This is an action of contract upon a machinery and boiler policy issued as of April 9, 1947, which had attached thereto a use and occupancy indorsement for the payment of a daily indemnity, so called, for each day the insured were prevented totally or partially from conducting their business by reason of the happening of an event which was insured against in the policy. The action was referred to an auditor whose findings of fact were final. He found for the defendant. The plaintiffs excepted to the denial of their motion to recommit the report, to the allowance of the defendant's motion to overrule the plaintiffs' objections to the report and that the report "be confirmed,"
The insured named in the policy were the New England Gas and Electric Association and twelve affiliated and subsidiary companies or corporations including the New Bedford Gas & Edison Light Company, hereinafter called New Bedford, the Cape & Vineyard Electric Company, hereinafter called Cape, and the Plymouth County Electric Company, hereinafter called Plymouth. The New England Gas and Electric Association, hereinafter called New England, was a voluntary association under a written declaration of trust. It owned all the capital stock of Cape and Plymouth and 97% of the stock of New Bedford. It was a public utility holding company engaged in supervising the business of its operating subsidiaries. New Bedford produced, distributed, and sold electricity to its customers in the southeastern part of the Commonwealth. Plymouth purchased the greater part of its electricity in bulk from New Bedford and the remainder from Brockton Edison Company. It generated no electricity. Cape purchased all of its electricity from New Bedford except that during the summer it operated a small plant having a capacity of 1,360 kilowatts on Martha's Vineyard for distribution of electric current on that island. These three corporations really formed an integrated system, with New Bedford as the principal source of supply.
The shaft or spindle of one of the turbines at the New Bedford plant was so badly cracked that it became necessary to shut the turbine down and to replace the spindle by a new one. The liability of the defendant to pay the damage arising from the cracking of the spindle and to pay daily indemnities depends on whether that event came within the provisions of the policy. One provision, in so far as now pertinent, reads: "To Pay the Assured for loss on the property of the Assured directly damaged by such Accident (or, if the Company so elects, to repair or replace such damaged property)," excluding losses from various sources not here involved. Another provision, in so far as material,
The case was heard by an auditor whose findings of fact were to be final. His report was in effect a case stated. Merrimac Chemical Co. v. Moore, 279 Mass. 147. Monaghan v. Monaghan, 320 Mass. 367. The report, construed in accordance with the governing principles of law, furnished the sole basis for determining the correct order for judgment that should be entered in the case. In reviewing the action of the trial judge in entering an order for judgment for the defendant we have before us all that he had, and consequently we are in the same position as to both law and fact that he was. The auditor has stated very properly that his ultimate findings of fact rest upon his subsidiary findings, all of which are contained in the report. All of his findings which are not inconsistent with each other or which do not appear to be tainted with error of law must stand. His ultimate conclusions, however, which rest solely by way of inferences upon his subsidiary findings, are open to review here as matter of fact. In this respect, we are not bound by the action of the judge below as to the inferences he drew from the facts found. We must use our own judgment and determine what ultimate conclusions should flow from the subsidiary findings. United States Fidelity & Guaranty Co.
PROPERTY DAMAGE INSURANCE.
New Bedford purchased from Westinghouse Electric & Manufacturing Company, hereinafter called Westinghouse, a 20,000 kilowatt condensing turbine generator, hereinafter referred to as No. 1 turbine. The installation of this turbine began in January, 1946, and it was completely assembled except for generator leads and safety devices by Westinghouse on January 16, 1947. The spindle of the turbine was made of very high alloy steel from a single forging. It varied in diameter from a little less than nine inches to two feet. A boring three or four inches wide ran through its center. Blades were attached to the outside of the spindle so as to cause it to revolve from the impact with superheated steam which was discharged against them. Stationary blades were attached to the inside of the cover or shell of the turbine evidently to channelize the flow of the steam against the blades of the spindle. Outside of this shell was insulating material covered by a sheet metal casing. The spindle rested horizontally on two bearings, one where the steam was let in, and the second one, hereinafter called the No. 2 bearing, near the exhaust and where the steam was
The condenser, the function of which was to cool and convert the steam, after it had been utilized in the propulsion of the spindle, into water which was returned to the boilers where it was reheated and used again, was purchased from and set up by C.H. Wheeler Manufacturing Company, hereinafter called Wheeler. A part of its weight was supported by a flange firmly attached to the casing near the exhaust end of the turbine, and the remainder of its weight was supported by four legs each of which rested upon a metal plate supported by a bank of eight steel springs which in turn rested on the top of a concrete pier. Each of these banks of springs had a device for setting their tension. The condenser was originally designed with an eccentric setting showing its center of gravity to be 16.6 inches off the center line of the turbine exhaust and during the normal operation of the condenser a turning moment would be created about the longitudinal center line of the turbine of about 330,000 foot pounds. It was to counterbalance this designed moment that the spring settings were devised. Due to an error the condenser was set up by Wheeler with its center of gravity 32.5 inches off the center of the turbine exhaust which greatly increased the turning moment. In April, 1946, Wheeler tightened up the springs to such an extent that they supported more than the weight of the condenser and resulted in lifting the turbine off the "chairs" upon which it rested. In June, 1946, the springs were adjusted so that the turbine was let down to rest on its foundation. A conference was held between Westinghouse employees and Wheeler employees, and the latter in July, 1946, again set the springs. This setting did not agree with the drawings and instead of compensating for 330,000 foot pounds an actual turning moment of 584,000 foot pounds was created. Indeed, the hydraulic effect during the subsequent operation of the condenser created a turning moment which varied
The turbine was first started in January, 1947. It was subjected to a series of tests. The generator was out of commission for a month because due to an error a large quantity of oil had been pumped into it. In the latter part of February, 3,000 kilowatts of electricity were produced but the turbine was then shut down due to boiler incapacity. On May 13, 1947, its load was limited to 7,000 kilowatts due to the incapacity of the boilers to produce a throttle temperature of 900 degrees Fahrenheit as called for by the specification. A series of tests was made by Westinghouse employees during the period of May 13 to May 17. The turbine was run from May 24 to May 29 with temporary bus connections and without some safety devices. On May 26, 1947, a load of 18,000 to 20,000 kilowatts was acquired. From June 2 to June 6 the turbine was being run with loads varying from 9,600 to 20,400 kilowatts. The turbine was on the turning gear for tests and inspections of the generator leads and adjustment of the boiler equipment. The turbine was started up about 5:30 o'clock on the morning of June 9, 1947, and ran for approximately an hour at a speed of 300 to 500 revolutions a minute; it was then speeded up and about seven o'clock it was placed on the line. As it was being brought up to speed the turbine was running rougher than usual and this roughness increased and became so violent that it was shut down about 2:30 o'clock in the afternoon. A subsequent examination by Westinghouse employees disclosed a crack extending 190 degrees around the neck of the spindle, which passed completely through and underneath the gland steeple appearing on the opposite side, and a series of fatigue cracks along the remaining 170 degrees. A new spindle was furnished by Westinghouse, the installation of which was completed on October 31, 1947, and which was put in service on November 3, 1947.
During the hearings before the auditor the parties submitted to the auditor a "stipulation as to facts" in which they agreed "that the facts hereinafter stated shall be
The auditor considered each of the six causes assigned by these deponents for the failure of the turbine, to wit: (1) excessive forces and moments placed on the turbine exhausts by the condenser, (2) generator being run on high ambient inlet gas temperatures, (3) no allowance for differential expansion between generator and turbine on original
The event insured against was the sudden and accidental deforming, breaking, or rupturing of the turbine or any part of it so that its function was immediately impaired and its repair or replacement required. All these elements must be proved by the insured in order to recover under the policy. Connolly v. John Hancock Mutual Life Ins. Co. 322 Mass. 678, 681. Rich v. United Mutual Fire Ins. Co. 328 Mass. 133, 134.
We first discuss the question whether the damage to the spindle was accidental.
The auditor made no finding whether the damage was accidental. That was one of the principal issues presented at the hearing before him and it was his duty to decide it. It may be that he deemed a finding unnecessary in view of his conclusion that the cracking was gradual and not sudden. It is true that he traced the origin of the stress that destroyed
The words "sudden and accidental" modify the terms "breaking, deforming ... or rupturing ... which immediately impairs the functions of the Object." They describe a result and they do not refer to any means by which that result has been brought about. The risk covered by the policy was not confined to damage caused by accidental means. The tenor of the auditor's report furnishes persuasive evidence that he treated the policy as if it covered only losses arising out of some sudden or accidental cause instead of determining whether the actual cracking itself was sudden and accidental. His finding, that the only human effort which could be considered in the nature of an accident was the missetting of the springs almost a year before the breaking of the spindle, only confirms our conviction that he has too narrowly construed the policy. The coverage was not limited to accidental means
Even if the improper adjustment of the springs was the only human effort in the nature of an accident, that fact did not bring the damage to the spindle outside of the coverage of the policy. Although the setting of the springs was done voluntarily and knowingly by those who set them, they did not do so with any deliberate purpose or intent to damage the turbine. Compare Sontag v. Galer, 279 Mass. 309, 312, 313. The fact is that they did not know that they had improperly set the springs, much less that the turbine might be damaged. Even if the act of setting the springs constituted negligence, that would not aid the defendant. Johnson v. Berkshire Mutual Fire Ins. Co. 4 Allen, 388. Todd v. Traders & Mechanics Ins. Co. 230 Mass. 595. The missetting of the springs was latent and could only be discovered by measuring them with a caliper and comparing the measurements with the drawings. The plaintiffs were ignorant of any error in the adjustment of the springs until after the damage to the spindle. The auditor found that the damage was not due to the fault or negligence of the plaintiffs or of Westinghouse. In view of the categorical finding "that no cause for the cracking of the shaft [spindle] occurred other than the incorrect setting of the condenser springs," it is difficult to see how the damage to the spindle could be reasonably anticipated. We draw an inference to the contrary. The finding that the damage was inevitable means no more than that damage would result unless the latent defect due to the missetting of the springs was discovered and corrected before the stress increased in such intensity as to damage the spindle.
The term accident, unlimited except by the word sudden, should be given its ordinary meaning as denoting an unexpected, undesigned, and unintended happening or a mishap and as including an event which, according to the
Besides being accidental the damage to the spindle must be sudden. The cause, however, need not be sudden. It is enough if the mechanical breakdown itself is sudden. The distinction is pointed out in Detroit Lakes v. Travelers Indemnity Co. 201 Minn. 26, where the insuring clause was nearly identical with the one in the instant policy and where the question was whether the rupturing of a 1,700 pound casting of a turbine steam engine was sudden. It was said at page 28 that, "Although the factors of causation
The turbine had become violently rough at 1:15 P.M. and so continued until it was shut down about an hour and fifteen minutes later. It would be hard to infer that the spindle, at least during this last mentioned period, was merely undergoing only slow and gradual structural changes, especially in view of its condition as shown by the subsequent examination. We do not agree with the auditor's inference that the cracking of the spindle was gradual and not sudden.
If we lay to one side any idea of the rapidity or quickness in the actual cracking of the spindle and give to the term sudden its primary meaning according to the lexicographers as a happening without previous notice or with very brief notice, or as something coming or occurring unexpectedly, unforeseen, or unprepared for, then the cracking of the spindle comes within this concept of the word, for it is plain from the report of the auditor that the mechanical defect which caused the cracking arose through no fault and even without the negligence of the insured, and that the latter had no knowledge of the existence of the defect, much less any reason to anticipate that it would cause damage to the turbine. In fact, no one knew the cause of the damage until after the spindle had been replaced. The damage to the spindle could not be reasonably anticipated, and its occurrence was unexpected and unforeseen and consequently sudden in the ordinary meaning of the word.
It is too plain for argument that the damage to the spindle immediately impaired its function and necessitated
It therefore follows that the damage to the spindle came within the sudden and accidental type of injury defined by the policy.
The defendant contends that the only conduct that could be considered as an accident was the missetting of the springs in July, 1946, nearly nine months before the term of the policy began, which resulted in the damage to the spindle on June 9, 1947, and that this did not bring the happening to the spindle within the period of the policy. An injury arising from the use of property during the term of the policy is not removed from the risk insured merely because the condition which caused the injury antedated the policy. George W. Deer & Son v. Employers Indemnity Corp. 77 Fed. (2d) 175. Export Steamship Corp. v. American Ins. Co. 106 Fed. (2d) 9. Tulare County Power Co. v. Pacific Surety Co. 43 Cal.App. 315. Farmers Cooperative Society No. 1 v. Maryland Casualty Co. 135 S.W.2d 1033 (Tex. Civ. App.).
The defendant contends that the No. 1 turbine was never included in the coverage. It relies upon Edward Rose Co. v. Globe & Rutgers Fire Ins. Co. 262 Mass. 469. In that case a bale of cotton waste containing a spark which had become imbedded in it as it passed through a machine was included in each of three shipments of waste at the time the bales were placed in freight cars and the transportation began. This was the time when the term of fire insurance on those shipments commenced. At that time, neither the insured nor the insurer knew that a part of the shipment was on fire. The fires from these bales damaged the rest of the waste. The court, after pointing out that the property was actually on fire at the commencement of the term stated in the policy, stated that it could not be said that the parties contemplated that the policies should take effect in such circumstances; that the situation was analogous to
The doctrine of implied warranty as to the seaworthiness of a vessel at the commencement of the risk in force in marine insurance is not to be readily extended to other branches of insurance. Springfield Fire & Marine Ins. Co. v. National Fire Ins. Co. 51 Fed. (2d) 714, 719. Walker v. Fireman's Fund Ins. Co. 114 Or. 545. The fact that there was a latent defect in a boiler did not bar recovery against the insurer in First National Bank v. Royal Indemnity Co. 193 Iowa, 221.
The policy provided for the payment to the insured "for loss on the property of the Assured directly damaged by such Accident" with certain exceptions including "(e) loss from any indirect result of an accident." The contract of insurance was one of indemnity and the insured were entitled to be put in the same condition pecuniarily as if the property had not been damaged. Kingsley v. Spofford, 298 Mass. 469, 474-477. The reasonable cost of replacing the spindle if a charge had been billed by Westinghouse to New Bedford would have been $87,876.77. Westinghouse made no charge and attorneys for the insured stated to the auditor in open court that it might be assumed by him that none would be made although there was no express agreement between Westinghouse and New Bedford. We do not know
After the damage to the spindle New Bedford leased, made necessary changes in, and operated a street railway generating station, and set up additional transformers to enable Brockton Edison Company to supply more current
USE AND OCCUPANCY INSURANCE.
By the use and occupancy indorsement 6A, the insurer agreed to pay a daily indemnity of $11,000 for each day of total prevention of business on the premises described as power generating and distributing plants of New Bedford, Plymouth and Cape "caused solely by an Accident," "and to pay the Assured a part of the Daily Indemnity for Partial Prevention of Business on the Premises, so caused," subject to a limit of loss of $2,090,000. This indorsement provided for four different kinds of business — production, sales, rents, and income — with a definition for each kind. It stated that business here covered was "Production" which "shall mean the production on the Premises of the finished product ready for packing, shipment or sale." In accordance with another provision in the indorsement to determine "Current Business," New Bedford selected its output for April 30, May 1 and May 2, 1947, the net average production of electricity by New Bedford for these
New Bedford paid the insurer eight elevenths, Plymouth one eleventh, and Cape two elevenths of the premium charged under this indorsement. The purpose of this kind of insurance is to pay the insured for the loss which he sustains by reason of being totally or partially deprived of the use of his commercial property. Many use and occupancy policies base the amount to be paid, in case of loss, upon the net profits that the business would have earned if it had not been interrupted by damage to the plant, together with the fixed charges necessarily incurred during the suspension of the business. The indorsement in the case at bar provides for the selection of a standard of the capacity of the plant before it was damaged and provides for the payment of indemnity for reduction in that capacity due to the damage. It is not directly concerned with profits and fixed charges but is concerned with production before and after the damage. Both types of policies carry a limitation as to amounts to be paid and a limitation of the period for which payment is to be made.
It is to be noted that in ascertaining the output of the New Bedford plant on the three days selected, which furnished the standard for determining the daily indemnity, the No. 1 turbine was not in operation. On those days the six other turbines were manufacturing a net average of 1,377,460 kilowatt hours. They continued to operate while a new spindle was being substituted for the damaged one. The insured point out that electricity unlike other commodities cannot be manufactured and stored but must be produced and be available when a customer desires to use it. Production cannot be maintained at a uniform rate throughout any day but must be maintained at various rates to correspond with the demands of the customers. The plant according to the insured must be capable of sustaining the peak loads during the periods of the day when the demands are greatest. There was testimony briefly stated in the report which tended to show that before or after June 9, 1947, and up to the time the new spindle was put in service on November 3, 1947, the six turbines were able to meet whatever peak loads were needed. Furthermore, these six turbines on the days selected to determine the current business were carrying the required peaks which averaged about 80,000 kilowatts. Although New Bedford had the equipment to produce electricity equal to the volume of current business, it produced less than this amount on all days except eight during the period that the spindle was being replaced. It was obligated by the policy to adopt all reasonable measures to minimize the loss. It accordingly reduced the amount supplied to Plymouth and secured electricity from the street railway plant in order to see that its customers were supplied. Doubtless, cutting down on the amount furnished Plymouth by 11,211,999 kilowatt hours less than it would have otherwise supplied reduced the load which would have been imposed on the New Bedford
In any event, the auditor found that the sole reason 1,377,460 kilowatt hours of useful electricity were not generated by New Bedford on any day between June 9, 1947, and November 3, 1947, when that amount was not generated for distribution to the general public was the lack of demand for this quantity. We see no reason to disturb that finding. It is decisive upon the claim of New Bedford under the use and occupancy indorsement which did not require the payment of partial daily indemnity where the production of electricity was less than current business as fixed by the quantity last mentioned unless such reduction was due solely to the accident of June 9, 1947. New Bedford failed to prove that its daily capacity was reduced to less than 1,377,460 kilowatt hours of electricity due entirely to the cracking of the spindle.
Plymouth and Cape were not entitled to recover for daily partial prevention of business. Plymouth was engaged in the purchase, distribution, and sale of electricity. It did not generate any current. It is at least doubtful whether Plymouth's business was production as defined in the indorsement and as therein carefully differentiated from the other three kinds of business as we have already pointed out. If we assume, without deciding, that the business conducted by Plymouth came within the coverage and that it would be entitled in the circumstances, on account of partial prevention of its business, to share in the daily partial
The nature of these claims has already been mentioned. None of them can be recovered under a clause insuring against loss to property directly damaged by an accident and expressly excluding losses indirectly resulting from such damage. The damage sustained by the turbine is the measure of damages, and an incidental loss resulting therefrom such as "interruption of business, loss of profits or even loss of rents" cannot be recovered.
We have considered the various other contentions of the parties, their objections to the auditor's report, the motion to recommit, and the rulings of the trial judge upon them. To discuss them separately would unnecessarily and unreasonably prolong the opinion. Other than the findings that the breaking was gradual and not sudden and that the happening of an accident could be reasonably anticipated, and the general finding for the defendant, we find no error in the report. There was error in allowing the defendant's motion for judgment.
It follows that all the exceptions except those just specially mentioned are overruled, and that the plaintiffs' exception to the ordering of judgment for the defendant is