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Kaapa Ethanol, LLC v. Affiliated Fm Insurance Company

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Submitted: June 13, 2011

Before LOKEN, BEAM, and GRUENDER, Circuit Judges.

KAAPA Ethanol (“KAAPA”) manages a facility in Kearney County, Nebraska that distills corn into ethanol, a biofuel additive for gasoline. The plant was insured against property damage by an “all-risk” insurance policy issued by Affiliated FM Insurance Company (“Affiliated”). Soon after KAAPA began production, the plant’s ethanol production and storage tanks began to lean, their foundations began showing visible signs of distress, and their supporting concrete walls sunk into the ground. KAAPA commenced this diversity action after Affiliated denied KAAPA’s claim to recover the cost of extensive repairs and business interruption losses. After a lengthy trial, the jury found that some losses were caused by “collapse” of the tanks, awarded KAAPA property damages of nearly $4 million, but denied its claim for business interruption losses. Both sides appeal raising various issues. Applying Nebraska law, we affirm the district court’s denial of Affiliated’s motion for judgment as a matter of law. But we conclude the court committed reversible error in instructing the jury on the meaning of the term “collapse” and remand for a new trial. We do not decide the loss-mitigation and other post-trial issues raised in KAAPA’s cross-appeal.

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