                                                                United States Court of Appeals
                                                                         Fifth Circuit
                                                                        F I L E D
                       REVISED JULY 8, 2005
                                                                          July 7, 2005

                               In the                                Charles R. Fulbruge III
                                                                             Clerk
      United States Court of Appeals
                  for the Fifth Circuit
                    _______________

                             m 04-60707
                       _______________



                        ANGELA WHIDDON,
MINOR BY AND THROUGH ANGELA WHIDDON, MOTHER AND GENERAL GUARDIAN,

                                               Plaintiff-Appellee,

                               VERSUS

        FEDERATED MUTUAL INSURANCE COMPANY, ET AL.,

                                               Defendants,


            FEDERATED MUTUAL INSURANCE COMPANY,

                                               Defendant-Appellant.



                    _________________________

              Appeal from the United States District Court
                for the Southern District of Mississippi
                           m 2:03-CV-435
                    __________________
Before SMITH, DENNIS, and PRADO,                          liability policy and an umbrella liability policy.2
  Circuit Judges.
                                                             In the instant federal declaratory judgment
                                   *
JERRY E. SMITH, Circuit Judge:                            action, the parties filed cross-motions for sum-
                                                          mary judgment. Federated maintained that
    Federated Mutual Insurance Company                    neither the primary commercial liability policy
(“Federated”) appeals a summary judgment in               nor the umbrella liability policy issued to the
favor of Kassie Orr, through her legal repre-             insured provided coverage for Orr’s injuries;
sentative Angela Whiddon, in this declaratory             Orr claimed that both policies provided cover-
judgment action involving disputed issues of              age.
insurance coverage. Finding no error, we
affirm.                                                       The district court entered partial summary
                                                          judgment in favor of Federated on the ground
                       I.                                 that damages for Orr’s injuries did not come
    Catron Oil, Inc. (“Catron”), the insured,             within its coverage obligation under the pri-
owns and operates a gas station and conven-               mary commercial liability policy; but the dis-
ience store in Hattiesburg, Mississippi, and              trict court also granted a partial summary
sold beer to two minors in violation of state             judgment in favor of Orr on the ground that
law.1 While a passenger in a vehicle driven by            damages for her injuries did come within Feder-
one of those minors, Orr was severely injured             ated’s coverage obligation under the additional
when the driver, under the influence of alco-             liability coverage provisions of the umbrella
hol, lost control and crashed into a tree. Orr,           policy. Federated appeals the summary judg-
through her legal representative, sued Catron             ment in favor of Orr.
in Mississippi state court, asserting dram shop
liability.                                                                       II.
                                                             We review a summary judgment and a
   On behalf of its insured, Federated executed           district court’s interpretation of the relevant
a settlement with Orr pursuant to which it paid
the per-occurrence policy limit under Catron’s
                                                             2
liquor liability policy and further agreed to pay               Orr filed the declaratory judgment action
any sums ultimately determined, in a parallel             against Federated and Catron in state court, seek-
declaratory judgment action in federal court,             ing a declaration that the damages owed by Catron
to be covered by either or both of Catron’s               for her injuries were covered by its two additional
other two insurance policies underwritten by              insurance policies. Federated removed the action
Federated, which were a primary commercial                to federal district court on the basis of diversity
                                                          jurisdiction and, in support of which, maintained
                                                          that Catron, a Mississippi corporation, had been
                                                          improperly joined as a defendant, and thus moved
                                                          the district court to realign Catron as a plaintiff,
   *                                                      thereby creating complete diversity of citizenship.
    Pursuant to 5TH CIR. R. 47.5, the court has de-
termined that this opinion should not be published        Orr initially opposed the motion and moved for
and is not precedent except under the limited cir-        remand but, as part of the settlement of the
cumstances set forth in 5TH CIR. R. 47.5.4.               underlying tort suit, agreed to confess the re-
                                                          alignment issue, thereby enabling the declaratory
   1
       See MISS. CODE ANN. § 67-3-53 (Rev. 2001).         judgment action to proceed in federal court.

                                                      2
insurance policies de novo, applying the same                                      B.
standards as did the district court. Am. Guar.                 The district court then turned its attention
& Liab. Ins. Co. v. 1906 Co., 129 F.3d 802,                to whether there is additional coverage for
805 (5th Cir. 1997); Am. States Ins. Co. v.                Orr’s injuries under the umbrella policy, which
Nethery, 79 F.3d 473, 475 (5th Cir. 1996).                 provides two distinct types of coverage: (1)
“Under Mississippi law, courts interpret insur-            “excess liability coverage” and (2) “additional
ance policies according to contract law. This              liability coverage.” The umbrella policy de-
interpretation is limited to the written terms of          fines the insurer’s obligation for “excess liabil-
the policy. If the policy is unambiguous, its              ity coverage” as follows:
terms must be given their plain meaning and
enforced as written.” Nethery, 79 F.3d at 475                 Except as excluded under the underlying in-
(citations omitted).3                                         surance, we will pay on behalf of the in-
                                                              sured those sums that the insured becomes
                       III.                                   legally obligated to pay as damages that are
   At the time Orr sustained her injuries, Ca-                covered under the underlying insurance:
tron had three insurance policies underwritten                (a) because of bodily injury . . . (b) which
by Federated: (1) a liquor liability policy; (2) a            are in excess of the applicable insurance
primary commercial liability policy; and (3) an               limit.
umbrella liability policy. In the underlying tort
suit, as we explained, Orr, and Federated on                  In contrast, the umbrella policy defines the
behalf of Catron, settled for the per-occur-               insurer’s obligation for “additional liability
rence limit on the liquor liability policy. In this        coverage” as follows:
declaratory judgment action, then, the question
before the district court was whether there is                Except as excluded in Section II, we will
additional coverage for Orr’s injuries under                  pay on behalf of the insured those sums that
either or both the primary commercial liability               the insured becomes legally obligated to
policy and the umbrella liability policy.                     pay as damages from an occurrence during
                                                              the policy period arising from . . . the
                       A.                                     “products-completed operations hazard”
    The district court concluded that Orr’s in-               anywhere in the world.
juries were not covered by the insured’s pri-
mary commercial liability policy because that                 Critically, in section II, captioned “Exclu-
policy contains an exclusion for bodily injury             sions,” the umbrella liability policy treats these
for which the insured may be held liable by                two types of coverageSSexcess liability and
reason of the sale of alcohol to a minor. Orr              additional liabilitySSdifferently. As to excess
does not cross-appeal this holding.                        coverage, the umbrella policy provides that
                                                           “the exclusions in the underlying insurance
                                                           apply.” Thus, the exclusions in the other
                                                           policies limit Federated’s coverage obligation
   3
     See also Aero Int’l, Inc. v. United States Fire       for excess liability. As to additional liability
Ins. Co., 713 F.2d 1106, 1109 (5th Cir. 1983) (ap-         coverage, however, there are thirteen enum-
plying Mississippi law); J & W Foods Corp. v.              erated exclusions, none of which is applicable
State Farm Mut. Auto Ins. Co., 723 So. 2d 550,             here or claimed to be by Federated.
552 (Miss. 1998).

                                                       3
  The umbrella policy defines “products-                  cifically enumerated, and none applies here.
completed operations hazard,” for which                   Thus, as the district court properly recognized,
Federated owes additional liability coverage to           the outcome-determinative question of policy
Catron, as follows:                                       interpretation is whether the injuries sustained
                                                          by Orr, for which Catron owes damages, come
   [A]ll bodily injury and property damage oc-            within the umbrella policy’s additional liability
   curring away from premises you own or                  coverage for “products-completed operations
   rent and arising out of “your product” or              hazard”SSi.e., whether the accident and result-
   “your work” except (a) products that are               ing injuries “aris[e] out of” the insured’s
   still in your physical possession; or                  “work” or “product” as those terms are de-
   (b) work that has not yet been completed               fined in the policy.
   or abandoned.
                                                                                  a.
And the umbrella policy defines “your prod-                   The district court properly answered this
uct” as “any goods or products, other than real           question in favor of coverage. As a threshold
property, manufactured, sold, handled, distrib-           matter, there is no dispute that Orr’s personal
uted or disposed by you”; “your work,” is de-             injuries constitute the requisite “bodily injury”
fined, in part, as “work or operations per-               or that those injuries were sustained “away
formed by you or on your behalf.”                         from premises” owned or rented by the in-
                                                          sured. Nor is there any genuine dispute that
                         1.                               the alcohol sold at the convenience store qual-
    The district court first considered whether           ifies as “your product,” which the policy de-
the umbrella policy provides coverage for                 fines to include “any goods or products . . .
Orr’s injuries under its excess liability cover-          sold by” the insured. Similarly, the policy de-
age provision. The court correctly concluded              fines “your work” as “work or operations per-
that it does not: Because the umbrella policy             formed by you or on your behalf,” thus plainly
provides that, as far as excess liability is con-         encompassing the sale of regularly-stocked
cerned, the exclusions in the underlying insur-           products such as beer. And the injuries sus-
ance apply, the umbrella policy incorporates              tained by Orr “aris[e] out of” the sale of beer
the exclusion in the primary commercial lia-              in typical but-for causation terms, as is the
bility policy for injuries sustained as a result of       case with ordinary dram-shop liability.4
liquor sales to a minor; and thus there is no
excess liability coverage for Orr’s injuries.                                    b.
                                                             In fact, Federated does not dispute that the
                         2.
   In contrast to Federated’s excess liability
coverage obligation, however, its obligation                 4
                                                               Cf. Am. Guar. & Liab. Co., 129 F.3d at 807
for additional liability coverage under the um-           (“The phrase ‘arising out of’ is ordinarily under-
brella policy is not subject to the exclusions in         stood to mean ‘originating from,’ ‘having its origin
the underlying policies—including, therefore,             in,’ ‘growing out of,’ or ‘flowing from.’”); id.
the dram-shop liability exclusion in the com-             (noting that in the insurance context Mississippi
mercial liability policy. Instead, as we indi-            law interprets the phrase “arising out of” to require
cated, the only applicable exclusions are spe-            a “causal connection” between the injuries alleged
                                                          and the objects made subject to the phrase”).

                                                      4
damages owed by Catron for Orr’s injuries                      In rejecting this contention, the district rea-
“aris[e] out of” the sale of the insured’s prod-            soned as follows:
uct. Rather, Federated maintains that “[t]he
mere fact that a claim can be said to ‘arise out               While the terms of the “product-completed
of’ the sale of an insured’s ‘product’ in terms                operations hazard” coverage is certainly
of a but-for causation tort analysis, does not                 broad enough to include strict liability
result in the application of ‘Products Hazard’                 claims based on the sale of defective prod-
provision to afford the Claimant with a right of               ucts, the question is whether that coverage
recovery in this case.” Instead, Federated                     is restricted to claims based on that theory
argues that the umbrella policy’s grant of ad-                 of liability. The coverage might certainly
ditional liability coverage for products-com-                  have contained such a limitation, but I see
pleted operation hazards should be read as                     nothing in the terms of the policy itself that
granting coverage only for claims based on a                   limits the operation of this provision to
defective products theory of liability; Feder-                 strict liability in tort for the sale of a defec-
ated cites various cases from jurisdictions oth-               tive product. As written, the “product
er than Mississippi in support of this construc-               completed operations hazard” affords cov-
tion.5                                                         erage, up to the limits of the policy, for
                                                               “those sums that insured becomes legally
                                                               obligated to pay as damages,” without re-
   5
     Like the district court, we find the cases cited          gard to the theory of recovery upon which
by Federated from jurisdictions other than Mis-                an injured party may rely.
sissippi to be of limited utility. First, though Fed-
erated is correct that courts in other jurisdictions
                                                                We agree: Nothing in the terms of the
indeed have adopted, in some form, the position it
                                                            umbrella policy limits its grant of additional
urges here, those courts have done so in the context
of interpreting products-completed operations               liability coverage to claims based on a
hazard exclusions (as opposed to an affirmative             defective-products theory of recovery. To the
grant of coverage as is the case here) and thus were        contrary, the policy grants coverage in plain
generally bound to construe the exclusions                  and unambiguous terms: “all bodily injury and
narrowly. See, e.g., Lessak v. Metro. Cas. Ins.             property damage occurring away from pre-
Co., 151 N.E.2d 730, 735 (Ohio 1958); Gen. Ins.
Co. of Am. v. Crawford, 635 S.W.2d 98, 102-03
(Tenn. 1982); Farm Bureau Mut. Ins. Co. v. Lyon,                Third, each court tasked with interpreting an
528 S.W.2d 932, 937 (Ark. 1975).                            insurance policy must consider the specific policy
                                                            language at issue, and thus reported cases cited by
    Second, there is contrary authority from various        litigants for general propositions often turn out to
other jurisdictions that squarely rejects the de-           involve materially different policy language. See
fective-products limitation as beyond the text of the       Brazas, 220 F.3d at 6. Thus, for example, al-
typical products-completed operations hazard                though Federated relies heavily on Scarborough v.
exclusions. See, e.g., Brazas Sporting Arms, Inc.           N. Assurance Co. of Am., 718 F.2d 130 (5th Cir.
v. Am. Empire Surplus Lines Ins. Co., 220 F.3d 1,           1983) (in which we held, applying Louisiana law,
5-6 & n.2 (1st Cir. 2000) (collecting cases); Cob-          that a products hazard exclusion did not exclude
bins v. Gen. Accident Fire & Life Assurance                 coverage of a claim based on a negligent failure to
Corp., 290 N.E.2d 873, 877 (Ill. 1972); Hagen               warn theory), the specific exclusionary provision
Supply Corp. v. Iowa Nat. Mut. Ins. Co., 331 F.2d           we construed included language directed squarely
199, 200-04 (8th Cir. 1964).                                at defective products claims. See id. at 133.

                                                        5
mises you own or rent and arising out of ‘your              of an umbrella insurance policy, the very pur-
product’ or ‘your work.’”                                   pose of which is to provide coverage beyond
                                                            that provided by underlying insurance policies,
    Limiting this affirmative grant of coverage             it makes little sense to point to another policy
to injuries based on defective products would               that provides coverage as a reason for why
thus require importing terms into the policy                there cannot be additional coverage under the
that are plainly not there.6 We reject Fed-                 plain terms of the umbrella policy.
erated’s invitation to do so, for it is fundamen-
tally inconsistent with our duty faithfully to ap-              In sum, the terms of the additional liability
ply the governing principles of Mississippi                 grant of coverage in the umbrella policy, when
contract law, first among them being the rule               given their plain and ordinary meaning, do not
that the terms of an insurance policy “must be              admit of any limitation of coverage (and thus
given their plain meaning and enforced as writ-             ultimately of indemnity) for claims based only
ten.” Nethery, 79 F.3d at 475 (citations omit-              on a defective-products theory of liability. Ac-
ted) (emphasis added).7 Thus, although Feder-               cordingly, the judgment is AFFIRMED.
ated may well have intended to limit its cover-
age obligation for additional liability to third-
party claims based on a defective-products
theory of recovery, the granting provision in
the umbrella policy does not do so.

                       c.
   Federated suggests that because Orr’s dam-
ages claim is the type of claim the insured’s
liquor liability policy was “specifically de-
signed to cover,” coverage should not also be
found under the additional liability coverage
grant in the umbrella policy. But in the context


   6
     Federated practically admitted as much at oral
argument when its counsel repeatedly admonished
the panel not “slavishly [to] follow the text.” Cf.
Brazas, 220 F.3d at 6 (“[I]n order to limit the . . .
exclusion provision to defective products, we
would need to read into the text a requirement that
is simply not there. . . . Where, as here, the
language of the exclusion provision is unambig-
uous, the text should be given its plain meaning. In
this case, the plain meaning of the exclusion is that
it applies to all product-related injuries.”).
   7
     This is especially so where, as here, the in-
surer demonstrated elsewhere that it knew how to
exclude the disputed damages if it so desired.

                                                        6
