Furnace Not Defined Object Covered By Policy

Commercial Property	Business Interruption
Boiler and Machinery	Ambiguity

A steel galvanizing facility, covered by a boiler and machinery policy, suffered both physical damage loss and business interruption and loss of income due to heat damage to the large, cylindrical "rolls" internal to their galvanizing furnaces. The insured submitted a claim for damages to their boiler and machinery carrier, who denied coverage based on policy exclusions.

The basis of the contention between the insured and insurer was the definition of a furnace. "Furnace" was not defined in the policy, nor could the insured or insurer come up with a reasonable definition.

The rolls were actually a part of the robotic conveyance system that rolled or moved large steel through a series of four separate but continuous furnace processes. Without the rolls, the steel would not be able to move through the operation and, as such, were an essential part of the system. It was not disputed that the rolls were a part of the system's robotics equipment.

The boiler policy covered as defined objects" any: "(1) Boiler, fired vessel, unfired vessel normally subject to vacuum or internal pressure other than weight of its contents, refrigerating and air condition vessels, and any piping and its accessory equipment, including any boiler or pressure vessel mounted on mobile equipment. (2) Mechanical or electrical machine or apparatus used for the transmission or utilization of mechanical or electrical power including but not limited to: (a) fiber optic cable; (b) robotic equipment . . . ." Since the furnace assembly covered by the policy was pressurized, the insured contended the coverage applied.

The policy exclusions stated: "Object does not mean any: . . . (6) oven, stove, furnace, incinerator, pot or kiln; . . . ." The insurer used this exclusion to deny coverage but did not define furnace in the policy, nor could the insurer provide the court with a definition that would be used by a reasonable person.

The original trial court ruled in favor of the insurer as the rolls in question were the robotics or equipment for the item or object described as furnaces.

Upon appeal, the district court also ruled that the rolls were part of the furnace operation and thus excluded.

The case went to U. S. District Court where, after careful and thorough review, it was determined that since a technical definition of furnace was not provided in the policy and that a dictionary definition was so broad as to exclude even those items shown as covered, the term as used in the policy contract was ambiguous and would defeat the intent of the coverage provided.

The lower courts' decisions were overturned and ruled in favor of the insured.

I/N Kote, Plaintiff-Appellant v. The Hartford Steam Boiler Inspection and Insurance Company, Defendant-Appellee. 7^th Cir. No. 96-2052, June 11, 1997. United States District Court for the Northern District of Illinois, Eastern Division. CCH 1997 Fire and Casualty Cases, Paragraph 6183.