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Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co.

Supreme Court of Pennsylvania

October 19, 2004, Argued ; October 25, 2006, Decided

Nos. 47 MAP 2004 & 48 MAP 2004


 [*321]  [**890]   MR. CHIEF JUSTICE CAPPY

In this insurance coverage dispute, Appellant National Union Fire Insurance Company of Pittsburgh, Pennsylvania ("National Union") appeals from the Superior Court's April 16, 2003 order, which reversed the trial court's order granting National Union's motion for summary judgment and remanded the case for additional proceedings to determine whether National Union was responsible for defending and indemnifying Appellee Kvaerner Metals Division of U.S., Inc., and other related companies (collectively, "Kvaerner") in an action brought by Bethlehem Steel [***2]  Corporation ("Bethlehem"). Because we find that National Union has no duty under its policies to defend or indemnify  [**891]  Kvaerner in this case, the order of the Superior Court is reversed.

In June 1997, Bethlehem brought an action against Kvaerner asserting claims of breach of contract and breach of warranty. In its complaint, Bethlehem alleged that it entered into a contract with Kvaerner (the "Contract") pursuant to which Kvaerner agreed to design and construct a coke oven battery (the "Battery") for Bethlehem. According to Bethlehem,  [*322]  under the contract Kvaerner (1) agreed to build the Battery according to certain "plans and specifications that were made a part of the [Contract]," (2) warranted that its materials, equipment, and work would be free from defect, and (3) agreed to repair or replace any defective work or materials.

Bethlehem then contended that based on these facts, Kvaerner breached the above Contract terms because the Battery built by Kvaerner was "damaged" and "did not meet the contract specifications and warranties, or the applicable industry standards for construction…" Bethlehem further alleged that although it sent Kvaerner a "non-performance list" detailing [***3]  the Battery's "damages and breaches," Kvaerner had failed to remedy the Battery's problems. Moreover, Bethlehem incorporated by reference the "damages and breaches" listed in the non-performance list, which enumerated numerous problems with the Battery, including the following:

(1) "100% of the ovens have cracked paver bricks"; (2) "[s]hifting brickwork has caused maximum deviation of centerlines of flue inspection ports"; (3) "[t]he larry car rails are introducing eccentric loads on the oven walls"; (4) "[d]ue to displacement of oven top brick and appurtenances (e.g. larry car rail chairs) the chairs are not directly above the centerline of the heating walls"; (5) "[t]he non-uniform shifting of brickwork in the oven roof resulted in a tilted configuration of the flue inspection ports"; (6) "[s]heared/open joints are present in the horizontal plane of roof brick and there are open joints in the vertical plane of roof brick," causing the migration of gas; (7) "[s]ections of seven lintel blocks [have subsided] and the outer blocks of two ovens are completely broken or shattered"; (8) the centerlines of the Battery's ovens are displaced, causing multiple door jams;  [***4]  (9) there are sheared/open joints between the silica and fireclay in the Battery; (10) the oven walls are not plumb and are distorted, causing them to experience compressive stress orders of a magnitude greater than design; (11) the oven walls are spalling; (12) certain braces deviate from the Contract design specifications; (13)  [*323]  the spring adjustments are inadequate; (14) the tie rod housings are bowed; (15) the buckstays do not comply with the erection tolerances; and (16) water is penetrating the coke side bench.

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589 Pa. 317 *; 908 A.2d 888 **; 2006 Pa. LEXIS 2064 ***

Kvaerner Metals Division of Kvaerner U.S., Inc. f/k/a Kvaerner Davy Division of Kvaerner U.S. Inc. f/k/a Davy International, A Division of Trafalgar House, Inc. and Kvaerner Songer, Inc., f/k/a Kvaerner Davy Songer, Inc. f/k/a Davy Songer, Inc., together A Joint Venture; Kvaerner Metals Division of Kvaerner U.S., Inc. f/k/a Kvaerner Davy Division of Kvaerner U.S. Inc f/k/a Davy International, A Division of Trafalgar House, Inc., Kvaerner Songer, Inc., f/k/a Kvaerner Davy Songer, Inc. f/k/a Davy Songer, Inc.; Kvaerner Public Liability Company f/k/a Trafalgar House Public Liability Company; and Kvaerner ASA v. Commercial Union Insurance Company, Lexington Insurance Company, National Union Fire Insurance Company of Pittsburgh, PA, Bethlehem Steel Corporation, Thyssen Still Otto Anlagentechnick GMBH, Successor-in-interest to Still Otto, GMBH; APPEAL OF: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA

Prior History:  [***1]  Appeal from the Order of the Superior Court entered on April 16, 2003 at No. 973 EDA 2001 and at No. 1212 EDA 2001 which Vacated the Judgument Entered in favor of appellees and remanded the case of the Court of Common Pleas of Northampton County, Civil Division, entered on March 2, 2001, and February 9, 2001, respectively, at No. GD-1998-C-9531. Trial Court Judge: Robert E. Simpson, J. Intermediate Court Judges: Maureen Lally-Green, John T. Bender, JJ., and Stephen J. McEwen, Jr., President Judge Emeritus. 2003 PA Super 149, 825 A.2d 641 (Pa.Super. 2003).

Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commer. Union Ins. Co., 2003 PA Super 149, 825 A.2d 641, 2003 Pa. Super. LEXIS 781 (Pa. Super. Ct., 2003)

Disposition: The court reversed the intermediate appellate court's order.


coverage, damages, Battery's, Policies, occurrence, insured, property damage, trial court, oven, summary judgment, indemnify, work product, trigger, summary judgment motion, faulty workmanship, duty to defend, roof, allegations, bricks, breach of contract, provide coverage, bodily injury, business risk, Non-Performance, subcontractor, workmanship, specifications, provisions, warranties

Civil Procedure, Summary Judgment, Entitlement as Matter of Law, General Overview, Appeals, Summary Judgment Review, Standards of Review, Insurance Law, Commercial General Liability Insurance, Exclusions, Breach of Contract, Business Insurance, Duty to Defend, Indemnification, Standards of Review, De Novo Review, Policy Interpretation, Ambiguous Terms, Construction Against Insurers, Claim, Contract & Practice Issues, Unambiguous Terms, Question of Law, Ordinary & Usual Meanings, Work Exclusion Clauses