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National Fire & Casualty Co. v. The Kessler Tank Co., Inc.

United States District Court, N.D. Indiana, Hammond Division, Lafayette

July 18, 2017

THE KESSLER TANK CO., INC., an Ohio corporation, Defendant.

          OPINION & ORDER


         This action arises out of the collapse of a 300, 000-gallon water tower in Goodland, Indiana on November 7, 2011. The plaintiff, the National Fire and Casualty Company, is the insurer and subrogee of the town of Goodland, and the Kessler Tank Company is a contractor that Goodland hired to maintain and repair the water tank every four or five years between 1993 and 2007. Four claims are pending: breach of contract, breach of the implied duty of workmanlike performance, negligent misrepresentation, and negligence. For starters, we can ignore the breach of the implied duty of workmanlike performance claim because, under Indiana law, it is subsumed by the other claims. See St. Paul Fire & Marine Ins. Co. v. Pearson Const. Co., 547 N.E.2d 853, 857 (Ind.Ct.App. 1989); INS Invests. Bureau, Inc. v. Lee, 784 N.E.2d 566, 577 (Ind.Ct.App. 2003).)

         Kessler seeks summary judgment on all claims on the grounds that NFC has no expert witness and cannot satisfy its burden of proving causation without one. For its part, NFC has provided an offer of proof regarding the testimony of an expert witness this court has three times ruled must be excluded. Kessler has responded with a motion to strike NFC's motion, the expert's materials, and inferences drawn from them, as well as an unrelated document. For the reasons below, the motions for an offer of proof and to strike are denied, and Kessler's motion for summary judgment is granted.


         To fully understand what happened here, I need to recount the story of the water tower and its maintenance, so bear with me. Goodland's history of maintaining the tower, which was built in 1960, is spotty. The first documented maintenance of the water tower took place in August 1970, when Goodland hired the K. Kessler Company (“KKC”), a predecessor of the defendant, to clean and repaint the exterior of the tank. (DE 116-1 at 175-76.)

         In March 1974, KKC sent Goodland a written reminder and quotation/bid for servicing the exterior of the water tower again. (Id. at 169-71.) When KKC followed up with a phone call to the town, it learned that Goodland's town counsel had discussed servicing the water tank again “but decided to wait another year because of funds.” (Id. at 173; see also Id. at 172.) KKC's records also noted that the town was considering doing maintenance on both the interior and exterior of the tank the following year, although “[f]or some reason they have the idea that the interior doesn't need [painting] when they have cathodic protection.” (Id. at 173.) At risk of gross oversimplification, a “cathodic protection system” is a way to slow down corrosion by connecting a metal surface (like the inside of a water tank) to some other metal that more readily corrodes. (See generally DE 122-3 at 42 (161:14-23), [1] 43 (165:18-167:8).) When Goodland's water tank was built, it had cathodic protection, but the system was removed at some point prior to 1993. (See Id. at 45 (174:6-13); DE 116-1 at 163 (recommending installation of one in 1993).)

         In February 1975, KKC contacted Goodland again about servicing the water tank and provided an updated quotation/bid. (Id. at 179-80.) KKC followed up with a call to Goodland in December 1975, during which Goodland told KKC that its cathodic protection system contractor had recommended having the interior of the water tank painted. (Id. at 181-82.) KKC's records note that the “city [was] trying to get funds to do [the] job[, ]” but there is no evidence that KKC was hired to paint the interior or the exterior of the water tower that year. (Id. at 182.)

         In 1978-eighteen years after the water tower was built-Goodland hired a different contractor, the Leary Construction Company, to recoat the interior of the tank for the first time and to do “emergency” repairs. (Id. at 196, 199-200.) That same year, the town hired John “Butch” Donahue to serve as Street Superintendent and Assistant to the Water Superintendent. (Id. at 39 (10:13-16).) When Donahue was hired, he had no experience with water distribution systems and he warned Goodland “that if [he] went to work for the Town [he] would not have nothing to do with that water tower.” (Id. at 39 (10:22-11), 46 (26:16-21).) Donahue was promoted to Water Superintendent in 1980, after completing a course and passing tests required by Indiana. (Id. at 42-43 (13:14-14:25).)

         Five years later, in 1983, Goodland hired Leary a second time to apply a wax-grease coating to the interior of the tank and to repair “[an] estimated 2, 200 . . . to 2, 500 . . . pits located in the bottom of the bowl.” (Id. at 188-90.) Leary warranted the repairs “for 10 yrs., provided interior of tank is recoated each 3 yrs.” (Id. at 190.) But Goodland did not hire Leary to come back in 3 years, instead waiting until 1989 to have Leary repaint the tank's interior for the third time. (See Id. at 186-87.) Two years later, Leary was called back again to do some “emergency repairs, ” although it's not clear what the problem was. (Id. at 184-85.)

         In 1993, approximately four years after the interior of the water tower was last painted by Leary, there was a flurry of activity. In March, a representative from Kessler visited Goodland to discuss reconditioning the water tank, and Kessler followed up with a quotation/bid for work. (Id. at 201-2.) (By this time, KKC, which had last serviced the exterior of the tank 23 years earlier, no longer existed and had been succeeded in interest by Kessler.) Goodland accepted that bid in August, but it's unclear if Kessler did any work at that time. (See Id. at 203-4.)

         A couple months later, in October 1993, Goodland hired the Tank Industry Consultants (“TIC”), to conduct an engineering inspection of the water tank to evaluate its structural integrity. (Id. at 218-20; see also Id. at 60 (117:20-25).) Neither party has indicated exactly what prompted Goodland to solicit TIC's advice, but whatever concerns the town might have had could only have been amplified when TIC issued its 28-page report. (See Id. at 142-68.) That's because TIC concluded that the water tank would only last another 10 years, unless Goodland completed a number of repairs that TIC felt were required “to properly maintain this tank from an operational standpoint.” (Id. at 165-67 (estimating the repairs would cost $69, 000).) TIC's report advised Goodland that the interior coating of the tank “was in generally poor condition and not providing adequate corrosion protection” and “should be recoated as soon as possible [with] ”an epoxy coating system.” (Id. at 143.) The report further warned Goodland that “[a]nother application of a wax-grease coating to the interior surfaces may allow corrosion and metal [loss] to occur which will threaten the integrity of the tank.” (Id. at 162.) Finally, the report advised the town to hire a TIC field consultant to observe the removal of the wax-grease coating by a maintenance contractor and to better “determine which pits require repair.” (Id. at 218; see also Id. at 167 (stating that hiring a TIC field technician to observe the maintenance contractor's work would assure the quality of the application of the protective coating).)

         After it received the TIC report, Goodland opted to only do some of the recommended “minimal” repairs. It contracted with Kessler to “[f]ill all deep pits in bowl area with epoxy filler[, ] weld deep pits in bowl, repair all failed seams by welding, and sandblast interior surfaces of riser column”-and for less than half of what TIC estimated the repairs would cost. (Id. at 223-24.) Goodland also had Kessler reapply the wax-grease coating to the interior of the tank, even though TIC had just warned the town that continued use of wax-grease could compromise the structural integrity of the tank. (Id.; see also Id. at 162.) There is no evidence that Goodland shared the TIC report with Kessler or that it hired a TIC field consultant or someone with engineering expertise to oversee Kessler's work or to assess which pits required repair after Kessler removed the old coating. (See generally Id. at 13 (130:21-24), 61 (137:15-16), 265; see also DE 122-8 at 29 (110:18-24), 30 (115:13-18).) Instead, Butch Donahue, Goodland's Water Superintendent and the same guy who earlier said he wanted nothing to do with overseeing the water tower, supervised Kessler. (DE 122-8 at 30 (115:17-18).)

         The interior of the tank was not serviced again until June 1998, when Goodland hired Kessler to reapply the disfavored wax-grease coating. (DE 116 at 228; see also Id. at 229-31.) And by June 2000, the tank had sprung another leak, so Kessler was brought in to repair it by replac[ing] the bottom 12 [inches] of [the] riser column with new steel.” (Id. at 235; see also Id. 236.) In 2002, Kessler was once again hired to reapply wax-grease to the tank's interior. (Id. at 237-39.)

         In 2006, Kessler sent Goodland a reminder that the tank had not been serviced in almost four years and provided two separate quotation/bids for maintenance-one for recoating with wax-grease and the other for epoxy, a more expensive coating and the one recommended by TIC in 1993. (Id. at 240-42.) Inexplicably, Goodland did not respond to the notice. Another year went by and Kessler sent Goodland another packet with updated figures for the maintenance, again providing separate bids for the wax-grease coating and epoxy coating. (Id. at 245-47.) Once again, Goodland took the less expensive route. They did this, according to Kessler, because “Mr. Donahue was adamant about not using epoxy because it was too expensive[.]” Kessler serviced the interior of the tank (for what would turn out to be last time) on June 11, 2007. (Id. at 257.)

         Four years later, in August 2011, Kessler sent Goodland its usual tickler about servicing the tank, along with quotations/bids. (See Id. at 252-54.) Goodland's assistant water superintendent, who had been brought on board a few years earlier, didn't respond to Kessler because he thought the tower wasn't due for service until 2012. (Id. at 32 (73:9-22).) Less than three months later, the water tower collapsed, prompting this lawsuit. (See Id. at 16.)

         As noted at the outset, Kessler has moved for summary judgment on all of the claims are pending against it: breach of contract, negligence, and negligent misrepresentation. (DE 1; see also DE 20 (dismissing a fifth count).) NFC has filed a Motion to Make an Offer of Proof in yet another attempt to get the testimony of its expert, Steven Meier, into evidence, and Kessler has filed a motion to ...

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