Millennium Inorganic Chemicals Ltd. v. National Union Fire Insurance

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 13-1194

MILLENNIUM INORGANIC CHEMICALS LTD.; CRISTAL INORGANIC
CHEMICALS LIMITED,

Plaintiffs - Appellees,

v.

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA; ACE
AMERICAN INSURANCE COMPANY,

Defendants - Appellants.

Appeal from the United States District Court for the District of
Maryland, at Baltimore. Ellen L. Hollander, District Judge.
(1:09−cv−01893−ELH)

Argued: December 12, 2013 Decided: February 20, 2014

Before NIEMEYER, AGEE, and WYNN, Circuit Judges.

Reversed and remanded by published opinion. Judge Agee wrote
the opinion, in which Judge Niemeyer joined. Judge Wynn wrote a
dissenting opinion.

ARGUED: Charles Glaston Cole, STEPTOE & JOHNSON, LLP,
Washington, D.C., for Appellants. Joseph Lanham Beavers, MILES
& STOCKBRIDGE P.C., Baltimore, Maryland, for Appellees. ON
BRIEF: Jonathan D. Hacker, O’MELVENY & MYERS LLP, Washington,
D.C., for Appellant ACE American Insurance Company. Roger E.
Warin, STEPTOE & JOHNSON LLP, Washington, D.C., for Appellant
National Union Fire Insurance Company of Pittsburgh, PA. John
C. Mezzacappa, Hilary M. Henkind, MOUND COTTON WOLLAN &
GREENGRASS, New York, New York, for Appellants. Gary C. Duvall,
Jeffrey P. Reilly, John C. Celeste, MILES & STOCKBRIDGE P.C.,
Baltimore, Maryland, for Appellees.

2
AGEE, Circuit Judge:

National Union Fire Insurance Company of Pittsburgh, PA

(“National Union”) and ACE American Insurance Co. (“ACE” and

together with National Union, the “Insurers”) appeal from the

district court’s grant of partial summary judgment in favor of

Millennium Inorganic Chemicals Ltd. and Cristal Inorganic

Chemicals Ltd. (collectively, “Millennium”). Millennium sued the

Insurers in the United States District Court for the District of

Maryland, contending that the Insurers had wrongfully denied

Millennium's claim for coverage under contingent business

interruption provisions of commercial liability insurance

policies issued by the Insurers. The district court granted

partial summary judgment in favor of Millennium after concluding

that certain terms in the policies were ambiguous and that the

doctrine of contra proferentem therefore applied. For the

reasons set forth below, we reverse the judgment of the district

court and remand for entry of summary judgment in favor of the

Insurers.

I

A The Insurance Policy Provisions

In 2008, Millennium enlisted the help of Marsh USA, Inc.

(“Marsh”), an insurance brokerage firm, to secure a commercial

liability insurance policy including contingent business

3
interruption (“CBI”) insurance coverage. 1 Marsh solicited bids

from a number of insurers, including National Union and ACE,

seeking CBI coverage and outlining the coverage specifications

Millennium sought, specifically stating only that it required

coverage “for direct suppliers/customers.” (J.A. 1193.) In

response, National Union's quote provided, “THERE SHALL BE NO

COVERAGE FOR INDIRECT SUPPLIERS/RECIPIENTS.” (J.A. 1209.) ACE

also offered a quote, providing policy limits only for “direct”

suppliers. (J.A. 1217.)

Millennium chose to purchase its commercial coverage,

including the CBI endorsement, from National Union and ACE, each

of which would bear responsibility for 50% of Millennium’s

covered losses, up to specified limits. As pertinent to the CBI

coverage, National Union issued a Binder of Insurance (a

“Binder”), which stated, “THERE SHALL BE NO COVERAGE FOR

INDIRECT SUPPLIERS/RECIPIENTS.” (J.A. 1289.) The National Union

Binder also provided a sublimit on liability for “DIRECT

CONTRIBUTING OR RECIPIENT PROPERTY(IES).” (J.A. 1287.) Likewise,

1
Generically, business interruption insurance coverage
protects the insured party against losses stemming from
unexpected interruptions of normal business operations resulting
from damage to property caused by a covered hazard. 11 Steven
Plitt et al., Couch on Insurance 3d § 167:9 (2013). A subset of
business interruption coverage, termed CBI coverage, protects
against business losses caused by damage to property not owned
by the insured party. Id. § 167:14. The only provision of the
policies at issue in this case concerns the CBI coverage.

4
ACE issued a Binder that provided a similar sublimit on

“‘Direct’ Contingent Time Element[s].” (J.A. 1305.) Neither

Binder provided any coverage for “indirect” suppliers.

Shortly after issuing the Binders, National Union and ACE

separately issued policies to Millennium (the “Policies”) with

essentially identical terms. Each policy included an Endorsement

titled “CONTINGENT BUSINESS INTERRUPTION CONTRIBUTING

PROPERTY(IES) ENDORSEMENT” (the “Endorsements”). (J.A. 1392,

1496.) The Endorsements insured Millennium against certain

losses resulting from the disruption of the supply of materials

to Millennium caused by damage to certain “contributing

properties.” 2 (J.A. 1392, 1496.) Specifically, Section C of the

Endorsements defined events of coverage as insurance

only against loss directly resulting from
necessary interruption of business conducted
on premises occupied by [Millennium], caused
by damage to or destruction of any of the
real or personal property described above
and referred to as CONTRIBUTING

2
The term “contributing properties” means “the insured’s
prime suppliers of materials, parts and services. If the insured
depends upon one or, at most, a few manufacturers or suppliers
for the bulk of materials and supplies necessary to conduct its
business operations, then these suppliers are said to be
contributing properties.” Insuring Real Property § 3.03[2]
(Stephen A. Cozen ed. 2013); (see J.A. 1707). Consistent with
this industry definition, the Endorsements define “contributing
property” by reference to the policy schedules, which state that
covered locations “must be direct suppliers of materials to
[Millennium’s] locations.” (J.A. 1392, 1496.) The parties in
this case use the term “contributing property” interchangeably
with the term “supplier.” (See, e.g., Response Br. 27 n.12.)

5
 PROPERTY(IES) and which is not operated by
[Millennium], by the peril(s) insured
against during the term of this Policy,
which wholly or partially prevents the
delivery of materials to [Millennium] or to
others for the account of [Millennium] and
results directly in a necessary interruption
of [Millennium’s] business.

(J.A. 1392, 1496.) “Contributing Properties” in Section C of the

Endorsements was thus defined by reference (“described above”)

to the preceding Section B, which establishes that only a

“direct supplier of materials to the Insured's locations” can be

a “contributing property.” Section B provided a “SCHEDULE OF

LOCATION(S),” (the “Schedules”) in which Millennium could list

any “contributing property” that created a risk of business

interruption. (J.A. 1392, 1496.)

A general section of each of the Policies set policy

sublimits and provided that any direct contributing properties

named in the Schedules were covered for $25 million, while any

unnamed direct contributing properties were covered for $10

million. Millennium did not list any contributing properties on

the provided Schedules. The Endorsements also each contained a

loss-mitigation provision requiring Millennium to “use [its]

influence to induce the CONTRIBUTING PROPERTY(IES) to make use

of any other machinery, equipment, supplies or location

available in order to resume operations and delivery of

materials to [Millennium].” (J.A. 1393, 1497.)

6
 B Millennium's Coverage Claim

Millennium was in the business of processing titanium

dioxide, a compound often used for its white pigmentation, at

its processing facility in Western Australia. The energy source

for Millennium’s titanium dioxide processing operation was

natural gas received through the Dampier-to-Bunbury Natural Gas

Pipeline (the “DB Pipeline”), Western Australia’s principal gas

transmission pipeline. Millennium purchased the gas under a

contract with Alinta Sales Pty Ltd (“Alinta”), a retail gas

supplier. Alinta purchased the gas it offered for sale from a

number of natural gas producers, one of which was Apache

Corporation (“Apache”).

As a natural gas producer, Apache extracted and processed

natural gas from wells on Varanus Island, an island located off

the coast of Western Australia. Once Apache processed the

natural gas, it would inject the gas into the DB Pipeline, at

which point custody, title, and risk passed from Apache to

Alinta. The natural gas received from Apache's facility then

comingled with that obtained from other producers, resulting in

an amorphous mix of gas in a single pipeline.

Apache has no ownership interest in the DB Pipeline and

does not own any downstream gas transmission or distribution

facilities. Alinta retains sole ownership of the gas once it

enters the DB Pipeline. Under Alinta’s end-user contract with

7
Millennium, title to the gas passed to Millennium only at the

time of delivery, i.e., when the gas left the DB Pipeline and

was delivered to Millennium’s facility by way of a separate

delivery line. Millennium’s contract for the purchase of natural

gas was solely with Alinta. Millennium had no contract or

business relationship with Apache, and the contract with Alinta

made no reference to Apache. At the time period relevant to this

appeal, Apache produced about 20% of the natural gas that Alinta

sold.

On June 3, 2008, an explosion occurred at Apache’s Varanus

Island facility, causing its natural gas production to cease.

Apache notified Alinta that the explosion caused it to shut down

its operations and that there would be no gas supply from

Varanus Island until further notice. Alinta, in turn, sent a

notice of force majeure to Millennium and other customers. The

Australian government quickly intervened and imposed controls

prioritizing delivery of natural gas to domestic customers and

essential services. As a result, Millennium’s gas supply was

curtailed, and it was forced to shut down its titanium dioxide

manufacturing operations for a number of months.

Two days after the explosion, on June 5, 2008, Millennium

sent notice of claim letters to National Union and ACE, seeking

CBI coverage for its losses incurred when the titanium dioxide

facility closed. The Insurers investigated Millennium’s claim

8
and provided a detailed report explaining the Australian gas

distribution system and concluding that Apache was not a direct

supplier to Millennium. As a consequence, the Insurers

determined there was no coverage under the Policies for

Millennium’s claim, but invited Millennium to provide evidence

of a direct relationship between Millennium and Apache

sufficient to establish policy coverage.

Millennium responded by asserting, inter alia, that Apache

was a direct supplier to it because Alinta provided only a

service, the delivery of natural gas, whereas Apache provided

the actual material at issue. National Union reaffirmed its

denial of Millennium’s claim, contending that Alinta, and not

Apache, was the only direct supplier of natural gas to

Millennium. There was no further communication between the

parties.

C Proceedings in the District Court

In July 2009, Millennium filed a complaint against the

Insurers in the United States District Court for the District of

Maryland, invoking the court’s diversity jurisdiction. 3

Millennium requested a declaratory judgment regarding the rights

3
Millennium also asserted several claims against Marsh, but
voluntarily dismissed those claims pursuant to Rule 41(a)(1) of
the Federal Rules of Civil Procedure. Millennium’s claims
against Marsh are not at issue on appeal.

9
and liabilities of the parties with respect to the Policies.

Further, Millennium asserted claims of breach of contract 4 and

failure to act in good faith pursuant to section 3-1701 of the

Maryland Courts and Judicial Proceedings Code.

After the close of discovery, Millennium moved for partial

summary judgment on its declaratory judgment claim, arguing that

the Policies unambiguously covered Millennium’s loss because the

Endorsements did not limit coverage to direct suppliers. The

Insurers filed a joint cross-motion for summary judgment on

Millennium’s declaratory judgment and bad faith claims,

contending that the Policies provided coverage only for direct

suppliers and that Apache was not a direct supplier to

Millennium. The Insurers also argued that Millennium failed to

present any evidence in support of its bad faith claim.

The district court entered an order granting Millennium’s

motion for partial summary judgment, denying the Insurers’

motion for summary judgment with respect to Millennium’s

declaratory judgment claim, and granting the Insurers’ motion

with respect to Millennium’s bad faith claim. In an accompanying

opinion, the district court reviewed and interpreted the

4
Millennium’s breach of contract claim was based upon the
Insurers’ refusal to cover Millennium’s CBI losses arising out
of the Varanus Island explosion, and Millennium asserts coverage
only under the Endorsements. Thus, Millennium’s breach of
contract claim must rise or fall with its coverage claim.

10
Policies, 5 concluding that coverage under the Policies extended

only to “direct contributing properties.” In determining the

meaning of the term “direct contributing property,” the district

court reviewed existing caselaw on CBI coverage.

The district court concluded that “the physical

relationship between the properties is as or more important than

the legal relationship between the properties’ owners.” (J.A.

1991.) The district court held that Millennium’s contract with

Alinta had “no effect on the physical realities of natural gas

supply between [Apache] and [Millennium]” because, although

Alinta took title to the gas when it traveled through the DB

Pipeline, Alinta “never [took] physical possession of the gas

and [had] no ‘property’ with which to do so.” (J.A. 1991.)

5
Finding that the Policies lacked choice of law provisions,
the district court applied a Maryland choice of law analysis to
determine which state’s law applied to the construction of the
Policies. See CACI Int’l, Inc. v. St. Paul Fire & Marine Ins.
Co., 566 F.3d 150, 154 (4th Cir. 2009) (holding that federal
courts exercising diversity jurisdiction “apply the choice of
law rules of the forum state”). Millennium argued in favor of
New Jersey law and the Insurers argued in favor of New York law.
The district court concluded that, under a lex loci analysis,
New York law would apply, but ultimately declined to reach a
decision, reasoning that there was no meaningful difference in
the common law regarding interpretation of insurance policies of
either state. We need not perform a choice of law analysis on
appeal because the parties now agree that there is no
substantive difference between the applicable laws of New York
and New Jersey with respect to the issues in this case, and each
party cites to both New York and New Jersey caselaw. We
therefore cite to the laws of both jurisdictions.

11
 The district court then observed that “the policies do not

define the term ‘direct,’” and concluded that “the term ‘direct’

is ambiguous here, in the context of an entity that provides a

direct physical supply of material to the insured, but has no

direct contractual relationship with the insured.” (J.A. 1993.)

Although the parties presented extrinsic evidence to establish

the meaning of "direct," the district court concluded that none

of that evidence “speaks to the specific meaning the parties

intended by the use of the word ‘direct.’” (J.A. 1994.) In order

to resolve the ambiguity, the district court applied the

doctrine of contra proferentem 6 in favor of Millennium.

Accordingly, the district court held that Apache qualified as a

“direct” supplier to Millennium and that Apache’s natural gas

production facility was a “direct contributing property” within

the meaning of the Policies “because Apache’s facility

physically provided a direct supply of natural gas to

Millennium’s premises, despite the fact that Apache and

Millennium had no direct contractual relationship.” (J.A. 1995.)

6
When a court determines that a provision in an insurance
contract is ambiguous and “extrinsic evidence does not yield a
conclusive answer as to the parties’ intent,” the rule of contra
proferentem provides that “where an insurer drafts a policy,
‘any ambiguity in [the] . . . policy should be resolved in favor
of the insured.’” Morgan Stanley Group Inc. v. New England Ins.
Co., 225 F.3d 270, 276 (2d Cir. 2000) (quoting McCostis v. Home
Ins. Co., 31 F.3d 110, 113 (2d Cir. 1994)).

12
 As an alternative holding, the district court opined that

the Endorsements also provided coverage for damage to

contributing properties “‘which wholly or partially prevents the

delivery of materials to [Millennium] or to others for the

account of [Millennium].’” (J.A. 1995.) The district court then

concluded that this provision was also ambiguous because it did

not explain “who must hold the ‘account of the Insured’—the one

who delivers, or the ‘others’ to whom delivery is made.” (J.A.

1998.) Based upon this ambiguity, the district court again

applied the doctrine of contra proferentem, construing “the

phrase [‘for the account of’] in favor of coverage for the

insured,” Millennium. (J.A. 1998.)

After the district court granted Millennium’s motion for

partial summary judgment, the parties stipulated and agreed to

the entry of judgment in favor of Millennium in the amount of

$10,850,000, inclusive of pre-judgment interest, with the

Insurers expressly preserving their right to appeal the

judgment. The district court then entered final judgment against

the Insurers in the stipulated amount, and the Insurers timely

appealed. We have jurisdiction under 28 U.S.C. § 1291.

II

We review a district court’s grant of a motion for summary

judgment de novo, construing all facts and reasonable inferences

13
in favor of the non-moving party. Crockett v. Mission Hosp.,

Inc., 717 F.3d 348, 350 n.1, 354 (4th Cir. 2013).

III

When interpreting insurance contracts, courts first look to

the plain language of the provision at issue. See Fed. Ins. Co.

v. Int’l Bus. Machs. Corp., 965 N.E.2d 934, 935 (N.Y. 2012);

Chubb Custom Ins. Co. v. The Prudential Ins. Co. of Am., 948

A.2d 1285, 1289 (N.J. 2008). If the plain language of the

provision is clear, “that is the end of the inquiry.” Chubb

Custom, 948 A.2d at 1289.

Beginning with the plain language of the Policies, as the

district court found and Millennium concedes, the Endorsements

provided coverage only with respect to “direct contributing

properties.” Millennium argues that the term “direct” is

ambiguous because it could refer either to the legal

relationship between the contributing property and the insured

or the physical relationship between those parties. We find the

term “direct” to be clear as used in the Policies and without

ambiguity.

The term “direct” is defined as “proceeding from one point

to another in time or space without deviation or interruption,”

“transmitted back and forth without an intermediary,” or

“operating or guided without digression or obstruction.”

14
Webster’s Third New International Dictionary 640. Thus, for

Apache to be considered a direct contributing property to

Millennium, it must have supplied Millennium with materials

necessary to the operation of its business “without deviation or

interruption” from “an intermediary.” 7 Id.

On the undisputed facts of this case, neither Apache nor

Apache’s facilities on Varanus Island can be considered a

“direct contributing property” of Millennium. Millennium does

not dispute that it received its gas from Alinta, and that

Alinta—and not Apache—had the sole ability to control the amount

of gas directed to Millennium, to determine the rate at which

Millennium would be charged for that gas, and even to shut the

gas off completely. Indeed, Millennium concedes that it has no

legal relationship, direct or otherwise, with Apache.

7
Our colleague in dissent argues that the term "direct" is
ambiguous as used in the Policies because the dictionary
contains another definition for the term, "from the source or
the original without interruption or diversion." See Webster's
Third New International Dictionary 640. However, the definition
cited to in the dissent is the adverbial definition of the term
"direct," even though the term is clearly used as an adjective
in the operative policy phrase, "direct contributing
properties." Regardless, the phrase "without interruption or
diversion" as used in the adverbial definition of the term
"direct" has the same meaning as the phrase "without digression
or obstruction" as used in the adjectival definition,
demonstrating that the term "direct" has a single clear,
unambiguous meaning. Even using the phrase selected by the
dissent, it is unambiguous that there is no "direct" transfer of
gas from Apache to Millennium because of the unescapable fact of
the "interruption or diversion" by the presence of Alinta and
the DB Pipeline as interrupting intermediaries.

15
 Millennium also does not dispute that it received its gas

by way of the DB Pipeline, and that the DB Pipeline is neither

owned nor operated by Apache. Nor does Millennium dispute that

Apache relinquished both legal title and physical control over

the gas once it entered the DB Pipeline. In fact, Millennium

concedes that Apache had no control over whether Millennium

received its gas and that, due to commingling, Millennium could

not demonstrate how much, if any, of the gas it received

originated with Apache. Thus, neither Apache nor Apache’s

facilities had a direct physical relationship with Millennium.

Whatever the relationship between Apache and Millennium, it

was clearly interrupted by “an intermediary,” Alinta, who took

full physical control of Apache’s gas before delivering

indistinguishable commingled gas to Millennium. That

relationship was also interrupted by an intervening step, the

physical insertion of the gas into the DB Pipeline, at which

point Apache relinquished all physical control over that gas.

Under any view of the relevant facts, Apache can therefore be

only an indirect contributing property to Millennium, coverage

of which is not included in the terms of the Policies. 8

8
The Insurers failed to argue in their briefing that the
Binders, which stated directly that “THERE SHALL BE NO COVERAGE
FOR INDIRECT SUPPLIERS/RECIPIENTS,” J.A. 1289, were the
operative documents at the time of the explosion on Varanus
Island. Had the Insurers properly made that argument before this
(Continued)
16
 Having concluded that, on the plain language of the

Policies, Apache cannot be considered a direct contributing

property to Millennium, we consider Millennium’s alternative

argument that it could also receive coverage under the “for the

account of” clause of the Endorsements. Millennium’s alternative

contention fails for the same reason as its primary argument.

Under the plain language of the Policies, coverage is triggered

only by damage to or destruction of direct contributing

properties. Because Apache is at most an indirect supplier to

Millennium, there can be no coverage under any reading of the

“for the account of” clause. Therefore, Millennium presents no

plausible reading of the Policies under which it could receive

coverage for its CBI losses. 9

IV

For the foregoing reasons, the judgment of the district

court is reversed, and we remand the case to the district court

for entry of summary judgment in favor of the Insurers.

REVERSED AND REMANDED

Court, that language would also demonstrate that Millennium had
no coverage on the facts of this case.
9
As we find no basis for coverage of Millennium’s CBI
losses under the Endorsements, Millennium’s breach of contract
claim, as pleaded, also must fail.

17
WYNN, Circuit Judge, dissenting:

On June 3, 2008, a massive explosion at a natural gas

production facility on Varanus Island, Australia disrupted the

availability of natural gas throughout Western Australia.

Appellant Millennium’s supply of natural gas ceased later that

same day, requiring it to shut down operations at its titanium

dioxide production facilities, and resulting in over $10 million

in damages. The sole question we must decide is whether the

contingent business interruption endorsements of the insurance

contracts between Millennium and Appellees National Union and

ACE (together, the “Insurers”) require the latter to cover

Millennium’s losses.

Although the majority opinion provides a reasonable

interpretation of the disputed portions of the insurance

policies, the district court articulated an equally reasonable

alternate interpretation. Because “no writing is unambiguous if

‘susceptible of two reasonable interpretations[,]’” Atalla v.

Abdul-Baki, 976 F.2d 189, 192 (4th Cir. 1992), I find the

policies to be ambiguous. Like the district court, I would thus

evaluate the extrinsic evidence for an indication of the

parties’ intent in drafting the ambiguous policy provisions.

And like the district court, I would find that none of the

proffered evidence reveals that intent. It follows that I would

affirm the district court’s decision to apply the doctrine of

18
contra proferentem to resolve the ambiguity in favor of

Millennium and against the Insurers. Accordingly, I must

respectfully dissent.

I

A

For the policy year at issue, 2008–09, Millennium obtained

insurance coverage through its broker, Marsh. Millennium’s

coverage consisted of “master policies” issued by National Union

and ACE and local policies issued by Australian companies. The

master policies covered Millennium for up to $450 million per

occurrence in aggregate losses, with each insurer bearing

responsibility for 50% of any covered loss. The disputed

provisions are for contingent business interruption (“CBI”)

coverage, which is “a relatively recent development in insurance

law[.]” Zurich Am. Ins. Co. v. ABM Indus., Inc., 397 F.3d 158,

168 (2d Cir. 2005).

CBI coverage “protects against the loss of prospective

earnings because of the interruption of the insured’s business

caused by an insured peril to property that the insured does not

own, operate, or control.” CII Carbon, L.L.C. v. Nat’l Union

Fire Ins. Co. of La., Inc., 918 So. 2d 1060, 1061 n.1 (La. Ct.

App. 2005). CBI coverage is distinct from “[r]egular business

interruption insurance[, which] replaces profits lost as a

19
result of physical damages to the insured’s” own property.

Archer Daniels Midland Co. v. Hartford Fire Ins. Co., 243 F.3d

369, 371 (7th Cir. 2001).

Endorsement 8 of each of Millennium’s master policies sets

forth the CBI coverage. The relevant portion of Endorsement 8

reads as follows:

CONTINGENT BUSINESS INTERRUPTION
CONTRIBUTING PROPERTY(IES)
(Not Operated By The Insured)

A. AMOUNT OF INSURANCE:

$(As per declarations) Only against loss
directly resulting from necessary interruption of
business conducted on premises occupied by the
insured, caused by damage to or destruction of any of
the real or personal property described below and
referred to as CONTRIBUTING PROPERTY(IES) and which is
not operated by the Insured, by the peril(s) insured
against during the term of this Policy, which wholly
or partially prevents the delivery of materials to the
Insured or to others for the account of the Insured
and results directly in a necessary interruption of
the Insured’s business.

B. SCHEDULE OF LOCATION(S):

The following locations must be direct suppliers of
materials to the Insured’s locations or coverage is
deemed to be void:
CONTINGENT
LOCATION NO. CONTRIBUTING PROPERTY LIMIT OF LIABILITY

DIRECT ONLY AS STATED IN
DECLARATIONS 1

1
The most significant difference between the National Union
and the ACE Endorsements is that the ACE policy contains the
phrases “DIRECT ONLY” and “AS STATED IN DECLARATIONS” as shown
(Continued)
20
 C. COVERAGE:

Subject to all terms, conditions and stipulations of
the Policy to which this endorsement is attached, not
in conflict herewith, this Policy is extended to cover
only against loss directly resulting from necessary
interruption of business conducted on premises
occupied by the Insured, caused by damage to or
destruction of any of the real or personal property
described above and referred to as CONTRIBUTING
PROPERTY(IES) and which is not operated by the
Insured, by the peril(s) insured against during the
term of this Policy, which wholly or partially
prevents the delivery of materials to the Insured or
to others for the account of the Insured and results
directly in a necessary interruption of the Insured’s
business.

J.A. 336, 450

The value of the CBI coverage is set forth in the

Declarations of the master policies. The coverage limit is

$25,000,000 for locations that Millennium has named in the

policy, whereas the coverage limit is $10,000,000 for locations

that are not named or listed in the policy. The Declarations

refer to both named and unnamed locations as “DIRECT

CONTRIBUTING OR RECIPIENT PROPERTY(IES).” J.A. 303, 416.

B

The salient facts giving rise to this suit are

straightforward and undisputed. At all relevant times,

here. The National Union policy, by contrast, contains nothing
in the columns shown above.

21
Millennium was in the business of producing titanium dioxide, a

white pigment used in a variety of applications including paints

and plastics. Millennium operated two interdependent factories

near Bunbury, Australia, which relied primarily on natural gas

for energy. Like many businesses in Western Australia,

Millennium purchased its natural gas from a supplier or an

aggregator, rather than directly from a producer. Millennium

had a natural gas supply contract with one such entity, Alinta

Sales Pty Ltd. (“Alinta”).

Alinta obtained the gas that it resold from multiple

producers in Western Australia, including Apache Corporation

(“Apache”), which supplied at least 20% of the gas that Alinta

bought and resold. Pursuant to the agreement between Alinta and

Apache, Alinta took title to Apache’s gas when the gas entered a

major Western Australian gas transmission line known as the

Dampier to Bunbury Natural Gas Pipeline (“Pipeline”). The

Pipeline is a government-regulated common carrier owned by third

parties who charge pipeline users a fee based on the distance

their gas travels. After the gas leaves the Pipeline, it is

transported to end users via a network of distribution lines.

Alinta consumes a small amount of the natural gas that it

purchases for its own operations. And although it takes title

to the gas, it never physically possesses the gas that it sells

to its customers because it does not own the transmission or

22
distribution facilities. 2 Indeed, because the gas molecules are

commingled as soon as they enter the Pipeline, it is impossible

to tell either the source or the owner of any given molecule at

any given time. Notwithstanding the impossibility of

determining the source or the ownership of any particular gas

molecule, the title to a specified volume of gas passed from

Alinta to Millennium at the inlet point of Millennium’s

production facilities.

On June 3, 2008, a massive explosion and fire occurred at

Apache’s production facilities on Varanus Island, off the coast

of Western Australia. The explosion caused the interruption of

20% to 30% of the natural gas supply in Western Australia.

Apache immediately issued a notice of force majeure to Alinta,

and Alinta immediately issued the same to Millennium. Shortly

thereafter, Millennium notified the Insurers of its claim of

lost business income through its broker, Marsh. The parties

agree that the damages total $10,850,000, but the Insurers

denied Millennium’s claim because “[t]here is no direct supply

of gas between [Millennium] and Apache.” J.A. 760.

2
The Insurers seem to dispute Millennium’s statement that
Alinta never took physical possession of the gas. But they
offer no evidence to establish that the gas that they purchased
ever made its way into a vessel that was owned or controlled by
Alinta. The Insurers merely reassert that Alinta owned the
title to the gas after it was injected into the Pipeline, a fact
that is neither disputed nor probative of whether Alinta
physically possessed the gas.

23
 C

On July 17, 2009, Millennium filed this suit alleging,

among other things, declaratory relief, breach of contract, and

bad faith. After a lengthy discovery process and the

presentation of a “virtual cornucopia of extrinsic evidence,”

Millennium Inorganic Chems. v. Nat’l Union, 893 F. Supp. 2d 715,

736 (D. Md. 2012), the parties submitted cross motions for

summary judgment.

In a well-reasoned opinion, the district court analyzed the

language of the policies and determined that multiple reasonable

interpretations existed for two disputed provisions in

Endorsement 8. The district court then analyzed the extrinsic

evidence and found that “none of it presents a dispute of

material fact for a fact finder to resolve[] because none of the

extrinsic evidence sheds light on what the parties’ mutual

intent was at the time that the Master Policies were

established.” Id. The district court thus applied the doctrine

of contra proferentem to resolve the ambiguity in favor of

Millennium by holding that “Apache’s natural gas production

facility was a ‘direct contributing property’ to Millennium’s

Bunbury Operations, . . . because Apache’s facility physically

provided a direct supply of natural gas to Millennium’s

premises, despite the fact that Apache and Millennium had no

direct contractual relationship.” Id. at 737. The district

24
court conducted a similar analysis and reached the same

conclusion as to the second disputed phrase in Endorsement 8,

“for the account of the Insured.” See id. at 737–39.

The district court granted Millennium’s motion for partial

summary judgment regarding its declaratory judgment claim and

granted the Insurers’ motion for summary judgment regarding

Millennium’s bad faith claim. The parties jointly moved for

entry of judgment, which the district court granted on January

11, 2013. The Insurers appealed.

II

The parties initially disputed whether New York or New

Jersey law governs the interpretation of their insurance

contracts. Like the district court, I perceive little

difference between the two states’ laws. See Millennium, 893 F.

Supp. 2d at 728.

In both states: Insurance contracts are to be interpreted

according to their “plain and ordinary meaning.” Voorhees v.

Preferred Mut. Ins. Co., 607 A.2d 1255, 1260 (N.J. 1992). See

also Fieldston Prop. Owners Ass’n, Inc. v. Hermitage Ins. Co.,

Inc., 945 N.E.2d 1013, 1017 (N.Y. 2011) (“In resolving insurance

disputes, we first look to the language of the applicable

policies. If the plain language of the policy is determinative,

we cannot rewrite the agreement by disregarding that language.”)

25
(citations omitted). But “[i]f the terms of the contract are

susceptible to at least two reasonable alternative

interpretations, an ambiguity exists.” Chubb Custom Ins. Co. v.

Prudential Ins. Co. of Am., 948 A.2d 1285, 1289 (N.J. 2008).

See Mostow v. State Farm Ins. Cos., 668 N.E.2d 392, 394 (N.Y.

1996) (“Because the policy may be reasonably interpreted in two

conflicting manners, its terms are ambiguous.”).

If a provision is ambiguous, “a court may look to extrinsic

evidence as an aid to interpretation.” Chubb, 948 A.2d at 1289.

See Greenfield v. Philles Records, Inc., 780 N.E.2d 166, 170

(N.Y. 2002) (“Extrinsic evidence of the parties’ intent may be

considered only if the agreement is ambiguous, which is an issue

of law for the courts to decide.”). Extrinsic evidence is

relevant only if it sheds light on the parties’ intent at the

time of contracting. Newin Corp. v. Hartford Acc. & Indem. Co.,

467 N.E.2d 887, 889 (N.Y. 1984). And if a determination as to

the parties’ intent turns on “the credibility of extrinsic

evidence[,]” “such determination is to be made by the jury.”

Hartford Accident & Indem. Co. v. Wesolowski, 305 N.E.2d 907,

909 (N.Y. 1973).

In the absence of clear policy language or relevant

extrinsic evidence, courts must rely on additional rules of

contract interpretation to apply the terms of an ambiguously

worded provision to the facts at hand. “[C]overage provisions

26
are to be read broadly, exclusions are to be read narrowly,

potential ambiguities must be resolved in favor of the insured,

and the policy is to be read in a manner that fulfills the

insured’s reasonable expectations.” Selective Ins. Co. of Am.

v. Hudson East Pain Mgmt. Osteopathic Medicine, 46 A.3d 1272,

1277 (N.J. 2012). See Westview Assocs. v. Guaranty Nat’l Ins.

Co., 740 N.E.2d 220, 223 (N.Y. 2000) (“If the language of the

policy is doubtful or uncertain in its meaning, any ambiguity

must be resolved in favor of the insured and against the

insurer.”) (citation omitted). “When an insurance carrier

drafts an ambiguously worded provision and attempts to limit its

liability by relying on it, we will construe the language

against the carrier.” Metro. Prop. & Cas. Ins. Co. v. Mancuso,

715 N.E.2d 107, 112 (N.Y. 1999).

“It has long been the rule that ambiguities in a

contractual instrument will be resolved contra proferentem,

against the party who prepared or presented it.” 151 West

Assocs. v. Printsiples Fabric Corp., 460 N.E.2d 1344, 1345 (N.Y.

1984). When construing an ambiguous policy, “courts should

consider whether more precise language by the insurer, had such

language been included in the policy, ‘would have put the matter

beyond reasonable question.’” Gibson v. Callaghan, 730 A.2d

1278, 1282 (N.J. 1999) (quoting Mazzilli v. Accident & Cas. Ins.

Co., 170 A.2d 800, 803 (N.J. 1961)).

27
 In short, these cases convincingly show that there is

little difference between the two states’ laws. But to the

extent that applicable New York and New Jersey law differ, it is

with respect to contra proferentem. Whereas New York seems to

use the doctrine anytime a contract is not jointly drafted, New

Jersey seems to require unequal bargaining power before it will

favor an insured. Compare Taylor v. U.S. Cas. Co., 199 N.E.

620, 622 (N.Y. 1936) with Chubb, 948 A.2d at 1294 and Pacifico

v. Pacifico, 920 A.2d 73, 78 (N.J. 2007).

Here, this is a distinction without a difference. Although

Millennium is a sophisticated commercial entity and employed a

broker to obtain its policies, it did not possess equal

bargaining power with the Insurers. Therefore, even under New

Jersey law, contra proferentem would still be available. But

were it necessary to choose between New York and New Jersey law,

I would apply New York law for the same reasons that the

district court articulated. Millennium, 893 F. Supp. 2d at 727

(conducting a lex loci analysis and determining that New York

law would apply because both policies were countersigned by the

Insurers in New York).

28
 III

A

Turning now to the Insurers’ appeal, summary judgment shall

be granted “if the movant shows that there is no genuine dispute

as to any material fact and the movant is entitled to judgment

as a matter of law.” Fed. R. Civ. P. 56(a). We review the

district court’s grant of a motion for summary judgment de novo.

See Henson v. Liggett Group, Inc., 61 F.3d 270, 274 (4th Cir.

1995).

Where, as here, the district court considered cross motions

for summary judgment, we “must review each motion separately on

its own merits to determine whether either of the parties

deserves judgment as a matter of law.” Rossignol v. Voorhaar,

316 F.3d 516, 523 (4th Cir. 2003) (quotation marks omitted). In

considering each motion, we “resolve all factual disputes and

any competing, rational inferences in the light most favorable

to the party opposing that motion.” Id. (quotation marks

omitted).

B

The majority opinion outlines a reasonable interpretation

of the disputed portions of Endorsement 8. For example, the

majority opinion provides a dictionary definition of “direct”

and concludes that under its chosen definition, “neither Apache

29
nor Apache’s facilities on Varanus Island can be considered a

‘direct contributing property’ of Millennium.” Ante at 15.

The problem for the majority opinion’s reasoning is that

other equally reasonable alternative explanations exist. For

example, an alternate definition for “direct” can be found on

the same page of the same dictionary as that cited in the

majority opinion, yet it supports the conclusion that Apache was

indeed a direct contributing property. Specifically, “direct”

is also defined as being “from the source or the original

without interruption or diversion.” Webster’s Third New

International Dictionary 640. As stated by the district court:

“Regardless of whether Millennium contracted with Alinta or

contracted directly with Apache, the pressurized natural gas

still would flow directly from Apache’s facility through the

[Pipeline] to Millennium’s Bunbury Operations by operation of .

. . the law of physics.” Millennium, 893 F. Supp. 2d at 735

(quotation marks omitted). 3

3
The majority opinion takes issue with the definition cited
above, noting that it is “the adverbial definition of the term
‘direct,’ even though the term is clearly used as an adjective
in the operative policy phrase, ‘direct contributing property.’”
Ante at 15 n.7. But the issue here is not whether the term
“direct” is an adverb that modifies the word “contributing” or
an adjective that modifies the term “contributing property.”
Nor is the issue a question of which of the over 200 available
dictionaries we should selectively choose to find the definition
that satisfies our own interpretation of the policies. See,
e.g., OED Online, http://www.oed.com/view/Entry/53293?rskey
(Continued)
30
 Moreover, no evidence suggests that Alinta has the ability

to divert natural gas once it is injected into the Pipeline. In

fact, because it does not own any of the transmission or

distribution lines through which the natural gas flows, the

evidence indicates that Alinta has just as much physical control

over the gas as does Apache, which is to say, none. Because the

policies do not describe the nature of the direct relationship

required for something to be a “direct contributing property,” I

find this to be sufficient for Millennium to withstand the

Insurers’ motion for summary judgment.

In fact, and as explained by the district court, the

language of Endorsement 8 is written in terms of the

relationships between physical properties rather than the

relationships between people and entities. First, the

Endorsement uses the words “CONTRIBUTING PROPERTY(IES) for a

subtitle.” Second, Section “B” limits coverage to “locations”

that must be direct suppliers. Third, Section “C” covers losses

attributable to damage or destruction of “real or personal

=x0vIbu&result=2&isAdvanced=false (last visited Feb. 06, 2014)
(defining the adjectival form of “direct” as “[s]traight,
undeviating in course; not circuitous or crooked”) and Oxford
Dictionaries Online, http://www.oxforddictionaries.com/us/
definition/american_english/direct?q=direct (last visited Feb.
6, 2014) (defining the adjectival form of “direct” as “extending
or moving from one place to another by the shortest way without
changing direction or stopping”).

31
property . . . not operated by the Insured . . . .” All of this

“suggests that the physical relationship between the properties

is as or more important than the legal relationship between the

properties’ owners.” Millennium, 893 F. Supp. at 735.

Additionally, the fact that it is impossible to trace any

of the gas molecules to Apache is of no import in determining

whether a physical relationship existed between Apache and

Millennium. If it mattered where each molecule came from or

which molecule belonged to whom, Alinta would have no way of

knowing that it actually owned any of the gas that it

transferred to its customers. The Insurers’ arguments regarding

the gas molecules are simply a red herring.

C

To be sure, reasonable alternate interpretations of the

contested provisions of Endorsement 8 exist. As I noted above,

the majority opinion provides one such reasonable interpretation

for each provision. The district court provides a few more.

See Millennium, 893 F. Supp. 2d at 736. For example, the

district court noted that “[i]t is not an unreasonable

interpretation of the Master Policies to conclude that, by

providing only ‘direct’ CBI coverage, the Insurers sought to

limit their exposure to situations in which the insured lacked

the kind of influence over a contributing property that comes

32
with contractual privity.” Millennium, 893 F. Supp. 2d at 736.

But, as with the other reasonable interpretations, “the Master

Policies do not say this expressly[,]” id. and the plain

language of the policies cannot resolve the ambiguity. The

district court also explained that the “for the account of

clause” was ambiguous because the policies fail to name a party

who must hold the account, and one could reasonably conclude

that either Apache or Alinta could “hold the ‘account of the

Insured’” to trigger coverage. Id. at 739. The only thing we

can conclude from this recitation of competing reasonable

interpretations is that the language of the policies is

ambiguous. See Atalla, 976 F.2d at 192 (“[N]o writing is

unambiguous if susceptible of two reasonable

interpretations[.]”) (quotation marks omitted).

I would, therefore, proceed to analyze the extrinsic

evidence submitted by the parties. Although the record in this

case is nearly 2,200 pages long, I agree with the district

court’s conclusion that none of the extrinsic evidence is

admissible because none of it provides evidence of the parties’

intent at the time the provisions of Endorsement 8 were drafted.

See Millennium, 893 F. Supp. 2d at 737, 739.

Because none of the extrinsic evidence is relevant or

admissible, there is nothing for a jury to consider, and it is

“the responsibility of the court to interpret written

33
instruments.” Wesolowski, 305 N.E.2d at 909 (internal citation

omitted). We must, therefore, rely on well-settled rules of

contract interpretation to decide the case.

Here, the district court applied the doctrine of contra

proferentem to construe the ambiguous policies in favor of

Millennium and against the Insurers, and it granted Millennium’s

motion for partial summary judgment as to its declaratory

judgment claim. Millennium, 893 F. Supp. 2d at 739. I agree

with the district court, and I would, therefore, affirm. For

this and the other reasons discussed above, I must respectfully

dissent.

34