## Facts

- Stone Container Corporation operated a paper-production facility using large steel “pulp digesters” that converted wood chips to pulp by sealing the vessel and applying steam heat and pressure.
- On April 13, 1994, a digester at Stone’s Panama City, Florida mill failed when a thin portion of the steel shell ruptured under high pressure.
- The rupture caused a catastrophic explosion that produced extensive property damage, multiple fatalities, and a months-long shutdown; Stone’s total losses exceeded $80 million.
- Stone carried (1) an “all-risks” policy issued by Lloyd’s that covered the accident, and (2) a Hartford boiler-and-machinery policy limited to accidents involving specified “objects.”
- Hartford’s policy broadly excluded coverage for “loss caused by or resulting from … an explosion,” but contained a carve-out for “loss caused by or resulting from an explosion of an ‘object’” of specified kinds (including steam boilers, electric steam generators, steam piping, steam turbines, steam engines, gas turbines, and certain moving or rotating machinery).
- Hartford denied coverage based on the explosion exclusion.
- Lloyd’s financed and supported Stone’s suit against Hartford, taking the position that Hartford’s policy was primary for the loss.

## Issues

1. Whether the digester event was excluded as an “explosion” under Hartford’s boiler-and-machinery policy.
2. Whether the exclusion’s exception for explosions of specified “objects” could reasonably be read to include a pulp digester.
3. Whether any arguable uncertainty in the exclusion/exception language required construing the policy against Hartford to find coverage.

## Decision

- The Seventh Circuit reversed the summary judgment entered for Stone.
- The court held Hartford’s explosion exclusion barred coverage for Stone’s digester loss.
- The court held the exception for explosions of enumerated “objects” did not apply because the digester was not within the listed categories.
- The court rejected the view that the exception’s wording created an ambiguity sufficient to expand coverage beyond the policy’s structured limitations.

## Legal Principles

- Insurance policies are interpreted by reading provisions in context, including how coverage grants, exclusions, and exceptions allocate risk across the contract as a whole.
- An exception to an exclusion restores coverage only for the risks the exception specifically identifies; it does not convert a specialized policy into broad coverage for excluded hazards.
- Contra proferentem applies only where contractual language is reasonably susceptible to more than one meaning; it does not justify extending coverage that conflicts with a policy’s clear structure and scope.
- In specialized insurance (such as boiler-and-machinery coverage), courts may treat enumerated “object” lists as limiting, not illustrative, when the contract’s design indicates targeted rather than comprehensive risk transfer.

## Conclusion

The Seventh Circuit held that Hartford’s boiler-and-machinery policy did not cover the pulp-digester explosion because explosions were excluded and the carve-out for explosions of listed “objects” did not include the digester, so Hartford had no duty to indemnify Stone for the loss.


Stone Container Corp. v. Hartford Steam Boiler Inspection & Ins. Co., 165 F.3d 1157 (7th Cir. 1999)