Lakeland Asphalt Corporation v. Westfield Insurance Company
Filing
38
OPINION GRANTING SUMMARY JUDGMENT; signed by Judge Gordon J. Quist (Judge Gordon J. Quist, jmt)
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
__________________________
LAKELAND ASPHALT CORP.,
Plaintiff,
v.
Case No. 1:10-CV-887
WESTFIELD INSURANCE CO.,
HON. GORDON J. QUIST
Defendant.
___________________________/
OPINION GRANTING SUMMARY JUDGMENT
This case involves a property insurance coverage dispute arising from the failure of an
asphalt-dispensing silo. Defendant, Westfield Insurance Company (“Westfield”), filed a Motion for
Summary Judgment. (Dkt. #20.) Plaintiff, Lakeland Asphalt Corporation (“Lakeland”) filed a
response to which Westfield replied. The parties dispute two issues. First, in addition to “wear and
tear,” did “weight” of the asphalt or some other factor cause the silo failure? If not, recovery is
precluded. Second, if, and only if, an additional factor caused the failure, does the insurance policy
in question permit recovery? Because no genuine issue of fact exists that the only proximate cause,
in accordance with Michigan law, was “wear and tear” of the steel hopper, Westfield’s Motion for
Summary Judgment will be granted.
I. BACKGROUND
Lakeland is an asphalt supplier which stores and distributes the asphalt it manufactures in
two silos, one of which is the 200-ton capacity silo at issue (“the silo”) manufactured in 1988.
Lakeland purchased the silo in used condition in 1994. John Carr, one of Lakeland’s owners, along
with the used equipment salesman, inspected the silo prior to the purchase. In 1996, Lakeland
installed the silo at its place of business in Springfield, Michigan. Lakeland also installed a truck
scale located below the silo. Thereafter, the silo had been used for every paving season from 1996
to 2008.
The silo is a 200-ton capacity cylinder with a discharge gate and safety gate at the bottom.
(Def.’s Br. Ex. 5 (Dkt. #23-1).) The “cone” or “hopper” is a funnel permanently welded to the
bottom of the cylinder and comprises part of the silo. At the bottom of the cone is a gate-type valve
that restricts the flow of asphalt through a three-foot opening to allow the asphalt to drop into
waiting trucks when the gate is opened.
The asphalt is comprised of hot oil, “liquid asphalt cements,” and “aggregate.” Aggregate
includes sand, gravel, crushed stone, slag, rock dust, and can include used asphalt pavement. The
materials are mixed and then transferred by conveyor belt to the top of the silo. (Def.’s Br. Ex. 5
(Dkt. #23-1).) Once the asphalt reaches the top of the silo, it drops off of the conveyor and into a
“batcher” at the top of the silo. Once the batcher reaches a certain capacity, it opens and drops the
asphalt into the silo.
The silo was designed to hold up to 200 tons of asphalt. The asphalt is funneled by gravity
down through the cylinder to the cone of the silo. The cone has an opening covered by a discharge
and safety gate, which is attached to the bottom of the cone. Through remote operation, asphalt is
then dispensed into trucks that are parked on a scale located below the silo. The gate is held open
until the appropriate weight of asphalt is dispensed into the truck.
On August 14, 2008, a customer pulled a truck onto the scale below the silo to obtain a 10ton load of asphalt. At that time, the silo contained 198 tons of asphalt–below the original design
capacity of 200 tons. As the gate opened to dispense the load, the cone tore away from the bottom
of the silo. The cone along with the 198 tons of asphalt in the silo fell onto the truck and the scale
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below. On August 14, 2008, Lakeland submitted a Claim to Westfield for a “cone failure, asphalt
fell on truck.”
On October 6, 2008, based upon its investigation, Westfield sent a letter to Lakeland
explaining the denial of Lakeland’s claim. Westfield identified the applicable policy provisions and
stated:
I am writing in follow-up to our conversation on September 30, 2008 regarding the
above referenced claim for damage to your silo resulting from wear of the metal skin
of the silo cone which resulted in damage to your motor truck scale. Our
investigation indicated that a collapse did not occur to your silo.
...
Because the damage caused to your silo was from wear we must deny your claim as
it is specifically excluded under your policy.
(Def.’s Br. Ex. 12 at 1, 8.)
Lakeland claims breach of contract for failure to pay its claim for damages “due to a silo
collapse.” (Compl. ¶¶ 8, 10-18.) Lakeland also seeks penalty interest under the Uniform Trade
Practices Act. See M.C.L. § 500.2001 et. seq. (Compl. ¶¶ 19-24.)
II. PERTINENT POLICY PROVISIONS
The parties do not dispute the pertinent portions of the insurance policy. The general
coverage provision for “Building and Personal Property” states:
A.
Coverage
We will pay for direct physical loss of or damage to Covered Property at the
premises described in the Declarations caused by or resulting from any Covered
Cause of Loss.
(Dkt. #20-2 at 55.) Thus, coverage exists under the policy when two conditions are satisfied: 1)
damage to “Covered Property”; and 2) resulting from any “Covered Cause of Loss.” The only issue
is whether the condition of a “Covered Cause of Loss” was satisfied.
The “Causes of Loss - Special Form” explains what consists of a “Covered Cause of Loss.”
3
A.
Covered Causes of Loss
When Special is shown in the Declarations, Covered Causes of Loss means Risks of
Direct Physical Loss unless the loss is:
1.
Excluded in Section B., Exclusions; or
2.
Limited in Section C., Limitations;
that follow
B.
....
D.
Exclusions
....
2.
We will not pay for loss or damage caused by or resulting from any of the
following:
....
d.
(1)
Wear and tear;
....
k.
Collapse, except as provided below in the Additional Coverage for
Collapse.
Additional Coverage - Collapse
The term Covered Cause of Loss includes the Additional Coverage - Collapse as
described and limited in D.1 through D.5 below.
....
2.
We will pay for direct physical loss or damage to Covered Property, caused
by collapse of a building or any part of a building that is insured under this
Coverage Form or that contains Covered Property insured under this
Coverage Form, if the collapse is caused by one or more of the following:
....
b.
Decay that is hidden from view, unless the presence of such decay is
known to an insured prior to collapse;
....
d.
Weight of people or personal property;
(Dkt. #20-2 at 46-51.)
III. ANALYSIS
Because this is a diversity case, this Court applies substantive state law. Fed-Mogul U.S.
Asbestos Pers. Injury Trust v. Cont’l Cas. Co., --- F.3d ---, 2011 WL 2652232, at *2 (6th Cir. July
8, 2011). The parties agree that Michigan law applies. Interpretation of the policy language is a
question of law. Id. at *2 (citations omitted).
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In the absence of specific contractual language to the contrary, Michigan courts have long
applied the “proximate cause” standard to determine if coverage was precluded by the occurrence
of a particular event. Berger v. Travelers Ins. Co., 379 Mich. 51, 53, 149 N.W.2d 441, 442 (1967);
TMW Enters., Inc. v. Fed. Ins. Co., 619 F.3d 574, 579 (6th Cir. 2010); Couch on Ins. § 101:39
(stating that parties can “‘contract out’ of this general causation rule, as long as their agreement does
not violate public policy”). Lakeland’s insurance policy states that Westfield will not pay for loss
or damage “caused by” or “resulting from” from specifically listed, excluded events. Because the
exclusion provision at issue contains no contrary standard, the Court concludes that the excluded
cause, in this case “wear and tear,” must be the proximate cause of the loss to preclude recovery.
“[T]he question of proximate cause in insurance cases is generally held to be one for the trier
of fact.” Mich. Sugar Co. v. Emp’rs Mut. Liab. Ins. Co. of Wis., 107 Mich. App. 9, 14, 308 N.W.2d
684, 686 (1981) (citing Kangas v. New York Life Ins. Co., 223 Mich. 238, 244-45, 193 N.W. 867,
869 (1923)). In this case, however, there is no genuine issue of material fact that “wear and tear”
proximately caused the loss. Moreover, Westfield has correctly pointed out the absence of evidence
to establish a different or concurrent proximate cause besides “wear and tear.” Thus, drawing all
inferences in Lakeland’s favor, a reasonable jury could not find for Lakeland.
Proximate cause is “that which in a natural and continuous sequence, unbroken by any new,
independent cause, produces the injury, without which such injury would not have occurred.” TMW
Enters., 619 F.3d at 579 (citing Mich. Sugar Co., 107 Mich. App. at 14, 308 N.W.2d at 686). The
insurer bears the burden of proving that an exclusion to coverage is applicable. Heniser, 449 Mich.
at 161 n.6, 534 N.W.2d at 505. Westfield has met this burden and Lakeland has not rebutted it.
Initially, Westfield has pointed out the absence of evidence to establish that “weight” of
personal property proximately caused the injury. That is, no evidence exists that the cone hopper
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could not support the weight of 198 tons of asphalt, had it not been for some other new, independent
cause. Lakeland’s own expert, Isaac Sheppard, testified that, up until the silo failure, the silo could
hold 200 tons of asphalt. (Sheppard Dep. Def.’s Br. Ex. 6 at 13-14 (Dkt. #23-2 at 14-15).) Thus,
taking all inferences in favor of Lakeland, up until the silo failure, the silo could hold 200 tons of
asphalt or less. Also, the parties do not dispute that at the time of the incident, the silo contained 198
tons of asphalt. Therefore, because the silo failed with 198 tons of asphalt in it, some other new
cause produced the silo failure. (See id. at 14 (Dkt. #23-2 at 15).) Consequently, as a matter of law,
the weight of the asphalt could not have been the “proximate cause” of the silo failure. See, TMW
Enters., 619 F.3d at 579 (citing Mich. Sugar Co., 107 Mich. App. at 14, 308 N.W.2d at 686).
Most importantly, all of the experts who have produced evidence agree that “wear and tear”
of the cone is the only cause that was unbroken by any new, independent cause, without which the
silo failure would not have occurred.
!
On August 20, 2008, Glen Leckie, a structural engineer retained by Westfield, visited
Lakeland’s work-site to inspect the cone along with other documents provided by
Lakeland and performed measurements of the cone and silo. Leckie concluded:
The silo hopper/cone was worn down by abrasive wear and tear
through use over time and on August 14, 2008 it failed because it was
worn to a point that the cone was so thin it could not hold the full
weight of the HMA in the silo.
(Def.’s Br. Ex. 4 at 10 (Dkt. #22-3 at 12).)
!
David Weaver, an investigator for Cincinnati Insurance Company, which insured the
asphalt truck caught under the silo, opined that the failure of the cone was due to the
long term wear and tear to the metal skin of the cone and silo. (Def.’s Br. Ex. 9 ¶ 8
(Dkt. #23-5 at 3).)
Mr. Weaver determined that the metal skin had lost
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approximately 80% of its thickness as compared to the steel in other portions of the
asphalt silo. (Id. ¶ 5.)
!
Isaac Sheppard, Lakeland’s expert, agreed that the strength of the steel cone hopper
was reduced to the point where it was no longer capable of holding 198 tons of
asphalt. (Sheppard Dep. Def.’s Br. Ex. 6 at 15 (Dkt. #23-2 at 16).) But for this
reduction in strength due to wear and tear, Sheppard thought that the cone probably
would not have failed on August 14, 2008. (Id. at 16 (Dkt. #23-2 at 17).)
For this same reason, the “Additional Coverage - Collapse” provision does not apply. To
be considered a Covered Cause of Loss, a “collapse” must be “caused” by one or more of the
enumerated factors. (Dkt. #20-2 at 51.) Because there is no contrary language in the provision to
apply a different standard,1 proximate cause is the appropriate standard to determine if one of the
enumerated factors “caused” the collapse. As established above, contrary to Lakeland’s contention,
the “weight” of the asphalt was not, as a matter of law, a proximate cause of the silo failure.2 See,
supra, TMW Enters., 619 F.3d at 579 (citing Mich. Sugar Co., 107 Mich. App. at 14, 308 N.W.2d
at 686). Isaac Sheppard’s findings are insufficient to create a genuine issue of fact. His findings
and testimony only establish that “weight” was a but-for cause, not a proximate cause. Lakeland
1
Looking at the language of the agreement as a whole establishes that the parties consciously did not include
language to the contrary. In a provision not relevant to this case, Westfield stated it would not pay for damaged caused
“directly or indirectly” by certain events. (Dkt. #20-2 at 26 (emphasis added).) By including indirect causes, this
provision excludes coverage of damage beyond that of damage caused by the proximate cause. No such language exists
in the pertinent provisions for this case.
2
Lakeland does not dispute W estfield’s argument that “decay” was not a cause of the silo failure. Despite a
conclusory statement by Isaac Sheppard, no evidence exists to suggest “decay” caused the silo failure. M oreover, this
Court agrees with W estfield’s argument. (See Sheppard Dep. Def.’s Br. at 27 (admitting that wear and tear of steel is
not an organic process) with Travelers Prop. of Am. v. Eyde Co., 2007 W L 107667, at *6 (W .D. Mich. Jan. 9, 2007)
(interpreting “decay” to mean “not a general, gradual decline in strength, but rather, the organic rot or deterioration from
a normal state”).)
Nor does Lakeland dispute the inapplicability of the “Additional Coverage - Equipment Breakdown” policy
provision.
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has not come forth with any evidence for a jury to reasonably conclude otherwise.3
See Celotex,
477 U.S. at 323-24, 106 S. Ct. at 2553 (“One of the principal purposes of the summary judgment
rule is to isolate and dispose of factually unsupported claims or defenses . . . .”).
IV. CONCLUSION
Lakeland’s insurance policy plainly and unambiguously excludes coverage. Therefore,
Westfield’s Motion for Summary Judgment (Dkt. #20) pursuant to Federal Rule of Civil Procedure
56 will be granted.
A separate Order will issue.
Dated: February 2, 2012
/s/ Gordon J. Quist
GORDON J. QUIST
UNITED STATES DISTRICT JUDGE
3
It is unnecessary to address W estfield’s argument regarding “concurrent-causation.” That argument would
need to be addressed only if this Court had found more than one cause of the silo failure. Since: A) the policy provisions
do not “contract out” of the “proximate cause” standard employed by Michigan courts; and B) no genuine issue of fact
exists that the only proximate cause was “wear and tear,” the Court need not delve into the analysis regarding concurrent
causes–which necessarily implies more than one cause.
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