Red Bird Egg Farms, Incorporated v.  Pennsylvania Manufacturers Indemnity Company

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
 RED BIRD EGG FARMS, INCORPORATED,
Plaintiff-Appellant,
v. No. 00-1149 
PENNSYLVANIA MANUFACTURERS
INDEMNITY COMPANY,
Defendant-Appellee. 
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Andre M. Davis, District Judge.
(CA-99-1303-AMD)
Argued: December 6, 2000
Decided: August 3, 2001
Before WILKINSON, Chief Judge, WIDENER, Circuit Judge,
and William L. GARWOOD, Senior Circuit Judge of the
United States Court of Appeals for the Fifth Circuit,
sitting by designation.
Affirmed by unpublished opinion. Senior Judge Garwood wrote the
opinion, in which Chief Judge Wilkinson and Judge Widener joined.
COUNSEL
ARGUED: Curtis Charles Coon, LAW OFFICE OF CURTIS C.
COON, L.L.C., Towson, Maryland, for Appellant. Jeffrey Allan
Wothers, NILES, BARTON & WILMER, Baltimore, Maryland, for

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Appellee. ON BRIEF: Robert L. Mauro, LAW OFFICE OF CURTIS
C. COON, L.L.C., Towson, Maryland; C. Daniel Saunders, LAW
OFFICES OF C. DANIEL SAUNDERS, Chestertown, Maryland, for
Appellant. Jason C. Brino, Sedica Sawez, NILES, BARTON & WIL-
MER, Baltimore, Maryland, for Appellee.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
GARWOOD, Senior Circuit Judge:
Plaintiff-appellant Red Bird Egg Farms, Inc. (Red Bird) brought a
declaratory judgment action against defendant-appellee Pennsylvania
Manufacturer’s Indemnity Co., (PMA),1 in the Circuit Court of Mary-
land for Kent County on March 17, 1999. On May 5, 1999, PMA
removed the case to the United States District Court for the District
of Maryland on the basis of diversity of citizenship. After a bench
trial on January 6, 2000, the district court issued an oral opinion and
granted judgment in favor of PMA, and Red Bird now appeals. We
affirm the judgment of the district court.
FACTS AND PROCEEDINGS BELOW
Red Bird’s primary business is the production of chicken eggs. Its
facility consists of seven layer houses in Millington, Maryland, which
house over one-half million chickens. If these chicken houses are not
constantly ventilated, the chickens will die within an hour or so. To
prevent this, Red Bird employs an extensive system of electric venti-
1Red Bird is a Delaware corporation, with its principle place of busi-
ness in Maryland. PMA is a Pennsylvania corporation with its principal
place of business in Pennsylvania; it does business in several states.
2 RED BIRD EGG FARMS v. PENNSYLVANIA MFRS INDEM.

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lation fans. The ventilation fans require "three-phase" alternating cur-
rent to operate correctly.2
Red Bird’s original insurance carrier was CIGNA, which decided,
in the wake of a hurricane, to discontinue coverage to poultry busi-
nesses east of the Mississippi. Red Bird went shopping for another
carrier, and shortly before March 1, 1997, Red Bird and PMA agreed
on insurance coverage, and a "Binder" which comprised most of the
policy was issued to Red Bird. This original policy included the state-
ment "Hartford Steam Boiler Endorsements to Follow," as also did
the renewal policy, which was issued March 1, 1998. In June of 1998
a Hartford Steam Boiler Endorsement was received by Red Bird
which required that for a business interruption loss involving the
interruption of power to be covered, power must be lost for a period
of twenty-four hours or more.
On the evening of July 21, 1999, a lightning strike somewhere out-
side of Red Bird’s property caused a power loss that interrupted the
power supply to Red Bird’s property. Red Bird had two backup gen-
erators on its property, each of which was capable of supplying three-
phase power. When the power was interrupted, the primary generator
automatically engaged. Shortly thereafter, the primary generator
failed because of a ruptured coolant hose. As a Red Bird employee
was trying to fix the primary generator, the local power company,
Choptank Electrical Cooperative, restored power to Red Bird’s facil-
ity. Instead of three-phase power, however, Choptank restored only
single-phase power, which burned out the motors in approximately
one hundred of Red Bird’s ventilation fans, permanently damaging
them. A Red Bird employee disconnected the incoming power and
2Alternating current oscillates between positive and negative voltage,
and in ordinary household current this oscillation is a straightforward
sine wave. This kind of current is called single-phase. Three-phase cur-
rent is essentially the "stacking" of three single phase voltage oscillations
on a single line. This stacking enables greater power transmission over
an existing electrical line. Each stacked wave is slightly out of phase
with the others. Electric motors, such as the ones in the ventilation fans,
are built to handle only one type of alternating current. Three-phase
power is used mainly in industrial applications. Three-phase motors will
burn out if they are supplied with single phase current.
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activated the secondary generator, but that generator failed as well, at
least partly because it could not handle the increased load of the
burned out fan motors. Without the fans, approximately 500,000
chickens perished. Red Bird filed a claim with PMA for the loss of
the birds, debris removal, damage to the generators, and business
interruption. PMA paid Red Bird approximately $1,000,000 in satis-
faction of all but the business interruption claim, which PMA denied.
Red Bird brought this declaratory judgment action against PMA in
Maryland state court, seeking a declaration that PMA was required to
provide Red Bird with business interruption coverage. PMA removed
the suit to federal district court. On October 7, 1999, three months
before the scheduled trial date, Red Bird’s counsel withdrew from the
case. Several joint motions for extensions of discovery and for re-
setting the trial date were denied. On January 3, 2000, three days
before trial, Red Bird requested leave to amend its complaint to add
an estoppel theory of recovery. The court denied Red Bird’s motion
on the grounds that the requested amendment would unfairly preju-
dice the defendant. The court observed that the addition of an estoppel
claim would require the joinder of an additional party (the insurance
broker) which, three days before trial, was not feasible and was
unfairly prejudicial to PMA.
After a bench trial on January 6, 2000, the district court issued an
oral opinion and granted judgment in favor of PMA (it did not issue
a written opinion in this case). The district court ruled that there was
no ambiguity in the relevant portions of the insurance policy, and that
Red Bird was not due coverage for business interruption. The court
found that there was no fire, and so the fire damage portions of the
policy were not relevant. The court also found that single-phase cur-
rent was the same as too little power, and that too little power was the
same as no power. Accordingly, the court considered the business
interruption to be caused by an interruption in power and therefore
excluded from coverage under the policy.
DISCUSSION
This Court will not set aside a district court’s findings of fact
unless they are clearly erroneous. Fed. R. Civ. P. 52(a). Similarly,
"we must give due regard to the opportunity of the district court to
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judge the credibility of the witnesses." Multi-Channel TV Cable Co.
v. Charlottesville Quality Cable, 65 F.3d 1113, 1122 (4th Cir. 1995).
We review the district court’s conclusions of law de novo. Benedi v.
McNeil-P.P.C., Inc., 66 F.3d 1378, 1383 (4th Cir. 1995). Finally, the
district court is given broad discretion to grant or deny a motion to
amend a complaint, and we will overturn such a decision only if there
has been an abuse of discretion. Gladhill v. General Motors, 743 F.2d
1049, 1052 (4th Cir. 1984).
POWER FAILURE EXCLUSION
As a preliminary matter, Red Bird argues that the district court
improperly considered a disputed endorsement to be part of the policy
in question.3 PMA counters by claiming that this issue was not argued
at trial, and that in any event the court did not rely on the language
of the endorsement, and instead relied on the language of the policy
itself, particularly Part B(4)(a) of the Causes of Loss-Special Form.4
PMA has the better argument.
Although the district court’s oral ruling was brief, it clearly appears
that the court’s ruling was based on the language of Part B(4)(a),
which excludes coverage for any loss caused directly or indirectly by
the failure of power or other utility services, and which was part of
the original policy. The Hartford Endorsement is therefore irrelevant
3The document in question, the "Hartford Steam Boiler Endorsement,"
provided business interruption coverage for losses caused by certain off
premises utility interruptions. But, the endorsement had a limitation—the
interruption in service had to continue for twenty-four hours before cov-
erage attached to damage caused by the interruption.
4The relevant exclusion in the policy, Part B(4)(a)(1) of the form
explaining the covered causes of loss, reads:
We will not pay for:
(1) Any loss caused directly or indirectly by the failure of power
or other utility service supplied to the described premises, how-
ever caused, if the failure occurs outside of a covered building.
But if the failure of power or other utility service results in a
Covered Cause of Loss, we will pay for the loss resulting from
that Covered Cause of Loss.
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to the present case,5 and the propriety of the district court’s ruling
depends on whether it properly construed Part B(4)(a) of the policy.
PMA cites several cases in its brief in which courts have construed
similar policy language to exclude coverage for business interruptions
caused by power outages. But, the court in this case did not simply
hold that the outage caused the damage. Instead, the court held that
the introduction of single-phase current caused the damage to Red
Bird’s facility. Thus, the facts of this case are somewhat more compli-
cated than a situation in which utility service simply stops. The ques-
tion is whether what happened in this case was "a failure of power or
other utility service" that is excluded from coverage under the policy.
Under Delaware law, which the parties agree applies in this
respect, the language of insurance contracts is construed against the
insurance company that drafted them. Novellino v. Life Insurance
Company of North America, 216 A.2d 420, 422 (Del. 1966). How-
ever, Delaware law also holds that the court should not re-write an
insurance policy under the guise of construction. The court should
analyze the policy as a whole to determine whether an ambiguity
exists. See Aetna Casualty & Surety Co. v. Kenner, 570 A.2d 1172,
1174 (Del. 1990). Only if there is ambiguity in the language
employed or confusion in the selection of language should any prob-
lem of construction arise, and the plain meaning of the language in
the policy should control. Novellino, 216 A.2d at 422. We agree with
the district court that the plain meaning of "failure of power or other
utility service" encompasses the power problems Red Bird experi-
enced on July 21, 1999.
After a bench trial, the district court concluded that the power prob-
lems at Red Bird constituted a "failure of power or utility other ser-
vice" within the meaning of the policy exclusion in part B(4)(a)(1) of
the Covered Causes of Loss—Special Form. The district court stated:
. . . I find as a fact and conclude as a matter of law, that the
5Red Bird does not claim that the Hartford Endorsement would expand
its coverage under the policy so as to include its business interruption
claim. Instead, Red Bird seeks to avoid the Endorsement.
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single phasing was the equivalent of a power interruption.
Too little power is the same as no power.
. . . As I say, and I emphasize, if the equipment on this
plant requires three-phase current to properly operate and
Choptank provided less than three-phase current, then that
was a power interruption. It was a power loss. It was not that
they had power. They did not have power. As a matter of
fact, that is the Court’s finding.
Red Bird attacks the district court’s finding on essentially the grounds
that since the motors in the fans burned out, the introduction of single
phase power cannot properly be considered an "interruption" in
power, and, in fact, can best be characterized as too much power for
the three-phase fans. There are two flaws in Red Bird’s argument.
First, the language of the policy excludes business interruption losses
caused by a "failure of power or other utility service," and does not
mention "interruptions." Accordingly, Red Bird’s detailed discussion
of the accepted meanings of the word "interruption" is irrelevant. It
is the language of the policy that controls.
Second, the record evidence supports the determination that, con-
trary to Red Bird’s assertions, single-phase current was not "too
much" power for the ventilation fans. Rather, single-phase power was
the wrong type of power for the fans. Red Bird’s argument that
single-phase power should be considered to be "too much" power is
unsupported by the record.
The district court, after a bench trial, found that the introduction of
single-phase power to equipment that was designed to use three-phase
power was a "failure of power" within the meaning of Part B(4)(a) of
the Causes of Loss—Special Form. The district court’s application of
the facts to the language of the policy was reasonable and is not
clearly erroneous in light of the evidence. It was not error for the dis-
trict court to have determined the events at Red Bird’s farm to be a
"failure of power or other utility service" within the plain meaning of
that phrase. The district court accordingly did not err in concluding
that the PMA policy did not provide business interruption coverage
for this loss.
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MOTION TO AMEND THE COMPLAINT
Red Bird also claims that the district court abused its discretion
when it refused to allow Red Bird to amend its complaint to include
a theory of recovery based on promissory estoppel and detrimental
reliance. Red Bird brought this motion on January 3, 2000, three days
before trial was scheduled to begin.
Rule 15(a) of the Federal Rules of Civil Procedure provides that
when a party seeks leave to amend a complaint, "leave shall be freely
given when justice so requires." Fed. R. Civ. P. 15(a), Ward Electron-
ics Service v. First Commercial Bank, 819 F.2d 496, 497 (4th Cir.
1987). Leave to amend should be given absent some stated reason,
such as undue delay, bad faith, futility, or undue prejudice to the
opposing party. However, the disposition of a motion to amend is
within the sound discretion of the district court and there must be
some abuse of that discretion to warrant reversal on this issue. Glad-
hill v. General Motors Corp., 743 F.2d 1049, 1052 (4th Cir. 1984).
Red Bird’s new counsel had been counsel of record for over three
months, and the case was scheduled to begin three days after the
motion to amend was filed. The district court found that the amend-
ment would result in undue prejudice to PMA, since the amended
complaint would add a theory of the case that would require joinder
of additional parties and the addition of new witnesses. Despite the
permissive standard of Rule 15(a), the district court did not abuse its
discretion when it denied the motion to amend—the addition of this
new theory of the case three days before trial would have disrupted
the trial schedule and unduly prejudiced PMA.
FINDINGS OF FACT: FIRE
Finally, Red Bird argues that the district court’s finding that the
damage to the motors was not "fire" damage within the policy was
clearly erroneous. Part B(4)(a)(1) of the Causes of Loss-Special Form
contains an exception: "[I]f the failure of power or other utility ser-
vices results in a Covered Cause of Loss, we will pay for the loss
resulting from that Covered Cause of Loss." Since fire is a covered
cause of loss, Red Bird argues, if the motors were damaged by fire
their business interruption loss should be covered.
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Once the electric motors in the ventilation fans were exposed to
single-phase current, the motors in many of the fans "burned out."
This appears to have involved overheating, melting of the insulation
around wires in the motors, and some smoke. But, there was no evi-
dence of any flames. The district court found as a fact that although
the motors "burned out," there was no actual "fire" involved. The
damage caused in this case is enough like fire that perhaps a finding
that the damage was fire damage would be supported by the evidence.
However, the damage is not so obviously "fire" damage as to render
the district court’s factual finding clearly erroneous. See, e.g., Quad-
rangle Development Corp. v. Hartford Ins. Co., 645 A.2d 1074, 1075
(D.C. 1994) (holding that the plain meaning of "fire" indicates the
presence of flame). The district court’s finding that there was no fire
damage to the ventilation fan was not clearly erroneous, and is sup-
ported by the evidence.
CONCLUSION
The district court did not err when it concluded that plain meaning
of the phrase "failure of power or other utility service" encompassed
the introduction of single-phase current into Red Bird’s facility under
the circumstances here. Nor did the court abuse its discretion when
it refused to allow Red Bird to amend its complaint and add a new
theory of recovery on the eve of trial. Finally, the district court’s find-
ing that the damage to Red Bird’s ventilation fans was not fire dam-
age is not clearly erroneous. Accordingly, the judgment of the district
court is
AFFIRMED.
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