Filed: Oct. 02, 1997
Latest Update: Mar. 02, 2020
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 96-3893 _ United States Fidelity and * Guaranty Company, * * Appellee, * * Appeal from the United States v. * District Court for the * Eastern District of Missouri First State Bank and Trust Company; * Bank of Hayti, * * Appellants. * _ Submitted: April 10, 1997 Filed: October 2, 1997 _ Before McMILLIAN, FLOYD R. GIBSON, and JOHN R. GIBSON, Circuit Judges. _ McMILLIAN, Circuit Judge. Appellants First State Bank and Trust Company and Ban
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 96-3893 _ United States Fidelity and * Guaranty Company, * * Appellee, * * Appeal from the United States v. * District Court for the * Eastern District of Missouri First State Bank and Trust Company; * Bank of Hayti, * * Appellants. * _ Submitted: April 10, 1997 Filed: October 2, 1997 _ Before McMILLIAN, FLOYD R. GIBSON, and JOHN R. GIBSON, Circuit Judges. _ McMILLIAN, Circuit Judge. Appellants First State Bank and Trust Company and Bank..
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United States Court of Appeals
FOR THE EIGHTH CIRCUIT
_____________
No. 96-3893
____________
United States Fidelity and *
Guaranty Company, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Missouri
First State Bank and Trust Company; *
Bank of Hayti, *
*
Appellants. *
____________
Submitted: April 10, 1997
Filed: October 2, 1997
____________
Before McMILLIAN, FLOYD R. GIBSON, and JOHN R. GIBSON,
Circuit Judges.
____________
McMILLIAN, Circuit Judge.
Appellants First State Bank and Trust Company and Bank of Hayti,
Inc., appeal from a final order entered in the United States District
Court1 for the Eastern District of Missouri declaring that damage resulting
from an incident at an industrial plant did
1
The Honorable Stephen N. Limbaugh, Senior United States District Judge for
the Eastern District of Missouri.
not arise from a cause of loss covered under an insurance policy issued by
United States Fidelity and Guaranty Company (USFG). United States
Fidelity & Guar. Co. v. First State Bank & Trust Co., 941 F. Supp. 101
(E.D. Mo. 1996) (United States Fidelity & Guar. Co.). For reversal,
appellants argue that the district court erred in holding that (1) no fire
occurred during the incident and (2) “smoke” has a different meaning from
“vapor.” For the reasons discussed below, we affirm the order of the
district court.
Jurisdiction was proper in the district court based upon 28 U.S.C.
§§ 1332 and 2201-2202. Jurisdiction on appeal is proper based upon 28
U.S.C. § 1291. The notice of appeal was timely filed under Fed. R. App.
P. 4(a).
I. Background
The following facts are taken primarily from the district court
order. United States Fidelity & Guar. Co., 941 F. Supp. at 103-05. At the
time of the events giving rise to this lawsuit, appellants owned a metal
building in Caruthersville, Missouri. Appellants leased the building to
Missouri Fabricated Products (MFP), a subsidiary of Gleason Corporation
(Gleason). Appellants subsequently sold the building and assigned their
rights under the insurance policy at issue to Gleason, which is the real
party in interest to this lawsuit.
MFP uses the building as an industrial plant for the production of
metal lawn and garden wheels. The production process involves stamping the
wheel parts out of flat coil steel, washing the parts, welding them
together, painting the metal parts, and mounting tires on the wheels.
After the process is complete, MFP ships the assembled wheels to its
customers.
In the early stages of the production process, the coil steel is
protected by a heavy grease that must be removed before the wheel parts are
painted and assembled.
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The grease is removed in a machine called a “Detrex Degreaser,” consisting
of a large, square vat which is partially filled with liquid
trichloroethane (TCE) and has electrical coils in the bottom. When the
machine is started, the electrical coils are activated and begin to warm.
The heat from the electrical coils causes the TCE to boil, evaporate, and
create a vapor in the top portion of the vat. Around the top of the vat
is a pipe containing cold water that causes the vaporized TCE to condense
and fall back to the bottom of the vat to be re-heated by the coils. The
machine is equipped with a ventilator system to pull off any stray vapors
that escape from the vat. The wheel parts are placed in a basket and
suspended in the vaporized TCE. A metal grate above the electrical coils
in the bottom of the vat prevents any objects that might fall from the
basket from landing on the electrical coils. The vaporized TCE dissolves
the grease, and the grease falls to the bottom of the vat and is suspended
in the liquid TCE. Every four to six weeks, the machine must be cleaned
and the TCE containing the suspended oil must be cleaned out of the
machine.
At the end of a work day, the electrical coils are turned off first.
After the TCE has cooled to a point where the vapor is no longer present,
the operator turns off the water to the condensing ring. Then the
ventilator fans are shut off. A roll top covers the vat to keep objects
from falling into it.
On Saturday, August 14, 1993, the plant closed around 12:30 p.m.
Later that evening, MFP employee Adam Babcock drove by the plant and
noticed that the lights were left on in the temporary office set up in a
construction trailer in front of the building. Babcock went into the
plant, noticed that it was “smoky,” and ran to the trailer to call the fire
department.
Within minutes, the fire fighters searched the plant to be sure there
were no open flames and instructed Babcock to open the windows and doors.
Babcock also activated the exhaust fans. The fire fighters determined that
the degreaser was the source of the “smoke,” and, after it was shut off,
the “smoke” dissipated. The fire chief testified that
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he did not see any open flames and that no water, hoses, or any other type
of fire fighting equipment was used during the incident. He also testified
that the “smoke” was not very dense and had an unusual odor. Babcock’s
testimony was similar. Although the parties disagree on what caused the
incident, they agree that the degreaser overheated and emitted a vapor
cloud containing hydrochloric acid which damaged the inside of the plant.
They also disagree on whether the damage is a covered loss under the
insurance policy issued by USFG.
USFG brought this declaratory judgment action, seeking a
determination of its rights and obligations under the insurance policy
issued by USFG to appellants covering the building used by MFP. On July
21, 1995, USFG presented its case, including live testimony from three
expert witnesses, to the district court sitting without a jury. Due to
scheduling problems, the district court agreed to hear appellants’ case,
consisting solely of testimony from one expert witness, at a later date.
After additional scheduling problems, appellants, with leave of court,
submitted the testimony by deposition.
The insurance policy at issue is a peril policy providing coverage
for loss or damage to covered property if the loss or damage stems from a
covered cause of loss. The relevant policy provisions provide:
A. COVERED CAUSES OF LOSS
When Basic is shown in the Declarations, Covered
Causes of Loss means the following:
. . . .
1. Fire
. . . .
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5. Smoke causing sudden and accidental loss or damage. This
cause of loss does not include smoke from agricultural
smudging or industrial operations.
At trial, the dispute focused mainly on whether or not the incident
in question constituted a fire. USFG’s experts agreed that there had been
no fire. They testified that the incident in question was nothing more
than an exothermic chemical reaction caused by the unstable condition of
the degreaser. They concluded that, in closing the facility, the cold
water pipe above the degreaser had been turned off, but the heating element
in the vat had inadvertently been left on and, as a result, the vaporized
TCE continued to rise, escaped the vat, reached the atmosphere, and
combined with hydrogen and oxygen in the air to form hydrochloric acid.
By contrast, appellants’ expert testified that there had been a fire.
He opined that the degreaser’s heating element burned off so much of the
TCE that the heating coils became exposed and reached a level of such
extreme heat that the oil deposits in the base of the vat combusted. He
suggested that the fire was not very big and had extinguished itself before
anyone arrived on the scene.
USFG also presented evidence that, whether or not the damage was
caused by smoke, the incident is still excluded under the policy because
it resulted from industrial operations. However, appellants presented
evidence that the damage should be covered under the policy because it was
caused by smoke -- the vapor cloud -- that was not a result of industrial
operations.
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After reviewing all of the evidence, the district court concluded
that, as a matter of fact, there had been no fire in the building during
the incident and, as a corollary, that the emissions caused by the chemical
reaction were gas vapors and not wood-burning or oil-burning smoke. United
States Fidelity & Guar. Co., 941 F. Supp. at 105. The district court
further concluded that, as a matter of law, “gas vapors” does not mean
“smoke” to the ordinary lay person.
Id. The district court thus held that
the relevant policy language regarding damage from “fire” and “smoke” does
not cover the damages to the building resulting from the August 14, 1993,
incident.
Id. This appeal followed.
II. Discussion
A. “Fire”
Appellants argue that the district court’s finding that there was no
fire involved in the August 14, 1993, incident must be reversed as clear
error because it is against the weight of credible evidence, not supported
by substantial evidence, and contrary to law. Appellants contend that the
most coherent and logical account of the events was provided by appellants’
expert, Robert Lowe. Appellants claim that the district court clearly
erred in rejecting Lowe’s theory that there was a fire because his was the
only version of the incident which took into account the undisputed
presence of certain combustible materials in and on the degreaser vat.
Appellants also argue that the district court’s finding was contrary
to law because, under Missouri law, the words in an insurance policy must
be given their
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ordinary meaning. Appellants claim that the ordinary meaning of “fire” is
“[a] rapid, persistent chemical reaction that releases heat and light, esp.
the exothermic combination of a combustible substance with oxygen.” Brief
for Appellants at 19, quoting Webster’s II New Riverside University
Dictionary 480 (1984) (Webster’s II). Appellants contend that a flame is
not required to satisfy the ordinary meaning of the word “fire.” Rather,
contend appellants, the incident satisfies the ordinary meaning of “fire”
because a “rapid, persistent chemical reaction,” which was in fact an
“exothermic” reaction, occurred. Appellants maintain that the presence of
certain elements -- i.e., light from the glow of the electrical coils;
combustible materials, including cutting oil residue and paint; and oxygen,
or at least an oxidizer -- combined to create a “fire.”
We disagree and hold that the district court did not err in
concluding that what occurred in this case does not come within the
ordinary meaning of “fire” as defined by the district court or by
appellants. Appellants failed to present evidence that a flame had been
present. United States Fidelity & Guar. Co., 941 F. Supp. at 104. There
was also no evidence of charring or smoke stains above the degreaser or
anywhere in the plant, and, in fact, the only damage appeared to be rust.
Id. Based on the evidence presented at trial, the district court’s finding
that there was no fire is not clearly erroneous.
Applying, without adopting, appellants’ definition of “fire,” we
reject appellants’ contention that the “glow” of the electrical coils falls
within the definition of fire. In any event, although an “exothermic”
reaction apparently occurred, USFG’s experts’ testimony that no oxygen
could have entered the vat during the incident was sufficient
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to support the district court’s conclusion that the reaction did not
involve oxygen, as is required under appellants’ proffered definition of
fire.
B. “Smoke”
Appellants argue that the term “smoke” is not defined in the
insurance policy and should thus be interpreted, under its ordinary
meaning, to include the gaseous by-product of the exothermic chemical
reaction described by the expert witnesses. Appellants define “smoke” as:
1. Vapor made up of small particles of carbonaceous
matter in the air, resulting chiefly from
incomplete combustion of organic material, such as
wood or coal. 2. A suspension of particles in a
gaseous medium. 3. A cloud of fine particles.
Brief for Appellants at 21, quoting Webster’s II at 1098. Appellants
define “vapor” as “[b]arely visible or cloudy diffused matter, as mist,
fumes, or smoke, suspended in the air.” Id. at 22, quoting Webster’s II
at 1276. Appellants maintain that the policy covers the incident because
the active agent, which was released from the degreaser and damaged the
metal surfaces of the facility’s interior, “was a chemical substance
produced by a rapid, exothermic reaction, and was suspended as fine
particles in a gas or vapor,”
id. at 23, and thus falls within the
ordinary meaning of “smoke.” Appellants contend that to narrowly interpret
“smoke” as the by-product of burning wood or oil ignores the technology of
today’s industrial world. Appellants argue that the district court erred
in excluding gaseous vapors from its interpretation of “smoke” and,
therefore, this case should be remanded to the district court to determine
whether the vapor or smoke resulted from industrial operations.
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We disagree with appellants’ definition of the term “smoke” because
a term’s ordinary meaning is derived from the interpretation of lay persons
rather than the definition provided in a dictionary. See Robin v. Blue
Cross Hosp. Serv., Inc., 637 S.W.2d 695, 698 (Mo. banc 1982); see also
Cantrel v. Farm Bureau Town & Country Ins.,
876 S.W.2d 660, 664-65 (Mo. Ct.
App. 1994) (per curiam) (rejecting dictionary definition of “contamination”
in favor of a reasonable person’s interpretation). Missouri cases have not
defined “smoke” as used in insurance policies, and other jurisdictions
which have addressed the issue have developed varying interpretations.
See, e.g., K & Lee Corp. v. Scottsdale Ins. Co.,
769 F. Supp. 870, 874
(E.D. Pa. 1991) (holding that invisible chemical vapor is not ordinarily
and commonly understood to be “smoke”), aff’d,
953 F.2d 1380 (3d Cir. 1992)
(table); Henri Food Prods. Co. v. Home Ins. Co.,
474 F. Supp. 889, 893
(E.D. Wis. 1979) (holding that a vapor which left a residue on plaintiff’s
goods was smoke); Capital Bank & Trust Co. v. Equitable Life Assurance
Soc’y of the United States,
542 So. 2d 494, 496 (La. 1989) (holding that
a person of average understanding would not regard “smoke” as a gas or
vapor); State v. Mundet Cork Corp.,
86 A.2d 1, 4 (N.J.) (defining smoke to
include “visible products of combustion in the normally accepted sense”),
cert. denied,
344 U.S. 819 (1952); Aubertel v. Consolidated Edison Co.,
116
N.Y.S.2d 555, 558 (Mun. Ct. 1952) (generally defining “smoke” as a visible
exhalation from burning material); cf. Farmers Ins. Co. v. Trutanich,
858
P.2d 1332, 1336 (Or. Ct. App. 1993) (declining to decided whether, as a
matter of law, smoke includes vapor). We need not develop a definition
under Missouri law because, under appellants’ proffered definition of
“smoke,” the vapor involved, hydrogen chloride, did not contain any
particulate matter and, therefore, does not constitute “smoke.” The vapor
produced by the boiling liquid TCE is analogous to steam produced by
boiling water, which most people would not consider “smoke” despite its
smoky appearance.
Furthermore, even if we were to hold that the chemical vapor was
“smoke” within the meaning of the policy, it was the result of the
degreaser’s malfunctioning.
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Because the operation of the degreaser is an “industrial operation,” this
incident is specifically excluded from coverage under the terms of the
peril policy.
III. Conclusion
Based upon the testimony presented at trial, the district court’s
finding that a fire did not occur is not clearly erroneous. As a matter
of law, the district court did not err in distinguishing “vapor” from
“smoke.” In any event, the vapor or smoke resulted from an industrial
operation and therefore does not qualify as a covered cause of loss under
the policy. Accordingly, the order of the district court is affirmed.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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