Spirtas Co. v. Federal Ins. Co.

• Decision Date: 01 April 2008
• Docket Number: No. 07-1916.,07-1916.
• Citation: 521 F.3d 833
• Parties: SPIRTAS COMPANY, doing business as Spirtas Wrecking Company, Appellant, v. FEDERAL INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

521 F.3d 833

SPIRTAS COMPANY, doing business as Spirtas Wrecking Company, Appellant, v. FEDERAL INSURANCE COMPANY, Appellee.

No. 07-1916.

United States Court of Appeals, Eighth Circuit.

Submitted: December 13, 2007.

Filed: April 1, 2008.

Timothy E. Hayes, argued, Thomas M. Payne III and Daniel R. Schramm, on the brief, St. Louis, MO, for appellant.

Jonathan Constine, argued, Doublas S. Cosno, Washington, DC. Gerlad P. Greiman, St Louis, MO, on the brief, for appellee.

Before BYE, ARNOLD, and MELLOY, Circuit Judges.

BYE, Circuit Judge.

Spirtas Company appeals the district court's¹ grant of summary judgment in favor of Federal Insurance Company, which insured Spirtas by virtue of directors and officers liability (D & 0) policies it had sold and issued. The district court determined Federal had no obligation to defend or indemnify Spirtas in a lawsuit brought against it by MIG/Alberici LLC (MIG). We affirm.

I

The district court's decision contains a thorough discussion of the factual background. See Spirtas Co. v. Fed. Ins. Co., 481 F.Supp.2d 993, 994-96 (E.D.Mo.2007). We provide an abbreviated version here.

Spirtas is a Missouri corporation in the business of demolishing structures. It was insured by Federal under D & O policies issued in Missouri which, as relevant, contained exclusions (hereinafter contract exclusions) precluding coverage for claims "based upon, arising from, or in consequence of any actual or alleged liability . . . under any written or oral contract or agreement, provided that this Exclusion[] shall not apply to the extent that an Insured Organization would have been liable in the absence of the contract or agreement."

Spirtas entered into a written subcontract agreement with MIG obligating Spirtas to serve as a demolition subcontractor on a project located in New Jersey. A dispute arose between MIG and Spirtas over Spirtas's performance of the subcontract. MIG sued Spirtas in Michigan state court. MIG's complaint contained five counts. One count alleged a breach of contract based upon Spirtas's failure to complete its work as required under the subcontract. One count was titled "Express or Implied' Trust" and alleged an express trust relationship existed between MIG and Spirtas as a result of the subcontract and Spirtas breached its trust obligations by failing to pay other subcontractors, suppliers, and job creditors of the New Jersey project. Another count was for conversion and alleged Spirtas wrongfully converted funds MIG paid to Spirtas under the subcontract by refusing to pay other subcontractors, suppliers, and job creditors. Another count was for unjust enrichment and alleged Spirtas would be unjustly enriched if allowed to keep funds paid to it by MIG under the subcontract without fully compensating Spirtas's subcontractors and suppliers. Finally, an additional count sought declaratory relief asking for a stay of a lawsuit Spirtas filed against MIG in Missouri state court and alleging Spirtas initiated the Missouri litigation in violation of a clause in the subcontract requiring the parties to submit disputes to non-binding mediation as a condition precedent to litigation.

Spirtas asked Federal to defend and indemnify it in the MIG lawsuit. Federal denied coverage based upon its policies' contract exclusions. Spirtas then filed this lawsuit against Federal in Missouri federal district court contending Federal's D & O policies provided coverage for the MIG lawsuit. Federal moved for summary judgment, which the district court granted after concluding all the claims brought in MIG's lawsuit arose from the contractual relationship between Spirtas and MIG, and the policies' contract exclusions applied to bar coverage. Spirtas filed a timely appeal to this court.

II

We review a district court's grant of summary judgment de novo. Macheca Transport Co. v. Phila. Indem. Co., 463 F.3d 827, 831 (8th Cir.2006). This case involves the interpretation of the terms of an insurance contract, an issue which we also review de novo. Id.

"[I]n this appeal from a Missouri forum, Missouri law governs the interpretation of a policy issued there to a Missouri corporation, with its principal place of business and principal risk in the state." State Farm Fire & Cos. Co. v. Nat'l Research Ctr. for Coll. & Univ. Admissions, 445 F.3d 1100, 1104 (8th Cir.2006); see also Cont'l Ins. Cos. v. Ne. Pharm. & Chem. Co., Ina, 811 F.2d 1180, 1184 (8th Cir. 1987) (holding "Missouri law governs the interpretation of the insurance policies at issue because that state has the most significant relation with the negotiation and terms of the insurance contract."); Superior Equip. Co., Inc. v. Md. Cas. Co., 986 S.W.2d 477, 480-81 (Mo.Ct.App.1998) ("In cases involving surety or casualty insurance . . . the most important factor is the state which the parties contemplated as the principal location of the insured risk."); Hartzler v. Am. Family Mut. Ins. Co., 881 S.W.2d 653, 655 (Mo.Ct.App.1994) (indicating the "policies at issue furnish a clear showing of the parties' intention as to the location of the insured risk" where "[m]any terms and conditions of these policies make express reference to [the law of a particular jurisdiction].").

Spirtas contends the district court erred when it determined the D & O policies' contract exclusions applied and Federal had no duty to defend or indemnify Spirtas in the MIG lawsuit. More specifically, Spirtas alleges the district court construed the "arising from" language used in the exclusions too broadly. We disagree. The district court correctly noted the term "arising from" is construed broadly such that an exclusion precluding insurance coverage for claims arising from a contract not only applies to claims sounding directly in contract but also to claims sounding in tort as long as they "flowed from or had their origins in the breach of the [] contract." Spirtas, 481 F.Supp.2d at 998 (citing Capitol Indem. Corp. v. 1405 Assocs., Inc. 340 F.3d 547, 550 (8th Cir. 2003) (applying Missouri law and interpreting the synonymous phrase "arising out of) & Callas Enters., Inc. v. Travelers Indem. Co. of Am., 193 F.3d 952, 955-56 (8th Cir.1999) (applying Minnesota law)); see also GE HFS Holdings, Inc. v. Natl Union Fire Ins. Co. of Pittsburgh, 520 F.Supp.2d 213, 229 (D.Mass.2007) (concluding a contract exclusion barred coverage where "performance under the contract is the crux of [the] complaint" and "the allegedly wrongful conduct was part and parcel of performance under the contract.").

In this case, the five counts MIG alleged in its lawsuit against Spirtas all arose from the contractual relationship between the parties and flowed from Spirtas's alleged breach of the subcontract, and thus the D & O policies' contract exclusions applied notwithstanding the fact some of MIG's counts sounded in tort rather than in contract.

Spirtas argues the courts which have given an expansive reading of similar contract exclusions have done so when interpreting the phrase "arising out of rather than the phrase "arising from." Spirtas argues...