The bottom of each bushing was bolted to a lead cable located inside the transformer that in turn was attached to the transformer's internal core and coil. The top portion of the bushing extended about nine feet above the top of the transformer. To remove a bushing from the transformer, it had to be disconnected from the lead cable, which required someone to go inside the transformer and remove all the bolts that attached the components.

In attempting to remove the first bushing, EPS allegedly failed to remove one of the bolts connecting the bushing to the lead cable. When EPS attempted to lift the bushing with a crane, the lead cable was pulled upward, which in turn pulled on the core and coil, damaging it.

After LGE asserted a claim against EPS for the damage to the core and coil, EPS tendered the claim to Zurich American Insurance Company, which had issued EPS a commercial general liability insurance policy.

Zurich denied coverage, citing among other things the j(6) "particular part" exclusion.

EPS sued Zurich. The U.S. District Court for the Eastern District of Missouri concluded that exclusion j(6) precluded coverage. It reasoned that at the time the coil was damaged, the particular part of the transformer on which EPS was working included the bushing, lead cable, and coil. The district court concluded that because the damage to the coil allegedly was caused by EPS's incorrect performance of its work – failing to detach the lead cable from the bushing – exclusion j(6) applied to exclude coverage for the damage to the coil.

The district court granted summary judgment to Zurich.

EPS appealed to the Eighth Circuit. It argued that the district court had misapplied Missouri law by including the core and coil as a component of the "particular part" of the transformer on which EPS had been working. According to EPS, Missouri law supported a narrow interpretation of the "particular part" exclusion and Missouri courts applied this exclusion "with great specificity." EPS argued that the precise part of the property on which it had been working at the time of the occurrence was the bushing, not the core and coil. EPS asserted that in construing the scope of the "particular part" exclusion to exclude coverage for damage to any part of the transformer besides the bushing, the district court had failed to recognize that the bushing, lead cable, and coil were separate and distinct components of the transformer.

The Zurich Policy

Exclusion j(6) of the policy excluded coverage for

property damage 

to

[t]hat particular part of any property that must be restored, repaired or replaced because "your work" was incorrectly performed on it. 

The circuit court, applying Missouri law, affirmed.

In its decision, the circuit court explained that exclusion j(6) excluded coverage for property damage to a particular part of any property on which EPS performed work if EPS's work was incorrectly performed on that particular part.

It then decided that the interpretation of the exclusion urged by EPS was "too narrow." In the circuit court's opinion, a Missouri court would find that the "particular part" of the transformer on which EPS was working included the core and coil. "Disconnecting the bushing from the lead cable and core and coil was the first step of the job of disassembling the bushing, and it was an integral part of the job," the circuit court stated. It then said:

Because the damage to the coil was caused by EPS's faulty performance of its work in detaching the lead cable from the bushing, we agree with the district court that exclusion j(6) applies and there is no coverage for the claimed damage.

The case is Electric Power Systems Int'l v. Zurich American Ins. Co., No. 16-3927 (8th Cir. Jan. 26, 2018). For Electric Power Systems International, Inc., Plaintiff – Appellant: Lori R. Koch, Don Sherman, GOFFSTEIN & RASKAS, Saint Louis, MO. For Zurich American Insurance Company, Defendant – Appellee: Jean-Paul Assouad, Larry D. Fields, KUTAK & ROCK, Kansas City, MO.