                               UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT


                               No. 03-2470



SCOTTSDALE INSURANCE COMPANY,

                                                Plaintiff - Appellee,
           and

CERTAIN UNDERWRITERS AT LLOYD’S, LONDON,

                                    Third Party Plaintiff - Appellee,

           versus


LYNNHAVEN INLET FISHING PIER CORPORATION;
C.D.C. ENTERPRISES, INC., t/a Lynnhaven Inlet
Fishing Pier Tackle Shop; KYRUS ENTERPRISES,
INC., d/b/a Lynnhaven Fish House,

                                             Defendants - Appellants.



Appeal from the United States District Court for the Eastern
District of Virginia, at Norfolk. F. Bradford Stillman, Magistrate
Judge. (CA-02-238)


Argued:   September 29, 2004             Decided:    November 10, 2004


Before WILLIAMS, KING, and DUNCAN, Circuit Judges.


Reversed and remanded by unpublished per curiam opinion.         Judge
Duncan wrote a dissenting opinion.


ARGUED: C. Thomas Brown, SILVER & BROWN, Fairfax, Virginia, for
Appellants.  Robert Tayloe Ross, MIDKIFF, MUNCIE & ROSS, P.C.,
Richmond, Virginia, for Appellee Scottsdale Insurance Company.
Jeffrey Allan Wothers, NILES, BARTON & WILMER, L.L.P., Baltimore,
Maryland, for Appellee Certain Underwriters at Lloyd’s, London. ON
BRIEF: Glenn H. Silver, SILVER & BROWN, Fairfax, Virginia, for
Appellants. Robert S. Reverski, Jr., LAW OFFICES OF MICHAEL T.
HURD, P.C., Deltaville, Virginia, for Appellee Certain Underwriters
at Lloyd’s, London.


Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).




                                2
PER CURIAM:

     This appeal stems from an insurance coverage dispute resolved

on summary judgment in favor of two insurers.                     Lynnhaven Inlet

Fishing    Pier     Corporation     and     C.D.C.   Enterprises,      Inc.,    t/a

Lynnhaven     Inlet       Fishing     Pier     Tackle      Shop     (collectively

“Lynnhaven”),       and    their     restaurant-operating         tenant,      Kyrus

Enterprises, Inc., d/b/a Lynnhaven Fish House (“Kyrus”), appeal the

court’s award of summary judgment in favor of Scottsdale Insurance

Company (“Scottsdale”) and Certain Underwriters at Lloyd’s, London

(“Lloyd’s”). Scottsdale initiated this declaratory judgment action

in the Eastern District of Virginia against Lynnhaven and Kyrus,

asserting that an insurance policy it had issued to Lynnhaven did

not provide coverage for damages suffered by the restaurant (the

“Fish House”). In turn, Lynnhaven and Kyrus counterclaimed against

Scottsdale    and    filed   their    own     third-party    complaint      against

Lloyd’s, seeking declarations that insurance policies issued by

Scottsdale and Lloyd’s provided coverage for damages suffered at

the Fish House.

     On cross-motions for summary judgment, the magistrate judge,

acting for the district court pursuant to 28 U.S.C. § 636(c), ruled

that the damages were not covered by the insurance policies.                    The

court   accordingly       awarded    summary    judgment    to    Scottsdale     and

Lloyd’s.     Scottsdale Ins. Co. v. Lynnhaven Inlet Fishing Pier

Corp., No. 2:02cv238 (E.D. Va. Oct 31, 2003) (the “Opinion”).


                                          3
Lynnhaven and Kyrus have appealed and, as explained below, we

reverse and remand.


                                       I.

                                       A.

     Lynnhaven owns and operates a fishing pier in Virginia Beach,

Virginia, upon which certain enclosed structures, including the

Fish House, have been erected.1             The Fish House restaurant was

built on the deck of the pier, above ground.              Access to the Fish

House, which is leased and operated by Kyrus, is available from

beneath the pier.     Prior to this dispute, Lynnhaven, in an effort

to protect the Fish House’s plumbing from freezing, insulated and

covered the underside of the restaurant with plywood.               The area

below    the   restaurant’s   floor,    consisting   of    this   insulation,

plywood, and floor joists, constitutes the Fish House’s “subfloor.”

     During the relevant period, Lynnhaven maintained coverage

through an insurance policy issued by Scottsdale in Virginia,

specifically Policy No. CPS328957, effective from November 1999

through November 2000 (the “Scottsdale Policy”).            Kyrus maintained

coverage through an insurance policy issued by Lloyd’s in Virginia,

specifically Policy No. ROC0443, effective from July 2000 through



     1
        Because this appeal is from an award of summary judgment,
we present the relevant facts in the light most favorable to
Lynnhaven and Kyrus, as the insureds and non-moving parties. See
Seabulk Offshore, Ltd. v. Am. Home Assurance Co., 377 F.3d 408, 418
(4th Cir. 2004).

                                       4
July 2001 (the “Lloyd’s Policy”).                The relevant terms of these

policies are identical.            They are both so-called “all risks”

policies,    covering   all   risks       of    direct    physical     loss    unless

specifically excluded or limited by the policy terms.                       Among the

excluded causes of loss set forth in Section B(2) of the “Causes of

Loss - Special Form” of each policy are: “Collapse, except as

provided below in the Additional Coverage for Collapse [Section D].

. . .”     The parties agree that the damage to the subfloor of the

Fish House would ordinarily be excluded from coverage under this

section.

     Lynnhaven and Kyrus maintain, however, that they are entitled

to coverage under Section D, which provides, in pertinent part:

“[The insurer] will pay for direct physical loss or damage to

Covered Property, caused by the collapse of a building or any part

of a building insured under this Coverage Form, if the collapse is

caused by one or more of the following:” listing among other

causes,    “hidden   decay”   or    the       “weight    of   people   or    personal

property.”     Id. (emphasis added).              Significantly, neither the

Scottsdale Policy nor the Lloyd’s Policy defines what it means by

the term “collapse.”

                                      B.

     In August 2000, Lynnhaven retained a structural engineering

firm to inspect the subfloor of the Fish House.                 As a result, that

firm prepared a report, entitled Pier and Pier Deck Structural


                                          5
Evaluation (the “Report”), which concluded that the subfloor was

unsound in certain respects.         The Report found that damage to the

subfloor   had   resulted    from    four     causes:    (1)condensation   from

refrigeration    units      and     piping;     (2)     plumbing   leaks   from

disconnected drainpipes; (3) seepage through the floor from the

food preparation area; and (4) moisture trapped by the insulation.

The Report also found that some locations of the subfloor were

“completely deteriorated,” and that “the floor beams are saturated

and the wood soft.”      In October 2000, on the basis of this Report,

Lynnhaven filed a claim with its insurer, Scottsdale, seeking

coverage for the subfloor damage.

     According to the kitchen manager at the Fish House, who is

also the restaurant’s chef, the floor became spongy and unstable

during the first two weeks of November 2000, and several of the

floor tiles cracked and popped off. He testified that, during that

time period, “the subfloor was like a sand base that was wet and

the wood beneath it was rotting.”           Viewed from below, the subfloor

was visibly crumbling and falling apart.                As a result, Lynnhaven

retained a contractor who temporarily repaired the subfloor in

November 2000.    Lynnhaven notified Scottsdale that same month that

the subfloor of the Fish House had collapsed and that Lynnhaven was

proceeding with its claim under Section D of the “Causes of Loss -

Special Form” of the Scottsdale Policy.




                                       6
     In March 2001, an engineer engaged by Scottsdale prepared a

report on the subfloor problem, concluding that the subfloor had

decayed “to the point that it could be penetrated with a screw

driver.” In August 2001, a wheel on a piece of the Fish House’s

restaurant equipment, a cooler, sank into the floor, penetrating

the subfloor and requiring additional temporary repairs.

     In   late    August   2001,    Kyrus   gave   notice   to   its   insurer,

Lloyd’s, of its claim under the Lloyd’s Policy for the damages

sustained by the Fish House’s subfloor in mid-November 2000.                The

Fish House was closed for a short time following Kyrus’s notice,

and the problem areas of the subfloor were finally repaired on a

more permanent basis in September 2001.                In October 2001, an

adjuster for Lloyd’s reported to that insurer’s London office that

he had found that “a portion of the building had collapsed, which

is contrary to what we had previously thought.”

     In the summary judgment proceedings, Lynnhaven and Kyrus

presented   two    experts    who    concluded     that   the    subfloor   had

“collapsed.”     One of those experts, a structural engineer who had

prepared the Report, stated by affidavit that, as his expert

litigation report spelled out, the Fish House subfloor had in fact

collapsed, in that the subfloor had broken down, fallen apart in a

disorganized fashion, or disintegrated.            In addition, an insurance

claims expert opined by affidavit that the restaurant’s “subfloor




                                       7
had collapsed.”      Lynnhaven and Kyrus also proffered nearly 100

photographs to show the damage sustained by the subfloor.

                                       C.

      At the close of discovery in 2002, the parties filed cross-

motions for summary judgment. In ruling in favor of Scottsdale and

Lloyd’s, the district court concluded that summary judgment was

appropriate because, applying Virginia law, there was “no evidence

that the subfloor broke down completely, fell apart in confused

disorganization, or disintegrated.”            Opinion at 17.       According to

the   court,   Lynnhaven   and      Kyrus    failed   to   present    sufficient

evidence to demonstrate that a “collapse” had occurred. Opinion at

19. Lynnhaven and Kyrus have appealed, and we possess jurisdiction

pursuant to 28 U.S.C. § 1291.


                                       II.

      We   review   de   novo   a   district    court’s     award    of   summary

judgment, viewing the facts and inferences drawn therefrom in the

light most favorable to the non-moving party.               Seabulk Offshore,

Ltd. v. Am. Home Assurance Co., 377 F.3d 408, 418 (4th Cir. 2004).

An award of summary judgment is appropriate only “if the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no genuine

issue as to any material fact and that the moving party is entitled

to a judgment as a matter of law.”              Fed. R. Civ. P. 56(c).         A

genuine issue of material fact is one “that might affect the

                                        8
outcome of the suit under the governing law . . . .”          Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).        A dispute presents

a genuine issue of material fact “if the evidence is such that a

reasonable jury could return a verdict for the nonmoving party.”

Id.


                                    III.

      Lynnhaven and Kyrus contend that the district court erred in

awarding summary judgment to Scottsdale and Lloyd’s because there

is, under the evidence in the summary judgment record, a genuine

issue of material fact as to whether a “collapse” of the subfloor

occurred.     Scottsdale and Lloyd’s, by contrast, maintain that the

evidence presented by Lynnhaven and Kyrus does not establish any

such “collapse” and that summary judgment was appropriate.

                                    A.

          Significantly, the Supreme Court of Virginia has recently

interpreted     policy   language   identical   to   that   found   in   the

Scottsdale and Lloyd’s policies in addressing an insurance coverage

dispute where “collapse” was an undefined policy term.2              Lower

Chesapeake Assocs. v. Valley Forge Ins. Co., 532 S.E.2d 325, 330

(Va. 2000).      In Lower Chesapeake, the court accorded the term


      2
        In this matter, as found by the magistrate judge, Virginia
appears to be the place where the policy was formed, and neither
party has contested the application of Virginia law. Consequently,
we are obliged, as was the district court, to apply the substantive
law of Virginia in our resolution of this dispute. See Seabulk,
377 F.3d at 418-19.

                                     9
“collapse” one of its ordinary and accepted meanings, that is: “‘to

break down completely: fall apart in confused disorganization: . .

. disintegrate.’”   Id.   (quoting Webster’s Third New International

Dictionary 443 (1993)), cited with approval in Transcont’l Ins. Co.

v. RBMW, Inc., 551 S.E.2d 313, 317 (Va. 2001).       Scottsdale and

Lloyd’s rely on this definition of “collapse” to support their

contention that Lynnhaven and Kyrus failed to produce sufficient

evidence to satisfy their burden in opposing summary judgment.

      This contention, however, overlooks a key and distinguishing

aspect of the Lower Chesapeake decision.      In that dispute, the

Supreme Court of Virginia was able to rely on the trial court’s

factual findings, made by the lower court after a bench trial.   532

S.E.2d at 330-31 (“The [trial] court’s factual finding . . . is

central to the resolution of this appeal.”).3     And, according to

the Supreme Court of Virginia, whether a “collapse” has occurred,

in the context of such a coverage issue, is a question of fact.

Id.




      3
       In Lower Chesapeake, the Supreme Court of Virginia assessed
the trial court’s decision under a deferential standard of review.
The lower court’s verdict would “not be set aside unless it
appear[ed] from the evidence that the judgment [was] plainly wrong
or without evidence to support it.”      532 S.E.2d at 330.    Our
standard of review, on the other hand, is de novo, and we view the
facts and inferences fairly drawn therefrom in the light most
favorable to Lynnhaven and Kyrus, as the non-moving parties.
Seabulk, 377 F.3d at 418.

                                  10
                                       B.

     The     district   court,    in        ruling   on    summary    judgment,

appropriately did not make a finding on whether a “collapse” of the

Fish House subfloor had occurred; however, the court decided that

Lynnhaven and Kyrus had failed to produce sufficient evidence of a

“collapse.”    We are unable to agree with that assessment.

     Lynnhaven and Kyrus, in opposing summary judgment, forecast

the presentation of evidence by two expert witnesses, a structural

engineer and an insurance claims expert, to the effect that the

Fish House subfloor had indeed “collapsed,” as that term was

applied in the Lower Chesapeake decision. See Fed. R. Evid. 704(a)

(providing that opinion testimony on ultimate issue of fact is not

objectionable on that basis); TFWS, Inc. v. Shaefer, 325 F.3d 234,

241-42 (4th Cir. 2003) (vacating summary judgment award because

nonmoving party proffered expert reports demonstrating genuine

issue of material fact); see also Ashley Furniture Indus., Inc. v.

Sangiacomo N.A., Ltd., 187 F.3d 363, 377 (4th Cir. 1999) (“[I]n

many areas, an expert’s affidavit will enable the plaintiff to

survive summary judgment . . . .”).            As we have pointed out, see

supra Part I.B., Lynnhaven and Kyrus also presented multiple

photographs showing the disintegration of the Fish House subfloor,

they proffered testimony from the restaurant’s kitchen manager

describing    the   subfloor’s   disintegration       in    detail,   and   they

presented a letter from the Lloyd’s adjuster that a “portion of the


                                       11
building had collapsed . . . .”    Scottsdale and Lloyd’s did not and

do not challenge the admissibility of any of this evidence.

     In these circumstances, the evidence forecast by Lynnhaven and

Kyrus in opposition to summary judgment supports the reasonable

inference that a “collapse” of the Fish House subfloor occurred in

November 2000, under the terms of the Scottsdale Policy and the

Lloyd’s   Policy.    Whether      such   a   “collapse”   occurred   is

determinative of this dispute, and the evidence, viewed in the

proper light, creates a triable issue of fact.      Summary judgment,

therefore, should not have been awarded.


                                  IV.

     Pursuant to the foregoing, we reverse the award of summary

judgment to Scottsdale and Lloyd’s and remand for such other and

further proceedings as may be appropriate.

                                                REVERSED AND REMANDED




                                   12
DUNCAN, Circuit Judge, dissenting:

     Federal courts sitting in diversity are bound to apply the

substantive law of the state in which the court sits, as that law

has been applied by the state’s highest court.           Commissioner v.

Estate of Bosch, 387 U.S. 456, 465 (1967); see also Erie R.R. v.

Tompkins, 304 U.S. 64 (1938).             Accordingly, I agree with the

majority that the substantive law of Virginia applies to this case.

Because, however, I believe that the district court correctly

applied Virginia law as it has been interpreted by the Virginia

Supreme Court, I respectfully dissent from the majority opinion

mandating reversal.

     The Virginia Supreme Court holds that “collapse,” if not

defined elsewhere in an insurance contract, means “to break down

completely:      fall   apart   in   confused   disorganization:   .   .   .

disintegrate.”    Lower Chesapeake Associates v. Valley Forge Ins.

Co., 532 S.E.2d 325, 330 (Va. 2000).         While the majority correctly

notes that Lower Chesapeake was not a summary judgment case, it

notes a distinction without a difference.           The Virginia Supreme

Court in Lower Chesapeake defined “collapse” as a matter of law.

Id. (holding that collapse means “to break down completely: fall

apart in confused disorganization: . . . disintegrate,” without any

reference to the factual findings of the district court (alterations

in original) (internal quotations omitted)).         It further held that

the district court applied the correct legal definition of collapse


                                     13
and separately held that the district court’s factual finding that

the deck at issue in that case met the definition was not clearly

erroneous. Id. at 330-31 (“[T]he [trial] court properly applied the

ordinary and customary meaning of [collapse] when reaching its

conclusion.”) In other words, the Virginia Supreme Court did give

deference to the district court’s factual findings, but not in

regards to the definition of collapse.        That definition is a legal,

not factual, definition and is therefore applicable to this summary

judgment proceeding.

       Using that definition of “collapse,” and taking everything that

the plaintiffs posit as true, there is no basis here on which a jury

could find that the flooring in question fell apart in confused

disorganization.      The expert reports and proffered testimony upon

which the majority relies to create a dispute of material fact

simply   state   legal     conclusions--not   factual    assertions.       See

Weinstein's Federal Evidence § 704.04[1] (2004) (“In general,

testimony about a legal conclusion, or the legal implications of

evidence is inadmissible under Rule 704.”).           No one disputes that

the flooring in question was damaged and required repairs.              But no

actual    evidence,   as    opposed   to   mere     conclusory   statements,

demonstrates that the flooring in question came close to “breaking

down   completely”    or   “disintegrating”    as    required    by   Virginia

insurance law.




                                      14
     I would therefore affirm the well reasoned opinion of the

district court.*




     *
        As the district court succinctly notes:       “The   . . .
evidence submitted to the Court, by both parties, similarly fails
to describe damage beyond the clearly established rot, decay, and
deterioration. In their briefs, Lynnhaven and Kyrus equate this
deterioration with ‘disintegration’ and ‘collapse’ without setting
forth any additional facts beyond the undisputed decay and
deterioration of the restaurant’s subfloor. Likewise, Millenium’s
expert report opines that the subfloor ‘disintegrated’ and
‘collapsed,’ but provides no objective support for these conclusory
statements.   Mere recitation of the words ‘disintegration’ and
‘collapse’ is not sufficient to bring the damage within the scope
of the ordinary and accepted meaning of ‘collapse.’       The Court
finds no evidence that the subfloor broke down completely, fell
apart in confused disorganization, or disintegrated.” Dist. Ct.
Opinion and Order at 17 (E.D. Va. # 2:02cv238, Oct. 31, 2003).



                                15
