ACE AMERICAN INS. CO. v. KEYSTONE CONSTRUCTION & MAINTENANCE SERVICES, INC.
United States District Court, D. Connecticut.
September 27, 2012.
After the explosion, the Governor of Connecticut issued an executive order banning power plants from using natural gas in gas blows. Around that time, the National Fire Protection Association also instituted standards prohibiting the use of flammable gas to clean the interior of piping systems.
Prior to the explosion, Kleen had contracted with defendant O&G Industries, Inc. ("O&G") to design, construct, and deliver gas to the Kleen Plant. O&G subcontracted the work out to Keystone, Bluewater, WorleyParsons, and Siemens, among others.
Keystone was responsible for, among other things, engineering and designing the gas blow temporary piping, developing the safety procedures for the gas blow process, and implementing the gas blow process.
Bluewater was responsible for, among other things, the engineering and design of the temporary gas lines used for the gas blow process, the design and implementation of the gas blow process, and the design and implementation of gas blow safety procedures at the Kleen Plant.
WorleyParsons provided engineering services for the construction of the Kleen Plant, including the design of the main gas fuel supply line, end supply piping to the turbines, and implementation for gas piping.
The natural gas for the gas blows at the Kleen Plant was provided by Sprague. Sprague knew that the gas was to be used for a gas blow. Kleen did not alter the gas sold by Sprague in any way. Algonquin transported Sprague's natural gas to the Kleen Plant through its "Kleen Energy Lateral" and meter station. Algonquin knew that the gas was to be used for gas blows. Algonquin is Spectra's subsidiary.
Siemens required, in its "System Requirements," that the gas piping servicing its turbines be cleaned of all debris. In its system requirements, Siemens indicated that natural gas was typically used to clean gas piping. The plaintiffs are also suing Siemens AG, Siemens' parent company.
1. Unless otherwise noted, all background information is taken from the Third Amended Complaint.
2. Although the plaintiffs made similar allegations with regard to Algonquin, at the motion hearing the plaintiffs admitted that they had no reason to believe Algonquin was involved in developing gas blow protocols.
3. In response to the motion to dismiss, the plaintiffs provided the court with an affidavit describing Spectra's involvement in the gas blows. I am unable to consider that additional material at the motion to dismiss stage.
4. Plaintiffs' various builder's risk insurance policies follow the form of a single lead policy issued by Ace American Insurance Company. Unless otherwise noted, the term "insurance policy" refers to Kleen's insurance agreements with the plaintiffs.
5. In support of their argument, the plaintiffs cite Stop & Shop Supermarket Co. v. Abco Refrigeration Supply Corp., 48 Conn.Sup. 301 (2003). Stop & Shop was also a subrogation action, in which the defendant claimed to be an additional insured. The contract in that case stated that "Unless otherwise provided, the Owner shall purchase and maintain . . . property insurance upon the entire Work at the site to the full insurable value thereof. This insurance shall be on an all-risk policy form and shall include interests of the Owner, the Contractor, Subcontractors, and Sub-subcontractors in the Work and shall insure against the perils of fire." Id. at 305. The Court concluded that the defendant was not an "additional insured" under that agreement because "[w]hen Stop & Shop wanted to designate others as additional insureds, it did so." Id. at 311. I believe there is more evidence in this case that the subcontractors were actual insureds under the contract, including the fact that the Contractor was considered a fiduciary for the "insureds," including the subcontractors.
6. Perhaps the least convincing of Bluewater's arguments is that the contract should be read in the subcontractors' favor because the contract is ambiguous. "`As with contracts generally, a provision in an insurance policy is ambiguous when it is reasonably susceptible to more than one reading. . . . Under those circumstances, any ambiguity in the terms of an insurance policy must be construed in favor of the insured because the insurance company drafted the policy.'" Johnson v. Conn. Ins. Guar. Ass'n, 302 Conn. 639, 640 (2011) (quoting Conn. Med. Ins. Co. v. Kulikowski, 286 Conn. 1, 5-6 (2008)). The ambiguity here stems not from the insurance agreement, however, but the contract between Kleen and O&G. There is no indication that Kleen alone drafted the contract, and thus the usual rule regarding ambiguity in insurance agreements does not apply here.