LEVEL 1 - 167 OF 179 STORIES
Copyright 1988 Crain Communications, Inc.
Business Insurance
April 4, 1988
SECTION: Pg. 2
LENGTH: 2158 words
HEADLINE: Jury rules no cover for bombed building
BYLINE: By JUDY GREENWALD
DATELINE: BRIDGEPORT, Conn.
BODY:
Grand Sheet Metal Products Co. is seeking a new trial after a jury ruled last month that its property insurer does not have to pay for damage caused by the March 1975 firebombing of its Shelton, Conn., plant. Instead, the Connecticut Superior Court jury ruled that Grand Sheet's Top officials arranged the bombing.

Grand Sheet, based in Spencerville, Ohio, had sued Park Ridge, Ill.-based Protection Mutual Insurance Co. for about $ 30 million in insurance coverage, plus fees and damages that could have totaled $ 90 million (BI, March 28). The firebombing had attracted widespread attention, in part because one of the arsonists had suggested to plant employees that he belonged to the Weathermen, the underground radical sect of Students for a Democratic Society.

Testimony during the five-month trial involved tales of financial fraud, surreptitious calls from pay phones and meetings in airport terminals, a parking garage and a men's room.
Among those testifying was a man who has admitted he arranged the arson and was an alleged "psychic" and "spiritual adviser" to one of Grand Sheet Metals' top officials.

The jury, after nearly four weeks of deliberation, found there was a "preponderance of evidence that the plaintiff caused or arranged for the fire," said Protection Mutual's attorney, Norman G. Sade of Budd, Larner, Gross, Picillo, Rosenbaum, Greenburg & Sade in Short Hills, N.J. But Grand Sheet's attorney, Michael P. Koskoff of Koskoff, Koskoff & Bieder in Bridgeport, disagreed. "We think the jury was wrong and we think a Retrial might show that," he said, adding, that "it comes down to a question of whom they believed."

Charles Moeller, Grand Sheet's president and majority owner, was acquitted of arson charges in a 1976 federal court trial, though seven other individuals were convicted and another pleaded guilty. Most served sentences of five to seven years. One other defendant, besides Mr. Moeller, was found innocent at the 1976 trial.

Mr. Moeller was again acquitted in a 1983 state court trial, along with Lowell Powell, the company's treasurer and secretary, who had not been tried in the 1976 trial. Mr. Sade noted that the conflicting verdicts could be reconciled by the fact that a jury in a criminal trial must find there is "no reasonable doubt" of guilt, while a "preponderance of evidence" suffices in a civil trial.

A trial brief submitted by Protection Mutual presents a scenario of a financially pressed company whose officials saw arson as the only way out of its problems. According to the brief, Grand Sheet, a subsidiary of Ohio Decorative Products Co., purchased the Shelton rubber plant from Akron, Ohio-based BF Goodrich Co. in 1974.

The $ 13.8 million acquisition, which was totally financed through a loan, involved five plants in Shelton and Derby, Conn., of which Plant Four -- the one that was firebombed -- was the largest, accounting for half of production. Under the agreement, Grand Sheet took possession of the property on April 1, 1974, but delayed the real estate closing. This was eventually set for March 31, 1975. The firebombing occurred in the interim.

Protection Mutual provided Grand Sheet with a blanket policy covering contents -- including inventory, machinery and equipment -- and business interruption with limits of $ 52 million, according to Mr. Sade. There also was an oral binder for coverage on the building itself, though there was a dispute over the terms of this coverage, noted Chris Finazzo, Business Insurance April 4, 1988 another member of Mr. Sade's firm. Grand Sheet contended it was owed about $ 9 million in coverage on the building, while Protection Mutual said its limit on the coverage was for $ 5 million.

There was also a dispute over the contents policy and the oral binder as to whether Protection Mutual was obligated to pay replacement values or cash values for losses. The coverage had been brokered for Grand Sheet by Wilson & Allen, a New York-based brokerage that originally was named as a defendant in Grand Sheet's suit but was dropped from the litigation during the trial.
Goodrich had been insured by Hartford, Conn.-based Factory Insurance Assn., a property insurance pool now known as Industrial Risk Insurers, which Ultimately paid the tire company $ 2.8 million to settle its claim on the property, according to Mr. Sade.

According to Protection Mutual's court brief, Grand Sheet, which operated the plan as part of its Sponge Rubber Products Division, found itself in financial difficulties soon after the acquisition.

Sponge Rubber's cash shortage became so severe, according to court Papers,that it began to use funds withheld from employees' paychecks -- Including Social Security taxes and union dues -- to keep the division afloat. Closing the division, though, would have saddled Grand Sheet and its parent company's other subsidiaries with its debt, court papers say. "Unable to resolve that dilemma, Grand Sheet decided to have a fire," says the court brief.

As Sponge Rubber's financial problems emerged through the fall of 1974, Mr. Moeller regularly discussed the problem with David Bubar, "his friend, consultant, spiritual adviser and psychic," the brief says. At Mr. Moeller's request, Mr. Bubar set out to arrange for the arson, it charges. A number of meetings were held in a variety of locations that resulted in the assembly of an arson team, according to the brief. On more than one occasion, members of this team were picked up by the company's chauffeur-driven car and driven to the plant to inspect the building they were eventually to bomb, the brief alleges.

Various payments were made to the arsonists during this period as they escalated their demands for money, the brief says. A total of $ 60,000 was eventually promised, though only about $ 40,000 of this was apparently paid, according to Mr. Finazzo. At one point, Mr. Moeller flew to New York to deliver a $ 20,000 check made out to Mr. Bubar, according to the brief. While Mr. Moeller has admitted delivering that check, he claimed at different times in his testimony the money was for:

* Water treatment services to be performed by Mr. Bubar at Plant Four.
* Water cost-savings measures that Mr. Bubar had suggested in the past.
* Indirect payment for Mr. Bubar's psychic services.
* A loan or investment in connection with Mr. Bubar's various projects.
* A gift to Mr. Bubar "to assist him with his bills in a time of need."

The arson was originally scheduled for the weekend of Feb. 22 and 23, 1975, but postponed because arrangements could not be completed on time, the brief says. And, through a series of mishaps the firebombing almost never come off, the brief says.

On Feb. 26, for instance, Mr. Bubar arranged to have lime delivered to Plant Four in fiber barrels deliberately similar to those that would subsequently be used to bring gasoline into the plant, court papers say. But this nearly backfired when the arsonists tried to get the explosives and other equipment needed for the firebombing into the plant on March 1, the brief adds.

When the driver of the truck explained he was bringing in lime, he was turned away "because the plant already had on hand more lime than it could ever use." "As a result, it was necessary for Bubar to go looking for the truck in the Shelton/Derby area and when he located it, arrange to get it past the guards, which he did," the brief says. Later that day, using a company car, Mr. Bubar drove three of the Arsonists into the plant, explaining to guards they were there to conduct a Telephone survey, according to the brief. "Problems were encountered almost immediately," says the court brief. The loading dock's elevator was inoperable, and the barrels of gasoline could not be readily unloaded until it was repaired, the brief says. Postponing the arson a week also created a problem, because many Employees were in the plant that day to complete the month-end inventory, according to court papers. "As one might expect," states the brief, the arsonists "were upset by how things were going, particularly by the fact that there were so many people in the plant and threatened to abort the effort to destroy Plant Four." By that afternoon, though, the plant emptied out, the brief says. "The truck was unloaded, the barrels of gasoline were distributed throughout the plan and the dynamite and detonating cord was set into place." The arsonists then left the plant.

Mr. Bubar left separately to pick up an additional three members of the team, slipping them into the facility by having them crouch down behind the seat of his car, the brief says, adding that after delivering them, Mr. Bubar left for LaGuardia Airport.

These three men kidnapped the guards and a boiler worker at gunpoint, set the timing device, connected it to the explosives and left the plant with their captives, the brief said. "At 11:35 p.m. on March 1, 1975, Plant Four exploded and was immediately engulfed in flames."
An investigation by the Federal Bureau of Investigation immediately followed.

Mr. Finazzo said despite the attention that has been paid to the arsonists's references to the Weathermen, there was apparently no predetermined plot to blame the firebombing on the radical group. "I think it was probably just a brainstorm of the guys who kidnapped the guards, just borne of the moment and some desire to distract authorities," said Mr. Finazzo. "I don't think it was planned out beforehand." Mr. Finazzo said he does not believe the arsonists and their employers ever developed any possible explanations beforehand for the firebombing. "I don't think they ever thought about it, to tell the truth," he said.

Mr. Finazzo noted that between the state trial and the federal trial, Mr. Bubar, who spent seven years in prison, agreed to testify that he had he arranged the arson at the company's request.
But Mr. Moeller has contended Mr. Bubar had acted on his own in arranging the bombing.

According to Mr. Finazzo, Grand Sheet prior to the civil trial gave Three reasons for Mr. Bubar's activities:

* Mr. Bubar, an ordained Baptist minister, was mentally disturbed.
* Mr. Moeller, a follower of psychics, had recently begun seeing a rival psychic who predicted the plant would be destroyed and that its smokestack would collapse. Mr. Bubar responded with a prediction the plant would be destroyed, but its smokestack remain standing, then set out to make sure his vision came true. "It was the 'lover's triangle approach,'" said Mr. Finazzo.
*Mr. Bubar was acting in a misguided attempt to help Mr. Moeller. During the trial itself, according to Mr. Finazzo the plaintiffs presented the theory that Mr. Bubar, along with another associate, Michael Festa, had tried to convince Mr. Moeller to invest in a business in Ohio in which they would have had a share. However, when Mr. Moeller refused to go along with the scheme, they arranged the arson in retribution.

Mr. Festa was charged in connection with the arson, but pleaded "no contest"
and did not serve any time in prison, said Mr. Finazzo. In an amended complaint filed with the superior court in Bridgeport, Grand Sheet charged that Protection Mutual "acted in bad faith and failed and refused to engage in fair dealing" in paying claims following the explosion.
In addition Grand Sheet accused the insurer of conspiring with others
"to create false evidence against Grand Sheets executive officials in an
attempt to defeat Grand Sheet's insurance claim." "Rather than retain a qualified, independent appraiser to estimate Grand Sheet's loss, (Protection Mutual) hired unqualified and biased appraisers," the lawsuit said. The insurers "then used the appraisal so obtained as a basis of denying plaintiff's claim."

The complaint also accused the insurer of engaging in a "continuing course of unfair acts and practices, consisting of misrepresentation of pertinent facts and insurance policy provisions relating to Grand Sheet's insurance coverage."

Mr. Koskoff said he anticipates a decision from Connecticut Superior Court Judge Dennis Harrigan "within six to eight weeks" as to whether he will set Business Insurance April 4, 1988 aside the jury verdict and order a new trial. If the request is turned down, said Mr. Koskoff, a decision will be made whether to appeal the verdict on the basis that the judge made errors of law in his legal rulings during the course of the trial.

Mr. Koskoff noted also he is now awaiting a Connecticut Supreme Court decision that could establish that insurers must present "clear and convincing evidence" of arson when denying insurance coverage. While this standard has been established in some other states, an insurer in Connecticut need only establish there was a "preponderance of evidence" that a fire was caused by arson. Judge Harrigan's instructions to the jury reflected this standard, noted Mr. Koskoff.

Regards,

Chris Manthey
Chairman and Acting Executive Director
Environmental Background Information Center