                 NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                            File Name: 05a0588n.06
                              Filed: July 12, 2005

                                             Case No. 03-1998

                             UNITED STATES COURT OF APPEALS
                                  FOR THE SIXTH CIRCUIT

 CONTINENTAL CASUALTY COMPANY,                               )
                                                             )
           Plaintiff-Appellant,                              )
                                                             )        ON APPEAL FROM THE
                  v.                                         )        UNITED STATES DISTRICT
                                                             )        COURT FOR THE EASTERN
 THE MAY DEPARTMENT STORES                                   )        DISTRICT OF MICHIGAN
 COMPANY, d/b/a LORD & TAYLOR, MAY                           )
 FINLEY, CARLA SULLIVAN-FINLEY,                              )
 FEDERAL INSURANCE COMPANY,                                  )
                                                             )
           Defendants-Appellees,                             )
                                                             )
 FAIRLANE TOWN CENTER,                                       )
 GALLAGHER PIPINO, INCORPORATED,                             )
                                                             )
           Third Party-Defendants.                           )
                                                             )
 _______________________________________

BEFORE: MARTIN and BATCHELDER, Circuit Judges; JORDAN,* District Judge.

       ALICE M. BATCHELDER, Circuit Judge.                                Continental Casualty Company

(“Continental”) appeals the district court’s order declaring that Continental’s premises liability

policy issued to The May Department Stores Company d/b/a Lord & Taylor (“Lord & Taylor”)

provided coverage for an alleged wrongful death that occurred in the parking lot outside of Lord &

Taylor’s store in the Fairlane Town Center (“Fairlane”), as a result of actions by Lord & Taylor’s

security guards. The district court found, after considering extrinsic evidence, that Continental was


       *
        The Honorable R. Leon Jordan, District Judge for the Eastern District of Tennessee, sitting by designation.
obligated under its policy to defend and indemnify Lord & Taylor in the wrongful death litigation.

Because the Continental policy at issue is not ambiguous, and because there was no mutual mistake

regarding the terms of the Policy, we find that the district court erred in admitting extrinsic evidence.

Further, because the unambiguous terms of the Policy provide coverage only for areas owned by

Lord & Taylor, and Lord & Taylor did not own the parking lot where the allegedly wrongful death

occurred, the district court erred in holding that Continental was obligated under the Policy to defend

and indemnify Lord & Taylor in that litigation. We therefore reverse the judgment of the district

court.

                                                   I.

         On June 22, 2000, Frederick Finley and several of his friends and relatives went to the Lord

& Taylor department store in the Fairlane Town Center in Dearborn, Michigan. Lord & Taylor’s

security guards saw two members of the group shoplift items from the store. The security guards

followed Finley and his group from the store into the parking lot, which is owned by the mall

developer, Fairlane. A confrontation ensued in the parking lot, which resulted in Finley’s death.

         Finley’s estate brought a wrongful death action against Lord & Taylor and Fairlane in the

Circuit Court for the County of Wayne, Michigan. Continental filed a complaint for declaratory

judgment in the Circuit Court seeking a declaration that the premises liability insurance policy it had

issued to Lord & Taylor did not provide coverage for the allegedly wrongful death of Finley or

require Continental to defend the action against Lord & Taylor. Continental’s case was removed

to the United States District Court, Eastern District of Michigan, on the basis of diversity

jurisdiction. Continental then amended its complaint to name Finley’s representatives and Federal

Insurance Company (Lord & Taylor’s excess carrier at the time of the Finley incident), and to name


                                                   2
The May Department Stores and Lord & Taylor correctly as defendants. Lord & Taylor filed a

counterclaim seeking a declaration that the Continental policy did provide for defense and indemnity

for the Finley complaint. Lord & Taylor also filed a third-party Complaint, asserting that if the

Continental policy did not provide coverage for the Finley wrongful death action, the shopping

mall’s developer, Fairlane, and/or Gallagher Pipino Insurance Agency (“Gallagher Agency”), the

company Fairlane had hired to negotiate the insurance contract with Continental, were responsible

for the lack of coverage.

       The parties agreed to a bench trial of Continental’s Complaint and Lord & Taylor’s

Counterclaim for declaratory judgment. The district court entered “Findings of Fact, Conclusions

of Law, and Application of Facts to Law” concluding, in pertinent part, that extrinsic evidence

demonstrated that the Policy’s Common Area Endorsement (“premises provision”) was ambiguous.

Consequently, the court construed that provision against Continental, and entered a judgment finding

that the Continental policy provided coverage for the claims asserted in the wrongful death

complaint. The parties then stipulated to a dismissal of all remaining claims without prejudice,

making the district court’s order final and appealable. Continental timely appealed the district

court’s judgment.

                                                II.

       The Continental insurance contract at issue here provided coverage for:

               “bodily injury”, “property damage”, “personal and advertising
               injury” and medical expenses arising out of:
               1.      The ownership, maintenance or use of the premises shown in
                       the Schedule and operations necessary or incidental to those
                       premises; or
               2.      The project shown in the Schedule.




                                                 3
The parties agree that those premises were specified as “General liability coverage for liability

arising out of the exterior common area owned by the named insured, in compliance with the Joint

Operating Agreement and/or reciprocal easement agreement in effect,” and that Lord & Taylor was

the named insured.

         The parties also agree that Michigan law governs this dispute. Under Michigan law, the

question of whether contractual terms are ambiguous is a question of law. Port Huron Educ. Assn.,

MEA/NEA v. Port Huron Area Sch. Dist., 550 N.W.2d 228, 237 (Mich. 1996). If contract language

is clear and unambiguous, the meaning of that language is also a question of law; the meaning of

ambiguous language, however, is a question of fact. Id. Although this court has held that Michigan

law allows a court to consider extrinsic evidence on the threshold question of whether a written

agreement is ambiguous, American Anodco, Inc. v. Reynolds Metals Co., 743 F.2d 417, 422 (6th Cir.

1984), that holding was premised on our noting that “Michigan does not apply the parol evidence

rule to written documents which do not integrate the agreement of the parties or which only partially

integrate the agreement.” Id. In construing insurance contracts, the Michigan courts consistently

hold that an insurance contract is ambiguous when “its words may reasonably be understood in

different ways.” Farm Bureau Mut. Ins. Co. of Michigan v. Nikkel, 596 N.W.2d 915, 919 (Mich.

1999).

         The Continental policy designates “the exterior common area owned by the named insured”

as covered premises (emphasis added). Lord & Taylor is the “named insured.” It is undisputed that

Fairlane owns the parking lot where the security guards assaulted Finley, and that Lord & Taylor

does not own that parking lot. Significantly, the Policy contains an integration provision stating that

the Continental policy “contains all the agreements” between the insured and Continental and can


                                                  4
be amended only by an endorsement issued by Continental. The explicit and unambiguous language

of this Policy does not provide coverage for anything occurring in the parking lot.

       The defendants reply, however, that the phrase containing the word “owned” is ambiguous

when looked at as a whole. The full phrase reads, “Premises: General liability coverage arising out

of the exterior common area owned by the named insured, in compliance with the Joint Operating

Agreement and/or reciprocal easement agreement in effect.” The Joint Operating Agreement, which

establishes rights between Fairlane and owners of the anchor retail stores in Fairlane’s Dearborn,

Michigan, shopping center, including Lord & Taylor, requires Lord & Taylor, jointly with the other

retailers, to “maintain general public liability insurance against claims on account of bodily injury

or death and property damage occurring upon, in, on or about the Common Areas.” Pointing to

Klapp v. United Ins. Group Agency, Inc., 663 N.W.2d 447, 453 (Mich. 2003), which holds that “if

two provisions of the same contract irreconcilably conflict with each other, the language of the

contract is ambiguous,” the defendants claim that the contract is ambiguous. They argue that the

ownership requirement in the Policy’s definition of covered premises “irreconcilably conflict[s]

with” the Policy’s requirement that the definition of premises be “in compliance” with the Joint

Operating Agreement, which in turn demands that all common areas be covered. Therefore, the

defendants argue, the district court correctly held that the Policy provision is ambiguous and the

court could properly consider extrinsic evidence.

       We are not persuaded by the defendants’ argument. The Policy’s reference to the Joint

Operating Agreement alone does not make the Policy ambiguous, even if that reference indicates

that Lord & Taylor intended the Continental policy to fulfill its requirements for obtaining joint

insurance covering the common areas. The Michigan case defendants rely on holds that “if two


                                                 5
provisions of the same contract irreconcilably conflict with each other, the language of the contract

is ambiguous.” Id. (emphasis added). The terms of the Joint Operating Agreement are not provisions

of the Continental policy.

       Nor are the terms of the Joint Operating Agreement incorporated into the Continental policy.

Under Michigan law, “[a]lthough neither physical attachment nor specific language is necessary to

incorporate a document by reference, the incorporating instrument must clearly evidence an intent

that the writing be made part of the contract.” Forge v. Smith, 580 N.W.2d 876, 881 n.21 (Mich.

1998). The words “in compliance with the Joint Operating Agreement” do not clearly evidence that

Continental and Lord & Taylor intended that the Joint Operating Agreement be made part of the

Continental policy. The Policy does not reference any particular section of the Joint Operating

Agreement, and it would not make sense to presume that all of the terms of the Joint Operating

Agreement—a contract between a mall developer and the retailers in that mall governing all aspects

of their relationship—are incorporated in the insurance Policy—a contract between a single retailer

and an insurance company establishing premises liability coverage for that retailer. Because the

Policy contains an integration provision; because there are no obvious terms missing from the

Continental policy that would suggest, despite the integration provision, that the parties did not

intend the Policy to be an integrated agreement; and because the terms of the Joint Operating

Agreement are not part of the Policy, we hold that the language of the Joint Operating Agreement

cannot render provisions of the Continental policy ambiguous.

       Even if the Joint Operating Agreement were relevant in determining whether the Continental

policy is ambiguous, the terms of the Policy and the Joint Operating Agreement do not

“irreconcilably conflict with each other.” In fact, they are compatible. The Joint Operating


                                                 6
Agreement requires Lord & Taylor to obtain joint insurance over common areas. The Joint

Operating Agreement does not, however, limit that obligation to those common areas owned by the

developer, as opposed to common areas owned by the individual stores. The Joint Operating

Agreement’s requirement that retailers obtain joint insurance covering common areas may,

therefore, encompass common areas actually owned by Lord & Taylor, such as the sidewalk outside

the store. Additionally, there is no provision in the Joint Operating Agreement that a store must

obtain a single insurance policy to cover of all the common areas. Consequently, the Continental

policy’s provision of coverage only for common areas owned by Lord & Taylor does not conflict

with the Joint Operating Agreement’s requirement that Lord & Taylor obtain insurance coverage

for all common areas.

       Even if Lord & Taylor believed the Continental policy covered the mall parking lots, that

belief does not negate the clear and unambiguous language of the Policy. In Michigan a person who

signs a contract cannot later argue that he did not read it or that he believed it was different in its

terms. Farm Bureau, 596 N.W.2d at 920. Although the drafter of the Continental policy testified

that he wrote the premises section of the Continental policy under the mistaken belief that Lord &

Taylor owned the parking lot assigned to its store, Lord & Taylor is the signatory to the contract,

not the drafter. There is no evidence that Lord & Taylor was under the mistaken belief that it owned

the parking lot. Even if Lord & Taylor believed the Continental policy fully satisfied its obligation

under the Joint Operating Agreement to obtain insurance covering all common areas and not just

those it actually owned, that mistake would be one of law, rather than one of fact. In other words,

that mistake would have arisen from Lord & Taylor’s failing to read the contract carefully, inasmuch




                                                  7
as the words “owned by the named insured” are clear. Consequently, the mistake doctrine does not

justify the district court’s consideration of extrinsic evidence.

       We therefore conclude that the unambiguous language of the Continental policy provides

coverage only for common areas actually owned by Lord & Taylor, and that the district court erred

in considering extrinsic evidence to determine that the insurance contract was ambiguous and to

interpret that contract to provide coverage beyond those areas. Because the actions resulting in

Finley’s death did not occur on property actually owned by Lord & Taylor, the Continental policy

did not provide coverage and Continental has no duty to defend the wrongful death action. We

decline to reach Continental’s alternative ground for appeal, namely, that premises liability coverage

for bodily injury arising out of the “ownership, maintenance or use of the premises” does not extend

to this wrongful death, which cannot be shown to be causally related to the ownership, maintenance

or use of the parking lot where the death occurred.

                                                 IV.

       Accordingly, we REVERSE the district court’s judgment in favor of the defendants.




                                                  8
       BOYCE F. MARTIN, JR., Circuit Judge, dissenting. The majority concludes that the

Continental Casualty insurance policy at issue in this case is unambiguous and that the policy does

not cover the costs of settling the Finley suit. Because this holding contradicts principles of contract

law that are well-established in Michigan jurisprudence, I dissent from the majority’s reversal of the

district court’s well-reasoned opinion.

                                                   I.

        On June 22, 2000, Frederick Finley, his girlfriend, her daughter, and a friend with two

minor sons visited the Lord & Taylor department store in the Fairlane Town Center in Dearborn,

Michigan. While they were in the store, Lord & Taylor’s security personnel allegedly saw at least

one of the minors shoplift items. As the group left the building and approached their parked car

in the Fairlane parking lot, Lord & Taylor’s security agents confronted them, allegedly accosting

an accused minor. Finley, who was ahead of the group, rushed back to come to the minor’s aid and

allegedly assaulted the security officials. When he did, the security officials apparently knocked

him to the ground and choked him with a gold chain Finley wore around his neck. As a result of

the altercation, Finley died. Finley’s estate filed a wrongful-death suit against Lord & Taylor, the

insured, and Fairlane, which settled for more than $3 million. Continental Casualty, the insurer,

now denies that it owes coverage, thus making a brief history of the insurance policy and its terms

of coverage necessary.

        Lord & Taylor, an operating division of May Department Stores, first became a party to the

Fairlane Town Center’s Operating Agreement on November 9, 1978. Paragraph 12(C) of the

Operating Agreement describes the insurance that is to be secured by the parties jointly. Paragraph

12(C) states in relevant part:


                                                   9
       The parties hereto each agree that they will, jointly, commencing with the
       completion of the Common Areas on their respective Sites and at all times and
       continuously thereafter maintain general public liability insurance against claims
       on account of bodily injury or death and property damage occurring upon, in, on,
       or about the Common Areas (excluding Developer’s buildings, including the Mall,
       and each of the other parties’ buildings) on the Total Property . . . .

(emphasis added). The district court found that “Common Areas” includes, among other areas, the

parking lots outside the stores of the Town Center, including the parking lot where Finley’s death

occurred.

       Pursuant to the Joint Operating Agreement, Fairlane, the developer, through the Gallagher

Pipino Agency, obtained an insurance policy from Continental. When drafting the Continental

policy, the Gallagher Pipino Agency assumed that the stores of the mall owned the parking lots

allocated to the stores, while, in actuality, Fairlane owned the lots. Consequently, the Continental

policy contains a “Common Areas” endorsement that reads:

       LIMITATION OF COVERAGE TO DESIGNATED PREMISES OR PROJECT,
       CG 2144, IS HEREBY AMENDED FOR LIABILITY ARISING OUT OF THE
       EXTERIOR COMMON AREA OWNED BY THE NAMED INSURED [Lord &
       Taylor], IN COMPLIANCE WITH THE JOINT OPERATING AGREEMENT
       AND/OR RECIPROCAL EASEMENT AGREEMENT IN EFFECT.

(emphasis added). Another endorsement (“Ownership Endorsement”) to the policy reads:

       This insurance applies only to “bodily injury”, “property damage”, “personal and
       advertising injury” and medical expenses arising out of:
               1. The ownership, maintenance or use of the premises shown in the
               Schedule and operations necessary or incidental to those premises; or
               2. The project shown in the Schedule.

(emphasis added).

       Thus, the central issue in this case is whether the Continental policy covers the costs of

settling the Finley dispute. On March 14, 2003, the district court ruled that Continental was

obligated to indemnify Lord & Taylor and its supplemental insurance company Federal

                                                10
$3,461,967.03 for the payments made in settlement of the Finley matter. In reaching its decision,

the court held that the Common Areas Endorsement of the Continental policy was ambiguous

because it suggests conflicting coverage guidelines. While the Common Areas Endorsement states

that policy only covers “liability arising out of the exterior common area owned by” Lord & Taylor,

the very next sentence states that the amended policy is “in compliance with the Joint Operating

Agreement,” which requires the parties to maintain insurance jointly to cover claims of injury

“occurring upon, in, on, or about the Common areas,” including parking lots owned by the

developer Fairlane. Finding that the policy could not do both, the court construed the ambiguity

in favor of the insured and looked to extrinsic evidence in finding that it was the intent of the

parties to include coverage of injuries such as those sustained by Finley. The court also rejected

Continental’s argument that the liability in the Finley matter did not “arise out of” the common

area, noting Michigan courts’ broad interpretation of similar contractual language.

       On appeal, Continental claims that the language of the policy agreement is not ambiguous

and, under the Common Areas Endorsement, covers only the “COMMON AREA OWNED BY

THE NAMED INSURED [Lord & Taylor].” Because the parking lot where Finley died is actually

owned by the developer Fairlane and not Lord & Taylor, Continental argues that it is not

responsible to the insured under the policy. Alternatively, Continental argues that even if the

Common Areas Endorsement does not preclude liability for accidents occurring in the parking lot,

it is not obligated because there is no direct causal connection between the condition of the parking

lot and the injury to Finley, which, it claims, is required under the policy.

                                                 II.




                                                 11
       On appeal from a district court judgment entered following a bench trial, this Court reviews

the lower court’s legal conclusions de novo. Schroyer v. Frankel, 197 F.3d 1170, 1173 (6th Cir.

1999). The district court’s factual findings, however, are reviewed for clear error. Pressman v.

Franklin Nat’l Bank, 384 F.3d 182, 185 (6th Cir. 2004).

       The parties concede that Michigan law applies to the present case. Under Michigan law,

an insurance contract must be enforced according to its terms if those terms are unambiguous.

Henderson v. State Farm Fire & Cas. Co., 596 N.W.2d 190, 193 (Mich. 1999). Although parol

evidence is not admissible to alter an unambiguous contract, it is well-established that parol

evidence is admissible to prove the existence of an ambiguity or the intent of the parties if the

proffered parol evidence is not inconsistent with the written terms. See, e.g., Am. Anodco, Inc. v.

Reynolds Metals Co., 743 F.2d 417, 422 (6th Cir. 1984) (citing Goodwin, Inc. v. Orsen E. Coe

Pontiac, Inc., 220 N.W.2d 664, 671 (Mich. 1974)). While “reviewing courts must interpret the

terms of the contract in accordance with their commonly used meanings,” ambiguous terms of an

insurance policy must be construed in favor of the insured. Henderson, 596 N.W.2d at 194.

                                                A.

       The threshold question therefore is whether the Continental policy is ambiguous. Under

Michigan law, “[a]n insurance contract is ambiguous when its provisions are capable of conflicting

interpretations.” Farm Bureau Mut. Ins. Co. of Mich. v. Nikkel, 596 N.W.2d 915, 919 (Mich.

1999). In my view, the district court was correct to hold that the policy’s language stating its

compliance with the Joint Operating Agreement, coupled with the terms of that Agreement, makes

the policy “capable of conflicting interpretations,” and thus ambiguous, under Michigan law. The

Common Areas Endorsement reads as follows:


                                                12
           LIMITATION OF COVERAGE TO DESIGNATED PREMISES OR PROJECT,
           CG 2144, IS HEREBY AMENDED FOR LIABILITY ARISING OUT OF THE
           EXTERIOR COMMON AREA OWNED BY THE NAMED INSURED [Lord &
           Taylor], IN COMPLIANCE WITH THE JOINT OPERATING AGREEMENT
           AND/OR RECIPROCAL EASEMENT AGREEMENT IN EFFECT.

(emphasis added). There is no doubt that, as the majority suggests, the first part of the Common

Area Endorsement suggests that coverage is limited only for liability “arising out of” the areas

owned by Lord & Taylor. If that were the only clause in the Endorsement, I would likely agree

with the majority that the policy is unambiguous. Importantly, however, the Endorsement goes

further.     In fact, the same sentence goes on to specify that the policy is amended “IN

COMPLIANCE WITH THE JOINT OPERATING AGREEMENT.” Because the Endorsement

expressly claims to be in compliance with the Joint Operating Agreement, Michigan law permits

the consideration of parol evidence, such as the terms of the Joint Operating Agreement in this case,

to determine whether an ambiguity in the policy’s terms exists. See, e.g., Meagher v. Wayne State

Univ., 565 N.W.2d 401, 415 (Mich. Ct. App. 1997) (noting that parol evidence “may be admissible

to prove the existence of an ambiguity and to clarify the meaning of an ambiguous contract”)

(citing Goodwin, 392 N.W.2d at 671).

           In fact, the terms of the Joint Operating Agreement establish that such an ambiguity exists.

Paragraph 12(C) expressly provides that

           [t]he parties hereto each agree that they will, jointly, commencing with the
           completion of the Common Areas on their respective Sites and at all times and
           continuously thereafter maintain general public liability insurance against claims
           on account of bodily injury or death and property damage occurring upon, in, on,
           or about the Common Areas (excluding Developer’s buildings, including the Mall,
           and each of the other parties’ buildings) . . . .

(emphasis added). Thus, the language of the Joint Operating Agreement contradicts the language

provided in the Common Areas Endorsement by requiring insurance to be provided for common

                                                   13
areas owned by the developer Fairlane, including the parking lot where the Finley incident

occurred. Therefore, because the language in the Continental policy is “capable of conflicting

interpretations” as to whether the costs of the Finley settlement are covered, Michigan law requires

a finding that the policy is ambiguous.

       The next task in interpreting the Continental policy is to resolve the ambiguity discussed

above. As this Court has noted, “[a] Court’s primary responsibility in construing a Michigan

contract is to ascertain and enforce the intent of the parties.” Wonderland Shopping Ctr. Venture

Ltd. P’ship v. CDC Mortgage Capital, Inc., 274 F.3d 1085, 1092 (6th Cir. 2004) (citing Rasheed

v. Chrysler Corp., 517 N.W.2d 19, 29 n.28 (Mich. 1994), and Zobczak v. Kotwicki, 79 N.W.2d 471,

475 (Mich. 1956)). I am convinced that the district court was correct to conclude that the

ambiguous insurance policy covers the parking lot where the Finley death occurred. The district

court found that the parties intended the policy to comply with the terms of the Joint Operating

Agreement for several reasons, including the Common Areas Endorsement’s express statement that

it was to comply with the terms of the Joint Operating Agreement. I can find nothing in the record

suggesting that this finding was erroneous. Moreover, this Court is required by Michigan law to

construe any ambiguity in favor the insured, Lord & Taylor. See, e.g., Hellebuyck v. Farm Bureau

Gen. Ins. Co. of Mich., 685 N.W.2d 684, 686 (Mich. Ct. App. 2004). Thus, in my view, the parking

lot where the Finley accident occurred was intended to be covered by the Continental policy.

                                                B.

       The majority’s approach in concluding that the Continental policy is unambiguous is

misguided for several reasons. First, the majority concludes that “[t]he Policy’s reference to the

Joint Operating Agreement alone does not make the Policy ambiguous.” Maj. Op. at 5. If the


                                                14
policy merely referred to the Agreement, as the majority suggests, perhaps I would consider their

interpretation of the policy to be justified. However, the policy does more than just refer to the

Joint Operating Agreement—it expressly provides that the policy is amended “IN COMPLIANCE

WITH THE JOINT OPERATING AGREEMENT.” In light of the terms of the Joint Operating

Agreement, with which the policy is supposed to comply, the district court was correct to conclude

that under Michigan law the policy is ambiguous.

       Second, in holding that the language of the policy is unambiguous, the majority’s

interpretation of the policy essentially “reads out” of the policy the language specifying the policy’s

intended compliance with the Joint Operating Agreement. This approach violates the well-

established rule under Michigan law that “courts must give effect to every word, phrase, and clause

in a contract and avoid an interpretation that would render any part of the contract surplusage or

nugatory.” Klapp v. United Ins. Group Agency, Inc., 663 N.W.2d 447, 468 (Mich. 2003). The

Michigan Supreme Court has stated very clearly that “courts cannot simply ignore portions of a

contract in order to avoid a finding of ambiguity.” Id. at 467. Simply put, the majority’s

interpretation of the policy renders the “IN COMPLIANCE WITH THE JOINT OPERATING

AGREEMENT” language nugatory, thus violating one of the most basic principles of Michigan

contract law.

       Perhaps recognizing this fact to be an unfortunate yet unmentionable consequence of their

interpretation of the policy, the majority does not expressly claim, as Continental does in its brief,

that the Joint Operating Agreement language is “meaningless surplusage.” Continental argues that

the language is “meaningless surplusage” and therefore does not create ambiguity justifying the

district court’s reference outside the four corners of the contract under Michigan law. In support


                                                  15
of this argument, Continental cites Michigan Township Participating Plan v. Pavolich, 591 N.W.2d

325, 331 (Mich. Ct. App. 1999), in which a Michigan Court of Appeals considered a “sloppily and

inartfully drafted” insurance policy that expressly referred to a village as the insured party, but

elsewhere referred to “you or any family member” in defining the insured parties. An employee

of the village claimed that the “you or any family member” language indicated that the policy

insured him as an employee of the village. Id. The court rejected the claim, holding that the “you

or any family member” language was “mere surplusage” and did not create any ambiguity. Id.

       Pavolich, however, is clearly distinguishable from the present case because it involved what

the court considered to be a “standard policy, which was not tailored to the needs of the village.”

Id. The case before this Court, however, presents an entirely different situation. The alleged

“surplusage” in the present case is not “standard” contractual language that was mistakenly left in

the policy. Rather, it is additional language specifically added for this particular client. The fact

that this language is client-specific further underscores the extent of the majority’s error in

disregarding the language specifically stating the policy’s intended compliance with the Joint

Operating Agreement.

       Third, Continental also argues, and the majority appears to agree, see Maj. Op. at 6, that the

district court should not have considered the terms of the Joint Operating Agreement in finding that

the policy was ambiguous because the Continental policy had an integration clause. The

integration clause, contained in the Continental policy, provides: “This policy contains all the

agreements between you and us concerning the insurance afforded.” Continental claims that such

a clause prevents a court from considering extrinsic evidence even where, such as here, such

evidence is offered to show the existence of an ambiguity in the contract.


                                                 16
       The fact that the policy contained an integration clause merely makes the parol evidence

rule applicable in this case. See, e.g., Am. Anodco, Inc., 743 F.2d at 422 (noting that under

Michigan law “before the parol evidence rule may be invoked there must be a finding that the

parties intended the written instrument to be a complete expression of their agreement”). As

established above, Michigan’s parol evidence rule expressly allows the consideration of extrinsic

evidence to prove the existence of an ambiguity or the intent of the parties as long as the proffered

parol evidence is not inconsistent with the written contract terms. See, e.g., Goodwin, Inc., 220

N.W.2d at 671; see also Turner Const. Co. v. Robert Carter Corp., 162 F.3d 1162, 1998 WL

553009, at *6 (6th Cir. Aug. 17, 1998) (unpublished table opinion) (noting that even though the

contract at issue contained an integration clause, the parol evidence rule in Michigan “nonetheless

permit[ed] extrinsic evidence to demonstrate the existence of an ambiguity”). Neither Continental

nor the majority cites any authority establishing that extrinsic evidence, such as the terms of the

Joint Operating Agreement, is somehow inadmissible in this case merely because the policy

contained an integration clause.

       Finally, in support of its conclusion that the policy language is not rendered ambiguous by

the terms of the Joint Operating Agreement, the majority concludes that “Continental policy’s

provision of coverage only for common areas owned by Lord & Taylor does not conflict with the

Joint Operating Agreement’s requirement that Lord & Taylor obtain insurance coverage for all

common areas.” That the policy and the Joint Operating Agreement can, in the majority’s view,

somehow be harmonized as “compatible,” Maj. Op. at 6, does not answer the question before us.

The issue here is whether the policy is “capable of conflicting interpretations,” or “may reasonably

be understood in different ways,” Nikkel, 596 N.W.2d at 919 (emphasis added), and thus


                                                 17
ambiguous, not whether the policy can be purportedly reconciled with the terms of the Joint

Operating Agreement. See id.; accord Klapp, 663 N.W.2d at 453. For the aforementioned reasons,

I would conclude that under Michigan law the insurance policy here “is reasonably susceptible to

more than one meaning.” Raska v. Farm Bureau Mutual Ins. Co. of Mich., 314 N.W.2d 440, 441

(Mich. 1982). Michigan courts have “no patience with attempts by a paid insurer to escape liability

by taking advantage of an ambiguity, a hidden meaning, or a forced construction of the language

in a policy, when all question might have been avoided by a more generous or plainer use of

words.”    Hooper v. State Mut. Life Assurance Co., 28 N.W.2d 331, 334 (Mich. 1947).

Unfortunately, this is precisely what the majority allows the insurer to do in this case. Therefore,

in my view, the district court was correct to find that the contract is ambiguous and, for the reasons

stated above, to construe the ambiguity in favor of Lord & Taylor.

                                                  III.

        Continental also argues on appeal that the policy only provides for indemnity for liabilities

causally connected to the condition, ownership, maintenance, or use of the parking lot and therefore

the district court erred in holding it liable in the Finley settlement. The Ownership Endorsement

provides: “This insurance applies only to ‘bodily injury’ . . . arising out of . . . [t]he ownership,

maintenance or use of the premises shown . . . .” Because the insured property was the “mere situs”

of the injury, and did not cause the injury, Continental claims that it is not liable.

        In light of the breadth of the language included in the Continental policy, I would conclude

that the district court was correct to find that the liability in this case falls within the coverage of

the Continental policy. As this Court has pointed out before in interpreting Michigan insurance

law, “the term ‘arising out of’ is ‘ordinarily understood to mean ‘originating from[,]’ ‘having its


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origin in,’ ‘growing out of’ or flowing from’ or in short, ‘incident to or having a connection with.’”

Assurance Co. of Am. v. J.P. Structures, Inc., 132 F.3d 32, 1997 WL 764498, at *5 (6th Cir. Dec.

3, 1997) (unpublished table opinion) (quoting Red Ball Motor Freight, Inc. v. Employers Mut. Liab.

Ins. Co. of Wis., 189 F.2d 374, 378 (5th Cir. 1951)); accord Kmart Corp. v. Fireman’s Fund Ins.

Co., 88 F. Supp. 2d 767, 773 (E.D. Mich. 2000) (citing Assurance Co. and noting broad definition

of “arising out of” in applying Michigan law). In my view, the law’s broad interpretation of the

phrase “arising out of” in the context of general liability insurance compels the conclusion that the

Finley death arose out of “the ownership, maintenance or use of” the Fairlane parking lot. This

interpretation also comports with the terms of the Joint Operating Agreement, with which the policy

is clearly intended to comply, broadly requiring Lord & Taylor to obtain insurance for bodily

injuries and death “occurring upon, in, on or about the Common Areas,” such as the parking lot

where the Finley incident occurred.

       This reading of the policy is further supported by the fact that the Michigan Supreme Court

has rejected an argument similar to that asserted by Continental. In Frankenmuth Mutual Insurance

Co. v. Piccard, 489 N.W.2d 422, 424-25 (Mich. 1992), abrogated on other grounds, Frankenmuth

Mut. Ins. Co. v. Masters, 595 N.W.2d 832, 839 n.8 (Mich. 1999), the court interpreted a similar

commercial liability policy that limited coverage to those events “arising out of the ownership,

maintenance or use of the insured premises.” The insured, Charles Piccard, intentionally started

a fire on his business premises, resulting in damage to his property. Id. at 424. The insurance

company claimed that coverage was precluded by the terms of the policy because “arson [was] not

attendant to the ‘ownership, maintenance or use’ of the insured’s business.” Id. at 425. The court

expressly rejected that argument, noting that “the phrase ‘ownership, maintenance or use’ is used


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by the insurer to define the subject matter and the nature of the risk assumed. In other words, the

risk covered by the commercial liability insurance issued to Piccard was limited to those events that

occurred on or at the premises of his business.” Id. (footnote omitted). Thus, the court held that

“the scope of the policy, and the risk that it covers, applie[d] to Piccard because the fire occurred

at his business.” Id. (citations omitted).

       Applying the Piccard reasoning to this case further supports the conclusion that the

Continental policy covers the costs associated with settling the Finley manner. Lord & Taylor, like

Piccard, obtained a general premises liability policy to cover injuries “arising out of the ownership,

maintenance or use of” the insured premises. Moreover, the Michigan Supreme Court seemingly

interpreted that language not to require a direct casual relationship between the premises and the

injury; rather, the court expressly held that such language covered the damage resulting from the

fire set by the insured “because the fire occurred at [the insured’s] business.” Consequently, I can

see no good legal reason why the similar language used by the Continental policy in the present

case should be interpreted differently.

       The primary case that Continental cites in support of its claim that a direct causal

relationship is required under this policy is Thornton v. Allstate Insurance Co., a case decided

before Piccard, which involved a Michigan no-fault automobile insurance statute limiting coverage

to injuries “arising out of the ownership, operation, maintenance or use of a motor vehicle as a

motor vehicle.” 391 N.W.2d 320, 322 (Mich. 1986) (quoting Mich. Comp. Laws § 500.3105(1)).

In my view, Thornton does not control the question presented in the present case. First, Thornton’s

applicability in this context is questionable because it involved the interpretation of a no-fault

automobile insurance statute, not a premises liability policy. Automobile policies are certainly


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intended to be less comprehensive than general premises liability insurance contracts such as the

one in the present case.

       Second, the Thornton court made very clear that its decision was premised on specific

limiting language found in the no-fault statute that is noticeably absent here. The Michigan no-fault

statute limited benefits to injuries “arising out of the ownership, operation, maintenance or use of

a motor vehicle as a motor vehicle.” Id. (quoting Mich. Comp. Laws § 500.3105(1)) (emphasis

added). The court concluded that the language limiting benefits to those injuries resulting from the

use of a motor vehicle “as a motor vehicle” “shows that the Legislature . . . chose to provide

coverage only where the causal connection between the injury and the use of a motor vehicle as a

motor vehicle is more than incidental, fortuitous, or ‘but for.’” Id. Unlike the language in

Thornton, the Continental policy at issue here contains no such limiting language. Instead, the

Continental policy broadly provides for coverage “arising out of the ownership, maintenance or use

of the premises.” If Continental wanted to limit its liability to situations in which the injury is

directly caused by the premises, it obviously could have done so. In this case, however, it did not.

       Thus, for these reasons, I would conclude that the district court was correct in finding that

the costs associated with the Finley dispute are within the broad terms of the Continental policy.

                                                IV.

       In sum, I would hold that the Continental policy is ambiguous because of the policy’s

express statement that it was amended to comply with the Joint Operating Agreement and because

of the terms of that Agreement. In light of the evidence in this case, I would construe that

ambiguity in favor of the insured Lord & Taylor and hold that the costs of the Finley settlement are

covered under the Continental policy. I therefore respectfully dissent.

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