Arkwright Mutual Insurance v. Gwinner Oil, Inc. ( 1997 )

___________
No. 96-3004
____________
Arkwright Mutual Insurance *
Company, a Massachusetts *
corporation; Insurance Company *
of North America, a *
Pennsylvania corporation, *
*
Plaintiffs - Appellants, *
* Appeal from the United States
v. * District Court for the
* District of North Dakota.
Gwinner Oil, Inc., a North *
Dakota corporation; Commonwealth *
Petroleum Co., an Ohio *
Corporation; Gwinner Propane *
Inc., an Ohio corporation, *
*
Defendants - Appellees. *
___________
No. 96-3223
___________
Arkwright Mutual Insurance *
Company, a Massachusetts *
corporation; Insurance Company *
of North America, a *
Pennsylvania corporation, *
*
Plaintiffs - Appellees, *
*
v. *
*
Gwinner Oil, Inc., a North *
Dakota corporation, *
*
Defendant, *
*
Commonwealth Petroleum Co., an *
Ohio corporation; Gwinner *
Propane, Inc., an Ohio *
corporation, *
*
Defendants - Appellants.*
___________
No. 96-3227
___________
Arkwright Mutual Insurance *
Company, a Massachusetts *
corporation; Insurance Company *
of North America, a *
Pennsylvania corporation, *
*
Plaintiffs - Appellees, *
*
v. *
*
Gwinner Oil, Inc., a North *
Dakota corporation, *
*
Defendant - Appellant, *
*
Commonwealth Petroleum Co., an *
Ohio corporation; Gwinner *
Propane, Inc., an Ohio *
Corporation, *
*
Defendants. *
___________
Submitted: June 9, 1997
Filed: September 19, 1997
___________
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Before MURPHY and HEANEY, Circuit Judges, and BOGUE,* District Judge.
___________
BOGUE, Senior District Judge.
This case arises out of an explosion and fire in Gwinner, North
Dakota at The Melroe Company’s manufacturing plant, on January 31, 1993.
The plaintiffs, Arkwright Mutual Insurance Company and Insurance Company
of North America were Melroe’s property insurers at the time of the
explosion. They brought this subrogation action in their own names against
the defendants, Gwinner Oil Company and Gwinner Propane, Inc., for
negligence in delivering liquid propane to their insured, Melroe.
Defendant Commonwealth Petroleum Company is the parent company of Gwinner
Propane and was named as a defendant for its alleged negligent training and
supervision of Gwinner Propane’s employees. The district court1 entered
judgment against the plaintiffs upon a jury verdict assessing more than 50%
of the fault for the loss to Melroe. The plaintiffs appeal from that
verdict and judgment asserting several points of error. We affirm.
I.
Melroe is a large industrial company which manufactures “Bobcat” skid
steer loaders at its factory in Gwinner, North Dakota for shipment to
customers worldwide. Melroe uses large amounts of liquid propane to heat
its manufacturing facility and power its
*The HONORABLE ANDREW W. BOGUE, United States District
Judge for the District of South Dakota, sitting by
designation.
1
The Honorable Rodney S. Webb, Chief Judge, United States
District Court for the District of North Dakota.
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factory utility vehicles. In fact, during the winter months, Melroe
consumes approximately 30,000 gallons of propane per week. At the time of
the accident, Melroe was storing nearly 100,000 gallons of propane in a
storage and delivery system located on its property. This system consisted
of five large tanks--four with 30,000 gallon capacities each, and one with
a 15,000 gallon capacity. These five containers were interconnected with
a series of pipes called a “manifold” which enabled all of the containers
to operate together as one storage system. Each tank had its own shut-off
valve, however, so that any one tank could be shut off or isolated from the
rest of the system. With all of the valves open, a properly manifolded
system maintains a relatively equal level of propane in all of the tanks
as the propane is consumed. The liquid level in the tanks can vary widely,
however, due to the peculiar properties of liquid propane. As the
temperature rises, liquid propane expands. A small increase in temperature
can cause a large volume expansion within the tanks. If a tank is
overfilled, and the propane then expands with an increase in temperature,
hydrostatic pressure begins to build within the tank which, without some
mechanism for releasing excess pressure, could become great enough to
rupture the tank. To prevent such an event, each of Melroe’s tanks were
equipped with two pressure relief valves designed to vent propane into the
atmosphere if the pressure inside the tanks reached unusually high levels.
By regulation, all of the relief valves were required to be fitted with
caps to prevent rain, snow, ice, etc. from blocking the vents and causing
the valves to fail.
Melroe contracted with Gwinner Propane to supply its great demand for
propane. Because Gwinner Propane did not have a delivery truck large
enough to transport the bulk propane required by Melroe, Gwinner Propane
contracted with Gwinner Oil whereby Gwinner Oil used its fuel transporter
to make propane deliveries
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from Gwinner Propane’s rail siding to Melroe’s plant. Melroe’s fuel was
supplied on an “as needed” basis. Gwinner Propane’s manager, Daniel
Enderson, monitored Melroe’s fuel levels and decided when to deliver
propane, and in what amounts. Marshall Johnson drove Gwinner Oil’s fuel
transporter. Although he was an employee of Gwinner Oil, he took
instructions from Enderson relative to the Melroe deliveries.
On January 25, 1993, at Enderson’s direction, Marshall Johnson made
another delivery of fuel to Melroe. Before pumping the nearly 9,000
gallons of propane into the manifold, Johnson noticed the 15,000 gallon
tank was registering 97% full--a dangerously high level. Johnson called
Enderson to report the overfull tank. Enderson instructed Johnson to close
the shut-off valves to the 15,000 gallon tank, deliver the fuel to the
system and reopen the valves to the tank. Johnson followed these
instructions and the delivery was made without incident. Upon learning of
the overfull tank, Enderson placed a telephone call to Melvin Adolfs, the
maintenance foreman at Melroe, and informed him that the tank was
registering 97% full. Adolfs in turn conveyed the information to Jerry
Johnson, Melroe’s maintenance coordinator, and to Mark Hardebeck, Melroe’s
maintenance worker in charge of the propane system. No one took measures
to correct the problem. On January 27, Marshall Johnson returned to Melroe
with another 9,000 gallons of propane. When he informed Enderson that the
small tank was still 97% full, Enderson instructed him to follow the same
delivery procedure as that of two days earlier. On January 29, Johnson was
instructed to pump another 9,000 gallons of propane into the system
following the same procedures, despite that the 15,000 gallon tank was
still registering 97% full. After Enderson’s initial call to Melroe
regarding the overfull tank, no more calls were made to inform them the
tank was still full. As of the January 29 delivery, no one had taken any
measures to correct the problem.
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By January 31, the outside temperatures had warmed from below zero
to above freezing Fahrenheit. At about 6 a.m. on the morning of January
31, the 15,000 gallon tank ruptured and began releasing its contents. The
ensuing explosion and fire caused nearly $2 million in damage to the Melroe
plant and surrounding neighborhood. As Melroe’s insurers, the plaintiffs
bore the bulk of this loss.
At trial, the plaintiffs theory was that Marshall Johnson overfilled
the tank, closed its shut-off valves, and left them closed for a week,
thereby isolating the tank from the rest of the system. Moreover, because
the rain caps were missing from the pressure relief vents, they became
blocked with snow and ice preventing them from releasing excess pressure.
The overfilled isolated tank, they argued, combined with a dramatic rise
in temperatures, created tremendous hydrostatic pressure inside the tank
which ultimately caused the tank to fail at pressure levels much higher
than it was designed to withstand. The plaintiffs presented evidence to
support their theory that the defendants knew the rain caps were missing,
knew the tank was dangerously overfull, did nothing to alleviate the
problem, and in fact, added fuel to an extremely dangerous manifold system.
The plaintiffs maintained that the defendants’ fault far exceeded that of
Melroe’s because the defendants breached their duty to either inspect
Melroe’s storage system or shut off the supply of propane once it obtained
knowledge that the system was unsafe.
The defendants’ theory, on the other hand, was that the tank failed
as a result of a defective weld which, over time, weakened and burst at
pressures much lower than 250 psi--the pressure at which the relief valves
were calibrated to activate. The defendants disputed the plaintiffs’
theory that the shut-off valves were closed and that the vent pipes were
blocked by snow and ice. They presented expert testimony to support their
theory that the
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cracked weld caused the tank to become overfull. The increased
temperature, they argued, created pressure levels which, although lower
than 250 psi, were higher than normal. As the weakest point on the tank,
the defective weld then failed under the pressure, allowing the propane to
escape and ignite. The defendants argued that Melroe’s fault exceed their
own because Melroe’s storage tank and maintenance procedures did not comply
with industry standards, thus allowing this accident to occur.
The jury was instructed to apportion fault among the various parties
pursuant to North Dakota’s comparative fault laws. The jury returned a
verdict assessing 54% fault to Melroe, 26% to Gwinner Propane and
2
Commonwealth Petroleum, and 20% to Gwinner Oil.
II.
The plaintiffs first argue the district court erred in refusing to
submit the plaintiffs’ proposed jury instruction regarding a propane
supplier’s duty of care when delivering propane into customers’ appliances
that are known to be unsafe. Failure to instruct on this duty, they
maintain, erroneously allowed the defendant to characterize their duty as
merely an allegation of negligence rather than an affirmative duty imposed
by law. See, Monahan v. Flannery, 755 F.2d 678, 684 (8th Cir.
1985)(reversing a judgment based upon faulty instructions because it was
“quite possible that the jury could have believed that the [legal duty]
was, in fact not a specific duty by law, but, instead, merely an
2
Gwinner Propane merged into Commonwealth Petroleum Company
prior to trial and the jury was instructed to consider the
negligence of both as if they were one entity.
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allegation of negligence by plaintiffs”). The plaintiffs’ proposed
instruction No. 21 provides:
The law imposes an affirmative duty upon a supplier of liquid propane
to investigate once it receives reasonable notice of the existence
of danger. Whenever a distributor or supplier of liquid propane is
in possession of facts that would suggest to a person of ordinary
care and prudence that a storage container or appliance of a customer
is unsafe, the company has the duty to investigate, as a person of
ordinary care and prudence similarly situated in handling a dangerous
substance would do, before it continued to furnish additional liquid
propane. The duty to exercise reasonable diligence to inspect or
shut off the liquid propane supply is measured by the likelihood of
the injury and only arises upon a reasonable notice of the existence
of danger. The law does not measure the duty to exercise reasonable
diligence by the customer’s sophistication.
We review the district court’s instructions to the jury for an abuse
of discretion. Hoselton v. Metz Baking Co., 48 F.3d 1056 (8th Cir. 1995).
De novo review applies, however, to the issue of whether the district court
correctly interpreted state law. Kostelec v. State Farm and Cas. Co., 64
F.3d 1220 (8th Cir. 1995). It is well established that a party is entitled
to have the jury instructed on its theories if the proposed instructions
are correct statements of the law and supported by the evidence. Hoselton,
48 F.3d at 1063. The district court, however, is not bound to give the
instruction requested by the litigants. Rather, the court has broad
discretion in choosing the form and the language of the instructions. Essco
Geometric v. Harvard Industries, 46 F.3d 718, 727 (8th Cir. 1995). There
is no reversible error if the instructions, taken as a whole and viewed in
the light of the evidence and applicable law, fairly and adequately submit
the issues to the jury. Randle v. Parker, 48 F.3d 301, 304 (8th Cir. 1995).
Initially, we must determine whether North Dakota has expressly delineated
the legal duties owed by propane gas suppliers. The district court
concluded it has not.
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A.
The plaintiffs argue that North Dakota law “imposes a duty upon
suppliers of propane to inspect and take affirmative action in the face of
propane-related danger.” They suggest that this duty arises from the
National Fire Protection Association (NFPA) safety standards adopted by the
North Dakota Fire Marshal pursuant to his authority under N.D.C.C. § 18-09-
02 to make rules or regulations setting forth minimum general standards for
the transport and utilization of liquified petroleum gases. NFPA standard
58, as adopted by the North Dakota Fire Marshal, provides in part that
“[c]ontainers shall be filled only after determination that they comply
with the design, fabrication, inspection, marking and requalifcation
provisions of this standard.” NFPA 58 § 4-2.2.3. The plaintiffs cite no
authority nor does the Court’s research reveal any authority wherein this
provision of the safety standards has been interpreted by the North Dakota
courts as imposing an affirmative duty upon a propane supplier to inspect
its customers’ appliances and take affirmative actions when it knows an
appliance is unsafe. Indeed, the applicability of NFPA 58 was hotly
contested at trial. The defendants called Mr. William Mahre to testify
relative to NFPA 58’s application. Mr. Mahre is a member of the National
Propane Gas Association safety committee and is regularly involved in the
interpretation and application of NFPA 58 for the propane industry and
propane users. Mr. Mahre testified that in his opinion, § 4-2.2.3 did not
apply to the defendants. In the face of the uncertainty surrounding its
interpretation and application, the district court did not err in refusing
to instruct on an affirmative duty arising out of NFPA 58.
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B.
The plaintiffs also refer us to Van Ornum v. Otter Tail Power Co.,
210 N.W.2d 188 (N.D. 1973) for the proposition that the North Dakota
Supreme Court has imposed a duty to take affirmative action in the face of
a propane-related danger when the party knows about the danger and has the
authority to reduce it. The plaintiffs, however, mischaracterize the
holding of Van Ornum. In Van Ornum a construction worker was suffocated
when he entered a sump room filled with propane gas in the basement of the
new building his employer was constructing. One of the named defendants
in the wrongful death action brought by the decedent’s wife was the
architect who designed the new building. The plaintiff alleged that the
architect knew of the unsafe condition of the sump room but did nothing to
halt the construction or alter the design plans to correct the problem.
The plaintiff appealed the trial court’s refusal to instruct the jury that
the architect, as a matter of law, had authority under its contract with
the building owners, to halt construction or take whatever measures were
necessary to correct the known danger in the sump room. The court rejected
the plaintiff’s argument and merely held, inter alia, that the architect’s
authority under the contract was a question of fact for the jury, and the
jury was properly instructed that if the architect indeed had such
authority yet failed to exercise it in the face of a known danger, such
failure to act might constitute negligence. Id. at 200-01. The Van Ornum
case does not, as the plaintiffs argue, impose an affirmative duty upon the
defendants to inspect and take action in the face of a known propane-
related danger.
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C.
Alternatively, the plaintiffs would have us rule that North Dakota
would follow other jurisdictions which have addressed this issue and impose
an affirmative duty on the part of a propane supplier to inspect the
appliance or shut off the supply after obtaining notice that the storage
appliance is unsafe. The plaintiffs rely substantially on Simpson v.
Skelly Oil Company, 371 F.2d 563 (8th Cir. 1967) for the language of their
proposed instruction number 21. In Simpson, a residential customer of the
defendant oil company sued to recover damages from an explosion that
occurred when the customer attempted to re-light the pilot on his propane
burning water heater. There was evidence that the propane supplier
inspected the water heater but failed to detect a gas leak in the system.
Because the Iowa courts had not defined the duty of a gas distributor in
Iowa to inspect or remedy defects after notice of a leak in appliances
owned by its customers, the court relied in part on the cases of
surrounding states regarding the question of the duty of a gas supplier.
The court held that when a gas supplier is on notice of the unsafe
condition of one of its residential customer’s appliances, it has a duty
to either inspect the appliance before furnishing additional gas, or shut
off the gas supply entirely. Id. at 567-68. Importantly, however, in
Simpson and the other cases relied upon by the plaintiffs, the courts
imposed an affirmative duty to inspect or shut off the gas only in those
situations where the defective appliance was owned by a residential
customer of the supplier.3 In the case at bar,
3
See, Gas Service Co. v. Helmers, 179 F.2d 101 (8th Cir. 1950);
Bellefuil v. Wilmar Gas Co., 66 N.W.2d 779 (Minn. 1954); Ambriz v.
Pertolane, 319 P.2d 1 (Cal. 1958); and Weber v. Interstate Light
and Power Co., 68 N.W.2d 39 (Wis. 1955).
In Van Den Hul v. Baltic Farmers Elevator Co., 716 F.2d 504
th
(8 Cir. 1983) this court indicated that South Dakota would
probably adopt the definition of a gas supplier’s duty set out in
Simpson where a propane supplier was on notice that the grain
elevator’s gas line was defective. There is no indication,
however, that the elevator’s propane system and consumption were
vastly different from that of a residential customer.
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Melroe had a maintenance crew of 20 workers, one of whom was specifically
assigned to the propane storage system. Melroe was subject to a myriad of
regulations relative to their tank farm and was responsible for training,
maintenance, and the safe operation of their tanks. We cannot conclusively
say that under these circumstances, the North Dakota court would impose an
affirmative duty upon a gas supplier to inspect Melroe’s tank farm or take
measures, other than those taken by the defendants here, to correct the
situation.
Because the plaintiffs’ proposed instruction 21 does not accurately
reflect the law of North Dakota, the district court did not err in refusing
to give that specific instruction to the jury. Our ruling does not mean,
as the plaintiffs suggest, that a supplier is free to disregard any
dangerous situation and indiscriminately add propane to an unsafe system.
It only means there is no specific duty imposed upon the defendants by
North Dakota law. General negligence law, on the other hand, still
applies. The suppliers in this situation are not relieved of their duty
to act reasonably under the circumstances, nor of their liability for their
failure to so act. We have reviewed the court’s instructions in this case
and find that, as a whole, they fairly and adequately presented the issues
and the plaintiffs’ theory to the jury.
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III.
The plaintiffs next argue the district court erroneously admitted the
opinions of two of the defendants’ expert witnesses, Thomas Crane and John
Brynildson. We review the district court’s admission of expert testimony
for an abuse of discretion. Ventura v. Titan Sports, Inc., 65 F.3d 725 (8th
Cir. 1995).
A.
Crane, a mechanical engineer, was called by the defendants to offer
an opinion as to how the 15,000 gallon tank became 97% full and remained
so throughout the week despite that the propane levels in the four other
tanks were rising and falling uniformly. Crane’s opinion was in part based
upon a report by Philip Johnson prepared in connection with this accident.
Johnson was an expert and consultant in the gas industry and a former
employee of Crane’s firm. Unfortunately, Mr. Johnson died before this case
went to trial. The plaintiffs objected to any of Crane’s testimony based
upon his reliance on Johnson’s report on grounds that it was not admissible
under Fed. R. Evid. 703. Pursuant to Rule 703, an expert may rely on
otherwise inadmissible hearsay evidence in forming his opinion if the facts
and data upon which he relies are of a type reasonably relied upon by
experts in his field. Fed. R. Evid. 703; South Central Petroleum, Inc. v.
Long Brothers Oil Co., 974 F.2d 1015, 1019 (8th Cir. 1992). Specifically,
the plaintiffs objected to Crane’s testimony on grounds that Crane never
testified that Johnson’s report was of the type reasonably relied upon by
experts in his field. Our review of the record, however, reveals the
district court made inquiry of Crane on this point and was satisfied that
Johnson’s report was of the type reasonably relied upon by experts in the
field and that it was reasonably relied upon by Crane in forming his
opinion. Moreover, as required by Rule
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703, the district court expressly limited the admission to Crane’s opinion
and did not admit the substance of Johnson’s report. South Central, 974
F.2d at 1019.
In any event, any error in the admission of testimony based upon
Johnson’s report would be harmless. Although Crane relied on Johnson’s
report in forming his opinion, this reliance was not exclusive. Where an
expert’s opinion is partly based on hearsay which does not meet the Rule
703 requirements, his opinion is nevertheless admissible if it is supported
by the other independent bases upon which he relied to form that opinion.
See, Simmons v. Chicago and Northwestern Transportation Co., 993 F.3d 1326
(8th Cir. 1993)(per curiam). Here the record shows that in addition to
Johnson’s report, Crane relied upon his own thorough understanding of the
manifold system, his extensive experience in the behavior of propane, and
his extensive investigation of the physical evidence, including the storage
tanks, to arrive at his conclusions. We find that the district court did
not abuse its discretion, and properly admitted Mr. Crane’s expert
testimony.
B.
The plaintiffs argue further that the district court erroneously
admitted the expert testimony of John Brynildson, a metallurgist called by
the defendants to testify regarding his opinion on the cause of the
explosion. The plaintiffs maintain that Brynildson should not have been
allowed to testify because his opinion was “pure speculation and totally
lacked foundation.” This argument goes to the weight rather than the
admissibility of the expert’s testimony. “[T]he factual basis of an expert
opinion goes to the credibility of the testimony, not the admissibility,
and it is up to the opposing party to examine the factual basis for the
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opinion in cross-examination.” Hose v. Chicago Northwestern
th
Transportation Co., 70 F.3d 968, 974 (8 Cir. 1995)(citing Loudermill v.
th
Dow Chemical Co., 863 F.2d 566, 570 (8 Cir. 1988)). Questions of an
expert’s credibility and the weight accorded to his testimony are
ultimately for the trier of fact to determine. Fox v. Dannenberg, 906 F.2d
1253, 1256 (8th Cir. 1990). “Only if an expert’s opinion is so
fundamentally unsupported that it can offer no assistance to the jury must
such testimony be excluded.” Hose, 70 F.3d at 974.
Here the district court made the threshold determination that
Brynildson was competent to testify as an expert and that his testimony
would assist the jury in determining a fact in issue. See, Fed. R. Evid.
702. Brynildson testified that in his opinion, the tank failed as a result
of a growing “crack” in a defective weld within the tank. He also offered
testimony to refute the plaintiffs’ assertion that the tank failed at
pressures greater than 250 psi. Brynildson based his opinion on his
experience and knowledge as a metallurgist and on his extensive
investigation and testing of the fractured tank. The plaintiffs greatly
emphasize the fact that Brynildson testified although one would expect to
find “beach marks” evidencing the type of growing crack which he opined was
present in the 15,000 gallon tank, he found no such evidence during his
examination of the tank. Thus, they argue, Brynildson’s opinion regarding
the existence of the crack was based on speculation and mere possibilities
and should have been excluded. Brynildson also testified, however, that
given the low quality of this particular weld, and the obliteration of the
evidence caused by the explosion, it would be extremely difficult for
anyone to find the characteristic beach marks. Moreover, beach marks (or
the absence thereof) was not the only evidence upon which Brynildson based
his opinion. Our review of the record reveals
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that Brynildson’s testimony was not without some basis in fact. He was
subjected to extensive cross-examination regarding his opinion and the jury
was properly allowed to assess his credibility and the weight of his
testimony. The district court did not abuse its discretion in admitting
Brynildson’s expert testimony.
IV.
Finally, the plaintiffs argue that the district court erred in
denying their motion for judgment as a matter of law, or alternatively, for
a new trial on grounds that the jury’s verdict was against the clear weight
of the evidence. We have thoroughly reviewed the record and find these
asserted points of error are without merit. Accordingly, the judgment of
the district court is affirmed.4
A true copy
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
4
Insofar as it was brought only to preserve errors for
resolution in the event the Court ordered a new trial, we do not
reach the merits of the defendants’ cross-appeal.
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