappropriate for summary judgment. See
Klockner Stadler Hurter Ltd. v. Insurance Co. of Pennsylvania, 780 F. Supp. 148, 157-58
(S.D.N.Y. 1991)(finding genuine issues of material fact and ambiguities in policy
exclusion for land precluded summary judgment in action for reimbursement for losses to
excavated construction site damaged by landslide).
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Unmined Limestone.
Unmined limestone, like any mining ore embedded in its natural state in the earth,
does not become “personal property” of its owner until it is removed. See Forbes v.
Gracey, 94 U.S. 762, 765-66 (1876). As I stated in my Order denying Plaintiff’s Motion
for Summary Judgment, the assertion that the unmined limestone at the Pikeview Quarry
avoids this fate, which is a fundamental premise in American property law, because
Affiliated covered certain already-extracted limestone lost at the quarry as “Stock in
Process” under the policy’s personal property provisions, fails as a matter of law and
logic. See Order (Doc.109 at 4-5 & n.3). “Stock in Process” is defined in the policy as
“raw materials or stock” that has “undergone any aging . . . [or] process.” That mined
limestone may qualify as “stock in process” under this definition does not compel the
conclusion that unmined limestone is “raw materials.” It is considerably more logical to
view unmined limestone simply as “stock” that became “stock in process” once it was
extracted and sat on pallets awaiting use in the making of concrete. Only “Stock in
Process” is covered at replacement value under the policy. “Stock,” i.e., unmined quarry
rock, is not.
I decline at this time to rule on Affiliated’s remaining arguments regarding the
“physical damage”/closure distinction and Continental’s claims for additional business
interruption and reclamation coverage. To the extent Continental seeks coverage for “lost
profits” related to the market value of limestone that remains in the ground, that claim
clearly falls with the determination that, as a matter of law under the policy’s coverage
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provisions, unmined limestone is not personal property replaceable at market “value.”
Whether coverage is available to repair or stabilize the quarry or for business interruption
related to those repairs are matters for another day. Deferring these issues and denying
Affiliated’s request for summary judgment on them is not the same as finding coverage
exists. During the jury instructions process and with a gimlet eye, we may parse these
questions and arrive at additional legal determinations about what will and will not be
sent to the jury. It is to these final trial preparation matters that we will now jointly turn.
Accordingly,
IT IS ORDERED that Affiliated’s Motion for Summary Judgment (Doc. 74) is
GRANTED to declare, as a matter of law, that unmined limestone is not personal
property/”raw materials” under the policy and is not covered at replacement value. The
Motion is DENIED with regard to the 7250 Allegheny Drive “Unnamed Location” issue
and the assertion that the quarry is “land” excluded from coverage entirely. Other legal
determinations are DEFERRED for further consideration during the trial preparation
process and Affiliated’s Motion for Summary Judgment as to them is DENIED.
Given the complexity of the coverage issues presented and the premium I place on
the development and finalization of jury instructions before trial, it is FURTHER
ORDERED that the date for the submission of a first set of jointly proposed jury
instructions, with objections and counter-proposals, is accelerated from 30 days before
the January 24, 2013 Final Trial Preparation Conference (December 24, 2012) to
December 14, 2012. Should the parties desire a further status conference before that
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date, they should confer and call in jointly to chambers to schedule one. FINALLY,
counsel are directed to confer and submit an updated, AMENDED PRETRIAL ORDER.
The Amended Pretrial Order is due on or before December 14, 2012.
Dated November 7, 2012.
s/John L. Kane
SENIOR U.S. DISTRICT JUDGE

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