Continental sought recovery under an equipment breakdown insurance policy it had obtained from The Hartford Steam Boiler Insurance and Inspection Company (“HSB”).

HSB sent payment for damages that it determined were caused by the ruptured pipe but did not pay for damages due to the explosion or subsequent fire.

Continental then brought suit.

During discovery, Continental specifically admitted that the charge heater was not a steam boiler, steam piping, steam engine, or steam turbine, meaning that the insurance policy's fire and explosion exclusion applied, regardless of whether it was a fire, explosion, or BLEVE immediately followed by a fire.

The U.S. District Court for the Eastern District of Kentucky, in granting HSB's motion for summary judgment, held that this “lone discovery admission” ensured exclusion and disposed of the case.

Continental appealed to the Sixth Circuit, contending that the district court had improperly granted summary judgment to HSB “because HSB failed to demonstrate that there [was] no coverage under the policy for Continental's entire loss.” Continental argued that, at the very least, there was a genuine issue of material fact as to whether its loss was covered, precluding a grant of summary judgment.

The Sixth Circuit's Decision

The Sixth Circuit affirmed.

In its decision, the circuit court explained that the only type of explosion covered by the HSB policy was a non-combustion explosion in a steam vessel, specifically, an “[e]xplosion, other than [a] combustion explosion, of steam boilers, steam piping, steam engines or steam turbines.” The policy also contained specific exclusions for “loss, damage or expense caused directly or indirectly by . . . [f]ire, [or] [c]ombustion explosion. This includes, but is not limited to, a combustion explosion of any steam boiler or other fired vessel.” The Third Circuit added that the exclusion also extended to “[a]ny other explosion, except as specifically provided” in the clause discussing covered non-combustion explosions.

The circuit court pointed out that Continental's own expert attributed the loss to a BLEVE-type mechanical explosion. The circuit court then observed that the HSB policy expressly excluded all explosions, except for non-combustion explosions of “steam boilers, steam piping, steam engines or steam turbines.”

The Third Circuit added that the policy's language emphasized that HSB would “not pay for loss . . . caused directly or indirectly by [excluded events], whether or not caused by or resulting from an 'accident.'”

Continental's own admission that the charge heater was not any form of steam vessel, therefore, was properly found by the district court to be dispositive, as the claimed BLEVE-type mechanical explosion did not fall within the policy's coverage clause and was excluded by the policy's exclusions, the Third Circuit concluded.

The case is Continental Refining Co., LLC v. Hartford Steam Boiler Inspection & Ins. Co., No. 18-6152 (6th Cir. May 3, 2019).