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Hartford Steam Boiler wins litigation against oil refinery

oil refinery

Hartford Steam Boiler Inspection & Insurance Co. has prevailed in coverage litigation filed against it by an oil refinery company in connection with a fire that disabled a refinery, based on a policy exclusion.

A unanimous three-judge panel of the 6th U.S. Circuit Court of Appeals in Cincinnati on Friday upheld a ruling by the U.S. District Court in Lexington, Kentucky, against Somerset, Kentucky-based Continental Refining Co. LLC in Continental Refining Co. LLC v. Hartford Steam Boiler Inspection & Insurance Co.

Continental owns a crude oil refinery that Hartford Steam insured through an equipment breakdown insurance policy that only covered non-combustion explosions in a steam vessel, according to the ruling.  The policy also contained specific exclusions for losses caused directly or indirectly by a fire or combustion explosion of “any steam boiler or other fired vessel,” according to the ruling. The exclusion also extended to any other explosion “except as specifically provided” in the clause discussing covering non-combustion explosions.

In October 2015, a section of piping in a furnace broke open, which caused considerable damage. This line continued to discharge a flammable naphtha/hydrogen mixture, and a substantial fire ensued.  This damaged a nearby electrical cable tray, which ultimately disabled the entire plant, according to the ruling.

Hartford Steam Boiler paid for the damages it determined were caused by the ruptured pipe, but not for those due to the explosion or fire.

Continental filed suit against the insurer. The company specifically admitted the furnace is not a steam boiler, steam piping, steam engine or steam turbine, meaning the fire and explosion exclusion in the policy applied, said the ruling. In granting Hartford Steam’s motion for summary judgment, the district court held that this “lone discovery admission ensures exclusion and disposes of the case.”

The appeals court agreed. “Continental’s position relating to genuine issue of material fact is unavailing,” the ruling said. “Likewise, Continental’s position regarding the Policy’s coverage is unpersuasive,” it said.

“Important in this case, ‘a clearly worded exclusion is not treated as ambiguous’ and ‘tortured construction for clauses in an attempt to create an aura of ambiguity are unavailing to create coverage,’” the ruling said.

“The relationship between the relevant Policy clauses is clear and unambiguous, and the Policy must therefore be enforced as written,” said the ruling, in affirming the lower court’s decision.

Hartford Steam’s attorney had no comment while Continental’s attorneys could not immediately be reached for comment.

A federal appeals court last month ruled an oil refinery company did not have a duty of care to a worker who was injured in an oil pump explosion.





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