Electric Power Systems International, Inc. Plaintiff- Appellant
Zurich American Insurance Company Defendant-Appellee
Submitted: September 21, 2017
from United States District Court for the Eastern District of
Missouri - St. Louis
COLLOTON, BENTON, and KELLY, Circuit Judges.
Power Systems International (EPS) appeals the district
court's grant of summary judgment to Zurich
American Insurance Company (Zurich). EPS asserts the court
erred in concluding that the commercial general liability
policy issued by Zurich to EPS did not provide coverage for
damage EPS caused to an electrical transformer while working
on it. Having jurisdiction under 28 U.S.C. § 1291, we
Gas and Electric Company (LGE) contracted to purchase a used
electrical transformer from American Transmission Company.
The transformer was a large piece of electrical equipment,
weighing 403, 000 pounds. It consisted of "many devices,
such as bushings, the radiators, the tank, the core and coil,
insulating wards, control panel, CT's control wiring,
monitoring devices, gauges, [and] many components that make
up a device that's able to either step up or step down
voltage so electricity can operate in a efficient
manner." LGE is located in Kentucky and the transformer
was located in Wisconsin. In order to relocate the
transformer to Kentucky, LGE hired EPS, a Missouri
corporation, "to disassemble, transport, reassemble, and
test" the transformer. LGE arranged for an internal
inspection of the transformer by a third party, but EPS
agreed to "assist in the inspection from the outside of
the unit." As part of its work to disassemble the
transformer, EPS was to "remove all parts necessary to
relocate the transformer[, ] including but not limited to the
. . . HV, LV & TV bushings." A bushing is the
conduit through which electrical current flows.
bottom of each bushing was bolted to a lead cable located
inside the transformer that in turn was attached to the
transformer's internal core and coil. The top portion of
the bushing extended about nine feet above the top of the
transformer. To remove a bushing from the transformer, it had
to be disconnected from the lead cable, which required
someone to go inside the transformer and remove all the bolts
that attached the components. In attempting to remove the
first bushing, EPS failed to remove one of the bolts
connecting the bushing to the lead cable. When EPS attempted
to lift the bushing with a crane, the lead cable was pulled
upward, which in turn pulled on the core and coil, damaging
LGE asserted a claim against EPS for the damage to the core
and coil, EPS tendered the claim to Zurich. Zurich denied
coverage based on three exclusions in EPS's policy, two
of which are relevant here: the j(4) "care, custody, or
control" exclusion and the j(6) "particular
part" exclusion. EPS sued Zurich in state court on
theories of breach of contract, vexatious delay, and bad
faith refusal to settle. Zurich removed the case to federal
court based on diversity jurisdiction. Concluding that
exclusion j(6) precluded coverage, the district court granted
summary judgment to Zurich. This appeal followed.
court reviews de novo a grant of summary judgment, construing
all facts and making all reasonable inferences favorable to
the nonmovant." Spirtas Co. v. Nautilus Ins.
Co., 715 F.3d 667, 670 (8th Cir. 2013) (quoting
General Mills Operations, LLC v. Five Star Custom Foods,
Ltd., 703 F.3d 1104, 1107 (8th Cir. 2013)).
"Summary judgment is proper 'if the movant shows
that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of
law.'" Id. (quoting Fed.R.Civ.P. 56(a)).
parties agree that Missouri law applies in this diversity
case. Under Missouri law, "the interpretation of an
insurance contract is generally a question of law,
particularly in reference to the question of coverage."
D.R. Sherry Constr., Ltd. v. Am. Family Mut. Ins.
Co., 316 S.W.3d 899, 902 (Mo. banc 2010). It is the
insured's burden to establish coverage under the policy
and the insurer's burden to show that an exclusion to
coverage applies. Taylor v. Bar Plan Mut. Ins. Co.,
457 S.W.3d 340, 344 (Mo. banc 2015). Missouri courts strictly
construe exclusionary clauses against the insurer.
j(6) of the policy excludes coverage for "property
damage" to "[t]hat particular part of any property
that must be restored, repaired or replaced because 'your
work' was incorrectly performed on it." Put another
way, exclusion j(6) excludes coverage for property damage to
a particular part of any property on which EPS performed work
if EPS's work was incorrectly performed on that
particular part. See Columbia Mut. Ins. Co. v.
Schauf, 967 S.W.2d 74, 81 (Mo. banc 1998) (holding that
a similar exclusion "denies coverage for property damage
to the particular part of the real property that is the
subject of the insured's work at the time of the damage,
if the damage arises out of those operations"). The
district court concluded that at the time the coil was
damaged, the particular part of the transformer on which EPS
was working included the bushing, lead cable, and coil.
Because the damage to the coil was caused by EPS's
incorrect performance of its work-failing to detach the lead
cable from the bushing-the court concluded exclusion j(6)
applied to exclude coverage for the damage to the coil.
argues the district court misapplied Missouri law by
including the core and coil as a component of the
"particular part" of the transformer on which EPS
was working. According to EPS, Missouri law supports a narrow
interpretation of the "particular part" exclusion.
See id. at 80 (construing similar exclusion with
respect to real property to "bar coverage only for the
particular part of the real property on which the
insured is performing operations"). EPS notes Missouri
courts apply this exclusion "with great
specificity." Id. According to EPS, the precise
part of the property on which it was working at the time of
the occurrence was the bushing, not the core and coil. EPS
argues that in construing the scope of the "particular
part" exclusion to exclude coverage for damage to any