RIEFFLIN v HARTFORD INS CO
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No. 12629 I N THE SUPREME C U T O THE STATE O M N A A OR F F OTN ALBERT L. RIEFFLIN e t a l . , P l a i n t i f f s and A p p e l l a n t s , THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY, a Corporation, Defendant and Respondent. Appeal from: D i s t r i c t Court of t h e Fourth J u d i c i a l D i s t r i c t , Honorable E. Gardner Brownlee, Judge p r e s i d i n g . Counsel of Record: For A p p e l l a n t s : J u l i o K. Morales argued, Missoula, Montana For Respondent : G a r l i n g t o n , Lohn and Robinson, Missoula, Montana Gary L. Graham argued, Missoula, Montana Submitted: Decided : F i l e d : APR e 5 1974 March 21, 1974 M r . J u s t i c e Gene B. Daly delivered the Opinion of the Court. P l a i n t i f f s and appellants, Albert L., Robert L., and Margaret A. Rief f l i n , d/b/a The Missoula Motel, h e r e i n a f t e r r e f e r r e d t o as p l a i n t i f f s o r R i e f f l i n s , bring t h i s appeal from a judgment of the d i s t r i c t court of Missoula County i n t h e i r favor i n the amount of $1,332.48 against defendant and respondent, The Hartford Steam Boiler Inspection and Insurance Company, a Corporation, h e r e i n a f t e r r e f e r r e d t o a s Hartford. The d i s t r i c t court judgment awarded c o s t s of s u i t amounting t o $197.24 t o defendant Hartford. This l i t i g a t i o n a r i s e s o u t of a c o n t r a c t of insurance e x i s t i n g between these l i t i g a n t s which covered a c a s t i r o n b o i l e r located i n the Missoula Motel, owned by the Rief f l i n s . The b o i l e r consisted of ten center sections and two end sections and was used t o heat the motel. the end sections cracked. O February 1, 1970, one of n Hartford performed an inspection of the b o i l e r and paid a claim i n the amount of $440.43 f o r replacement of the cracked section. B l e t t e r dated March 26, 1971, y Hartford advised the Rief f l i n s : "In view of the amount of s c a l e i n t h e damaged section, i t can be expected t h a t the remaining sections i n the b o i l e r may a l s o contain excessive s c a l e and a r e subject t o f u t u r e cracking i n a s i m i l a r fashion. "Since t h i s b o i l e r has been i n s e r v i c e l e s s than 3 years, the amount of i n t e r n a l s c a l e would i n d i c a t e to us t h a t an excessive amount of make up water i s being required t o maintain t h e water l e v e l . Excessive feedwater make up w i l l r e s u l t i n rapid scaling; therefore, we strongly reconnnend t h a t t h e e n t i r e heating system be investigated f o r leakage o r o t h e r conditions t h a t a r e r e s u l t i n g i n excessive o r l o s s of water i n the system. "As a safeguard against possible cracking of a d d i t i o n a l sections, w strongly advise t h a t the b o i l e r be opened e up e i t h e r by removing wash out plugs o r disconnecting e pipe connections t o observe t h e i n t e r n a l surfaces. W a r e advising our Inspector t o contact you with regard t o such an inspection sometime following the end of the present heating season. I f excessive s c a l e i s detected, i t may then be necessary to remove the deposits by chemical means along with washing and flushing of the individual sections I 1 . During the summer of 1971 the R i e f f l i n s had the b o i l e r chemically cleaned a t t h e i r expense i n the amount of $911.96. Neither Hartford nor i t s inspector specified who would bear the c o s t of t h i s cleaning. On o r about October 18, 1971, an i n t e r n a l b o i l e r section cracked. Again Hartford performed an inspection and acknowledge l i a b i l i t y i n the amount of $818.49 f o r replacement of the cracked section. While the b o i l e r was dismantled f o r r e p a i r , a t h i r d cracked section was discovered on November 30, 1971. B letter y dated December 6, 1971, Hartford advised the R i e f f l i n s : "We a r e aware t h a t t h e b o i l e r had been dismantled during the Summer and t h e sections had been chemically t r e a t e d t o remove the s c a l e ; i t i s q u i t e evident t h a t the cleaning process was not successful and i n view of t h e density of t h e deposits and t h e i r location i n the sections, i t i s doubtful t h a t t h e deposits can ever be removed. "Under t h e circumstances, w can only recommend t h e e replacement of a l l intermediate sections containing s c a l e o r t h a t the e n t i r e b o i l e r be replaced, depending on t h e expense involved. It has been our experience t h a t i t w i l l be l e s s expensive t o replace the e n t i r e boiler. "The Inspector r e p o r t s t h a t a new b o i l e r has been placed on order and t h a t i t w i l l be i n s t a l l e d t o replace the present b o i l e r when delivered. "In view of the trouble t h a t has been experienced with t h i s b o i l e r i n the p a s t year a s the r e s u l t of d a i l y i n t e r n a l scaling, w again strongly advise t h a t t h e e e n t i r e heating system be checked f o r leakage o r l o s s of water from the system. Any leakage found should be repaired t o minimize trouble of t h i s n a t u r e i n the future. I 1 The new b o i l e r , ordered by the R i e f f l i n s p r i o r t o r e c e i p t of the above quoted l e t t e r , was i n s t a l l e d i n l a t e February of 1972 a t a c o s t t o them of $4,815.00. Again n e i t h e r Hartford nor i t s inspector specified who would bear the c o s t of t h i s replacement. While R i e f f l i n s were awaiting a r r i v a l and i n s t a l l a t i o n of t h e i r new b o i l e r , the o l d b o i l e r continued i n use. It appears t h a t during t h i s period additional sections of the o l d b o i l e r cracked, leaving only e i g h t operational sections when the b o i l e r was replaced i n February. N proofs of l o s s were received by o Hartford from R i e f f l i n s on any of these a d d i t i o n a l cracked sections. Rief f l i n s ' complaint claimed damages of $4,500 .OO caused by frozen heating pipes and appliances and l o s s of $3,000 motel income during the period from October 1, 1971 to March 1, 1972. R i e f f l i n s also sought judgment from Hartford f o r $911.96, the c o s t of cleaning the b o i l e r ; $4,815.00, t h e c o s t of replacing the e n t i r e b o i l e r ; and $818.49, the c o s t of replacing the second cracked section. Hartford made an o f f e r of judgment i n the sum of $1,332.48 representing i t s l i a b i l i t y f o r replacement c o s t s of the second cracked b o i l e r section i n the sum of $818.49 and the t h i r d u cracked b o i l e r section i n the s m of $513.99, which was based on a plumber's estimate. The contract of insurance, introduced a s p l a i n t i f f s ' e x h i b i t one, required w r i t t e n n o t f c e and proof of l o s s t o Hartford as soon a s p r a c t i c a b l e a f t e r an accident occurred. The policy defined "accident" f o r purposes of i t s coverage as: "* * * a sudden and accidental breakdown of the Object, o r a par-r: thereof, which manifests i t s e l f a t the time of i t s occurrence by physical damage t o the Object t h a t n e c e s s i t a t e s r e p a i r o r replacement of the Object o r a p a r t thereof; but Accident s h a l l n o t mean (a) depletion, d e t e r i o r a t i o n , corrosion, o r erosion of material * * *." The policy s p e c i f i c a l l y excluded: ** "* l o s s from delay o r i n t e r r u p t i o n of business o r manufacturing o r process, ( f ) l o s s from lack of power, l i g h t , heat, steam o r r e f r i g e r a t i o n and (g) l o s s from any o t h e r i n d i r e c t r e s u l t of an Accident." P l a i n t i f f s bring t h i s appeal from the judgment and order of t h e d i s t r i c t c o u r t , and from i t s d e n i a l of t h e i r post t r i a l motions, assigning the following issues: (1) Whether the t r i a l court erred i n denying (a l a r g e r ) judgment t o the p l a i n t i f f s and against the defendant. (2) Whether t h e t r i a l court erred i n denying p l a i n t i f f s ' motion t o amend and make additional findings of f a c t and conclusions of law. (3) Whether t h e t r i a l court e r r e d i n denying p l a i n t i f f s ' motion f o r a new t r i a l on the ground the evidence did n o t j u s t i f y the v e r d i c t . (4) Whether t h e t r i a l court erred i n f a i l i n g t o grant the m t i o n f o r a new t r i a l on the grounds t h a t e r r o r was committed during t r i a l by denying p l a i n t i f f s ' presentation of evidence regarding cracking of b o i l e r sections which took place subsequent t o October 31, 1971. The arguments propounded by p l a i n t i f f s i n support of these i s s u e s concern p r i m a r i l y t h e l e g a l o p e r a t i o n of t h e insurance c o n t r a c t between t h e l i t i g a n t s and c o l l a t e r a l l y t h e e f f e c t of a l l e g e d negligence by Hartford i n i t s performance of t h e b o i l e r i n s p e c t i o n s and proposed a p p l i c a t i o n of t h e d o c t r i n e of e q u i t a b l e estoppel a g a i n s t Hartford. Regarding t h e primary argument, t h e t r i a l c o u r t found t h a t t h e buildup of s c a l e w i t h i n t h e b o i l e r was n o t "sudden and a c c i d e n t a l " and was n o t a "breakdown o f t h e o b j e c t " which w a s manifested a t t h e time of t h e accident "by physical damage to t h e o b j e c t t h a t n e c e s s i t a t e s r e p a i r o r replacement of t h e o b j e c t " and hence was n o t an "accident" under t h e terms o f t h e policy. Consequently, t h e t r i a l c o u r t r u l e d t h e r e w a s no coverage under t h e p o l i c y of t h e R i e f f l i n s ' expenses of $911.96 f o r t h e b o i l e r cleaning done during t h e summer of 1971 o r of t h e i r expenses o f $4,815.00 f o r t h e b o i l e r replacement done i n February o f 1972. Based upon t h e record b e f o r e u s , we concur with t h e s e r u l i n g s of t h e t r i a l c o u r t . Both t h e s e a c t i o n s were undertaken by t h e R i e f f l i n s i n an attempt t o remedy t h e i n t e r n a l s c a l i n g problem. I n i n t e r p r e t i n g and applying insurance c o n t r a c t s , t h e Montana r u l e has been t o u s e t h e common r a t h e r than some t e c h n i c a l usage o r meaning of d e f i n i t i o n a l terms i n t h e policy, W i l l s v. Midland Nat. L. Ins. Co., 108 Mont. 536, 91 P.2d 695. The i n t e r n a l b o i l e r s c a l i n g problem was n o t an accident under t h e u s u a l meaning of t h e term as defined i n t h e insurance p o l i c y i s s u e d by Hartford. Hartford has paid o r i s now o b l i g a t e d t o pay, under t h e d i s t r i c t c o u r t ' s judgment, the replacement c o s t of three cracked b o i l e r sections. The t r i a l court found t h a t f a i l u r e of the R i e f f l i n s t o submit n o t i f i c a t i o n s of accident and proof of l o s s a s soon a s p r a c t i c a b l e , a s required by the policy, barred any claims f o r reimbursement f o r sections which may have cracked subsequent t o these f i r s t three. Appellants r e l y on the case of Staggers v. U . S . F . & G. Co., 159 Mont. 254, 496 P.2d 1161, i n which t h i s Court held t h a t "substantial compliancef1by insured i n furnishing i n s u r e r with proof of l o s s a s required f o r recovery under a f i r e insurance policy was s u f f i c i e n t . The existence of "substantial compliance" i n Staggers was predicated upon the f a c t t h a t the insureds f i l l e d out and submitted statement of l o s s forms which the i n s u r e r did n o t o b j e c t t o f o r almost two years. In the i n s t a n t case the insureds f i l e d nothing f o r n e a r l y two years concerning the cracked b o i l e r sections i n question. However, the R i e f f l i n s contend t h a t t h e i r i n s u r e r knew of the p r i o r s c a l e accumulation problem and of the three b o i l e r sections which had cracked previously and therefore should have a n t i c i p a t e d t h e l a t e r cracking of b o i l e r sections. To i n t e r p r e t the concept of sub- s t a n t i a l compliance t h i s broadly would eliminate the need f o r any compliance with insurance policy provisions. W find that e the t r i a l court was c o r r e c t i n i t s r u l i n g t h a t the R i e f f l i n s f a i l e d t o comply with the proof of l o s s requirements f o r any except the f i r s t t h r e e cracked b o i l e r sections. The t r i a l court a l s o found, and w concur, t h a t the insure ance s p e c i f i c a l l y excluded from coverage the i n c i d e n t a l damages from frozen pipes claimed i n the amount of $4,500 and from i n t e r r u p t i o n of business l o s s e s claimed i n the amount of $3,000. The record before us does n o t support a p p e l l a n t s ' allegat i o n s of negligence on the p a r t of Hartford i n conducting the inspections of the b o i l e r . Under the terms of t h e insurance contract Hartford reserved t h e r i g h t but did n o t assume the duty t o inspect. A s a general p r i n c i p l e of our law of t o r t s , however, once Hartford undertook to inspect the b o i l e r and make recommendations, they were obliged to do so i n a nonnegligent manner. The hereinabove quoted passages of l e t t e r s from Hartford t o R i e f f l i n s recommend the "excessive feedwater" problem be remedied i n order t o c o r r e c t t h e scaling. There i s no evidence i n the record t h a t these recommendations were followed u n t i l i t became necessary t o replace the e n t i r e b o i l e r . The plumbing contractor who i n s t a l l e d the new b o i l e r t e s t i f i e d t h a t he used a water softener and chemical a d d i t i v e s i n the new feedwater system, t o help r e l i e v e scaling. There i s no testimony t h a t these i n s t a l l a t i o n s would have corrected the s c a l i n g cond i t i o n e x i s t i n g i n t h e o l d b o i l e r , o r t h a t a b o i l e r n o t using excessive amounts of feedwater would r e q u i r e them. The appellants contention concerning application of equitable estoppel i s defective i n t h e f i r s t instance through t h e i r f a i l u r e to r a i s e the i s s u e before t h e t r i a l c o u r t , S t a t e Highway Comm. v. Voyich, 142 Mont. 355, 384 P.2d 765, and i n t h e second instance the record discloses no statement o r conduct on the p a r t of Hartford anmunting t o a misrepresentation, Mundt v. Mallon, 106Mont. 242, 76 P.2d 326. F i n a l l y , concerning the t r i a l court ' s r u l i n g assessing c o s t s against p l a i n t i f f s and appellants R i e f f l i n s , Rule 68, M.R.Civ.P. provides i n p e r t i n e n t p a r t : "* * * I f the judgment f i n a l l y obtained by the of f e r e e i s n o t more favorable than the o f f e r (of judgment), the o f f e r e e must pay the c o s t s incurred a f t e r t h e making of the o f f e r . * * *" W f i n d Rule 68, M.R.Civ.P. e c l e a r l y applicable and c o r r e c t l y applied by the t r i a l court. W f i n d no e r r o r i n the judgment of the d i s t r i c t c o u r t , e and i t i s hereby affirmed. Justice W goncur : e -- : . ,- --- . r ' - - . - AL Cr .%. Chief ~ u s g i c e y. \,A J &&, && Justices I / j&2&
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