Filed: May 27, 2009
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 08-1885
(1:08-cv-00249-LMB-TRJ)
CACI INTERNATIONAL, INCORPORATED; CACI, INCORPORATED -
FEDERAL; CACI PREMIER TECHNOLOGY, INCORPORATED; CACI N.V.,
Plaintiffs – Appellants,
v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY,
Defendant – Appellee.
O R D E R
The court amends its opinion filed May 14, 2009, as follows:
On page 2, attorney information section, the names “Brian J.
Gerling, HUNTON & WILLIAMS, LLP, McLean, Virginia, Reginald M.
Skinner, HUNTON & WILLIAMS, LLP, Richmond, Virginia, for Appellee”
are added at line 5.
For the Court - By Direction
/s/ Patricia S. Connor
Clerk
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
CACI INTERNATIONAL,
INCORPORATED; CACI,
INCORPORATED - FEDERAL; CACI
PREMIER TECHNOLOGY,
INCORPORATED; CACI N.V.,
Plaintiffs-Appellants, No. 08-1885
v.
ST. PAUL FIRE AND MARINE
INSURANCE COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Leonie M. Brinkema, District Judge.
(1:08-cv-00249-LMB-TRJ)
Argued: March 26, 2009
Decided: May 14, 2009
Before WILKINSON and SHEDD, Circuit Judges, and
David A. FABER, Senior United States District Judge for
the Southern District of West Virginia, sitting by
designation.
Affirmed by published opinion. Judge Wilkinson wrote the
opinion, in which Senior Judge Faber joined. Judge Shedd
wrote a dissenting opinion.
2 CACI INT’L v. ST. PAUL FIRE
COUNSEL
ARGUED: John Edward Heintz, KELLEY, DRYE &
WARREN, LLP, Washington, D.C., for Appellants. Walter J.
Andrews, HUNTON & WILLIAMS, LLP, McLean, Virginia,
for Appellee. ON BRIEF: David Laufman, KELLEY, DRYE
& WARREN, LLP, Washington, D.C., for Appellants. Brian
J. Gerling, HUNTON & WILLIAMS, LLP, McLean, Virginia,
Reginald M. Skinner, HUNTON & WILLIAMS, LLP,
Richmond, Virginia, for Appellee.
OPINION
WILKINSON, Circuit Judge:
CACI International ("CACI") appeals the district court’s de-
cision that its insurer, St. Paul Fire and Marine Insurance Com-
pany ("St. Paul"), had no duty to defend CACI against claims al-
leging torture and abuse at Abu Ghraib and other prisons in Iraq.
CACI acknowledges that the insurance policies at issue in this
case generally limit coverage to the United States and Canada.
Still, CACI argues that some of the underlying claims implicate
events that happened in the United States, and that other claims
fall under an exception to the coverage provision for employees
who were away from home for a "short time."
We agree with the district court that the underlying
complaints cannot be read to allege events that happened in the
coverage territory. Under well-established principles of
insurance law, the place of the injury—not the place of some
precipitating cause—determines the location of the "event" for
coverage purposes. Further, the underlying complaints do not
allege that any injuries resulted from the activities of a CACI
employee who was in Iraq for a "short time." Requiring St. Paul
to defend CACI on the mere possibility that some employee may
have been briefly in Iraq would allow the policies’ exception to
non-coverage to swallow the rule. We thus decline to extend
CACI’s coverage beyond the plain terms of its policies and
affirm the judgment of the district court.
CACI INT’L v. ST. PAUL FIRE 3
I.
A.
In 2003, CACI International entered into three contracts
with the United States government to provide logistical and
intelligence support for U.S. operations in Iraq.* This work
included screening and interrogating detainees at Abu Ghraib
and other prisons in Iraq. Also in 2003, CACI took out a one-
year "Commercial General Liability Protection" policy with
St. Paul, which provided that St. Paul would defend CACI
against any suit for covered injuries or damage and would
indemnify CACI for up to $2 million. See Policy TE09001851
("Policy A"), March 31, 2003. CACI renewed this policy for
an additional year in March 2004. For purposes of this case,
the two policies are identical in all material respects and we
will refer to them as "the policies."
The policies covered "bodily injury" that was "caused by an
event." Policy A at 2. They in turn defined "event" as "an
accident, including continuous or repeated exposure to sub-
stantially the same general harmful conditions." Id. They also
obligated St. Paul to pay any legally required damages for
"covered personal injury" that was "caused by a personal
injury offense." Id. But with one exception, the policies lim-
ited coverage to specific geographic areas, stating:
We’ll apply, and make payments under, this agree-
ment:
• only in the coverage territory; and
*The suit involves four appellants: three named insureds, CACI Interna-
tional, Inc., CACI Inc. Federal, and CACI N.V.; and CACI Premier Tech-
nology, Inc., which is a wholly-owned subsidiary of CACI Federal.
Because all four appellants were covered by the St. Paul policies, we con-
sider their coverage as a group and refer to them collectively as "CACI."
4 CACI INT’L v. ST. PAUL FIRE
• only for covered injury or damage that’s caused
by events or offenses which happen or are com-
mitted there.
Id. at 5. The "coverage territory" was defined as the United
States, its territories and possessions, Canada, and Puerto
Rico. But the policies also stated that:
[W]e’ll also apply, and make payments under, this
agreement in the coverage territory for covered
injury or damage that’s caused by events or offenses
which happen or are committed in the rest of the
world if:
...
• they result from the activities of a person whose
home is in the coverage territory, but is away
from there for a short time on your business
....
Id. Therefore, the policies included a "short time" exception
to the general bar on coverage outside the home territory.
In the summer of 2004, CACI was sued by two groups of
former Iraqi detainees and their survivors who alleged torture
and abuse by CACI employees at Abu Ghraib and other pris-
ons in Iraq. The first suit accused CACI and another corpora-
tion of implementing an ongoing "torture conspiracy" that, it
alleged, the defendants began in 2001 with the goal of profit-
ing by extracting "intelligence" through torture. Al Rawi v.
Titan Corp., No. 3:04-CV-01143, ¶¶ 72, 74, 76 (S.D. Cal.
filed June 9, 2004) (the "Saleh complaint"). The complaint
alleged that the torture conspiracy "exist[ed] separate and
apart from the ongoing lawful operations" of the defendants,
and included specific actions such as stripping detainees,
threatening them with dogs, kicking them, and forcing them
to watch family members being tortured. Id. ¶¶ 74, 90(b), (e),
CACI INT’L v. ST. PAUL FIRE 5
91, 97(d). Finally, the complaint alleged negligent supervision
and hiring on the part of CACI. Id. ¶¶ 274-76.
The second lawsuit made similar allegations. It claimed
that CACI employees had beaten detainees, deprived them of
food, stripped and photographed them, and forced them to
witness violent attacks on their relatives. Ibrahim v. Titan
Corp., No. 1:04-CV-1248, ¶¶ 36(a)-(b), 39(e)-(f), 44(d)
(D.D.C. filed July 27, 2004) (the "Ibrahim complaint"). The
complaint also alleged that CACI and other defendants had
"engaged in an ongoing, multi-year pattern of criminal con-
duct for which the enterprise has earned . . . millions of dol-
lars in profits." Id. ¶ 60. Because of the similarities in the two
complaints, the Saleh case was transferred to the U.S. District
Court for the District of Columbia, where it was consolidated
with Ibrahim for purposes of discovery. Saleh v. Titan Corp.,
436 F. Supp. 2d 55, 59-60 (D.D.C. 2006).
B.
When St. Paul received notice of these complaints, it noti-
fied CACI that it believed the alleged abuses did not implicate
St. Paul’s duty to defend or indemnify under the policies. In
March 2008, CACI filed a declaratory judgment action in fed-
eral district court in Virginia, seeking a declaration that St.
Paul was obligated under the policies to defend CACI in both
lawsuits. St. Paul countered that it had no duty to defend or
indemnify CACI. Both parties filed motions for summary
judgment.
In July 2008, the district court granted St. Paul’s motion for
summary judgment and denied CACI’s. See CACI Int’l v. St.
Paul Fire & Marine Ins. Co., 567 F. Supp. 2d 824, 835 (E.D.
Va. 2008). In considering whether St. Paul had a duty to
defend, the district court applied the Eight Corners Rule,
which requires courts "‘to compare the four corners of the
insurance policy against the four corners of the underlying
complaint [to determine] if any allegations may potentially be
6 CACI INT’L v. ST. PAUL FIRE
covered by the policy.’" Id. at 829 (quoting Capitol Envtl.
Servs., Inc. v. N. River Ins. Co., 536 F. Supp. 2d 633, 640
(E.D. Va. 2008)).
While affirming the importance of the Eight Corners Rule,
the district court noted that few courts have discussed what
evidence is "intrinsic" to the complaint and may be consid-
ered along with it. The court therefore compared the Eight
Corners Rule to the "well-established Four Corners Rule,"
which limits what federal courts may consider when ruling on
a Fed. R. Civ. P. 12(b)(6) motion to dismiss. Id. at 831. Under
this rule, the Fourth Circuit has held that courts may consider
the complaint itself and any documents that are attached to it.
Id. (citing Sec’y of State for Def. v. Trimble Navigation Ltd.,
484 F.3d 700, 705 (4th Cir. 2007)). This circuit has also held
that courts may consider a document that the defendant
attaches to its motion to dismiss if the document "‘was inte-
gral to and explicitly relied on in the complaint and if the
plaintiffs do not challenge its authenticity.’" Id. (quoting Am.
Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212,
234 (4th Cir. 2004)). Applying those standards to the Eight
Corners Rule, the district court concluded that it would con-
sider documents outside the complaint if (1) they were
attached to the complaint; or (2) the complaint explicitly
relied on the documents and no party challenged their authen-
ticity. Id. at 832.
The court therefore looked at two documents attached as
Exhibits A and D to the Saleh complaint: a job posting for lin-
guistic support positions with "Team Titan," a collaboration
between CACI and other corporations; and a military report
on Abu Ghraib that discussed the involvement of two CACI
employees in abuses there. See id. The court also considered
CACI’s contracts with the U.S. government, which it con-
cluded were "expressly incorporated into the complaints,"
noting that "several of [the detainees’] legal claims [were]
predicated on the contractual relationships created by" the
contracts. Id. Further, CACI had not challenged the contracts’
CACI INT’L v. ST. PAUL FIRE 7
authenticity and had even offered them as evidence to support
its motion for summary judgment in the Saleh proceeding. See
id. Finally, the district court noted that, in addition to the poli-
cies at issue here, CACI had a Global Policy with St. Paul that
covered events outside the policies’ coverage territory but
specifically excluded Iraq. Although the Global Policy was
not part of the underlying complaints, its provisions were
described in a declaration attached as Exhibit E to CACI’s
complaint in the declaratory judgment action.
After comparing these documents—along with the com-
plaints themselves—to the St. Paul policies, the district court
concluded that CACI could not invoke coverage under the
short time exception because the "alleged activities, by their
very nature, [were] not indicative of a brief overseas business
trip, but rather of a more permanent presence in Iraq." Id. The
court also held that the claims of negligent supervision and
hiring in the Saleh complaint did not allege activities within
the United States because "the factual predicate for such
claims arises from the underlying tortious conduct of the
employee," all of which took place in Iraq. Id. at 835. CACI
now appeals.
C.
Because we have diversity jurisdiction in this case, we
apply the choice of law rules of the forum state—in this case,
Virginia. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S.
487, 496-97 (1941). Virginia insurance law applies "the law
of the place where an insurance contract is written and deliv-
ered." Buchanan v. Doe, 431 S.E.2d 289, 291 (Va. 1993).
Because St. Paul delivered the policies to CACI in Virginia,
we apply Virginia law. We review a grant of summary judg-
ment de novo. Fuisz v. Selective Ins. Co. of Am., 61 F.3d 238,
241 (4th Cir. 1995).
8 CACI INT’L v. ST. PAUL FIRE
II.
A.
This case is not about the conduct of the war in Iraq. It is
simply a case about certain principles of insurance. It is also
not a case about whether coverage could exist, but whether it
did. Principles of insurance law in Virginia, as elsewhere, are
solicitous of insureds. For example, ambiguous terms in a pol-
icy are construed against the insurer, who wrote the policy
and presumably could have written it more clearly. E.g.,
Fuisz, 61 F.3d at 242. And as CACI points out, doubts over
coverage are typically to be resolved in favor of the policy-
holder and against a limitation of coverage. See Am. Reliance
Ins. Co. v. Mitchell, 385 S.E.2d 583, 585 (Va. 1989).
Likewise, it is well-recognized that an "insurer’s obligation
to defend is broader than its obligation to pay." Brenner v.
Lawyers Title Ins. Corp., 397 S.E.2d 100, 102 (Va. 1990). For
while the duty to defend is based on the allegations in the
underlying complaint, the duty to indemnify relies on litigated
facts. Policyholders often pay more to insure against the costs
of defending lawsuits, even those that are ultimately unsuc-
cessful. See Perdue Farms, Inc. v. Travelers Cas. & Sur. Co.
of Am., 448 F.3d 252, 257-58 (4th Cir. 2006). Therefore, Vir-
ginia and other states recognize the "potentiality rule,"
wherein "an insurer’s duty to defend is triggered if there is
any possibility that a judgment against the insured will be
covered under the insurance policy." Bohreer v. Erie Ins.
Group, 475 F. Supp. 2d 578, 584 (E.D. Va. 2007). St. Paul
must therefore defend CACI against the detainee lawsuits if
there is any potential that the policies would cover the claims
alleged in the underlying complaints. See, e.g., Va. Elec. &
Power Co. v. Northbrook Prop. & Cas. Ins. Co., 475 S.E.2d
264, 265-66 (Va. 1996).
But the duty to defend is not without limits. To implicate
the duty, the underlying complaint must allege some facts on
CACI INT’L v. ST. PAUL FIRE 9
which the insurer would be liable. Therefore, even construing
policies in favor of the insured, and even considering Virgin-
ia’s potentiality rule, "if it appears clearly that the insurer
would not be liable under its contract for any judgment based
upon the allegations," the duty to defend will not attach. Bren-
ner, 397 S.E.2d at 102.
It is also important to resolve disagreements over the duty
to defend—which is after all a collateral matter—as early as
possible in litigation. That is why Virginia and other states
have adopted the Eight Corners Rule, which requires courts
to look primarily at the underlying complaints and the insur-
ance policy to determine if there is a potential for coverage.
E.g., Am. Online, Inc. v. St. Paul Mercury Ins. Co., 207 F.
Supp. 2d 459, 465 (E.D. Va. 2002). This rule serves a salutary
purpose: it prevents courts from conducting an intensive fac-
tual analysis at an early stage of the proceedings, which
would only increase litigation costs and needlessly tax parties
and courts before the underlying suit had barely begun. More-
over, permitting courts to consider evidence outside the com-
plaint would not only lead to duplicative factual inquiries in
determining the duty to defend and the duty to indemnify, but
"would render the two duties indistinguishable and thus effec-
tively depreciate the duty to defend." Capitol Envtl. Servs.,
536 F. Supp. 2d at 642.
Therefore, the district court properly began its inquiry by
looking at the complaints themselves. See CACI Int’l, 567 F.
Supp. 2d at 832. It is less clear, however, whether the district
court properly extended its inquiry by considering those docu-
ments attached to or relied on by the complaints. On the one
hand, looking beyond the complaint might become a slippery
slope. On the other hand, considering documents attached to
the complaint would not entail the extensive factual inquiries
or lengthy litigation that the Eight Corners Rule seeks to pre-
vent. As the district court noted, we have held in the Rule
12(b)(6) context that courts may look at documents that the
defendant attaches to its motion to dismiss. E.g., Trimble Nav-
10 CACI INT’L v. ST. PAUL FIRE
igation Ltd., 484 F.3d at 705. But those cases are partly moti-
vated by concerns that a plaintiff could prevail on a motion
to dismiss by selectively quoting documents in the complaint
without providing their full context; therefore, courts can pre-
vent such manipulation by considering the documents in their
entirety when presented by the defendant. See Trigon Health-
care, 367 F.3d at 234. But there is no apparent need in the
insurance context to counter possible manipulations by the
plaintiff in the underlying complaint.
Because the question is a matter of state insurance law
rather than of federal procedure, and because Virginia courts
have not signaled a readiness to look beyond the underlying
complaint, we will decline to consider those documents
attached to the complaints or on which the complaints in the
underlying action rely. Moreover, we find it unnecessary to
consider these documents because, as we hold below, the alle-
gations in the complaints themselves foreclose the possibility
of coverage under the territorial provision or "short time"
exception of the policies.
B.
To assess whether St. Paul has a duty to defend in this case,
we first ask whether the abuses alleged in the underlying com-
plaints took place inside the coverage territory. To answer this
question, we look initially to the policies to determine the
scope of coverage. As noted, the policies agree to defend
against suits seeking damages for "covered injury . . . that’s
caused by events or offenses which happen or are committed
in the [coverage territory]," which includes the United States
and its territories as well as Canada and Puerto Rico. Policy
A at 5. It is undisputed that all of the alleged abuse took place
in Iraq.
Nevertheless, CACI argues that some of the alleged activi-
ties took place in the coverage territory because the Saleh
complaint alleges negligent supervision and hiring, and these
CACI INT’L v. ST. PAUL FIRE 11
activities (according to CACI) took place in Virginia, Califor-
nia, and elsewhere in the United States. See Saleh Complaint
¶¶ 274-76. CACI notes that the policies provide coverage for
"events or offenses which happen or are committed [in the
coverage territory]," Policy A at 5, and that the "‘event’ caus-
ing the alleged injury [was] CACI’s acts of negligent hiring
and supervision." Brief for Appellants at 43.
This argument fails for two reasons. First, the complaint
does not allege that the negligent supervision took place out-
side Iraq: it alleges only that CACI "acted negligently and
directly harmed Plaintiffs . . . by failing to take appropriate
steps to supervise those persons performing Interrogation Ser-
vices." Saleh Complaint ¶ 275. The complaint does not state
from where CACI directed its supervision, and in fact sug-
gests negligence on the part of those directly supervising
ongoing interrogations in Iraq. Therefore, it is not clear that
these allegations on their face implicate events in the cover-
age territory.
More importantly, however, even assuming that the com-
plaint alleges activities that happened in the United States, the
great weight of case law holds that it is the location of the
injury—not of some precipitating cause—that determines the
location of the event for purposes of insurance coverage. See
Farmers Alliance Mut. Ins. Co. v. Salazar, 77 F.3d 1291,
1296 (10th Cir. 1996) (collecting cases). The reasons for a
"place of the injury" test are clear. As the district court noted,
applying a "cause in fact" test would let plaintiffs sweep any
number of worldwide events into the ambit of a domestic pol-
icy as long as the underlying complaint alleged negligent
supervision. CACI Int’l, 567 F. Supp. 2d at 835, n.15. There-
fore, a causal test would create a windfall for the insured and
render "the insurer responsible for a liability for which it had
not contracted." Keystone Automated Equip. Co. v. Reliance
Ins. Co., 535 A.2d 648, 652 (Pa. Super. Ct. 1988) (noting that
if the policyholder "had wanted world-wide coverage, it could
have paid a higher premium to obtain it"); see also Hagen
12 CACI INT’L v. ST. PAUL FIRE
Supply Corp. v. Iowa Nat’l Mut. Ins. Co., 331 F.2d 199, 202
(8th Cir. 1964) (same). If domestic policies could be stretched
to this extent, global policies would become superfluous and
territorial coverage limitations would lose their meaning. Cf.
Hagen, 331 F.2d at 202-03.
The cases cited by CACI are not to the contrary. They do
not speak to the location of the event but simply hold that
negligent hiring and supervision can constitute "occurrences"
that give rise to a duty to defend. E.g., S.F. v. W. Am. Ins. Co.,
463 S.E.2d 450, 452-53 (Va. 1995); Hanover Ins. Co. v.
Crocker, 688 A.2d 928, 930-31 (Me. 1997); see also Black’s
Law Dictionary 1109 (8th ed. 2004) (defining "occurrence"
partly as an "event . . . that results in personal injury or prop-
erty damage"). The courts in S.F. and Hanover did not con-
sider the question before us—namely, the location of an event
for coverage purposes. And most courts that have considered
this question have concluded that "when determining whether
a bodily injury was ‘caused by an occurrence’" the focus
should be "on the injury and its immediately attendant causa-
tive circumstances." Farmers Alliance, 77 F.3d at 1296; Dow-
den v. Sec. Ins. Co. of New Haven, 378 F.2d 46, 48 (5th Cir.
1967); Upper Columbia River Towing Co. v. Md. Cas. Co.,
313 F.2d 702, 705 (9th Cir. 1963); Diamond Shamrock
Chems. Co. v. Aetna Cas. & Sur. Co., 609 A.2d 440, 470 (N.J.
Super. Ct. App. Div. 1992) (collecting cases).
Applying those principles to this case, it is clear that the
alleged injuries and abuses took place in Iraq. The Ibrahim
plaintiffs were held at Abu Ghraib prison, and the Saleh com-
plaint alleges that plaintiffs were abused at Abu Ghraib and
other prisons in Iraq. E.g., Ibrahim Complaint ¶ 38; Saleh
Complaint ¶¶ 2, 4, 11. Because the place of the injury is con-
trolling, we find that the alleged injuries happened outside the
coverage territory.
C.
Next, CACI argues that the alleged abuses may be covered
under the exception to the territorial coverage provision for
CACI INT’L v. ST. PAUL FIRE 13
"injury or damage" that "result[s] from the activities of a per-
son whose home is in the coverage territory, but is away from
there for a short time on [CACI’s] business." Policy A at 5.
Because CACI is arguing that an exception to non-coverage
applies, it bears the burden of proof. E.g., St. Paul Fire &
Marine Ins. Co. v. Warwick Dyeing Corp., 26 F.3d 1195,
1200 (1st Cir. 1994) (collecting cases holding that the insured
must prove that an exception to non-coverage applies). This
rule is consistent with the premise that it is the policyholder’s
burden to prove that the policy covers its loss. See, e.g., Glen
Falls Ins. Co. v. Long, 77 S.E.2d 457, 460 (Va. 1953).
CACI first argues that "short time" is an ambiguous term
that is undefined in the policies and that we should therefore
construe it against a limitation of coverage. But under Vir-
ginia law, when words are undefined in an insurance policy,
"as in the case of any other contract, the words used are given
their ordinary and customary meaning when they are suscepti-
ble of such construction." Salzi v. Va. Farm Bureau Mut. Ins.
Co., 556 S.E.2d 758, 760 (Va. 2002) (internal quotation omit-
ted). The word "short" has an ordinary everyday meaning: it
means "brief," or "lasting only a short period of time." Web-
ster’s II New College Dictionary 1045 (3d ed. 2005).
And we can further interpret "short time" by considering its
meaning in the context of the policies as a whole. See Res.
Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631,
636 (4th Cir. 2005). Here, the policies each had only a one-
year period of performance; therefore, travel outside the cov-
erage territory for several weeks or more would defy the com-
mon understanding of "short time." Rather, the provision most
naturally covers a brief, discrete event such as a several-day
business trip abroad. And it also intends to cover the activities
of a single employee—"the activities of a person . . . [who]
is away from [home] for a short time on [CACI’s] business."
Policy A at 5 (emphasis added).
It is clear therefore that this limited exception cannot
encompass activities of the scope and magnitude of CACI’s
14 CACI INT’L v. ST. PAUL FIRE
operations in Iraq. Looking at the complaints, we note that
they allege a pattern and course of conduct that spanned sev-
eral years. For example, the Ibrahim complaint alleges that
interrogators took part in an "ongoing, multi-year pattern of
criminal conduct" that led to "millions of dollars in profits
over the course of their multi-year contracts." Ibrahim Com-
plaint ¶ 60. And the Saleh complaint alleges that CACI and
other defendants "described the work in Iraq as a ‘24 x 7’
operation," ¶ 53, while both complaints repeatedly allege an
"ongoing pattern and practice" of illegal acts and abuse. E.g.,
Saleh Complaint ¶¶ 117-18, 134-37; Ibrahim Complaint
¶¶ 30-31, 34-36.
In fact, the complaints make clear that they are alleging a
long-term approach to interrogation that specifically aimed to
extract more information from detainees through repeated tor-
ture and humiliation. For example, the Saleh complaint
alleges that CACI sent its employees to Iraq "to set up a
‘Gitmo-style’ prison at Abu Ghraib," where the interrogations
at Guantanamo Bay had been "based on study and review of
what practices would be most humiliating to those who prac-
tice the Muslim faith." ¶ 86. According to the complaint,
CACI specifically sought employees with cultural and social
knowledge of the region, and the abuses aimed to "attack[ ]
and ridicul[e] [the detainees’] religious faith of Islam." Saleh
Complaint ¶ 53, ¶ 135. Therefore, the complaints frame the
alleged abuses, including beating detainees and threatening
them with dogs, not as isolated incidents but as part of the
"torture conspirators’" plan to "continually torture[ ] and oth-
erwise mistreat[ ]" detainees "[b]eginning in January 2002
and continuing to present." Id. ¶ 137.
Moreover, the process of interrogation alleged in the under-
lying complaints is not one that was quickly terminated.
Rather, it relied on interrogators who became more skilled as
time went by and who came to know the detainees—and each
other—more personally. Indeed, the Saleh complaint alleges
that the defendants worked together in a systematic way to
CACI INT’L v. ST. PAUL FIRE 15
use "physical and psychological coercion" to compel detain-
ees to give over information. Id. ¶ 134. The intent of the inter-
rogators, according to the Saleh complaint, was to "creat[e] an
environment" in which continual abuse would "result in more
persons ‘willing’ to provide so-called ‘intelligence.’" Id. ¶ 73.
Interrogation of this kind involves repetitive behavior over
time, or, in the complaint’s words, "a series of acts specifi-
cally designed to mentally devastate" the detainees. Id.
¶¶ 134-35. These descriptions make it difficult to infer that
those engaged in such activities were present in Iraq for only
a few days.
Nevertheless, CACI argues that there is some chance that
one or more of its employees involved in the alleged abuses
was in fact in Iraq for just a short time, and that the potential-
ity rule is so broad that any claim that is "arguably covered"
implicates the duty to defend. Donnelly v. Transp. Ins. Co.,
589 F.2d 761, 767 (4th Cir. 1978). But while there is always
a theoretical possibility that some CACI employee outside the
United States for a short time had some hand in the alleged
abuse, this mere possibility does not rise to the level of poten-
tiality. For example, we held that the insurer in Fuisz v. Selec-
tive Insurance Co. of America, 61 F.3d 238 (4th Cir. 1995),
had a duty to defend only because the underlying complaint
specifically alleged conduct that was covered by the policy.
See Fuisz, 61 F.3d at 244-45 (finding that a complaint alleg-
ing that the defendant had failed to verify the accuracy of his
statements could be read to allege unintentional conduct not
barred by the policy’s exclusion for intentional harms). But
here, the underlying complaints present no allegations of
abuse resulting from the activities of a CACI employee who
was in Iraq for only a short time. Therefore, CACI’s protesta-
tion finds no grounding in the language of the complaints, and
it cannot sustain its burden of proof.
In sum, the potentiality rule does not require us to abandon
the rule of reason. See Ellett Bros., Inc. v. U.S. Fid. & Guar.
Co., 275 F.3d 384, 388 (4th Cir. 2001) (holding that a com-
16 CACI INT’L v. ST. PAUL FIRE
plaint that sought injunctive relief as well as "such further
relief as [the] court deems just" did not present "a factual alle-
gation supporting a claim for damages"). For while we con-
strue ambiguities in coverage in favor of the policyholder,
there is no such ambiguity here. The term "short time" has a
plain and ordinary meaning, and the complaints allege a sys-
tematic pattern of activities lasting months and even years.
Presented with such a stark difference between the policies
and the underlying complaints, we are not permitted to take
such a massive operation and cram it into a short time excep-
tion. If we did so, the exception would swallow the policies’
coverage provisions whole, and there would be no reason for
an insured to ever contract for coverage broader than its poli-
cy’s narrowest exception.
For the foregoing reasons, the judgment is
AFFIRMED.
SHEDD, Circuit Judge, dissenting:
The majority acknowledges our obligation under Virginia
law to impose a duty to defend when "there is any possibility
that a judgment against the insured will be covered under the
insurance policy." Bohreer v. Erie Ins. Group, 475 F. Supp.
2d 578, 584 (E.D. Va. 2007) (emphasis added). None of the
factual allegations in these complaints forecloses the possibil-
ity that one or more CACI employees traveled to Iraq for a
short time and caused covered injuries to the plaintiffs, a sce-
nario covered by the insurance policies’ "short time" excep-
tion. In my view, this possibility requires us to reverse the
decision of the district court and remand for further discovery
on other material issues.