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Reliance Insurance Co. v. Al E.

decided: August 6, 1976.


Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division - No. IP 73-C-262. JAMES E. NOLAND, Judge.

Sprecher and Tone, Circuit Judges, and Joseph Sam Perry, Senior District Judge.*fn*

Author: Sprecher

SPRECHER, Circuit Judge.

This appeal arose from a judgment in a products liability case brought by Reliance Insurance Company (Reliance), plaintiff-appellee, as the subrogee of Cardinal Industrial Contractors (Cardinal) against AL E. & C., Limited (ALEC), defendant-appellant. The primary issues presented by defendant on appeal are whether plaintiff has standing to sue under Section 402A of the Restatement of Torts 2d, and whether the evidence submitted at trial was sufficient to sustain a jury verdict on the grounds of strict liability.


After carefully reviewing the record, the evidence considered in the light most favorable to the plaintiff reveals the following facts. American AirLiquide (AAL) and AL E. & C. (ALEC) are sister companies owned by L'Air Liquide, a French corporation. A.A.L. contracted with Citizens Gas Company to supply on a "turnkey" basis a liquified natural gas plant in Indianapolis. A.A.L. then hired Pittsburgh-Des Moines Steel Company (PDM) to act as general contractor for the erection of the plant, and to supply and erect the liquified natural gas storage tank. A.A.L. agreed with its sister corporation in Canada, ALEC, that ALEC would manufacture and supply the equipment needed for the liquefaction of the natural gas and certain engineering services including supervising the entire construction contract.

One of the pieces of equipment necessary to the operation of the plant which was manufactured and supplied by ALEC was a cold box. The cold box, a large structural steel enclosure containing high pressure piping and refrigeration vessels used to cool and liquify the gas, was about 65 feet by 10 feet by 12 feet, and weighed approximately 52 tons. In early 1971, PDM subcontracted the moving and erecting of the cold box to Cardinal Industrial Contractors (Cardinal), specialists in moving heavy machinery. In accordance with the terms of Article 14 of the Subcontract, Cardinal was insured by the plaintiff Reliance Insurance Co., an inland marine insurance carrier. The subcontract included provisions for the indemnification of PDM by Cardinal for acts of the subcontractor which occurred in connection with the performance of the contract and resulted in property damage or personal injury.

Around May 1971, the cold box arrived in Indianapolis, Indiana, on three flat-bed railroad cars. William Meredith, an experienced rigger, was the foreman selected by Cardinal for the task of effecting necessary lifts of the box. It should be noted here that a French-Canadian, Albert Brin' Mayer, and a Frenchman, Eugene Kaniecki, ALEC's field erection supervisor, were sent to the jobsite at Indianapolis to supervise and assist in the erection of the cold box. These men were introduced to a Cardinal supervisor, as "the people who are really running the job" and they were constantly at the jobsite.

Meredith, supervising a crew of eight, successfully lifted the cold box from the railroad car to the flat-bed truck for transportation to the jobsite and from the truck to some cribbing on the ground in preparation for its erection. Meredith utilized one and one-fourth or one and one-half inch cables in a basket hitch around each of the main trunnions (lifting devices) to make the lift.

Meredith testified that as he was attaching the basket hitch arrangement in preparation for the third and final lift onto the concrete foundation, a heavy set man in a white construction hat wearing a jacket and another man with a foreign accent in dress clothing stopped his rigging operations.*fn1 Meredith recognized the well-dressed man as the person who had been all around the truck and cold box during various construction operations. He had also seen this man constantly taking pictures of the work at the jobsite and cold box erection operations.

The heavy set man, acting as interpreter for the foreign speaking man, told Meredith that the lift could not be made with a basket hitch, but that a choker hitch should be used instead. Meredith then expressed strong reservations regarding this suggestion and said "that utilizing the choker hitch would be a tremendous mistake." The heavy set man replied "that's what the man wants."

After this conversation, the lift was topped, the rigging was changed to a choker hitch and pieces of steel plate were welded over the faces of the main lifting trunnions under the direction and supervision of the foreign speaking man. Meredith ultimately proceeded with the lift as directed by these men.

In the course of the lift, the cable on one side broke near the vicinity of the eye of the cable on the choker causing the other main cable to snap. As a result, the cold box fell and was severely damaged. The evidence clearly indicates that the use of the choker hitch upon the lifting trunnions caused the cable to shear.

On June 8, 1971, after the box had fallen and been examined by the insurance company for all parties, a meeting was held to discuss the responsibility for and manner of making repairs. At that meeting, Reliance informally agreed to pay for the repairs and two months later, after conducting additional investigations, signed a more detailed agreement for payment. Pursuant to these agreements, Reliance paid ALEC $199,228.78, a portion of the cost of repairs.

On April 19, 1973 Reliance filed a complaint in the Marion Superior Court in Indianapolis, Indiana, seeking rescission of the contract of repair. The cause was removed to the United States District Court for the Southern District of Indiana by petition of ALEC. At that time ALEC also filed a counterclaim seeking judgment against Reliance for the remaining amount due under the contract. On August 15, 1973, Reliance filed the second count of its complaint alleging a cause of action in strict liability under Section 402A of the Restatement of Torts 2d. This count was ultimately tried by a jury. ALEC then filed a motion ...

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