ECB USA, Inc. v. Chubb Ins. Co. of N.J.

109 F.4th 1367

ECB USA, INC., a Florida Corporation, Atlantic Ventures Corp.,a Florida Corporation, G.I.E. C2B, a French business entity,as assignees of Constantin Associations LLP,a New York limited liability partnership,Constantin Associates LLP, Plaintiffs-Counter Defendants-Appellants, v. CHUBB INSURANCE COMPANY OF NEW JERSEY,a New Jersey Insurance Company Corporation,Executive Risk Indemnity, Inc.,a Delaware Insurance corporation, Defendants-Counter Claimants-Appellees.

No. 22-10811

United States Court of Appeals, Eleventh Circuit

Filed: August 1, 2024

Appeal from the United States District Court for the Southern District of Florida, D.C. Docket No. 1:20-cv-20569-RNS

Joel Magolnick, John E. Kirkpatrick, David Marko, David Proietti, Marko & Magolnick, PA, Miami, FL, for Plaintiffs-Counter Defendants-Appellants.

Aaron Stenzler Weiss, Steven Jeffrey Brodie, Daniel G. Enriquez, David Arnold Karp, Carlton Fields, PA, Miami, FL, Nathaniel Garrett Foell, Gary L. Sasso, Carlton Fields, Tampa, FL, Sylvia H. Walbolt, Carlton Fields, PA, Tallahassee, FL, for Defendants-Counter Claimants-Appellees.

Before Jordan, Brasher, and Abudu, Circuit Judges.

Brasher, Circuit Judge:

This case comes down to grammar and canons of construction. Chubb issued an insurance policy that covers claims against Constantin arising from "services directed toward expertise in banking finance, accounting, risk and systems analysis, design and implementation, asset recovery and strategy planning for financial institutions." Constantin performed an audit for a food services company; the audit went wrong and led to liability. Constantin transferred its rights under the policy to the ECB parties. The question for us is whether "for financial institutions" limits "accounting" such that there is no coverage under the policy for the audit of a food services company.

Chubb and its related parties argue that the phrase "for financial institutions" applies to everything in the list; ECB and its related parties argue that "for financial institutions" applies only to the last phrase in the series of covered services. We agree with Chubb. The series-qualifier canon of interpretation suggests that a postpositive modifier like "for financial institutions" modifies all the terms in a list of parallel items. Chubb's position is also supported by the surrounding language of the policy. Although ECB argues that the last-antecedent canon and contra proferentem support its position, those canons are inapposite. Because the accounting at issue was not performed for a financial institution, the claim is not covered by the professional services insurance contract that Chubb issued. Therefore, we affirm the district court's grant of summary judgment to Chubb.

I.

Constantin is a sophisticated commercial entity that provides accounting services. In 2001, Constantin Control Associates LP acquired professional services insurance from Executive Risk Indemnity, Inc. ("ERI"), a subsidiary of Chubb Limited—the ultimate parent company. Constantin's application for insurance coverage stated that it wanted insurance for "management consulting for the financial community." Dist. Ct. Doc. 155-17 at 2. Constantin received professional liability insurance, which it renewed with ERI over the years. The last policy period with ERI ended in December 2017. In December 2017, Constantin renewed the policy for the 2017-18 policy period with Chubb Insurance Company of New Jersey, another subsidiary of Chubb Limited.

For the relevant contract years of 2016-17 and 2017-18, Constantin's contract included Constantin Associates LLP as an insured party either by express incorporation or through definitions involving their corporate relationship. Also in both years, Constantin's "Professional Services" liability insurance covered services Constantin performed for others for a fee that were listed in a specific cross-referenced list. The relevant cross-reference in the insurance policies insured Wrongful Acts—which the contracts define—in the performance of (1) "Computer Consulting including computer system architecture and design"; (2) "Temporary Placement Agency Services"; and, critically, (3) "Management consulting services." Dist. Ct. Doc. 155-16 at 6 (2016-17 Policy); Dist. Ct. Doc. 155-37 at 23 (2017-18 Policy).

The contracts defined "[m]anagement consulting services [to] mean[ ] services directed toward expertise in banking finance, accounting, risk and systems analysis, design and implementation, asset recovery and strategy planning for financial institutions." Dist. Ct. Doc. 155-16 at 6; Dist. Ct. Doc. 155-37 at 23.

Constantin performed an audit for Schratter Foods Incorporated. Schratter was a food company, not a financial institution; so the parties do not dispute that Constantin's provision of accounting services was not to a "financial institution." The audit allegedly did not go well. After the audit, the ECB parties—the plaintiffs here—sued Constantin for alleged wrongdoing in the professional audit of Schratter's financial statements in connection with the ECB parties' acquisition of Schratter. Constantin settled and assigned its rights against ERI and Chubb Insurance Company of New Jersey to the ECB parties.

In this case, the ECB parties sued to enforce Constantin's assigned contractual rights to the insurance contract, alleging a breach of contract based on a duty to defend or indemnify in the earlier, settled lawsuit. After arguing that New Jersey law applies, ECB argued in its summary judgment briefing that "for financial institutions" did not apply to "accounting" because of the absence of a comma before "for financial institutions." This was explicitly an argument about how Chubb did not win under the series-qualifier canon.

Applying New Jersey law, the district court granted the Chubb parties summary judgment in an omnibus order. The district court decided that—contrary to Chubb's argument—the auditing of financial statements was a "service[ ] directed toward expertise in . . . accounting." This meant that auditing could be a type of covered activity under the professional services insurance contract. But the district court decided that Chubb nonetheless won at the summary judgment stage because the accounting services must be for a financial institution to be covered by the insurance contract. The district court also granted reformation of the 2017-18 contract to ECB so that it included Constantin as a named insured, among other decisions not challenged on appeal.

The Chubb parties moved to amend the order, and the ECB parties requested reconsideration. At reconsideration, ECB raised the last-antecedent and contra proferentem canons for the first time, albeit without calling it the contra proferentem canon.

The district court granted the Chubb parties' motion to amend the order but denied the ECB parties' motion for reconsideration, stating that ECB's new canon arguments had been waived by not being made before the motion for reconsideration and that, alternatively, they did not convince the district court that reconsideration was warranted. The district court then entered an amended omnibus order on February 25, 2022, clarifying the judgment of reformation in favor of the ECB parties. Chubb does not challenge the reformation here, and the summary judgment decisions on appeal did not change in the amended omnibus order. The district court then entered its judgment.

The ECB parties appealed.

II.

Before we can assess the merits, we must resolve two preliminary issues: our standard of review and the district court's subject matter jurisdiction. We conclude that our review is de novo and that the district court had diversity jurisdiction over this dispute.

A.

We analyze de novo all the issues in this appeal. See Sweet Pea Marine, Ltd. v. APJ Marine, Inc., 411 F.3d 1242, 1247 (11th Cir. 2005) (diversity jurisdiction); Showan v. Pressdee, 922 F.3d 1211, 1223 (11th Cir. 2019) (state law legal questions); Yusko v. NCL (Bahamas), Ltd., 4 F.4th 1164, 1167 (11th Cir. 2021) (summary judgment). Chubb argues that we should apply an abuse of discretion standard on two points, but we disagree.

First, we do not defer to the district court's conclusion that ECB purportedly waived its New Jersey law arguments when we are assessing waiver for appellate purposes. Although we review for an abuse of discretion a district court's determination that a party waived an affirmative defense by not making it at the appropriate time or waived apportionment of damages by making an inconsistent argument, whether a party has waived an issue for purposes of appeal is a matter that we must assess de novo. Compare Proctor v. Fluor Enters., Inc., 494 F.3d 1337, 1350 n.9 (11th Cir. 2007) (affirmative defense), Smith v. R.J. Reynolds Tobacco Co., 880 F.3d 1272, 1280-82 (11th Cir. 2018) (apportionment of damages), and Searcy v. R.J. Reynolds Tobacco Co., 902 F.3d 1342, 1359 (11th Cir. 2018) (apportionment of damages), with United States v. Riggs, 967 F.2d 561, 564-65 (11th Cir. 1992) (analyzing appellate waiver ourselves when the party failed to make an argument in the district court), and Am. Builders Ins. Co. v. Southern-Owners Ins. Co., 71 F.4th 847, 856 n.1 (11th Cir. 2023) (same).

Second, the district court's denial of ECB's motion for reconsideration does not change the standard of review we apply to its decision to grant summary judgment. When we review a disposition after a denial of a motion for reconsideration, we review the original disposition itself under whatever standard of review we would normally use. See Blackburn v. Shire US Inc., 18 F.4th 1310, 1317 (11th Cir. 2021) (using an abuse of discretion standard when reviewing a denial of leave to amend under Federal Rule of Civil Procedure 15(a)(2) because that is the Rule 15(a)(2) standard, without regard to the denial of the motion for reconsideration). To reverse a judgment, an appellant needs to establish an error in the judgment, not an error in...