USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 96-1596
CONTINENTAL INSURANCE COMPANY AND
HARTFORD FIRE INSURANCE COMPANY,
Plaintiffs, Appellants,
v.
ARKWRIGHT MUTUAL INSURANCE COMPANY,
Defendant, Appellee.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Patti B. Saris, U.S. District Judge]
___________________
____________________
Before
Cyr, Boudin and Stahl,
Circuit Judges.
______________
____________________
James T. Hargrove, with whom Thomas M. Elcock, Richard W. Jensen
_________________ ________________ _________________
and Morrison, Mahoney & Miller were on brief for appellants.
__________________________
William Gerald McElroy, with whom Catherine M. Colinvaux and
______________________ ______________________
Zelle & Larson LLP were on brief for appellee.
__________________
____________________
December 19, 1996
____________________
CYR, Circuit Judge. Appellants Continental Insurance
CYR, Circuit Judge.
_____________
Company ("Continental") and Hartford Insurance Company
("Hartford") (collectively: "C&H" or "appellants") challenge the
district court's summary judgment ruling under New York law that
damage from flooding was not covered under the insurance policy
issued by Arkwright Mutual Insurance Company ("Arkwright" or
"appellee"). As the district court correctly applied New York
law, we affirm.
I
I
BACKGROUND
BACKGROUND
__________
In 1992, Olympia and York Development Company, L.P.
("Olympia") owned a high-rise office building at 55 Water Street,
New York, New York ("Water Street Building"). On December 11th
of that year, a severe storm struck New York City, causing the
Hudson and East Rivers to overflow their banks. Flood waters
entered the basement of the Water Street Building through cracks
in its foundation, resulting in more than one million dollars in
property damage. Slightly more than half the damage involved
energized electrical switching panels which had come into contact
with the flood waters. The water immediately caused a phenomenon
known as "electrical arcing"1 an electrical short circuit, in
lay terms which in turn caused an immediate explosion that
____________________
1Electrical arcing is defined as "the movement of electrons
from one point to another." Aetna Ins. Co. v. Getchell Steel
_______________ _______________
Treating Co., 395 F.2d 12, 17 (8th Cir. 1968) (citing Van
_____________
Norstrand, International Dictionary of Physics and Electronics;
_____________________________________________________
Palmer, Craig and Easton, World Book Encyclopedia). Electrical
________________________
arcing "produces heat and light, but does not involve the
combustion of matter." Id.
___
2
blew large holes in the switching panels. C&H appraised the
damage to the switching panels at $581,225. Much of the
remaining damage, appraised at $445,592, occurred when the flood
waters came in contact with non-energized electrical equipment;
it involved no electrical arcing.
At the time of the storm, three separate policies
provided various coverages for the Water Street Building. Two of
the policies identical "all risk" policies separately issued
by appellants Continental and Hartford insured against "all
risks including Flood and Earthquake" up to $75,000,000 per
occurrence for the one-year period beginning March 3, 1992. Each
policy underwrote fifty percent of the $75,000,000 "all risk"
coverage on identical terms and conditions, and contained a
$100,000 deductible for any loss and damage arising out of each
covered occurrence. In addition, each "all risk" policy excluded
coverage for mechanical or electrical breakdown caused by
artificially generated electrical currents.2
____________________
2The policies stated, in pertinent part:
8. Perils Insured Against
______________________
This policy insures against all risk of
direct physical loss of or damage to property
described herein except as hereinafter
excluded.
9. Perils Excluded
_______________
This policy does not insure:
* * *
c. against electrical injury or disturbance
to electrical appliances, devices, or wiring
caused by electrical currents artificially
generated unless loss or damage from a peril
insured ensues and then this policy shall
cover for such ensuing loss or damage.
3
The third policy, issued by appellee Arkwright, a
Massachusetts corporation, afforded $3,000,000,000 in total
liability coverage for the three-year period between January 1,
1992 and January 1, 1995, on approximately forty buildings owned
by Olympia around the world. As concerns the Water Street
Building in particular, the Arkwright policy afforded up to
$100,000,000 in covered property loss from flooding, subject to a
$75,000,000 deductible. Thus, the Arkwright policy principally
served as excess "all risk" coverage above the $75,000,000
______ _____
liability limit on the two separate "all risk" policies issued by
appellants Continental and Hartford.
The Arkwright policy on the Water Street Building
included a "Special Deductible Endorsement," which afforded
primary insurance coverage for mechanical or electrical breakdown
_______
by substituting a $50,000 deductible for the $75,000,000 "all
risk" deductible in the Arkwright policy. The $50,000 Special
Deductible Endorsement was subject to the following
qualifications:
In the event of insured loss or damage under
__ ___ _____ __ _______ ____ __ ______ _____
the policy to which this endorsement is
___ ______
attached, the Loss or Damage described below
___ ____ __ ______ _________ _____
shall be subject to the following deductible
_____ __ _______ __ ___ _________ __________
amount(s) in lieu of any other Policy
________ __ ____ __ ___ _____ ______
deductible amount(s) except those for Flood,
__________ ________ ______ _____ ___ _____
Earthquake or Service Interruption if
__
applicable:
__________
[$50,000.00]
__________
* * *
3. Loss or damage from mechanical or
____ __ ______ ____
electrical breakdown (except by direct
__________ _________
lightning damage) of any equipment,
unless physical damage not excluded
4
results, in which event this Special
Deductible shall not apply to such
resulting damage. (Emphasis added.)
Olympia submitted claims to appellants Continental and
Hartford for the total loss sustained at the Water Street
Building. It maintained that the entire loss had been caused by
flooding and therefore came within the coverage afforded under
the two primary "all risk" policies issued by appellants.
Continental and Hartford promptly paid $937,557 to Olympia,
representing coverage for the entire loss less a $100,000
deductible, then claimed reimbursement from Arkwright for the
$581,225 loss to the electrical switching panels allegedly caused
by electrical arcing. Arkwright refused to contribute,
contending that all damage to the Water Street Building had been
caused by, or resulted directly from, flooding. Relying on the
Special Deductible Endorsement language "in lieu of any other
Policy deductible amount(s) except those for Flood" Arkwright
insisted that since the damage had been due to flood, the $50,000
deductible in its endorsement did not displace the $75,000,000
deductible in its policy.
Continental and Hartford instituted this diversity
proceeding in United States District Court for the District of
Massachusetts, seeking a judicial declaration that Arkwright was
liable for the portion of the electrical switching panel loss due
to electrical arcing. After all parties moved for summary
judgment based on their respective interpretations of the
applicable New York caselaw, the district court concluded that
5
under the Arkwright insurance contract, including its Special
Deductible Endorsement, as viewed by a reasonable business person
in the relevant circumstances, see Bird v. St. Paul Fire & Marine
___ ____ ______________________
Ins. Co., 120 N.E. 86 (N.Y. 1918), the damage to the electrical
________
switching panels had been caused by flooding.3
The district court determined that in identifying the
cause of the storm-related damage to the electrical switching
panels, a reasonable business person would not have segregated
the flooding from the arcing. The court based its conclusion on
the fact that the $50,000 deductible is made inapplicable to
flood loss by the express language in the Special Deductible
Endorsement excluding electrical breakdown due to flood, as well
as the fact that all the damage occurred virtually simultaneously
at the same site.
II
II
DISCUSSION4
DISCUSSION
__________
____________________
3The parties stipulated, consistent with established "choice
of law" principles, that New York law governs. Under the law of
Massachusetts, the forum state, the applicable substantive law
would be supplied by New York, the jurisdiction with the most
significant relationship to the transaction. See Bi-Rite
___ _______
Enterprises v. Bruce Miner Co., 757 F.2d 440, 442-43 (1st Cir.
___________ _______________
1985).
4We review a grant of summary judgment de novo. Alexis v.
__ ____ ______
MacDonald's Restaurants of Mass., Inc., 67 F.3d 341, 346 (1st
________________________________________
Cir. 1995). It will be upheld if the record, viewed in the light
most favorable to the nonmoving party, shows that "there is no
genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law." Fed. R. Civ. P.
56(c). Moreover, we may affirm the district court judgment "on
any independently sufficient ground." Polyplastics, Inc. v.
___________________
Transconex, Inc., 827 F.2d 859, 860-61 (1st Cir. 1987).
________________
6
Appellants Continental and Hartford challenge the
district court ruling that the flooding, rather than the
electrical arcing, constituted the legal cause of the damage to
the electrical switching panels. Their proximate causation
analysis focuses upon what point in the "proverbial chain of
causation" a particular cause ceases to be remote and becomes the
"legal cause" of the damage. See Richard A. Fierce, Insurance
___ _________
Law--Concurrent Causation: Examination of Alternative
_________________________________________________________________
Approaches, 1985 S. Ill. U. L.J. 527, 534 (1986).
__________
1. Causation under New York Law
1. Causation under New York Law
____________________________
Appellants first contend that the district court
misapplied New York law in ruling that a reasonable business
person would consider the switching panels to have been damaged
by flood rather than electrical arcing. Under established New
York law governing insurance contract interpretation, appellants
maintain, the district court was required to identify the most
direct, physical cause of the damage, or what is termed "the
dominant and proximate cause." Novick v. United Servs. Auto.
______ ____________________
Ass'n, 639 N.Y.S.2d 469, 471 (App. Div. 1996). According to
_____
appellants, the most direct, physical cause of a loss under New
York law "is that which is nearest to the loss because [it] is
invariably the most direct and obvious cause."
Appellants predicate their contention principally upon
Home Ins. Co. v. American Ins. Co., 537 N.Y.S.2d 516 (App. Div.
______________ _________________
1989), where water and steam precipitated electrical arcing which
in turn damaged electrical equipment in a high-rise building.
7
There the New York Supreme Court, Appellate Division, held that
electrical arcing, not steam, caused the damage, since the steam
"merely set the stage" for the subsequent arcing and therefore
constituted the remote, rather than the proximate, cause of the
loss. Id. at 517 ("'[T]he causation inquiry stops at the
___
efficient physical cause of the loss; it does not trace events
back to their metaphysical beginnings. . . .'") (quoting Pan Am.
_______
World Airways, Inc. v. Aetna Cas. & Sur. Co., 505 F.2d 989, 1006
____________________ _____________________
(2d Cir. 1974)). Similarly, appellants maintain that the
efficient, legal cause of the damage to the switching panels in
the present case was the electrical arcing, whereas the flooding
merely set the stage for the arcing.5 Consequently, appellants
conclude, the district court need have looked no further than the
phenomenon of electrical arcing for the legal cause of the damage
to the switching panels.
____________________
5Appellants cite numerous cases for the proposition that the
efficient, legal cause of a loss invariably is the cause
"nearest" the loss. See, e.g., Kosich v. Metropolitan Property &
___ ____ ______ _______________________
Cas. Ins. Co., 626 N.Y.S.2d 618 (App. Div. 1995) ("efficient and
______________
dominant cause" of damage from asbestos contamination held to be
contamination itself and not the chain-saw's cutting into floor
which precipitated asbestos release); Album Realty Corp. v.
____________________
American Home Assur. Co., 607 N.E.2d 804, 805 (N.Y. 1992) (loss
________________________
following rupture of frozen sprinkler head not caused by freezing
but by resulting flooding); Loretto-Utica Properties Corp. v.
________________________________
Douglas Corp., 642 N.Y.S.2d 117, 118 (App. Div. 1996) (loss
_____________
following heaving of frozen ground not caused by freezing but by
movement of earth); Morgan Guar. Trust Co. v. Aetna Cas. & Sur.
_______________________ _________________
Co., 604 N.Y.S.2d 952, 953 (App. Div. 1993) (damage following
___
flooding, caused not by flooding but by resulting corrosion); Pan
___
Am. World Airways, Inc., 505 F.2d at 1006-07 (settled caselaw has
_______________________
established a "mechanical test of proximate causation for
insurance cases, a test that looks only to the 'causes nearest
the loss,'" and not to "remote causes of causes") (quoting Queen
_____
Ins. Co. v. Globe & Rutgers Fire Ins. Co., 263 U.S. 487, 492
________ _______________________________
(1924) (Holmes, J.)).
8
We turn to the language in the Arkwright insurance
contract to determine whether the damage to the switching panels
was legally caused by flooding or electrical arcing. Under New
York law, insurance policies are to be interpreted in accordance
with their terms. See, e.g., Frey v. Aetna Life & Cas., 633
___ ____ ____ __________________
N.Y.S.2d 880, 882 (App. Div. 1995).
In cases involving an electrical breakdown not caused
by lightning, the Special Deductible Endorsement substitutes a
$50,000 deductible for the $75,000,000 deductible in the
Arkwright liability policy proper, except in cases where the
higher deductible for "Flood" is "applicable." Appellants would
have the court interpret the operative provision ("in lieu of any
other Policy amount(s) except those for Flood . . . if
applicable") to mean that the $75,000,000 deductible in the
Arkwright liability policy proper applies only if there is a
separate, specific policy deductible for flood damage. Absent
such a specific deductible for flood damage, appellants say, the
exception for loss from flooding found in the $50,000 Special
_________
Deductible Endorsement is never triggered; therefore, the
electrical breakdown damage to the switching panels comes within
the $50,000 Special Deductible Endorsement, displacing the
$75,000,000 deductible in the Arkwright policy itself.
Appellants misinterpret the plain language in the
Special Deductible Endorsement, which unambiguously indicates
that the $50,000 deductible does not apply if another deductible
___ _____
for flooding damage does apply. Furthermore, the "all risk"
____ _____
9
general liability coverage in the Arkwright policy itself
expressly insures against "loss or damage resulting from a single
occurrence," including flood. Thus, the plain language employed
in both the Special Deductible Endorsement and the Arkwright
general liability policy itself, compatibly interpreted in
context, means that damage to mechanical or electrical equipment
proximately caused by flooding comes within the exception to the
_________
$50,000 Special Deductible Endorsement and hence the $75,000,000
deductible in the Arkwright general liability policy applies in
such a situation. See, e.g., Harris v. Allstate Ins. Co., 127
___ ____ ______ __________________
N.E.2d 816, 817 (N.Y. 1955) ("words of the policy are to be read
in context, the language construed fairly and reasonably with an
eye to the object and purpose to be achieved by the writing");
Moshiko, Inc. v. Seiger & Smith, Inc., 529 N.Y.S.2d 284, 287
______________ _____________________
(App. Div. 1988) (policy endorsements to be read in context of
general liability provisions). "Where the provisions of the
policy are 'clear and unambiguous, they must be given their plain
and ordinary meaning . . . .,'" United States Fidelity & Guar.
_______________________________
Co. v. Annunziata, 492 N.E.2d 1206, 1207 (N.Y. 1986) (quoting
___ __________
Government Employees Ins. Co. v. Kligler, 42 N.Y.2d 863, 864, 397
_____________________________ _______
N.Y.S.2d 777, 366 N.E.2d 865 (1977)).6
____________________
6Appellants' interpretation, on the other hand, renders the
exception to the Special Deductible Endorsement mere surplusage
and therefore is disfavored. See Technicon Elec. Corp. v.
___ ______________________
American Home Assur. Co., 542 N.E.2d 1048, 1050-51 (N.Y. 1989)
_________________________
(rejecting interpretation which would render exclusion clause
meaningless in context); Utica Mut. Ins. Co. v. Preferred Mut.
____________________ _______________
Ins. Co., 583 N.Y.S.2d 986, 987 (App. Div. 1992) (similar). In
________
cases involving an electrical breakdown, the language of the
Special Deductible Endorsement triggers the $50,000 deductible
10
2. Legal Cause of Loss
2. Legal Cause of Loss
___________________
Given the plain language in the Arkwright insurance
contract, we must determine the proximate or legal cause of the
damage to the switching panels, bearing in mind that "[t]he
concept of proximate cause when applied to insurance policies is
a limited one," especially under New York law. Great N. Ins. Co.
_________________
v. Dayco, 637 F. Supp. 765, 778 (S.D.N.Y. 1986).7 Moreover, in
_____
the context of an insurance contract, our inquiry may not proceed
beyond the dominant, efficient, physical cause of the loss. Home
____
Insurance, 537 N.Y.S.2d at 517. Ultimate causation or what
_________
the Second Circuit has referred to as the "metaphysical
beginnings" is not our concern. Pan Am. World Airways, Inc.
____________________________
v. Aetna Cas. & Sur. Co., 505 F.2d 989, 1006 (2d Cir. 1974).
_____________________
That is not to say, as appellants suggest, that the
court is constrained to settle upon the cause nearest the loss
____________________
"in lieu of any other Policy amount(s) except those for Flood . .
. if applicable." As noted above, appellants argue that the
phrase "other Policy amounts" should be read to mean other
specific deductible amounts not including the $75,000,000 general
deductible in the Arkwright general liability policy. But since
no other deductible amount for flood exists in the Arkwright
policy covering the Water Street Building, and appellants have
not been able to demonstrate the existence of any other special
flood deductible in the entire Arkwright policy covering Olympia
properties in general, their interpretation would mean that the
phrase "in lieu of other Policy amounts" is "mere surplusage"
as, indeed, appellants concede in their brief.
7Arkwright maintained at oral argument that the Special
Deductible Endorsement excludes arcing whenever flood is the
remote as well as the proximate cause of the damage. Its
contention fails, since the required plain language
interpretation dictates an end to our inquiry at proximate
causation.
11
without regard to other factors.8 Rather, we are "'to follow the
chain of causation so far, and so far only as the parties meant
that we should follow it.'" Album Realty Corp. v. American Home
___________________ _____________
Assur. Co., 607 N.E.2d 804, 805 (N.Y. 1992) (quoting Goldstein v.
__________ _________
Standard Acc. Ins. Co., 236 N.Y. 178, 183, 140 N.E. 235, 236
_______________________
(1923)). In its seminal discourse on the "loss causation"
inquiry under an insurance contract, the New York Court of
Appeals charted the course: "[O]ur guide is the reasonable
expectation and purpose of the ordinary business man when making
an ordinary business contract. It is his intention, expressed or
fairly to be inferred, that counts. There are times when the law
permits us to go far back in tracing events to causes." Bird v.
____
St. Paul Fire & Marine Ins. Co., 120 N.E. 86, 87 (N.Y. 1918)
__________________________________
(Cardozo, J.).9
____________________
8Nor does Pan Am. World Airways, Inc., supra., support
______________________________ ______
appellants' position. It held that proximate causation is
determined by a "mechanical . . . test that looks only to the
causes nearest to the loss." 565 F.2d at 1007 (emphasis added).
______
Its use of the plural permits more than one cause to be
considered. Moreover, even the language used by the district
court in Great N. Ins. Co. v. Dayco is qualified; viz.,
____________________ _____ ___
"generally [we] are to stop our inquiries with the cause nearest
_________
to the loss," 637 F. Supp. 765, 778 (S.D.N.Y. 1986) (emphasis
added),making the rule something less than a mechanical mandate.
9As appellants acknowledge, Bird remains good law to this
____
day, and continues to be cited for its discussions on intent and
proximate causation. See R. Dennis Withers, Proximate Cause and
___ ____________________
Multiple Causation in First-Party Insurance Cases, 20 Forum 256,
__________________________________________________
261 (January 1985) (citing Atlantic Cement Co., Inc. v. Fidelity
_________________________ ________
& Cas. Co. of N.Y., 459 N.Y.S.2d 425 (App. Div. 1983); Ace Wire &
__________________ __________
Cable Co. v. Aetna Cas. & Sur. Co., 457 N.E.2d 761 (N.Y. 1983));
_________ ______________________
see also Album Realty Corp., 607 N.E.2d at 804; Pan Am. World
___ ____ __________________ ______________
Airways, Inc., 505 F.2d at 1006.
_____________
12
The Bird case involved a fire insurance contract on a
____
vessel. Within the policy period, a fire of unknown origin broke
out beneath some freight cars loaded with explosives and located
at a considerable distance from the pier where the insured vessel
was docked. After burning for approximately 30 minutes, the
freight cars exploded, causing another fire, which in turn caused
a second explosion, the concussion from which damaged the insured
vessel located some 1,000 feet from the site of the second
explosion. No fire reached the vessel. Id. at 86. Then-Judge
___
Cardozo, writing for New York's highest court, employed a
pragmatic, "commonsense appraisement" of the circumstances, id.
___
at 87 (citation and internal quotation marks omitted), in
determining as a matter of law that coverage of the concussion
damage sustained by the vessel could not be said to have been
within the "range of probable expectation" under a policy which
protected against fire. Id. at 88.
___
The critical consideration in Bird was the "element of
____
proximity in space." Id. at 87. As the initiating event the
___
fire in the freight cars occurred a great distance from the
insured vessel, the court held that "there was never exposure to
its direct perils" and that the exposure to its indirect perils
i.e., the concussion from the second explosion came "only
through the presence of extraordinary conditions, the release and
intervention of tremendous forces of destruction." Id.
___
Consequently, the court concluded, reasonable business people
would not have expected that an insurance policy affording
13
protection against fire would cover damage to a vessel following
successive concussions precipitated by explosions caused by the
fire in the distant freightyard. As the Court of Appeals stated:
The case comes, therefore, to this. Fire
____
must reach the thing insured, or come within
____ _____ ___ _____ ________ __ ____ ______
such proximity to it that damage, direct or
____ _________ __ __ ____ _______ ______ __
indirect, is within the compass of reasonable
_________ __ ______ ___ _______ __ __________
probability. Then only is it the proximate
___________ ____ ____
cause, because then only may we suppose that
___ __ _______ ____
it was within the contemplation of the
__ ___ ______ ___ _____________ __ ___
contract.
________
Id. at 88 (emphasis added).
___
In sum, absent an explicit policy declaration of the
parties' intention, the contemplation of their insurance contract
must be inferred by the court from all the circumstances
surrounding the loss, including whether a peril insured against
came directly or indirectly within such proximity to the property
insured that the damage it sustained fairly can be considered
"within the compass of reasonable probability." Id. Among the
__
factors which must be assessed are the spatial and temporal
proximity between the insured peril and the claimed loss. See R.
___
Dennis Withers, Proximate Cause and Multiple Causation in First-
_________________________________________________
Party Insurance Cases, 20 Forum 256, 260 (January 1985) (Bird
______________________ ____
considers "proximity of a cause as a judgment to be made upon
matters of fact," including "proximity in space.").
Our case involves no spatial or temporal attenuation at
all comparable to that present in Bird. The flood waters came
____
directly in contact with the electrical equipment in the Water
________
Street Building, instantaneously precipitating the arcing which
_______________
in turn caused the immediate short-circuiting and explosion that
_________
14
damaged the switching panels. At most, mere seconds would have
elapsed from the time the flood waters directly contacted the
electrical equipment until the electrical switching panels
exploded.
Where any spatial and temporal separation between the
covered peril and the ensuing loss is so minimal as to be
virtually nonexistent, Bird clearly contemplates that the loss be
____
considered well within the "compass of reasonable probability"
and therefore inferentially within the contemplation of the
parties to the insurance contract. See Bird, 120 N.E. at 88.
___ ____
Consequently, given the absence of any significant spatial
separation or temporal remoteness between the insurgent flood
waters, the electrical arcing and the explosion of the switching
panels, we believe the district court correctly concluded that
flooding proximately caused the loss.
More recent New York caselaw continues implicitly to
recognize the significance of what the Court of Appeals in Bird
____
called the "element of proximity in space," see id. at 87, as
___ __
well as the temporal element. In Home Insurance, for example,
_______________
the Court of Appeals recently held electrical arcing to be the
__________ ______
proximate cause of damage where arcing had been precipitated by a
gradual intrusion of moisture. The court elucidated upon its
analysis as follows:
There was no flow of water directly onto the
_____ ___ __ ____ __ _____ ________ ____ ___
bus duct system. Rather, the moisture
___ ____ _______ ______ ________
saturated the duct insulation and supports,
_________ __________
which had deteriorated due to age and
_____ ___ ____________ ___ __ ___ ___
environment, resulting in breakdown of the
___________
insulation and permitting an arc to result .
__________ __ ___ __ ______
15
. . . Upon review of the record before this
Court, we find that . . . the steam merely
___ _____ ______
set the stage for the later event.
___ ___ _____ ___ ___ _____ _____
Home Ins. Co., 537 N.Y.S.2d at 517 (emphasis added). This
______________
passage distinguishes an intrusion of water and steam into a
basement, gradually causing moisture to seep through
deteriorating building materials into a duct, from a situation in
which water flows directly onto an electrical system, causing
immediate arcing and damage to the electrical system. In Home
____
Insurance, substantial time and space separated the peril (the
_________
water and steam entering the basement) from the eventual
electrical damage to the duct system resulting from the moisture
gradually generated by the water and steam. Also interposed
between the peril and the damage in Home Insurance were the
______________
deteriorating insulation and supports, which gave rise to a
considerably greater spatial separation than occurred here.
"There is no use in arguing that distance ought not to count if
life and experience tell us that it does." Bird, 120 N.E. at 87.
____
Thus, neither Bird nor Home Insurance involved
____ ________________
circumstances similar to the present, where flood waters flowed
directly onto electrical equipment, immediately precipitating in
turn the instantaneous electrical arcing, the short-circuiting,
and the explosion which damaged the switching panels.
Accordingly, as the district court correctly ruled, the insurgent
flood waters cannot reasonably be thought simply to have "set the
stage" for a remote event, or to have been merely some
16
metaphysical beginning to a succession of temporally remote
events.
Temporal remoteness and spatial separation distinguish
many recent New York cases cited by appellants.10 Given the
importance placed upon temporal remoteness and spatial separation
in Bird, 120 N.E. at 88, the wellspring decision under New York
____
law, we conclude that the district court correctly held that the
legal cause of the damage to the electrical switching panels was
the flooding, not electrical arcing.11 We therefore hold that a
reasonable business person would consider that the damage
sustained by the electrical switching panels in the Water Street
____________________
10See, e.g., Morgan Guar. Trust Co. v. Aetna Cas. & Sur.
___ ____ ________________________ ___________________
Co., 604 N.Y.S.2d 952, 953 (App. Div. 1993) (microbiologically-
___
induced corrosion occurring over one-year period, rather than
remote flooding which initiated corrosion, held proximate cause
of damage to electrical duct); Album Realty Corp., 607 N.E.2d at
__________________
805 (electrical damage precipitated by water which was emitted by
frozen sprinkler and filled basement, held to have been caused
not by freezing but by the more proximate flooding). Such
temporal and spatial considerations likewise distinguish other
New York cases not involving electrical breakdown. See, e.g.,
___ ____
Kosich v. Metropolitan Property & Cas. Ins. Co., 626 N.Y.S.2d 618
______ _____________________________________
(App. Div. 1995) (contractor's cutting into vinyl flooring with
chain saw merely "set in motion a chain of events that ultimately
resulted" in loss from asbestos contamination); Pan Am. World
______________
Airways, Inc., 505 F.2d at 1006-07 (in airline hijacking case,
_____________
general history of unrest throughout Middle East, extending
through three wars and several countries, is too remote to be
considered cause for loss under "war risk" insurance due to
"reasonable expectations of businessmen").
11Although the district court relied upon a conversion
theory derived from Bird i.e., that the exception to the
____
Special Deductible Endorsement converted a more remote cause into
the proximate cause it concluded as well that any temporal and
spatial separation between the flood and the damage to the
switching panels had been virtually nonexistent. In all events,
we may affirm on any ground supported by the record.
Polyplastics, Inc. v. Transconex, Inc., 827 F.2d 859, 860-61 (1st
__________________ ________________
Cir. 1987).
17
Building, just as any other water damage to the building, was
caused by flood. That is to say, as then-Judge Cardozo did,
since the flood waters surged onto the site of the loss, a
reasonable business person would consider the damage to the
electrical switching panels to have been "within the danger zone
of ordinary experience," see id. at 87, and consequently would
___ __
expect the Continental and Hartford flood policy coverages, not
the Arkwright Special Deductible Endorsement, to afford Olympia
indemnification for the loss. Thus, the exception to the
Arkwright Special Deductible Endorsement applies.
3. Appropriateness of Summary Judgment
3. Appropriateness of Summary Judgment
___________________________________
Finally, we turn briefly to appellants' alternate
contention. Continental and Hartford argue that the inquiry into
the dominant and efficient cause of the loss presents a question
of fact inappropriate for summary judgment. Once again, we
disagree.
Generally speaking, the determination as to which of
two causes was the dominant and efficient cause of a loss is for
the factfinder. See, e.g., Molycorp, Inc. v. Aetna Cas. & Sur.
___ ____ ______________ __________________
Co., 431 N.Y.S.2d 824, 825-26 (App. Div. 1980); Novick, 639
___ ______
N.Y.S.2d at 471. The trial courts in the cited cases, however,
were presented with a factual question as to which of the two
perils physically caused the loss. In our case, on the other
__________ ______
hand, there is no dispute concerning the physical, as
__ _______
distinguished from the legal, cause of the damage i.e., what
physical phenomenon precipitated the alteration to the electrical
18
switching panels.12 As the New York Court of Appeals explained
in Bird: "For the physicist one thing is cause, for the jurist,
____
another." Bird, 120 N.E. at 88. Thus, the question before this
____
court, as in Bird, is the question of law already resolved above:
____ ___
What would the New York courts determine to have been the legal
or proximate cause of the loss? Like the district court, we hold
that flood was the legal cause of the loss in this case.
III
III
CONCLUSION
CONCLUSION
__________
As the district court correctly applied the controlling
New York law, the judgment is affirmed. Costs are awarded to
________ _____ ___ _______ __
appellee.
________
SO ORDERED.
SO ORDERED.
__ _______
____________________
12As support for their claim that trialworthy issues of fact
remain, appellants point to a letter written to Arkwright by
David Passman, an insurance broker for Olympia. The Passman
letter is said to contradict the affidavit of Olympia's risk
manager, David Roth, who filed the claim for loss against
appellants only, based on his understanding that all the damage
stemmed from flooding within the contemplation of their policies.
But though the Passman letter contends that the Arkwright policy
affords coverage, it does not assert that the physical damage was
facilitated by any phenomenon other than flood, nor does it take
issue with the sequence of events as found by the district court.
Thus, the Passman letter raised no trialworthy issue. See
___
Guzman-Rivera v. Rivera-Cruz, 29 F.3d 3, 4 (1st Cir. 1994).
_____________ ___________
19
