Continental Insurance v. Arkwright Mutual Insurance

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).

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