                                                                 NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT

                                     _____________

                                      No. 10-1397
                                     _____________

                           CHARLES STAFFORD, Appellant

                                             v.

                       SCOTTSDALE INSURANCE COMPANY
                              __________________

                     On appeal from the United States District Court
                             for the District of New Jersey
                            (D.C Civil No. 2-08-cv-03629)
                         District Judge: Hon. Peter G. Sheridan
                                  __________________

                       Submitted Under Third Circuit LAR 34.1(a)
                                  November 17, 2010

            Before: BARRY, CHAGARES, and VANASKIE, Circuit Judges.

                                (Filed: December 3, 2010)

                                      ____________

                                        OPINION
                                      ____________


CHAGARES, Circuit Judge.

       Plaintiff, Charles Stafford, seeks a declaration that a homeowner’s insurance

policy issued by defendant, Scottsdale Insurance Company (“Scottsdale”), provided

personal liability coverage for injuries sustained in a dog attack. The District Court
granted summary judgment to Scottsdale. Because we agree with the District Court that,

as a matter of law, the insurance policy at issue excluded coverage for personal liability

arising out of injuries caused by an animal, we will affirm.

                                              I.

       As we write solely for the benefit of the parties, we will only briefly recite the

essential facts. On June 2, 2005, while walking on the sidewalk near his Maplewood,

New Jersey home, Charles Stafford was attacked by Oliver Kennedy’s dog, a pit-bull mix

named Tank. Tank’s attack on Stafford caused him severe injuries, which required seven

surgeries to repair. Having incurred substantial medical expenses, Stafford sued

Kennedy in the Superior Court of New Jersey for negligent supervision of his dog, as

well as a strict liability violation of New Jersey’s Dog Bite Act. Stafford ultimately

decided not to pursue the strict liability claim, but he won a $1,107,500 default judgment

stemming from Kennedy’s negligence. In its judgment, the Superior Court made several

findings of fact regarding Kennedy’s negligent conduct. Of particular relevance to this

action is the Superior Court’s factual finding that Tank’s attack on Stafford was

proximately caused by Kennedy’s negligent failures to (1) contain Tank within a fence,

despite a prior attack, (2) properly train Tank, and (3) provide Tank with adequate

exercise. Based on these findings, the Superior Court concluded that Kennedy was liable

to Stafford for negligent supervision of his dog.

       Kennedy kept Tank on the property of his sister, Natalie Kennedy, with whom he

lived at the time. Natalie Kennedy held a homeowner’s insurance policy issued by

Scottsdale (the “Policy”), which was in effect at the time of the attack and which

                                              2
provided personal liability coverage to the insured for “bodily injury” arising from an

“occurrence,” subject to a $300,000 limit. 1 Appendix (“App.”) at 47. Importantly,

however, the Policy also contained an exclusion, marked conspicuously with the heading

“THIS ENDORSEMENT CHANGES THE POLICY,” that denied coverage for “‘bodily

injury’… caused by any animal, whether owned or not owned by any ‘insured’” (the

“Animal Exclusion”). App. at 114. Pursuant to this Animal Exclusion, Scottsdale

refused to defend Kennedy in Stafford’s personal injury lawsuit and similarly declined to

indemnify Kennedy for the subsequent judgment against him.

       After the Superior Court entered judgment, Kennedy assigned his claim for

coverage under the Policy to Stafford, who then brought this action seeking a declaration

that the Policy provided personal liability coverage for the negligence claim that arose

out of Tank’s attack. The District Court granted Scottsdale’s motion for summary

judgment, finding that the Animal Exclusion unambiguously precluded coverage for

Stafford’s injuries and that Scottsdale, therefore, had not acted in bad faith when it

refused to defend against the negligence claim arising from those injuries.

                                             II.

       The District Court had diversity jurisdiction over this action pursuant to 28 U.S.C.

§ 1332. We exercise appellate jurisdiction pursuant to 28 U.SC. § 1291.




1
 Oliver Kennedy has alleged that he is an additional insured under the policy issued to
Natalie Kennedy. For purposes of this action, Scottsdale has assumed that Oliver
Kennedy qualifies as an insured under the policy issued to his sister, while reserving the
right to contest his insured status.
                                              3
         “We subject the District Court’s grant of summary judgment to plenary review,

and we apply the same standard that the lower court should have applied.” Smathers v.

Multi-Tool, Inc., 298 F.3d 191, 194 (3d Cir. 2002). By that standard, summary judgment

is appropriate “if the pleadings, the discovery and disclosure materials on file, and any

affidavits show that there is no genuine issue as to any material fact and that the movant

is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). In making this

determination, we must “view the facts in the light most favorable to the nonmoving

party and draw all inferences in that party's favor.” Farrell v. Planters Lifesavers Co.,

206 F.3d 271, 278 (3d Cir. 2000). A district court’s interpretation of state law and its

findings as to the legal operation of an insurance policy are conclusions of law which we

review de novo. Royal Ins. Co. of Am. v. KSI Trading Corp., 563 F.3d 68, 73 (3d Cir.

2009).

         Because this case comes before us pursuant to diversity jurisdiction, we apply the

substantive law as decided by the highest court of New Jersey, the state whose law

governs this action. See Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358, 1373 n.15 (3d

Cir. 1996) (citation omitted). 2

                                             III.

2
 “When the state's highest court has not addressed the precise question presented, [we]
must predict how the state's highest court would resolve the issue,” Orson, 79 F.3d at
1373 n.15, and to do so, “we must consider relevant state precedents, analogous
decisions, considered dicta, scholarly works, and any other reliable data tending
convincingly to show how the highest court in the state would decide the issue at hand,”
Covington v. Cont'l Gen. Tire, Inc., 381 F.3d 216, 218 (3d Cir. 2004) (quotation omitted).
Most significantly, the “decisions of state intermediate appellate courts should be
accorded significant weight in the absence of an indication that the highest state court
would rule otherwise.” Orson, 79 F.3d at 1373 n.15.
                                              4
         “[C]onstruction of an insurance policy must be approached with a well settled

doctrine in mind. If the controlling language will support two meanings, one favorable to

the insurer, and the other favorable to the insured, the interpretation sustaining coverage

must be applied. Courts are bound to protect the insured to the full extent that any fair

interpretation will allow.” Mazzilli v. Accident & Cas. Ins. Co. of Winterthur, Switz.,

170 A.2d 800, 803 (N.J. 1961); see also Flomerfelt v. Cardiello, 997 A.2d 991, 996 (N.J.

2010). Still, the law “will not make a better contract for parties than they themselves

have seen fit to enter into, or alter it for the benefit of one party and to the detriment of

the other. The judicial function of a court of law is to enforce the contract as it is

written.” James v. Fed. Ins. Co., 73 A.2d 720, 721 (1950) (quotation omitted); see also

Flomerfelt, 997 A.2d at 996. In other words, when an insurance policy’s language is

clear and unambiguous, the court is bound to enforce it according to its plain and

ordinary meaning. Voorhees v. Preferred Mut. Ins. Co., 607 A.2d 1255, 1260 (N.J.

1992).

         In keeping with the general principles outlined above, New Jersey law dictates

that, “if the clause in question is one of exclusion or exception, designed to limit the

protection [provided by an insurance policy], a strict interpretation is applied.” Mazzilli,

170 A.2d at 804; see also Flomerfelt, 997 A.2d at 996. A court will enforce an

exclusionary clause only if it is “specific, plain, clear, prominent, and not contrary to

public policy.” Princeton Ins. Co. v. Chunmuang, 698 A.2d 9, 17 (N.J. 1997) (quotation

omitted). But, as with all contract language, if the language of an exclusionary clause is

clear and unambiguous, “a court should not engage in a strained construction to support

                                               5
the imposition of liability.” Flomerfelt, 997 A.2d at 996 (quoting Longobardi v. Chubb

Ins. Co., 582 A.2d 1257, 1260 (N.J. 1990)).

       Applying these well-established principles of interpretation to the exclusionary

clause at issue here, we agree with the District Court that the Policy’s language could not

be clearer. The Policy provided its insured with personal liability coverage for “bodily

injury” arising from an “occurrence”, subject to a $300,000 limit. App. at 47. But the

Animal Exclusion explicitly denied such coverage for “‘bodily injury’… caused by any

animal….” App. at 48, 114. Read in accordance with its plain and ordinary meaning,

this contractual language could only lead a reasonable person to conclude that the Policy

does not provide personal liability coverage for bodily injuries sustained in the course of

an animal attack, such as those that Tank inflicted on Stafford.

       Nonetheless, Stafford argues that the Animal Exclusion does not preclude personal

liability coverage under the circumstances because Kennedy’s negligence in supervising

Tank was a concurrent source of his liability, independent of Tank’s attack, for which the

Policy provides coverage. In support of this argument, Stafford relies on the concurrent

causation doctrine set forth in Salem Group v. Oliver, 607 A.2d 138 (N.J. 1992). In

Salem Group, the New Jersey Supreme Court held that an insurance policy provided

personal liability coverage for an accident involving a minor’s use of the insured’s motor

vehicle, despite a motor vehicle exclusion, because the fact that the insured also served

alcohol to the minor was a concurrent cause of the accident, for which the policy at issue

provided personal liability coverage. Id. at 140. In reaching its decision, the court

emphasized that “the serving of alcohol to a minor does not depend on the insured’s

                                              6
ownership of a motor vehicle or its entrustment to another.” Id. Indeed, if the minor

claimant, having been served alcohol by the insured, had suffered injuries utterly

unrelated to the use of a motor vehicle, the insured would still have been exposed to

liability as a social host, which was covered by the relevant insurance policy.

Accordingly, the court found that the insurer could not avoid its obligation to defend its

insured on the social host claim merely because a separate excluded risk — the operation

of a vehicle — constituted an additional discrete act of negligence causing the claimant’s

injuries. Id.

       Despite Stafford’s lengthy arguments to the contrary, we agree with the District

Court that this case is readily distinguishable from Salem Group. Unlike the situation

presented by that case, which involved two entirely distinct negligence claims upon

which to premise liability for the claimant’s injuries, one of which was covered by the

policy and one of which was not, Kennedy’s liability for Stafford’s injuries flows from

his allegedly negligent supervision of Tank. And Kennedy’s negligent supervision of

Tank simply cannot be considered a cause of Stafford’s injuries, separate and apart from

Tank’s attack. 3 See Owens v. Prudential Prop. & Cas. Ins. Co. of N.J., 763 A.2d 792,

795 (N.J. Super. Ct. App. Div. 2000) (holding that a motor vehicle exclusion precluded

coverage for a negligent entrustment of a motor vehicle claim against the insured

because, “[u]nlike the facts in Salem, we are not dealing here with an independent,

3
 Kennedy’s reliance on Flomerfelt v. Cardiello, 997 A.2d 991, 996 (N.J. 2010), is
similarly misplaced. Like Salem Group, Flomerfelt addresses the application of the
concurrent causation doctrine to a injury for which there were two distinct negligence
claims on which to premise liability, one of which was covered by the relevant policy and
one of which was not.
                                             7
discrete act of negligence (such as service of alcohol to a minor) unrelated to the use or

operation of a motor vehicle”).

       As New Jersey law makes clear, liability for negligent supervision is grounded in

the insured’s failure to protect the plaintiff from injury in a situation where the insured

bore the legal obligation to do so. See Robert W. Hayman, Inc. v. Acme Carriers, Inc.,

696 A.2d 1125, 1128 (N.J. Super. App. Div. 1997). Viewed in such a light, it is readily

apparent that an insured’s negligence in supervising the cause of the harm cannot, as a

matter of logic, be considered a source of liability that is isolable from the harm itself.

To the contrary, the two are inextricably intertwined; there is no liability, but for the

harm. See, e.g., Robert W. Hayman, 696 A.2d at 1128-29 (holding that a theft exclusion

precluded personal liability coverage for a negligent supervision claim against an insured

that arose out of the theft of the plaintiff’s property because “the negligent supervision is

premised on [the defendant’s] failure to protect the plaintiff’s property and is intertwined

with the theft…”). Indeed, in this case, the breach of duty upon which the Superior Court

premised its finding of negligence was Kennedy’s failure to restrain his dog from causing

harm to others. Absent Tank’s injury-causing attack, Kennedy’s conduct could not have

been deemed negligent at all. 4


4
  Stafford argues, in this regard, that the District Court failed to give full faith and credit
to the Superior Court’s findings of fact that Kennedy was negligent in failing to contain
Tank within a fence and failing to properly train Tank. This is simply not true. The
District Court faithfully abided by the Superior Court’s factual findings in the underlying
negligence action, but concluded, as a matter of law, that Kennedy’s negligence in
supervising was not a tortious wrong independent of the harm that Tank caused to
Stafford. Rather Kennedy’s failures with regard to Tank’s supervision were only wrongs
against Stafford because those failures were responsible for Tank’s injury-causing attack.
                                               8
       In short, Kennedy’s negligence in supervising Tank was the cause of Stafford’s

bodily injuries, and the Animal Exclusion precludes personal liability coverage for the

lawsuit stemming therefrom. To hold otherwise would require us to engage in precisely

the type of “strained construction” of the Policy that New Jersey law prohibits. See

Flomerfelt, 997 A.2d at 996 (quotation omitted).

                                             IV.

       Stafford next argues that Scottsdale acted in bad faith when it refused to defend

Kennedy against Stafford’s negligence claim.

       [T]he duty to defend comes into being when the complaint states a claim
       constituting a risk insured against. Whether an insurer has a duty to defend is
       determined by comparing the allegations in the complaint with the language of the
       policy. When the two correspond, the duty to defend arises, irrespective of the
       claim’s actual merit. If the complaint is ambiguous, doubts should be resolved in
       favor of the insured and thus in favor of coverage.

Voorhees, 607 A.2d at 1259 (quotations and citations omitted). To succeed in his claim

that Scottsdale acted in bad faith when it refused to defend its insured, Stafford must

demonstrate that, comparing the Policy language to the allegations in the complaint, there

existed no “fairly debatable” reason for denying coverage. See Hudson Universal, Ltd. v.

Aetna Ins. Co., 987 F. Supp. 337, 341 (D.N.J. 1997) (citing Pickett v. Lloyd’s (A

Syndicate of Underwriting Members), 621 A.2d 445, 453 (N.J. 1993)). This Stafford

cannot do. Having concluded that the Animal Exclusion clearly and unambiguously

precludes personal liability coverage for the injuries caused by Tank’s attack, we must

also conclude that, at the very least, there existed a fairly debatable reason for Scottsdale




                                              9
to refuse to defend against Stafford’s claim for negligent supervision of the offending

animal in the first instance. 5

                                             V.

       For these reasons, we will affirm the judgment of the District Court.




5
 Stafford asserts, without explanation, that “Plaintiff’s expert’s report creates a question
of fact.” See Stafford Br. at 28. By this we assume that Stafford means to raise a
question of fact with regard to whether Scottsdale had a duty to defend the underlying
action. But this question is one of law that the court must answer based on a comparison
of the allegations in the complaint with the policy language. See, e.g., Robert W.
Hayman, 696 A.2d at 1127.
                                             10
