Stone Container Corporation v. Hartford Steam Boiler Inspection and Insurance Company

Stone Container Corporation (Stone) (plaintiff) manufactured pulp, paper, and paper products. To manufacture pulp, Stone placed wood chips in steel tanks called pulp digesters. The pulp digesters were sealed. Heat and steam were used in the pulp digesters to decompose the wood chips into pulp. One of the pulp digesters exploded, causing property damage to Stone and killing several workers. Because of the explosion, Stone had to shut down its manufacturing plant for months, incurring a loss of more than $80 million. Stone was covered by two insurance policies: (1) an all-risk insurance policy from Lloyd’s, and (2) a boiler and machinery insurance policy from Hartford Steam Boiler Inspection and Insurance Company (Hartford) (defendant). Stone’s policy with Hartford contained an exclusion for explosions, with an exception for loss caused by an explosion of one of seven enumerated objects, including a steam boiler. Lloyd’s claimed that Hartford’s policy was primary and that Lloyd’s policy was secondary. Therefore, according to Lloyd’s, it was only required to pay on its all-risk policy if Hartford was not legally obligated to pay on Hartford’s boiler and machinery insurance policy. Stone made a claim on its policy with Hartford, and Hartford denied the claim. Stone sued Hartford to compel Hartford to pay on its policy. The district court granted summary judgment in favor of Stone, holding that the exceptions to the exclusion were ambiguous and therefore should be interpreted in favor of Stone. Hartford appealed.