Fluor Corporation v. Zurich American Insurance Company

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 21-3389
___________________________
Fluor Corporation
lllllllllllllllllllllPlaintiff - Appellant
v.
Zurich American Insurance Company
lllllllllllllllllllllDefendant - Appellee
Hartford Accident and Indemnity Company; Does 1-100
lllllllllllllllllllllDefendants
____________
Appeal from United States District Court
for the Eastern District of Missouri - St. Louis
____________
Submitted: September 22, 2022
Filed: April 13, 2023
____________
Before COLLOTON, WOLLMAN, and STRAS, Circuit Judges.
____________
WOLLMAN, Circuit Judge.

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Zurich American Insurance Company (Zurich) insured St. Joe Minerals
Corporation (St. Joe) and its sole shareholder Fluor Corporation (Fluor) from 1981
to 1985. St. Joe operated a lead smelting plant in Herculaneum, Missouri. Residents
of the town sued Fluor and St. Joe (then named Doe Run Resources Corporation (Doe
Run)) in the early 2000s, alleging that they had been injured by the plant’s release of
lead and other toxins. Zurich agreed to defend the companies and paid $9.87 million
in four settlements on behalf of both companies. Zurich also contributed more than
$25 million to a settlement between Doe Run and remaining plaintiffs. Fluor went
to trial, suffered an adverse jury verdict, and thereafter settled the claims for $300
million.
Zurich filed a declaratory judgment action against Fluor, which, in turn, filed
a counterclaim alleging bad faith failure to settle.1 The district court granted
summary judgment to Zurich, concluding that the policy limited Zurich’s liability on
a per-occurrence basis and that the $3.5 million per-occurrence limit had been
exhausted by Zurich’s initial settlement payments. The court concluded that Zurich
thus did not act in bad faith when it did not settle the claims against Fluor.
Fluor appeals, arguing that the district court erred in determining that the policy
limited Zurich’s liability on a per-occurrence and not a per-claim basis, which would
have increased Zurich’s liability to $21.5 million for the 1981 and 1982 policies.
Fluor also contends that, regardless of whether the policy is limited on a per-
occurrence or per-claim basis, the limits do not foreclose its claim. Finally, Fluor
argues that it is entitled to partial summary judgment. Reviewing de novo and
applying Missouri law, we reverse the policy-limits determination and remand for
further proceedings. See Am. Fam. Mut. Ins. Co., S.I. v. Mid-Am. Grain Distribs.,
LLC, 958 F.3d 748, 752 (8th Cir. 2020) (standard of review); Cont’l Cas. Co. v. Nat’l
1Fluor also alleged breach of the duty to defend and unreasonable refusal to
pay, but those claims are not relevant to this appeal.
-2-

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Union Fire Ins. Co. of Pittsburgh, PA, 812 F.3d 1147, 1149 (8th Cir. 2016) (“No one
disputes Minnesota law governs, so it does.”).
An insurance policy is interpreted according to the plain and ordinary meaning
of its terms, “or the meaning that would be attached by an ordinary purchaser of
insurance.” Seaton v. Shelter Mut. Ins. Co., 574 S.W.3d 245, 247 (Mo. 2019)
(quoting Doe Run Res. Corp. v. Am. Guar. & Liab. Ins., 531 S.W.3d 508, 511 (Mo.
2017)). Courts should evaluate policies as a whole when interpreting policy
provisions. Ritchie v. Allied Prop. & Cas. Ins. Co., 307 S.W.3d 132, 135 (Mo. 2009).
When an endorsement conflicts with the policy’s terms, the endorsement prevails.
Merlyn Vandervort Invs., LLC v. Essex Ins. Co., Inc., 309 S.W.3d 333, 338 (Mo. Ct.
App. 2010) (citing Abco Tank & Mfg. Co. v. Fed. Ins. Co., 550 S.W.2d 193, 198
(Mo. 1977)). Moreover, the last antecedent rule provides that a limiting clause
“should ordinarily be read as modifying only the noun or phrase that it immediately
follows.” Paroline v. United States, 572 U.S. 434, 447 (2014) (quoting Barnhart v.
Thomas, 540 U.S. 20, 26 (2003)). The last antecedent rule is not absolute, however,
and can “be overcome by other indicia of meaning.” Id. (quoting Barnhart, 540 U.S.
at 26)). Finally, the scope of subparts canon recognizes that “[m]aterial within an
indented subpart relates only to that subpart.” Antonin Scalia & Bryan A. Garner,
Reading Law: The Interpretation of Legal Texts 156 (2012).
The Declarations in the policies at issue here set forth the limits for
comprehensive general liability, which included bodily injury liability.2 The
Declarations limited Zurich’s liability on an “each occurrence” basis. Endorsement
7 amended the Declarations, however, stating:
2The parties rely upon the language from the policies issued in 1981 and 1982.
This opinion cites the 1981 policy, which is identical in all material respects to the
1982 policy. We have omitted certain capitalizations for ease of reading.
-3-

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It is agreed that with respect to limits of liability for
comprehensive general liability as designated under Item 3
of the policy declarations is amended to read:
500,000 each claim
500,000 each aggregate as respects incidental professional
liability endorsement.
Fluor argues that Endorsement 7 amended the Declarations’ limitations in a
manner that limited comprehensive general liability—which, again, includes bodily
injury liability—to a per-claim basis. The plain language of Endorsement 7’s
introductory clause, “limits of liability for comprehensive general liability,” supports
Fluor’s reading. By contrast, Endorsement 7’s limiting language, “as respects
incidental professional liability endorsement,” was placed in an indented subpart.
Applying the last antecedent rule, Endorsement 7’s limiting clause applied only to the
immediately preceding phrase, “500,000 each aggregate.” The scope of subparts
canon leads to the same conclusion.
Zurich argues that the last antecedent rule should not apply here, because there
were other indicia that the policy intended to apply a per-occurrence limit to Zurich’s
comprehensive general liability. Zurich contends that Endorsement 7 provided the
limits of liability for incidental professional liability coverage, which it asserts were
not set forth elsewhere in the policy. But Endorsement 11, which set forth the terms
for incidental professional liability, provided those precise limits:
The total liability of the company for all damages, including damages
for care and loss of services, because of bodily injury sustained by
one or more persons as the result of any one occurrence shall not
exceed the limit of bodily injury liability stated in the Declarations
as applicable to “each occurrence”.
(emphasis added). Accordingly, the Declarations provided the limits of liability for
incidental professional liability coverage.
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Zurich also argues that reading Endorsement 7 as amending the comprehensive
general liability limits is contrary to a holistic reading of the policy because it
contradicts other important terms. When a contradiction arises, however, we enforce
the policy “as altered by the endorsement.” Merlyn Vandervort Investments, LLC,
309 S.W.3d at 338 (quoting Abco Tank & Mfg. Co., 550 S.W.2d at 198). Because
it as a whole may be given effect with per-claim limits on Zurich’s liability, we will
enforce the policy as so amended by Endorsement 7.
We conclude that Endorsement 7 modified the limits of liability for
comprehensive general liability, including bodily injury liability, to be on a per-claim
basis. The district court thus erred by determining that the policy was limited on a
per-occurrence basis.
Fluor argued before the district court that a determination of the actual limits
was unnecessary because it could establish its claim by showing that Zurich failed to
settle at a time when it did not believe that the policy limits had been exhausted.
When the district court rejected this argument and proceeded to determine the policy
limits, Fluor stipulated that Zurich’s settlement payments had exhausted those limits.
Fluor also argued that the court’s policy-limits determination “prevented Fluor from
proving up its bad faith failure to settle claim.” The court agreed that Fluor could not
establish its bad faith claim because the policy limits had been exhausted. D. Ct.
Order of July 27, 2021, at 3. Fluor contends on appeal, however, that it does not
matter whether the policy limits had been exhausted because it can still establish its
bad faith claim because of Zurich’s failure to timely inform Fluor that the policy
limits had been exhausted. Fluor did not present this argument below, however, nor
did it cite any authority regarding an insurance company’s duty to provide such
notice. We conclude that Fluor failed to preserve its argument that Zurich had not
provided timely notice of exhaustion, and we therefore decline to consider it in the
first instance. See Scott C. by and through Melissa C. v. Riverview Gardens Sch.
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Dist., 19 F.4th 1078, 1082 (8th Cir. 2021) (“As a general rule, we do not consider
issues that are raised for the first time on appeal.”).
We also do not rule on the district court’s denial of summary judgment on the
first two elements of Fluor’s claim because it was not a predicate to the final
judgment. See Beadle v. City of Omaha, 983 F.3d 1073, 1076 (8th Cir. 2020)
(explaining that an appeal “bring[s] up for review all of the previous rulings and
orders that led up to and served as a predicate for that final judgment” (quoting Greer
v. St. Louis Reg’l Med. Ctr., 258 F.3d 843, 846 (8th Cir. 2001))).
The judgment is reversed and the case is remanded for further proceedings
consistent with the views set forth herein.
COLLOTON, Circuit Judge, dissenting.
From 1981 to 1983, Zurich American Insurance Company provided
comprehensive general liability insurance coverage to Fluor Corporation for damages
due to bodily injury or property damage in the amount of $500,000 per occurrence.
One of many endorsements to the policies provided coverage for damages because
of bodily injury arising from “incidental professional liability” in the amount of
$500,000 for each claim, up to an aggregate of $500,000. Fluor argues, however, that
the endorsement concerning incidental professional liability transformed the entire
policy into an “each claim” policy without limits on liability per occurrence.
Accepting Fluor’s position would result in a $20 million windfall recovery for which
the company did not pay premiums. The district court properly construed the policy
as providing comprehensive general liability coverage up to $500,000 per occurrence,
and its judgment should be affirmed.3
3The 1981-82 policy was an extension of a 1980-81 policy that Zurich issued
to a company that Fluor acquired in 1981. The parties entered into another policy for
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The insurance policy begins with a Declarations page, excerpted as follows:
Item 3 provides that insurance is afforded for “comprehensive general
liability.” The item states limits of liability for (A) bodily injury liability and (B)
property damage liability. The pre-printed form provides a box for a limit as to “each
occurrence” for each type of liability, and a box for an “aggregate” limit for each type
of liability.
Under bodily injury liability, an amount of “$500,000” is typed for “each
occurrence.” No amount is typed in the “each occurrence” box for property damage
liability. The letters “C S L” are typed in the box for an “aggregate” limit under
bodily injury liability. “C S L” is an abbreviation for “combined single limit,” a term
of art in the insurance industry. This term means that the limit of $500,000 stated for
“each occurrence” is a single limit with respect to each occurrence for bodily injury
liability and property damage liability “combined.” No limit is stated in the “each
occurrence” or “aggregate” box for property damage liability because the single
combined limit applies to both types of liability arising from an occurrence. See H.
Walter Croskey, et al., California Practice Guide: Insurance Litigation §§ 7:348,
7:350 (The Rutter Group 2022).
1982-83. The polices are identical in material respects, and this discussion refers to
the 1981-82 policy except where noted.
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Item 3 also provides that the policy includes insurance for incidental
professional liability, as indicated by an “X” to the right of the term on the
Declarations page in the excerpt below. No limits of liability for this coverage are
stated in the Declarations.
Twenty-six endorsements are attached to the policy. Seven are identified by
title and a form number. Fourteen are numbered endorsements beginning with #1
through #13 and concluding with #18. All relevant endorsements, and the policy
itself, originally took effect on the same date of February 4, 1980.
One endorsement is entitled “Comprehensive General Liability.” This
endorsement specifies that Zurich will pay on behalf of the insured all sums that the
insured becomes legally obligated to pay as damages for bodily injury or property
damage caused by an occurrence. Section III of the endorsement sets forth “Limits
of Liability.” This section provides that the total liability for damages because of
bodily injury or property damage sustained as the result of any one occurrence will
not exceed the limit of bodily injury or property damage, respectively, stated in the
Declarations as applicable to “each occurrence.”
Fluor’s theory is that one line in one particular endorsement concerning limits
of liability for “incidental professional liability” revolutionized the entire policy—the
classic elephant hidden in a mousehole. Fluor maintains that Endorsement #7
transformed the contract from an “each occurrence” policy with carefully specified
limits of liability for each occurrence to an “each claim” policy that dispensed with
those limits.
-8-

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Endorsement #7 provides as follows:
Fluor contends that the reference to “$500,000 EACH CLAIM” in
Endorsement #7 applies to all claims under the policy, not only to claims respecting
incidental professional liability. Fluor maintains that this line in the endorsement
nullifies other references in contemporaneous provisions to coverage for “each
occurrence” and limits of liability for “each occurrence.”
When interpreting an insurance contract in Missouri, a court seeks to effectuate
the intent of the parties. A court “should not interpret policy provisions in isolation
but rather evaluate policies as a whole.” Ritchie v. Allied Prop. & Cas. Ins. Co., 307
S.W.3d 132, 135 (Mo. 2009); see Restatement (Second) of Contracts § 202(2) (1981).
“[N]o substantive clause should be allowed to perish by construction unless
unsurmountable obstacles stand in the way of any other course.” Soukup v. Emps.’
Liab. Assurance Corp., 108 S.W.2d 86, 92 (Mo. 1937). “[L]ooking to the instrument
as a whole, courts should give such construction that each clause will have some
effect and perform some office; seeming contradictions must be harmonized, if that
course is possible; a construction which entirely neutralizes one provision should not
be adopted if the contract is susceptible of another construction which gives effect to
all of its provisions and is consistent with general intent.” Id.; see Kyte v. Am. Fam.
Mut. Ins. Co., 92 S.W.3d 295, 299 (Mo. Ct. App. 2002).
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Fluor advances three arguments why Endorsement #7 supposedly transforms
the policy’s coverage from insurance based on “each occurrence” with defined limits
to insurance based on “each claim” with no limits per occurrence. Even viewing
Endorsement #7 in artificial isolation, these contentions are unpersuasive. When the
endorsement is considered properly as part of the policy as a whole, context
demonstrates convincingly that the district court was right to reject Fluor’s
submission.
Fluor first argues that unless Endorsement #7 is understood to revolutionize the
policy, the reference to “comprehensive general liability” in the endorsement would
be superfluous. In referring to Item 3 of the Declarations page, however, the parties
naturally specified which of the coverage parts was amended. The parties might have
left the coverage part unspecified, and required the reader to infer the coverage part
from the fact that incidental professional liability is a subcategory of comprehensive
general liability. But the clarity gained by including the term is hardly the sort of
redundancy that supports an inference that the parties intended sub silentio to make
a dramatic revision of the policy within one line of one endorsement. Contracting
parties, like legislatures, sometimes employ arguable redundancy to ensure that their
intent is communicated and understood, or simply due to inadvertence or
shortcomings of human communication. See Barton v. Barr, 140 S. Ct. 1442, 1453
(2020); Brazil v. Auto-Owners Ins. Co., 3 F.4th 1040, 1043-44 (8th Cir. 2021) (“The
canon against surplusage does not require courts to read a contract in a way that
contains no surplusage.”); In re SRC Holding Corp., 545 F.3d 661, 670 (8th Cir.
2008) (“Nothing prevents the parties from using a ‘belt and suspenders’ approach . . .
in order to be ‘doubly sure.’”); Crescent Plaza Hotel Owner, L.P. v. Zurich Am. Ins.
Co., 20 F.4th 303, 311 (7th Cir. 2021). Fluor’s contention about redundancy is
particularly unpersuasive here, because the parties used similar redundancy
elsewhere. See Garland v. Aleman Gonzalez, 142 S. Ct. 2057, 2073 (2022)
(Sotomayor, J., concurring in the judgment in part and dissenting in part); TMW
Enters., Inc. v. Fed. Ins. Co., 619 F.3d 574, 577 (6th Cir. 2010). In the 1982 policy,
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Endorsements #36, #38, and #39 refer to changing insurance for “comprehensive
general liability.” As with Endorsement #7, each of the three 1982 endorsements
proceeds to specify a distinct subcategory of coverage addressed by the endorsement,
even though each subcategory is part of coverage for “comprehensive general
liability.” R. Doc. 687-3, at 76, 78-79.
Fluor next invokes the formatting of Endorsement #7 and the “scope-of-
subparts canon.” This argument, however, seeks to place dispositive weight on a
canon of construction that does not match the text of the contract. Even when fully
applicable, canons of construction are not absolute rules; they provide “clues” to the
meaning of a text that must be considered with other indicators and balanced
according to the clarity and weight of each signal. Antonin Scalia & Bryan A.
Garner, Reading Law: The Interpretation of Legal Texts 59 (2012). In this case, the
cited canon does not support Fluor’s proposed policy interpretation.
The scope-of-subparts canon applies to a text that is formatted as follows:
Scalia & Garner, supra, at 156. In such a passage, the material in boldface relates to
all three subparts, but the if-clause in subpart (C) relates only to (C).
-11-

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Fluor’s argument regarding Endorsement #7 fails to acknowledge that
punctuation and subpart designations are significant predicates for the full-throated
application of this canon. In the prototype from Scalia & Garner, each subpart is
introduced by a separate parenthetical letter (A) through (C), and each subpart
concludes definitively with a period or semicolon. These features tend to show that
each subpart is complete by itself. The leading court decision on the canon, Jama v.
Immigration and Customs Enforcement, 543 U.S. 335 (2000), follows the same
pattern. In that case, each subpart was introduced with a parenthetical romanette (i)
through (vii), and each subpart ended with a period. See 8 U.S.C. § 1231(b)(2)(E).
The Court thus observed that “[e]ach clause is distinct and ends with a period,
strongly suggesting that each may be understood completely without reading further.”
543 U.S. at 344.
The text of Endorsement #7 is markedly different. The two indented lines of
text are not designated with letters or numbers as though they are self-contained
subparts. The first indented line of text does not end with punctuation to indicate that
it is a complete subpart. Rather, the endorsement flows uninterrupted as though it is
a textual sentence with a period appearing only at the end of the entire text. Contrary
to Fluor’s preferred canon, the format of Endorsement #7 suggests a single
continuous utterance in which the closing reference to incidental professional liability
qualifies the series of coverage amounts that come before it.
This inference is strengthened by the fact that the parties in Endorsement #5
to the same policy employed subpart designations and punctuation when they
intended to create complete, self-contained subparts:
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Like the model text cited by Scalia & Garner, Endorsement #5 includes three
subparts that begin with parenthetical numerals and conclude with periods at the end
of subparts (2) and (3). This format thus indicates that the qualifying language “as
respect bond issue” in subparts (2) and (3) does not qualify the text in subpart (1).
The structure displayed in Endorsement #5 is conspicuously missing from
Endorsement #7. The difference in usage within the same document is a signal that
the parties did not mean to employ self-contained subparts in Endorsement #7. See
Akhil Amar, Intratextualism, 112 Harv. L. Rev. 747, 748 (1999).
Fluor’s third argument relies on the “rule of the last antecedent,” under which
“relative and qualitative words are to be applied only to the words and phrases
preceding them.” Spradling v. SSM Health Care St. Louis, 313 S.W.3d 683, 688
(Mo. 2010). The company contends that Endorsement #7 transforms all
comprehensive general liability insurance into “each claim” coverage, because the
endorsement’s reference to incidental professional liability modifies only the amount
for “each aggregate” that appears immediately before the qualifying phrase. The
“last-antecedent canon,” however, competes here with the “series-qualifier canon,”
and the correct interpretation depends on context. See Facebook, Inc. v. Duguid, 141
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S. Ct. 1163, 1169 (2021). Under the series-qualifier canon, when “there is a
straightforward, parallel construction that involves all nouns or verbs in a series, a
prepositive or postpositive modifier normally applies to the entire series.” State v.
Champagne, 561 S.W.3d 869, 873 (Mo. Ct. App. 2018) (quoting Scalia & Garner,
supra, at 147); see Porto Rico Ry., Light & Power Co. v. Mor, 253 U.S. 345, 348
(1920). “Where several words are followed by a clause as much applicable to the first
and other words as to the last, the clause should be read as applicable to all.”
Spradling, 313 S.W.3d at 688 (quoting Norberg v. Montgomery, 173 S.W.2d 387, 390
(Mo. 1943)); see Scalia & Garner, supra, at 147.
Even viewing Endorsement #7 in isolation, the series-qualifier canon naturally
applies. This insurance policy, like most policies, states individual and aggregate
coverage amounts in tandem. There is an amount of coverage for “each occurrence”
or “each claim” and then an “aggregate” amount of coverage. The Declarations page
is a pre-printed form with boxes designed for the two companion amounts.
Endorsement #7 thus lends itself to a “straightforward, parallel construction that
involves all nouns or verbs in a series,” Champagne, 561 S.W.3d at 873 (quoting
Scalia & Garner, supra, at 147)—that is, “each claim” and “each aggregate” are part
of a single integrated series in an insurance policy. The qualifier—“as respects
incidental professional liability endorsement”—is “as much applicable to the first and
other words as to the last.” Spradling, 313 S.W.3d at 688 (quoting Norberg, 173
S.W.2d at 390). As the district court remarked, “[i]t strains credulity to think the
phrase ‘$500,000 EACH CLAIM’ would be left blank as to the type [of] coverage it
applied to, while the second phrase immediately below it for the aggregate limit
specifically references an entirely different type of coverage.” Ordinary principles
of interpretation indicate that “incidental professional liability” modifies the coverage
amounts for both “each claim” and “each aggregate.” See Duguid, 141 S. Ct. at 1169;
United States v. Loyd, 886 F.3d 686, 688 (8th Cir. 2018).
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Beyond Fluor’s three arguments that focus on Endorsement #7 standing alone,
a proper examination of the whole text confirms that the endorsement addresses only
coverage for incidental professional liability. The Declarations page and all relevant
endorsements had the same effective date. But rather than harmonize Endorsement
#7 with the rest of the policy as required by Missouri law, Fluor’s interpretation
would nullify several core provisions.
Item 3 of the Declarations sets forth limits of liability with respect to
comprehensive general liability insurance for “each occurrence” and in the
“aggregate.” Yet Fluor’s interpretation of Endorsement #7 would mean that the
parties used a form with limits for “each occurrence” that they never intended to
apply. Not only does Fluor’s interpretation require believing that the parties used the
wrong pre-printed form for the Declarations, but that the parties manually entered a
meaningless figure of $500,000 into the box for limits of liability on “each
occurrence” under Coverage A. Under Fluor’s interpretation of Endorsement #7, the
parties intended from the outset that liability would not be limited based on “each
occurrence,” so there would have been no reason to complete an “each occurrence”
box on the Declarations page. There is, however, a ready means to harmonize the
seeming contradiction: the endorsement states the “each claim” limits of liability for
incidental professional liability only, and the Declarations page states the “each
occurrence” limits for other comprehensive general liability.
Fluor’s interpretation also falters on the simple exercise of attempting to
implement its suggested amendment. Endorsement #7 calls for amending item 3 of
the Declarations to read “$500,000 each claim.” But the endorsement does not
specify which part or parts of item 3 should be amended—coverage A for bodily
injury, coverage B for property damage, or both. Fluor seems to propose an
amendment only to coverage A for bodily injury, but that suggestion produces an
anomaly: bodily injury coverage is then based on “each claim,” while coverage B for
property damage is based on “each occurrence,” and the aggregate limit is an
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incoherent “combined single limit” with respect to individual limits of two different
types. If Fluor instead means that the amendment of “$500,000 each claim” applies
to both types of coverage, then the Declarations page becomes a different jumble:
bodily injury liability and property damage liability are each limited to $500,000 each
claim, but the “aggregate” box continues to state a “combined single limit” that makes
no sense when each coverage type states its own limit of liability.
Fluor’s argument depends on a mix-and-match construction under which
Endorsement #7 amends the Declarations page to provide a limit of “$500,000 each
claim” for bodily injury under Coverage A, and to provide an “each claim” limit with
no specified dollar amount for property damage under Coverage B. This suggested
rewrite of the Declarations page is not supported by the text of Endorsement #7. The
endorsement does not purport to amend Coverage B for property damage.
But when Endorsement #7 is properly understood to address only incidental
professional liability, these several anomalies disappear. Endorsement #11 explains
that the incidental professional liability endorsement covers only damages because
of “bodily injury,” not property damage. Therefore, it was unnecessary for
Endorsement #7 to specify which coverage was at issue on the Declarations page: the
amendment necessarily applies only to coverage A for bodily injury. Endorsement
#7 sets a new “each claim” limit for bodily injury arising from incidental professional
liability only, and sets a new “each aggregate” limit for incidental professional
liability only. The Declarations page remains intact with its “each occurrence” limit
and aggregate “combined single limit” for both bodily injury and property damage
with respect to all other comprehensive general liability.
Fluor’s interpretation creates other unacceptable contradictions in the policy.
Fluor maintains that Endorsement #7 amended the Declarations page to eliminate the
reference to “each occurrence” and to substitute a limit of liability of $500,000 for
“each claim.” At the same time, however, other endorsements specifically
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contemplated that the Declarations page includes a limit of liability for “each
occurrence.” The Comprehensive General Liability endorsement, Form No. L9259A,
provides that the insurer’s total liability for damages because of bodily injury
sustained as a result of any one occurrence will “not exceed the limit of bodily injury
liability stated in the declarations as applicable to ‘each occurrence.’” R. Doc. 687-
2, at 16 (emphasis added). Fluor’s interpretation of Endorsement #7 would nullify
this core policy provision even though the two endorsements have the same effective
date.
Endorsement #11 states that with respect to the insurance afforded by that
endorsement, the total liability of the company for all damages because of bodily
injury sustained as the result of any one occurrence will “not exceed the limit of
bodily injury liability stated in the declarations as applicable to ‘each occurrence.’”
(emphasis added). Accepting Fluor’s contention, however, would mean that the
parties in Endorsement #11 referred to a phantom “each occurrence” limit of liability,
because Endorsement #7 supposedly had amended the Declarations page to read
“each claim” instead of “each occurrence.” Fluor’s interpretation of Endorsement #7
impermissibly attributes to the parties an intent to adopt meaningless provisions,
including in a later-numbered endorsement.
The district court also noted that the 1983 and 1984 insurance contracts
between the same parties confirmed the court’s interpretation of Endorsement #7.
The court cited endorsements in the later policies that specified “each claim” limits
of liability for incidental professional liability alone, independent of the “each
occurrence” limits for other comprehensive general liability. Fluor criticizes the
district court’s reliance on policies from later years, and posits that the parties could
have reached an “each claim” agreement for 1981 and 1982 and then changed to an
“each occurrence” agreement for 1983 and 1984. To accept Fluor’s hypothesis,
however, the court would have to believe that the parties substantially reduced
insurance coverage in 1983 but increased the premium paid by the insured. Fluor
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suggests that the parties changed from an “each claim” policy with no occurrence-
based limits of liability in 1981 and 1982 to an “each occurrence” policy with
carefully circumscribed limits of liability in 1983. But the parties at the same time
increased the insured’s premium payment from $94,982 to $114,000. R. Doc. 687-3,
at 2; R. Doc. 687-4, at 4. Fluor’s hypothesis is commercially unreasonable and is
another reason to reject its contention that Endorsement #7 transformed the 1981
policy.
“Perhaps no interpretive fault is more common than the failure to follow the
whole text canon, which calls on the judicial interpreter to consider the entire text, in
view of its structure and of the physical and logical relation of its many parts.” Scalia
& Garner, supra, at 167. Fluor’s proposed interpretation of the disputed policy
unfortunately suffers from this fault. Fluor focuses on Endorsement #7 in isolation,
invokes canons of construction that are unpersuasive even as to the endorsement
standing alone, and ignores broader context that convincingly demonstrates the
limited scope of Endorsement #7. The district court correctly determined that the
policies at issue establish coverage for bodily injury that is subject to an “each
occurrence” limit of liability as set forth on the Declarations page. Fluor’s argument
for recovery of an additional $20 million based on supposed “each claim” limits of
liability should be rejected.
Given the majority’s contrary conclusion, a lengthy discussion of the remaining
issues on appeal would be largely academic. The district court correctly determined
that the alleged injuries in this case arose from one occurrence, and that the relevant
policy limits were exhausted before 2010. Once the policy limits were exhausted, the
duty to defend or settle ended. Because the policy limits were exhausted before the
disputed settlement negotiations in November and December 2010, Fluor cannot
establish that Zurich acted in bad faith in refusing to settle a claim within the limits
of the policy. I would therefore affirm the judgment of the district court.
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