TNT Speed & Sport Center, Inc. v. American States Ins. Co.

• Decision Date: 27 May 1997
• Docket Number: No. 96-2303,96-2303
• Citation: 114 F.3d 731
• Parties: TNT SPEED & SPORT CENTER, INC., d/b/a TNT Golf Cars & Utility Systems, Appellant, v. AMERICAN STATES INSURANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 731

114 F.3d 731

TNT SPEED & SPORT CENTER, INC., d/b/a TNT Golf Cars &amp Utility Systems, Appellant, v. AMERICAN STATES INSURANCE COMPANY, Appellee.

No. 96-2303.

United States Court of Appeals,

Eighth Circuit.

Submitted Dec. 13, 1996.

Decided May 27, 1997.

Brian E. McGovern, Chesterfield, MO, argued, for appellant.

William F. James, St. Louis, MO, for appellee.

Before WOLLMAN and MURPHY, Circuit Judges, and TUNHEIM, ¹ District Judge.

TUNHEIM, District Judge.

Appellant TNT Speed & Sport Center, Inc. ("TNT") sold golf carts and operated a go-cart track in West Quincy, Missouri. On July 16, 1993, a vandal removed sandbags and dirt from a levee protecting West Quincy from the rising waters of the Mississippi River. The levee subsequently broke and river water flooded the West Quincy area. The water flooded TNT's property and destroyed TNT's buildings and personal property. TNT brought a declaratory judgment action against its insurer, American States Insurance Company ("American States"). On cross-motions for summary judgment, the district court ² ruled that the insurance policy American States issued to TNT did not cover TNT's losses. TNT appeals. We affirm.

I. BACKGROUND

On or about October 1, 1992, TNT and American States entered into an insurance coverage agreement. American States agreed to provide commercial property, commercial liability, commercial inland marine and commercial auto insurance to TNT for a one-year period starting on October 1, 1992. The policy listed losses covered and made all covered losses subject to specified exclusions and limitations. One of the express exclusions provided:

We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

The policy defines one of the excluded causes as:

Water ... Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not; ...

The district court, applying Missouri law in this diversity case, found that the insurance policy's exclusion of water loss or damage was unambiguous and prevented TNT from recovering under the policy. TNT argues on appeal that the district court improperly applied Missouri law regarding the efficient proximate cause doctrine and that the proximate cause of TNT's loss was the act of vandalism, a covered loss.

II. ANALYSIS

We review the district court's ruling on a motion for summary judgment de novo. Columbia Insurance Co. v. Baker, 108 F.3d 148, 149 (8th Cir.1997). The interpretation of insurance policies is governed by state law, and we review the district court's application of state law de novo. Dupps v. Travelers Ins. Co., 80 F.3d 312, 313 (8th Cir.1996).

Under Missouri law, an insurance policy is a contract and the rules of contract construction apply. Herpel v. Farmers Ins. Co., Inc., 795 S.W.2d 508, 510 (Mo.App.1990). "If the language of an insurance contract is clear and unambiguous, the court does not have the power to rewrite the contract for the parties and must construe the contract as written." Shaffner v. Farmers Mut. Fire Ins. Co., 859 S.W.2d 902, 906 (Mo.App.1993). Although ambiguities in insurance policies are generally construed as liberally as possible in favor of the insured, a court must accept the written policy as the expression of the agreement between the parties and give effect to the parties as disclosed by clear, unambiguous language. Landes v. State Farm Fire & Cas. Co., 907 S.W.2d 349, 358 (Mo.App.1995).

Missouri courts have recognized the doctrine of efficient proximate cause as a basis for recovery under insurance contracts. Bartholomew v. Cameron Country Mut. Ins. Co., 882 S.W.2d 173 (Mo.App.1994). The doctrine of efficient proximate cause governs situations where a risk specifically insured against sets other causes in motion in an unbroken sequence between the insured risk and the ultimate loss. In such situations, the insured risk is regarded as the proximate cause of the entire loss, even if the last step in the chain of causation was an excepted risk. Id. at 175 (citing 5 Appleman, Ins. Law and Practice § 3083 at 309-11 (1970)). If the efficient proximate cause doctrine applied to this case, TNT could recover under its policy with American States because a covered risk, vandalism, set in motion a sequence of events which ultimately caused the loss from water damage. The vandalism would be the efficient proximate cause of the loss, regardless of whether the last step in the chain of causation was an excepted risk, water damage.

The issue in this case is whether the exclusionary language in American States' insurance policy precludes application of the efficient proximate cause doctrine. The district court found that the express language of the exclusion was clear and unambiguous, and that Missouri courts had found similar language to be unambiguous. Rodin v. State Farm Fire and Cas. Co., 844 S.W.2d 537, 539 (Mo.App.1992). The district court therefore concluded that, in accordance with Missouri law, the exclusion language must be enforced in accordance with its plain meaning. See Safeco Ins. Co. v. Hamm, 718 F.Supp. 744, 747 (E.D.Mo.1989). The court found that the plain meaning of the exclusionary language was to directly address, and contract out of, the efficient proximate cause doctrine and exclude coverage for losses caused by water, regardless of the existence of any other contributing causes in any sequence.

Because the district court found that there was no controlling Missouri case which...