Manpower, Inc. v. Ins. Co. of Pa.

Decision Date16 October 2013
Docket NumberNo. 12–2688.,12–2688.
PartiesMANPOWER, INC., Plaintiff–Appellant, v. INSURANCE COMPANY OF the State of PENNSYLVANIA, Defendant–Appellee.
CourtU.S. Court of Appeals — Seventh Circuit


Thomas A. Vickers, Attorney, Vanek, Vickers & Masini, P.C., Chicago, IL, for PlaintiffAppellant.

Emilie Bakal–Caplan, Attorney, Jeffrey S. Weinstein, Attorney, Mound, Cotton, Wollan & Greengrass, New York, N.Y., Michael J. Cieslewicz, Attorney, Kasdorf, Lewis & Swietlik, Milwaukee, WI, for DefendantAppellee.

Before FLAUM and TINDER, Circuit Judges, and THARP, District Judge. *

THARP, District Judge.

In this insurance coverage dispute, Manpower, Inc., claims various losses stemming from a building collapse that left its French subsidiary unable to access its office space for more than a year. Manpower won an early victory against the Insurance Company of the State of Pennsylvania (ISOP) when the district court initially held that Manpower was covered under the so-called “master” policy issued by ISOP for its business interruption losses and the losses of its business personal property and improvements and betterments. But the case went south for Manpower when the district court excluded Manpower's accounting expert, without whom Manpower could not establish its business interruption damages. Manpower was dealt a second blow when the district court ruled that, although the ISOP master policy provided coverage for the losses of business personal property and improvements and betterments, that coverage was not triggered because the same losses were also covered under the subsidiary's local French policy, which had to be fully exhausted before coverage under the master policy was available. Manpower now appeals the exclusion of its accounting expert—and the attendant adverse judgment on its business interruption claim—as well as the district court's interpretation of the applicable policies with respect to its property loss claims. For the reasons that follow, we reverse the district court's exclusion of the expert, and therefore its entry of judgment against Manpower on the business interruption claim. We affirm the district court's judgment for ISOP on the property loss claim, agreeing with the district court that the master policy does not provide coverage for Manpower's property losses.


Manpower, Inc., an international recruiting and staffing firm headquartered in Milwaukee, is the parent company of Right Management, Inc., located in Paris, France. On June 15, 2006, a portion of a building located at 65 rue de la Victoire, in which Right Management leased office space, collapsed, seriously damaging part of the building as well as its underground garage. Right Management's offices and furnishings were not physically damaged, but they were rendered wholly inaccessible because the building could no longer be occupied by order of the Parisian Department of Public Safety. Eventually, Right Management relocated its business, without having gained access to its old office space and the furnishings therein; it therefore incurred replacement costs when it furnished and improved its new office space. In the meantime, Right had lost income and incurred expenses from the interruption of its business operations. This dispute arises from Manpower's claims for insurance coverage for its (Right's) various losses.

Two insurance policies govern the coverage dispute: a difference in conditions policy—the “master” policy—issued by ISOP and covering Manpower's operations worldwide, and a local policy that was issued by AIG–Europe, ISOP's French affiliate, to Right Management as the insured. In simple terms, the local policy provides the first line of coverage, and the master policy fills in the gaps by providing excess coverage over the local policy's limits, or by covering specific losses that are not insured under the local policy. Therefore, coverage under the master policy is triggered only when a given loss is not covered in full by the local policy, and the insured must exhaust coverage under the local policy before making any claim under the master policy. The local policy itself comprises “general conditions,” which provide basic coverage for fire and optional coverage for a number of other events, and “special conditions,” which set forth the terms of whatever optional coverage is in fact purchased by the insured. As relevant here, Right obtained coverage under the local policy's special conditions for “les dommages matériels” (a term we set off in quotation marks and leave untranslated until we address the parties' dispute over the correct translation of the term and whether it has a clear meaning even if properly translated) to or affecting insured property.

Right Management first filed a claim under the local policy and was paid $250,000 pursuant to a provision covering losses caused by a lack of access by order of a civil authority (here, the public safety agency's order prohibiting occupancy of the office building). Another $250,000 was paid out under the master policy, exhausting the $500,000 sublimit under that policy's similar lack-of-access provision.

Manpower also claimed that under the master policy it was entitled to reimbursementfor its business interruption losses and the loss of—not damage to—the business personal property located in the office space Right Management could no longer access, as well as the improvements and betterments it had made to that space and had to replicate in its new offices. Manpower claimed losses of about $12 million for these items. ISOP denied the claim under the master policy for these losses, and Manpower filed suit in the district court. The court's rulings, which denied each of Manpower's claims—business interruption and property losses-are discussed below.

A. Business Interruption Loss
1. Scope of Coverage.

On early cross-motions for summary judgment on the scope of coverage, the district court addressed the threshold issue of whether the master policy provides coverage for business interruption losses. There was no dispute that the local policy does not cover such losses, so the only question was whether the master policy did so. Examining the language of the master policy, the district court noted that the policy contains a business interruption provision covering [l]oss resulting from necessary interruption of or interference with business conducted by the Insured and caused by loss, damage, or destruction ... to real or personal property as covered by this policy.” The amount of coverage is $15 million. Coverage for business interruption is also provided by the lack-of-access provision, up to the sublimit of $500,000, for interruptions caused by an order of civil authorities.

According to ISOP, Manpower could not access the master policy's general business interruption provision because its losses were not caused by the building collapse, but only by the local government's closing of the building. ISOP argued that the collapse did not cause “direct physical loss ... or damage to” Right Management's interest in the building, because it damaged the parking structure and another area of the building, but not Right's offices, which were left intact, though inaccessible. Therefore, ISOP argued, only the lack-of-access provision, with its $500,000 sublimit, applied to the incident.

Manpower, on the other hand, argued that the collapse damaged its interests in its rental property because its interest was not limited to the portion of the building reserved for its exclusive use, but also included common areas, elevators and staircases, safety systems, and the building's foundation and support structure, which were necessary to its use of the leased space. Manpower argued that any damage to these features that caused its operations to stall or cease triggered the coverage under the master policy's general business interruption provision. ISOP conceded that there was some damage to the common areas of the building, but maintained that Right's offices were unharmed, and therefore could have been used but for the order of the civil authorities that prohibited Right from occupying them.

In its November 3, 2009, opinion, the district court sided with Manpower. Parsing the expert testimony submitted by both sides, the district court concluded that “the evidence establishes that the collapse rendered the entire [building] unstable, at least for a period of eight to ten weeks following the collapse,” during which temporary measures were taken to ensure the building's stability. Therefore, at least until temporary repairs were completed, it was the collapse itself that prevented Right from using its offices, and the order of the Department of Public Safety “merely confirmed that the collapse rendered the entire building unstable.” Accordingly, the district court held that the $500,000 sublimit on losses caused by lack of access by order of civil authorities did not apply, and that “Manpower is entitled to reimbursement for any business interruption losses it sustained between the collapse and the time the necessary repairs could have been, or were, completed, up to $15 million.” The business-interruption coverage further entitled Manpower to “extra expense” coverage, under the master policy provision that applies to additional expenses “reasonably and necessarily incurred resulting from loss, damage, or destruction to property by any of the perils covered herein.” Under the policy, extra expenses are defined as costs of operating the business “over and above the total cost that would normally have been incurred to conduct the business during the same period had no loss or damage occurred.”

2. Expert Witness Eric Sullivan

The legal issue of coverage having been decided, the parties moved on to expert discovery to determine the amount of the business interruption and extra expense losses. Manpower retained a forensic accounting expert,...

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