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Nationwide Mutual Insurance Co. v. Barton Solvents, Inc.

Supreme Court of South Dakota

October 1, 2014

NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiff and Appellant,
v.
BARTON SOLVENTS, INC. and CITGO PETROLEUM CORPORATION, Defendants and Appellees

Argued August 26, 2014

Page 146

APPEAL FROM THE CIRCUIT COURT OF THE THIRD JUDICIAL CIRCUIT LAKE COUNTY, SOUTH DAKOTA. THE HONORABLE TIM D. TUCKER, Judge.

MITCHELL A. PETERSON, JUSTIN T. CLARKE of Davenport, Evans, Hurwitz & Smith, LLP Sioux Falls, South Dakota Attorneys for plaintiff and appellant.

MICHAEL F. TOBIN, GARY J. PASHBY of Boyce, Greenfield, Pashby & Welk, LLP Sioux Falls, South Dakota Attorneys for defendant and appellee Barton Solvents, Inc.

WILLIAM C. GARRY of Cadwell, Sanford, Deibert & Garry, LLP Sioux Falls, South Dakota and WILLIAM S. BOOTH of Eimer, Stahl, Klevorn & Solberg, LLP Chicago, Illinois Attorneys for defendant and appellee Citgo Petroleum Corporation.

ZINTER, Justice. GILBERTSON, Chief Justice, and KONENKAMP, SEVERSON, and WILBUR, Justices, concur.

OPINION

Page 147

ZINTER, Justice

[¶1] A.H. Meyer & Sons, Inc. (A.H. Meyer) owned and operated a honey and beeswax processing plant that exploded. The explosion was caused by heptane vapors that were ignited by an electrical switch in the plant. Nationwide Mutual Insurance (Nationwide) paid for the damage and filed suit seeking subrogation from the supplier and the manufacturer of the heptane. Nationwide pleaded causes of action for strict liability and negligence premised on the theory that the defendants failed to adequately warn of heptane's dangers. Nationwide also pleaded causes of action for breach of express and implied warranties. The circuit court granted the defendants' motion for summary judgment. We affirm.

Facts and Procedural History

[¶2] A.H. Meyer produced honey and beeswax at its plant in Winfred, South Dakota. A.H. Meyer was owned by Jack Meyer, Jr. (Jack) and J.B. Meyer (J.B.). J.B. took over operations from his grandfather, Jack Meyer, Sr. Barton Solvents, Inc. (Barton Solvents) marketed, sold, and distributed heptane, a highly volatile and combustible solvent manufactured by CITGO Petroleum Corporation (CITGO).

Page 148

A.H. Meyer used heptane in its beeswax rendering process. Barton Solvents sold heptane to A.H. Meyer for over twenty years and had observed A.H. Meyer's plant on at least one occasion.

[¶3] Barton Solvents delivered the heptane to a 10,000 gallon tank located outside the plant. The heptane was then pumped and stored in a " kettle," a 150-gallon storage tank, inside the plant. Because liquid heptane would occasionally spill from the top of the kettle and vaporize, A.H. Meyer installed a ventilation system in an attempt remove the heptane vapors from the plant.

[¶4] Barton Solvents provided A.H. Meyer with CITGO's Material Safety Data Sheet (MSDS) with each delivery.[1] The MSDS was a ten-page document that described the volatile nature of heptane, listed its potential hazards, and provided other warnings. The MSDS specifically warned that heptane liquid and vapor were " extremely flammable" and " may cause flash fire[s]." Right beneath that warning, the MSDS warned that the " [v]apor may travel considerable distance to source of ignition and flash back." The MSDS therefore recommended that heptane be used only with " adequate" ventilation. The MSDS also warned that " [a]ll electric equipment should comply with the National Electrical Code." The National Electrical Code (NEC) referenced many recommended practices of the National Fire Protection Association (NFPA). NFPA 497 contained recommended practices for flammable liquids, gases or vapors, as well as the location and selection of electrical installations in chemical process areas. By illustration, NFPA 497 recommended a five-foot distance between heptane and ignition sources such as standard (non-explosive proof) electrical switches. The recommended practices were to be applied with " sound engineering judgment."

[¶5] A.H. Meyer suffered two heptane explosions at its plant. The first explosion occurred in 2004. It was caused when a standard electrical switch, located four feet from heptane, ignited heptane vapors.[2] Jack Meyer, Sr. designed a new plant following the 2004 explosion. A.H. Meyer contacted Premier Engineering, Inc., an electrical and mechanical engineering company, for consultation as to what electrical changes needed to be made to the new facility to avoid another explosion. Premier Engineering told A.H. Meyer that standard electrical switches should not be within five feet of heptane. A.H. Meyer also consulted with the State Fire Marshall regarding risks of fire and explosion.

[¶6] In the new plant, standard switches were installed a minimum of five feet from the kettle and five feet above the floor (because heptane vapor is heavier than air causing it to sink to the floor). Following reconstruction in 2006, a South Dakota State Electrical Inspector conducted a final inspection of the building. He indicated the building " was in compliance with South Dakota Laws and Rules and the National Electric Code."

[¶7] The explosion at issue occurred in 2009 when heptane spilled from the kettle and an A.H. Meyer employee pressed a standard switch to turn off a pump. Duane Wolf, a mechanical engineer, was retained as Nationwide's expert witness in this litigation. He concluded through experimental tests that the ventilation system A.H. Meyer installed possibly had the opposite effect that was intended:

Page 149

it stirred up heptane vapors and moved them more than five feet to a point where they were ignited by the ...


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