TNT Speed & Sport v. American States Ins. ( 1997 )

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No. 96-2303
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TNT Speed & Sport Center, Inc., *
d/b/a TNT Golf Cars & Utility *
Systems, *
* Appeal from the United States
Appellant, * District Court for the
* Eastern District of Missouri
v. *
*
American States Insurance
Company, *
*
Appellee. *
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Submitted: December 13, 1996
Filed: May 27, 1997
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Before WOLLMAN and MURPHY, Circuit Judges, and TUNHEIM,1 District Judge.
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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
1
The Honorable John R. Tunheim, United States District Judge
for the District of Minnesota, sitting by designation.
judgment, the district court2 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.
2
The Honorable Mary Ann Medler, United States Magistrate Judge
for the Eastern District of Missouri, presiding by consent of the
parties. See 28 U.S.C. § 636(c).
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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.
Dupp 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 County 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
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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 directly addressed the relationship between the
efficient proximate cause rule and an exclusionary provision like the one
in American States’ policy, the district court reviewed decisions from
other states’ highest courts to determine the approach the Missouri Supreme
Court would most likely take to resolving the issue. The court concluded
that the most analogous and more persuasive cases from other states
recognize that parties may contract out of application of the efficient
proximate cause doctrine. See, e.g. Alf v. State Farm Fire and Cas. Co.,
850 P.2d 1272 (Utah 1993); Kane v. Royal Ins. Co. of Am., 768 P.2d 678
(Colo. 1989); State Farm Fire Cas. Co. v. Paulson, 756 P.2d 764 (Wyo.
1988). See also Schroeder v. State Farm Fire and Cas. Co., 770 F. Supp.
558 (D. Nev. 1991) (applying Nevada law); Millar v. State Farm Fire & Cas.
Co., 804 P.2d 822 (Ariz. App. 1990)
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Appellant argues that the district court erred in reviewing cases
from other jurisdictions and contends that Missouri law is clear that the
efficient proximate cause doctrine applies and that the exclusionary
language in American States’ policy is indistinguishable from the
exclusionary language at issue in Bartholomew, which did not preclude
application of the doctrine. We disagree. First, we agree with the
district court that the Missouri Supreme Court has not decided the effect
of the exclusionary language at issue. The exclusionary language in
Bartholomew stated that the policy did not “insure against loss caused by,
resulting from, contributed to or aggravated by any of the following:
1. flood, surface water, . . ..” This policy did not employ language
referencing directly the efficient proximate cause doctrine. In contrast,
American States’ policy excluded “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 language in American States’ policy
reflects an intent to contract out of application of the efficient
proximate cause doctrine.
When a state’s highest court has not addressed the precise question
of state law at issue, a federal court must decide “what the highest state
court would probably hold were it called upon to decide the issue.” Hazen
v. Pasley, 768 F.2d 226, 228 (8th Cir. 1985). In determining what the
Missouri Supreme Court would probably hold if it were presented with this
issue, it was entirely proper for the district court to consider relevant
precedents from other jurisdictions. See Gilstrap v. Amtrak, 998 F.2d 559,
560 (8th Cir. 1993).
We affirm the district court’s grant of summary judgment in favor of
American States and its denial of TNT’s motion for summary judgment.
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A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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