                    United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
             ___________

             No. 02-2330
             No. 02-2489
             ___________

SFH, Inc.,
                                       *
      Plaintiff - Appellant/           *
      Cross-Appellee,                  *
                                       *
      v.                               *
                                       *
Millard Refrigerated Services, Inc.,   *
                                       *
      Defendant - Appellee,            *
                                       *
Larsen Realty Company,                 *
                                       *   Appeals from the United States
      Defendant - Appellee/            *   District Court for the
      Cross-Appellant.                 *   District of Nebraska.
            ___________

             No. 02-3442
             ___________

The Travelers Indemnity Company        *
of Illinois,                           *
                                       *
      Plaintiff - Appellant,           *
                                       *
      v.                               *
                                       *
Millard Refrigerated Services, Inc.,   *
                                       *
      Defendant - Appellee.            *
                                    ___________

                              Submitted: March 10, 2003

                                   Filed: August 12, 2003
                                    ___________

Before McMILLIAN, FAGG, and LOKEN,* Circuit Judges.
                           ___________

LOKEN, Chief Judge.

       We have consolidated these appeals in two diversity actions brought to
establish the parties’ respective liabilities for a January 1998 fire that destroyed the
Signature Foods processing business of SFH, Inc. (“Signature”). The fire started in
the portion of an Omaha warehouse that Signature leased from Millard Refrigerated
Services, Inc. (“Millard”). Millard managed the warehouse under an agreement with
the building’s owner, Larsen Realty Co. (“Larsen”).

       The lease required Signature to maintain not less than $1,000,000 of
comprehensive general liability (CGL) insurance and to include Millard as an
additional insured. Signature purchased a $1,000,000 CGL policy from The
Travelers Indemnity Co. (“Travelers”). The policy included an additional insured
endorsement for “Managers or Lessors of Premises.” Signature also purchased a
$25,000,000 excess liability policy from Travelers. After the fire, Travelers
indemnified Signature under both policies for $9,861,143 of Signature’s losses. The
amount of loss covered by the Travelers policies is not in dispute.

      Signature filed the first suit in Nebraska state court to recover damages for
Millard’s alleged gross negligence in failing to properly maintain the warehouse

      *
       The Honorable James B. Loken became Chief Judge of the United States
Court of Appeals for the Eighth Circuit on April 1, 2003.

                                          -2-
sprinkler system.1 Millard removed the case to federal court. Signature filed an
amended complaint adding Larsen and a third defendant who later settled by paying
Signature $750,000. Meanwhile, Millard demanded that Travelers defend Millard as
an additional insured under the Travelers policies. Travelers refused and filed the
second action for a declaratory judgment that it need not defend or indemnify Millard.
The two actions proceeded separately before different district judges.

       In the first action, after a trial of Signature’s claims, the jury found that the fire
was caused by Millard’s gross negligence and by Larsen’s negligence. The jury
awarded Signature damages of $11,962,753, assigning seventy percent of the fault to
Millard and thirty percent to Larsen. The district court2 reduced the award by the
$750,000 Signature received in the settlement and entered judgment against Millard
and Larsen in the amount of $11,212,573. Following this ruling, the district court in
the declaratory judgment action3 granted summary judgment to Millard, concluding
that Travelers had a duty to defend and indemnify Millard against Signature’s
lawsuit. The district court in the first action then reduced the judgment in favor of
Signature by (1) the $9,861,143 Signature received from Travelers for the insured
losses, and (2) the $200,000 Signature received from a post-fire salvage sale. The
court denied Signature’s motion for prejudgment interest and entered an Amended
Judgment of $1,151,430, the amount of Signature’s uninsured losses.




       1
       A few days before the fire, a Millard employee turned off the water to the
sprinkler system, so the sprinklers in Signature’s portion of the premises did not
activate when the fire began.
       2
       The HONORABLE LYLE E. STROM, United States District Judge for the
District of Nebraska.
       3
        The HONORABLE JOSEPH F. BATAILLON, United States District Judge
for the District of Nebraska.

                                            -3-
       In the first action, Signature appeals the district court’s decision to reduce the
judgment by the $9,861,143 paid by Travelers, raising distinct issues as to Millard
and Larsen. Signature also appeals the reduction for the amount recovered in the
post-fire sale and the denial of prejudgment interest. Larsen cross-appeals the
judgment that it was negligent. In the declaratory judgment action, Travelers appeals
the district court’s conclusion that Travelers must defend and indemnify Millard as
an additional insured under the liability policies. We will first discuss the appeal by
Travelers because our decision that Millard has coverage as an additional insured
makes it unnecessary to address a number of issues raised by the cross-appeals in the
Signature case. In the end, we affirm both district courts in all respects.

                              I. The Travelers Appeal.

       A. The Duty To Indemnify. On appeal, Travelers first argues the district
court erred in concluding that Travelers must indemnify Millard under both the CGL
and excess policies for Signature’s insured losses. This contention requires a
somewhat different analysis for each policy. The law of Nebraska controls our
analysis and requires that we construe the policies as contracts, giving effect to the
parties’ intentions at the time the contract was made. Home Ins. Co. v. Aetna Ins.
Co., 236 F.3d 927, 929 (8th Cir. 2001).

       1. The CGL Policy. The lease agreement between Millard and Signature
required Signature to obtain CGL insurance protecting both Signature and Millard “as
their interests may appear . . . in an amount not less than One Million Dollars . . . in
a form and issued by a company or companies satisfactory to [Millard].” Consistent
with that obligation, Signature purchased a CGL policy from Travelers that included
an endorsement defining as an Additional Insured “[a]ny manager or lessor of
premises with whom you have agreed in a written contract, executed prior to loss to
name as an additional insured . . . . but only with respect to liability arising out of the
ownership, maintenance or use of that part of the premises leased to you.” Millard

                                           -4-
was a “manager or lessor of premises” that Signature had agreed “to name as an
additional insured.” If the CGL policy therefore covered Millard’s liability for this
loss, as the district court concluded, the result seems at first blush anomalous --
Travelers must indemnify Millard, an additional insured, for loss its negligence
caused Signature, the named insured. But the result is not anomalous when
considered in light of paragraph 14 of the lease, which provided in relevant part:

             WAIVER OF RIGHTS IN INSURED LOSSES.        [Millard] and [Signature]
      agree that neither shall be liable to the other for damages to the premises
      or to any of the contents of the premises . . . by perils insured against by
      the party owning such damaged property . . . . Each party hereto shall
      provide the other party with documentary evidence of the concurrence
      of their respective insurance carriers with the provisions of this clause.

In other words, Millard and Signature as landlord and tenant agreed that, in the event
of property damage, each would look to its own insurance rather than to the other
party to the lease, and Signature agreed to obtain Travelers’s concurrence in that
contractual arrangement.4

       Though conceding Millard as lessor was an additional insured, Travelers
argues that the loss was not covered because Millard’s liability did not arise out of
ownership, maintenance, or use of the leased premises. Like the district court, we
disagree. The Nebraska courts have not interpreted this phrase in a CGL policy. But
the Nebraska Supreme Court has broadly construed “arising out of” language in an
automobile liability policy to require only “some causal relationship between the
injury and the use of the vehicle.” Farmers Union Coop. Ins. Co. v. Allied Prop. &
Cas. Ins. Co., 569 N.W.2d 436, 439 (Neb. 1997). Similarly, courts in other


      4
       An additional insured’s own negligence is covered under this type of
additional insured endorsement. See Marathon Ashland Pipe Line LLC v. Md. Cas.
Co., 243 F.3d 1232, 1240 (10th Cir. 2001), and cases cited.

                                          -5-
jurisdictions have broadly construed “arising out of” language in commercial liability
policies. See Colony Ins. Co. v. Pinewoods Enters., Inc., 29 F. Supp. 2d 1079, 1083
(E.D. Mo. 1998) (“[A] simple causal relationship must exist between the accident or
injury and the activity of the insured.”); Hormel Foods Corp. v. Northbrook Prop. &
Cas. Ins. Co., 938 F. Supp. 555, 557 (D. Minn. 1996) (“‘[B]ut for’ causation satisfies
the requirements of an insurance policy which specifies that only liabilities ‘arising
out of the use’ are covered.”); Maryland Cas. Co. v. Chicago & N. W. Transp. Co.,
466 N.E.2d 1091, 1094 (Ill. App. 1984). In construing an insurance policy, the
Supreme Court of Nebraska is guided “by judicial opinions rendered by other courts
which have considered the meaning of these terms.” Katskee v. Blue Cross/Blue
Shield, 515 N.W.2d 645, 649-50 (Neb. 1994).

        Construing the “arising out of” language broadly, we conclude that Millard’s
liability arose out of its maintenance of the leased premises. The fire started within
the portion of the warehouse leased by Signature and injured Signature’s property
located in the leased premises. Signature’s loss was caused, or significantly
increased, by the conduct of the Millard employee who shut off the water to the
building’s sprinkler system. As the district court stated, “the deactivation of the
sprinkler system is related to and causally connected to [Millard’s] maintenance of
the sprinkler system located within the confines of the premises leased to Signature.”
Thus, although the shut-off valve was located in another part of the warehouse, this
case is distinguishable from those on which Travelers relies, where the landlord was
denied additional insured coverage for liability arising from incidents that occurred
entirely outside the leased premises, such as U.S. Fid. & Guar. v. Drazic, 877 S.W.2d
140, 143 (Mo. App. 1994). There was coverage under the Travelers CGL policy.

      2. The Excess Policy. The excess policy did not contain an additional insured
endorsement. Rather, it defined the insured to include “[a]ny other person or
organization insured under any policy of the ‘underlying insurance.’” The Travelers
CGL policy was “underlying insurance.” See Maryland Cas., 466 N.E.2d at 1095.

                                         -6-
Accordingly, Millard was an additional insured under the excess policy. However,
an endorsement to the excess policy stated that its coverage did not apply to “property
you own, rent or occupy [or] property in your care, custody or control.” Travelers
argues that this endorsement excludes Millard’s coverage claim because the policy
expressly defines the word “you” as the named insured, Signature, and Millard seeks
coverage for damage to property owned and controlled by Signature.5

       The most relevant case the parties have brought to our attention supports the
district court’s decision. In Wyner v. North American Specialty Insurance Co., 78
F.3d 752, 756 (1st Cir. 1996), the landlord as an additional insured sought coverage
under the tenant’s CGL policy for damage to the landlord’s property. The First
Circuit affirmed the denial of coverage, construing the word “you” in the exclusion
for property “you own, rent or occupy” to mean the property of the party seeking
coverage, whether that party was a named insured or an additional insured. This
construction was necessary, concluded the court, because the purpose of an additional
insured provision is to extend the policy coverage to others, “not to change the nature
of the coverage nor to change declarations nor to remove exclusions.” 78 F.3d at 756
(quotation omitted). This reasoning was adopted by the court in Marathon Ashland
Pipe Line LLC v. Maryland Casualty Co., 243 F.3d 1232, 1241 (10th Cir. 2001).

       On appeal, Travelers seeks to turn this principle to its advantage, arguing the
district court “extended the policy coverage” by granting Millard as additional
insured coverage for damage to the named insured’s property. We disagree. The
purpose of the exclusion is to deny coverage under a liability policy for damage to the
insured’s own property. Millard has coverage as an additional insured. The issue is
whether the exclusion bars coverage for damage to its property or to Signature’s


      5
      In its reply brief, Travelers argued for the first time that coverage was
excluded because Millard controlled the property of its tenant, Signature. The
argument strikes us as factually unsound. In any event, it was not timely raised.

                                         -7-
property. Granting coverage for damage to the additional insured’s own property
would turn the liability policy into a form of first-party insurance. That would truly
be a change or extension in the policy’s coverage. On the other hand, construing the
exclusion so that the additional insured’s coverage is limited to damage caused to
another person’s property, including the named insured’s property, is consistent with
the purpose of the exclusion. Thus, we agree with the district court that Millard’s
liability to Signature is covered by the excess policy as well.6

      B. The Duty to Defend. Travelers also appealed the district court’s decision
to award damages for Travelers’s refusal to defend Millard against Signature’s
damage claims in the underlying action. However, Travelers concedes that “the
question whether Travelers had a duty to defend Millard against Signature Foods’
lawsuit hinges on whether Millard is entitled to indemnification under Signature
Foods’ CGL and excess policies.” Thus, our conclusion that Travelers must
indemnify Millard under both the CGL and excess policies means that the award of
damages for breach of the duty to defend must also be affirmed.

                              II. Signature’s Appeal.

      A. The Claim Against Millard for Insured Losses. Signature concedes that
it may not recover its $9,861,143 of insured losses from Millard if Travelers’s CGL

      6
       At a minimum, we conclude that the meaning of the term “you” in this
exclusion is ambiguous. Under Nebraska law, a contract is ambiguous “when a word,
phrase, or provision in the contract has, or is susceptible of, at least two reasonable
but conflicting interpretations or meanings.” Volquardson v. Hartford Ins. Co., 647
N.W.2d 599, 604 (Neb. 2002). If the policy is not ambiguous, the court accords its
terms “their plain and ordinary meaning as the ordinary or reasonable person would
understand them.” If the policy is ambiguous, “then the court may employ rules of
construction and look beyond the language of the policy to ascertain the intention of
the parties,” and may use the general principle of construction “that an ambiguous
policy will be construed in favor of the insured.” Katskee, 515 N.W.2d at 649.

                                         -8-
and excess policies provided coverage for those losses to Millard as an additional
insured. The concession is proper. When Travelers paid Signature’s insured losses,
it became subrogated to this portion of Signature’s claims. “Although an insurance
company has the right to recover against a wrongdoer whose negligence has subjected
the insurance company to liability, no right of subrogation can arise in favor of an
insurer against its own insured.” Jindra v. Clayton, 529 N.W.2d 523, 526 (Neb.
1995). Thus, we need not consider whether the district court in the first action acted
contrary to Nebraska public policy in ruling that paragraph 14 of the lease
contractually limited Millard’s liability to Signature for Millard’s gross negligence.

        B. The Claim Against Larsen for Insured Losses. The district court found,
and the parties agree, that Larsen was Millard’s undisclosed principal on the lease
with Signature. Therefore, Signature argues, Larsen is liable for Signature’s insured
losses, even if Millard as Travelers’s additional insured is not, because (1) Larsen was
not an additional insured so it may be liable in Travelers’s subrogation action; and (2)
Larsen is limited to Millard’s contractual defenses so, as a matter of Nebraska public
policy, Millard’s gross negligence precludes Larsen from relying on paragraph 14 of
the lease as a contractual defense to liability. Like Millard, Larson contests
Signature’s interpretation of Nebraska public policy. In addition, Larsen argues that,
as Millard’s undisclosed principal, it is entitled to the same defenses contained in the
lease as Millard. See Lenart v. Ragsdale, 385 N.W.2d 282, 284 (Mich. App. 1986);
RESTATEMENT (SECOND) OF AGENCY §§ 186, 203 (1958). Therefore, as Larsen’s
liability is based upon ordinary negligence, not gross negligence, Signature’s claim
for insured losses is barred by paragraph 14 of the lease. See Bedrosky v. Hiner, 430
N.W.2d 535, 540-41 (Neb. 1988) (holding a lease provision exempting a lessor from
liability for ordinary negligence was not contrary to public policy).7


      7
       Larsen further argues that Signature may not recover even its uninsured fire
loss because Signature in paragraph 14 waived “any and all right of recovery from
Lessor for loss caused by the perils of fire.” Larsen first raised this issue in its post-

                                           -9-
       The public policy issue, and the issue whether Larsen’s defense under
paragraph 14 is limited by Millard’s gross negligence, are novel and interesting, but
we need not address them. Signature concedes that Larsen as owner of the warehouse
was the undisclosed principal of Millard. Therefore, in the words of the district court,
Larsen “is bound by the terms of the lease and can assert any defenses or immunities
that arise out of the lease.” The additional insured endorsement in the Travelers CGL
policy applies to “[a]ny manager or lessor with whom [Signature] agreed . . . to name
as an additional insured.” Thus, Larsen as well as Millard was an additional insured
under the CGL policy. As we have explained, that made Larsen an additional insured
under the excess policy as well, so Signature is barred from asserting a subrogation
claim for its insured losses against both Larsen and Millard.8

       C. The Claim for Salvage Sale Proceeds. The district court instructed the
jury, without objection, that the proper measure of Signature’s damages “is the market
value of the business before the fire . . . less any sums plaintiff has received for the
sale of its tangible or intangible assets following the fire and plus any mitigation
expenses.” When the jury returned its verdict, the court asked the foreman whether
the damage award included a deduction for the $200,000 post-fire salvage sale
proceeds. The foreman responded, “We believed that to be in the calculation.” The
award of $11,962,573 was precisely the market value of Signature’s business as
estimated by Signature’s expert. Accordingly, when defendants satisfied the court
that the expert’s valuation did not include the salvage sale proceeds, the court reduced
the judgment by the amount of those proceeds.

verdict motion for judgment as a matter of law. Accordingly, it was not properly
preserved for appeal. See Peters v. Gen. Serv. Bureau, Inc., 277 F.3d 1051, 1057 (8th
Cir. 2002).
      8
       Larsen cross-appealed the district court’s instructions and the sufficiency of
the evidence supporting the jury’s finding that it was negligent. At oral argument,
Larsen conceded the cross-appeal is moot because Millard has paid the full amount
of damages awarded for Signature’s uninsured loss.

                                         -10-
       On appeal, Signature argues the district court erred because the jury verdict did
not reflect a manifest error of fact or law and therefore relief was not warranted under
Rule 59(e) of the Federal Rules of Civil Procedure. However, a district court has
broad discretion to alter or amend a judgment under Rule 59(e), and we will reverse
only for a clear abuse of discretion. See Innovative Home Health Care, Inc. v. P.T.-
O.T. Assocs., 141 F.3d 1284, 1286 (8th Cir. 1998). Here, the court heard the
evidence and concluded Signature failed to establish that its expert accounted for the
salvage sale proceeds. Thus, the court’s decision to amend the judgment was not a
clear abuse of discretion. See Howells Elevator, Inc. v. Stanco Farm Supply Co., 455
N.W.2d 777, 782 (Neb. 1990) (holding that a plaintiff must offer sufficient evidence
of the property’s market value before and after an accident).

       D. Prejudgment Interest. Signature appeals the district court’s denial of
prejudgment interest but admits it is entitled to prejudgment interest only if we
reinstate the insured portion of the jury’s award of damages. Once again, the
concession is appropriate. Signature’s claim for the uninsured portion of its loss was
contested and unliquidated. See 45 Neb. Rev. Stat. § 45-103.02; Lincoln Benefit Life
Co. v. Edwards, 243 F.3d 457, 462 (8th Cir. 2001) (per curiam). Signature may not
recover prejudgment interest on this unliquidated claim because its initial settlement
offer was $7.9 million, well in excess of the damages awarded. See 45 Neb. Rev.
Stat. § 45-103.02(1).

      For the foregoing reasons, the judgments of the district courts are affirmed.

      A true copy.

             Attest:

                CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.



                                         -11-
