C.L. FRATES & COMPANY, an Oklahoma corporation, Plaintiff-Appellee,
WESTCHESTER FIRE INSURANCE COMPANY, a Pennsylvania corporation, Defendant-Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA (D.C. No. 5:11-CV-01020-L).
Thomas Rowe Kendrick, Timothy L. Martin of Durbin, Larimore & Bialick, Oklahoma City, Oklahoma; Joseph K. Powers of Sedgwick LLP, New York, New York, for Defendant-Appellant.
Ryan S. Wilson, Elizabeth A. Price, Michael L. Brooks of Hartzog Conger Cason & Neville, Oklahoma City, Oklahoma, for Plaintiff -Appellee.
Before HOLMES, BACHARACH, and PHILLIPS, Circuit Judges.
BACHARACH, Circuit Judge.
This action involves a dispute over the interpretation of an errors-and-omissions policy issued by Westchester Fire Insurance Company to C.L. Frates & Company. The policy excludes coverage for claims "arising out of" bankruptcy or insolvency.
The dispute grew out of a stop-loss policy issued by United Re to a company that had hired Frates as a broker. After issuance of the policy, United filed for bankruptcy protection. When Frates learned of the bankruptcy, it investigated and learned that United was not an insurance company, had been sued in Ohio, and had filed bankruptcy to stall the Ohio litigation. Ultimately, Frates recommended to its client that it move the stop-loss insurance to another insurer. The client agreed. However, Frates had to reimburse the client for what it lost through higher deductibles.
Saddled with the cost of this reimbursement, Frates sued Westchester under the errors-and-omissions policy. In cross-motions for summary judgment, Westchester contended that Frates's claim "arose out of" United's bankruptcy or insolvency. In turn, Frates contends that the claim "arose out of" United's deception. The district court agreed with Frates and granted its motion for summary judgment. In this appeal, we are asked: Could a reasonable trier of fact conclude that Frates's claim arose out of United's bankruptcy or insolvency? We think so. As a result, we reverse the award of summary judgment to Frates.
Elements of the Decision
In considering the award of summary judgment, we must examine the standard applicable in the district court proceedings, the meaning of the phrase "arising out of, " and the possible inferences that could be drawn by a rational fact-finder.
Standard for Summary Judgment
To begin, we consider the summary-judgment standard. In reviewing the award of summary judgment, we view the evidence in the light most favorable to Westchester. See Justice v. Crown Cork & Seal Co., Inc., 527 F.3d 1080, 1085 (10th Cir. 2008). When the evidence could lead a rational fact-finder to resolve the dispute in favor of either party, summary judgment is improper. SCO Grp., Inc. v. Novell, Inc., 578 F.3d 1201, 1215 (10th Cir. 2009).
Reasonableness of a Finding for Frates
We must apply this standard against the backdrop of the underlying question, the meaning of the phrase "arising out of." Under Oklahoma law,  we broadly interpret the phrase "arising out of" as requiring only some connection to the injury. See Fed. Ins. Co. v. Tri-State Ins. Co., 157 F.3d 800, 804 (10th Cir. 1998) (interpreting Oklahoma law). Viewing the evidence in the light most favorable to Westchester, a reasonable fact-finder could ...