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Nord Excavating Inc. v. Northland Insurance Co.

March 29, 2010

NORD EXCAVATING INC., PLAINTIFF,
v.
NORTHLAND INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Honorable Edward J. Lodge U. S. District Judge

MEMORANDUM ORDER

Pending before the Court in the above-entitled matter are Defendant Northland Insurance Company's ("Northland") motion for summary judgment (Docket No. 12) and related motions to strike filed by Northland and Plaintiff Nord Excavating, Inc. ("Nord'). Having fully reviewed the record, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, this matter shall be decided on the record before this Court without oral argument.

Factual Background

Plaintiff Nord Excavating Inc. ("Nord") filed a Complaint in state court alleging breach of contract and bad faith against their insurance company, Northland, for Northland's alleged failure to cover the loss on a certain 1993 Dresser 256 Dozer ("dozer"). Plaintiff alleges the dozer was damaged due to vandalism via sand and dirt in the oil and Northland claims their investigation does not support vandalism as the cause for the failure of the dozer was mechanical failure that is excluded under the insurance policy. Northland removed the matter to federal court and has now moved for summary judgment.

It is undisputed that Northland issued Commercial Inland Marine Policy No. CP497881-06 (the "Policy") to Nord for a one year term expiring on November 1, 2007.

The Policy provided coverage for contractors equipment subject to certain exclusions. The dozer at issue was covered under the Policy. The exception to coverage Northland claims prevents coverage states:

We will not pay for a 'loss' caused by or resulting from any of the following : . . .

Wear and tear, any quality in the property that causes it to damage or destroy itself, hidden or latent defect, gradual deterioration, depreciation, mechanical breakdown, insects, vermin, rodents, corrosion, rust dampness, cold or heat unless 'loss' by fire, lightening, explosion of collision results. . . .

On January 29, 2007, Nord submitted a "Property Loss Notice" claiming the loss to the dozer was attributable to an act of vandalism and indicated the date of the loss was November 20, 2006. Nord alleged someone had tampered with the dozer's engine by placing rocks and debris in the valve covers which caused the engine to fail.

Upon receipt of the claim, Northland hired Intermountain Claims, Inc. ("Intermountain Claims") to investigate the claim. Intermountain Claims conducted an inspection of the dozer and met with a mechanic who inspected the dozer, obtained statements from Nord representatives and collected an oil sample from the dozer. Intermountain Claims issued a report concluding the dozer's engine failure was from a mechanical failure when anti-freeze washed the engine oil off the engine bearings and it was not a result of vandalism.

On March 1, 2007, Pioneer Equipment conducted another inspection of the dozer engine and noted an excessive amount of bearing material in the oil pan, rod bearing gaulded to the crankshaft, a deeply grooved crankshaft, and an excessively flaking bearing. Pioneer found the presence of antifreeze in the oil as well as excessive bearing wear, but did not find any rocks in the oil pan. On March 15, 2007, Horizon Fluid evaluated the oil sample and determined excessive bearing wear, severe levels of coolant indicators, severe levels of bearing material, and high metal levels indicative of crankshaft/camshaft wear. Based on these reports, Northland denied coverage for the failure of the dozer's engine.

On January 10, 2008, Nord reported the alleged vandalism to the Bonneville county Sheriff's Department. No witnesses or suspects were found concerning the vandalism report.

In response to the insurance company's denial of the claim, Nord had the dozer inspected. Nord first had Mr. Don Ker ("Ker") inspect the engine seven months after the dozer's engine failed. Ker determined the oil pan contain an excessive amount of dirt stuck to the bottom and sides along with bearing material from the failed bearings. Ker determined the reason for the engine failure was that someone placed dirt and rocks in the engine.

Nord asked Mr. John Telford ("Telford") to inspect the engine when he was replacing the engine in the summer of 2008. Telford noted extreme wear on the camshaft and gears and noted an excessive amount of sandy dirt inside many parts of the engine. He found sandy dirt in the oil pump which he believes would limit the oil flow. Telford opines the limited oil flow due to the dirt would have been a key factor in ...


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