Hartford Fire Ins. Co. v. Cna Ins. Co. (europe) Ltd.

• Decision Date: 27 January 2011
• Docket Number: No. 10–1177.,10–1177.
• Citation: 633 F.3d 50
• Parties: HARTFORD FIRE INSURANCE COMPANY; Federal Insurance Company, Plaintiffs, Appellants,v.CNA INSURANCE COMPANY (EUROPE) LIMITED; CNA Insurance Company Limited, Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

633 F.3d 50

HARTFORD FIRE INSURANCE COMPANY; Federal Insurance Company, Plaintiffs, Appellants,

v.CNA INSURANCE COMPANY (EUROPE) LIMITED; CNA Insurance Company Limited, Defendants, Appellees.

No. 10–1177.

United States Court of Appeals, First Circuit.

Heard Sept. 16, 2010.Decided Jan. 27, 2011.

John J. McGivney, with whom David Stanhill and Rubin and Rudman LLP were on brief, for appellants.Kristen V. Gallagher, with whom Christopher R. Carroll and Carroll McNulty & Kull L.L.C. were on brief, for appellees.Before TORRUELLA, RIPPLE,^* and LIPEZ, Circuit Judges.LIPEZ, Circuit Judge.

After plaintiffs Hartford Fire Insurance Company (“Hartford”) and Federal Insurance Company (“Federal”) settled a wrongful death suit, they sought equitable contribution from the defendants, CNA Insurance Company (Europe) Limited (“CNA Europe”) and CNA Insurance Company Limited (“CNA Limited”),¹ for the amounts paid to defend and settle that underlying action. Interpreting the critical phrase “arising out of” in the context of the relevant insurance policy, the district court held that the defendants were not obligated to contribute, and granted summary judgment in their favor.

The plaintiffs appeal, arguing that the court's interpretation was incorrect and that, given the facts surrounding the decedent's death, the policy requires the defendants to contribute to the defense and settlement costs. We conclude that, even under the plaintiffs' construction of the phrase “arising out of,” the defendants are not liable for any contribution. We thus affirm.

I.

A. The Underlying Litigation & Procedural Background

Stephen Custadio, a 53–year–old maintenance supervisor at the Fall River, Massachusetts facility of Roma Color, Inc., was working on a materials lift on November 20, 2003, when the lift jammed and then fell approximately two stories. Custadio was impaled through his eye by a metal pipe and died. In 2005, his widow sued European Colour PLC, of which Roma Color was a subsidiary, alleging negligence and wrongful death. European Colour eventually settled the claims against it for $2,750,000.

Both Hartford and Federal defended European Colour during the Custadio litigation under the terms of two insurance policies. The Hartford commercial general liability policy limited coverage to $1,000,000 per occurrence. Federal issued Roma Color an excess “follow-form” policy, which also covered European Colour, and limited coverage to $5,000,000 per occurrence. In accordance with those policies, Hartford paid $1,000,000 toward the Custadio settlement and Federal paid $1,700,000.² Hartford also incurred legal fees of $293,188.63 in defending European Colour.

In addition to the Hartford and Federal policies, European Colour was insured by CNA Europe. The CNA Europe policy provided coverage up to £2,000,000 per occurrence for “liability in respect of personal injury ... happening anywhere within the United States of America ... arising out of business visits by directors or non-manual employees” who ordinarily reside in the United Kingdom.

While the Custadio litigation was pending, counsel for Hartford and Federal sought contribution from CNA Europe for both the costs of defending European Colour and any potential liability. CNA Europe refused to contribute. It maintained that its policy did not cover Mr. Custadio's accident because, while European Colour employees made numerous business visits to the United States, the accident did not “aris[e] out of” those visits.

B. Factual Background

The following facts are undisputed; we view them in the light most favorable to the appellants, Hartford and Federal. Galera v. Johanns, 612 F.3d 8, 10 n. 2 (1st Cir.2010).

The business visits underlying Hartford's and Federal's claims occurred during the four years preceding the accident. Although the record reflects over seventy visits by approximately twenty European Colour personnel during that time period, the appellants focus our attention on the visits of four directors: Phillip Myles, European Colour's Chief Operating Officer; Michael Cooper, the environmental manager at EC Pigments, Ltd., a European Colour subsidiary; Neil McKinlay, European Colour's Supply Chain Director; and George Hughes, European Colour's Managing Director.

1. Phillip Myles

Myles visited the Fall River facility approximately eighteen times between February 2000 and July 2003. He was responsible for overseeing health and safety at the facility, and he observed several issues there that concerned him. During approximately three of his six visits in 2001, Myles spoke with Michael Clayton and John White, Roma Color's general manager and technical director, respectively, about the materials lift.³ At that time, Clayton requested that money be spent on the lift. By February 2003, Myles had drafted a budget that included a capital expenditure for a “replacement lift” that was “needed for safety reasons,” but it is unclear whether this proposal referred to replacing the receiving lift or the materials lift.⁴ The budget item was never proposed to the European Colour board, whose approval was required for any expenditures over $10,000.

2. Michael Cooper

In 2002, Myles conducted a preliminary health and safety review and then recommended to the European Colour board that a full audit be conducted by Michael Cooper, the environmental manager at EC Pigments, Ltd., a European Colour subsidiary. Cooper visited Fall River in February 2003 and spoke with Clayton. Clayton commented that he would rather spend money on “a new elevator” ⁵ than on an ice bin, another proposed investment, but Cooper did not inquire further. Cooper recorded the comment in a preliminary report but did not mention it to Myles or the European Colour board.

3. Neil McKinlay & George Hughes

Neil McKinlay, European Colour's Supply Chain Director, and George Hughes, European Colour's Managing Director, visited Fall River from October 6 to 10, 2003, at which time McKinlay conducted a broad health and safety review of the facility. McKinlay's most important responsibility during the trip was to ensure that the facility's safety procedures were sufficient to prevent accidents to employees. This goal was part of the “Zero Standards” program introduced by Stephen Smith, chairman of the European Colour board, which dictated that the only acceptable number of accidents was zero.

At the time of his visit, McKinlay was aware of a January 2002 incident in which the emergency braking device on the materials lift had failed. He also knew that the lift had been repaired, inspected, and placed back into service. He had not been told, however, that the lift had fallen again in September 2003, shortly before his visit, and indeed did not discover that fact until years later, at his deposition in the Custadio lawsuit. During the visit, both Clayton and Nadilio Almeida, Custadio's supervisor at Roma Color, told McKinlay that they wanted to replace the materials lift, in order both to increase capacity and improve safety. Despite the requests and McKinlay's duty to review the safety at the facility, he did not inspect or inquire about the materials lift's emergency braking device. Moreover, McKinlay knew that Custadio maintained the lift and was the most knowledgeable among the Fall River personnel about its condition, but the two did not discuss it.

During the return trip to the United Kingdom, on approximately October 10, 2003, McKinlay told Hughes that there had been a request for a large capital expenditure to add an additional lift at the Fall River facility. McKinlay advised that another lift was unnecessary, however, and that spending $100,000 on a new one was wasteful. After he returned, McKinlay discussed several of the facility's safety issues with Smith, the chairman of the European Colour board, but McKinlay did not mention the materials lift.

II.

The plaintiffs moved for partial summary judgment and the defendants cross-moved for summary judgment. In granting the defendants' motion, the district court construed the phrase “arising out of” in the CNA Europe policy to require “a strong and close causal connection with some specific conduct on the part of the director when involved in a business visit,” and found that Hartford and Federal “failed to articulate any colorable causal connection, let alone a strong and close connection, between Mr. Custadio's accident and business visits by European Colour directors and non-manual employees.” Hartford Fire Ins. Co. v. CNA Ins. Co. (Europe), 678 F.Supp.2d 1, 11 (D.Mass.2010).

We review de novo the district court's grant of summary judgment. Mass. Museum of Contemporary Art Found., Inc. v. Büchel, 593 F.3d 38, 52 (1st Cir.2010). “ ‘The presence of cross-motions neither dilutes nor distorts this standard of review.’ ” Id. (quoting Scottsdale Ins. Co. v. Torres, 561 F.3d 74, 77 (1st Cir.2009)). Rather, where the parties filed cross-motions for summary judgment, as they did here, we must determine based on the undisputed facts whether either the plaintiffs or the defendants deserve judgment as a matter of law. Id. (citing Littlefield v. Acadia Ins. Co., 392 F.3d 1, 6 (1st Cir.2004)). “We will uphold the entry of summary judgment if the record, evaluated in the light most favorable to the nonmoving party, shows that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Harrington v. City of Nashua, 610 F.3d 24, 27–28 (1st Cir.2010) (citing Fed.R.Civ.P. 56(c)(2)).⁶

A. The Dunthorne Construction of “Arising Out Of”

The parties agree that the phrase “arising out of” should be interpreted according to English law.⁷ There are two strains of English law construing the phrase “arising out of.” The district court held, and appellees agree, that the phrase is properly understood through the lens of Scott v. Copenhagen Reinsurance Co. (UK), [2003] EWCA (Civ) 688, (2003) 2 All E.R. (Comm.) 190. Appellants maintain that ...