
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT        No. 96-1596                          CONTINENTAL INSURANCE COMPANY AND                           HARTFORD FIRE INSURANCE COMPANY,                               Plaintiffs, Appellants,                                          v.                         ARKWRIGHT MUTUAL INSURANCE COMPANY,                                 Defendant, Appellee.                                                                                      ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                      [Hon. Patti B. Saris, U.S. District Judge]                                            ___________________                                                                                      ____________________                                        Before                                Cyr, Boudin and Stahl,                                   Circuit Judges.                                   ______________                                                                                      ____________________             James T. Hargrove, with whom Thomas M. Elcock, Richard W. Jensen             _________________            ________________  _________________        and Morrison, Mahoney & Miller were on brief for appellants.            __________________________             William Gerald McElroy, with whom Catherine M. Colinvaux and             ______________________            ______________________        Zelle & Larson LLP were on brief for appellee.        __________________                                                                                      ____________________                                  December 19, 1996                                                                                      ____________________                    CYR, Circuit Judge.   Appellants Continental  Insurance                    CYR, Circuit Judge.                            _____________          Company   ("Continental")   and   Hartford    Insurance   Company          ("Hartford") (collectively:  "C&H" or "appellants") challenge the          district court's summary  judgment ruling under New York law that          damage from flooding was not  covered under the insurance  policy          issued  by  Arkwright Mutual  Insurance  Company ("Arkwright"  or          "appellee").  As  the district court  correctly applied New  York          law, we affirm.                                           I                                          I                                      BACKGROUND                                      BACKGROUND                                      __________                    In 1992,  Olympia  and York  Development Company,  L.P.          ("Olympia") owned a high-rise office building at 55 Water Street,          New York, New York  ("Water Street Building").  On  December 11th          of  that year, a  severe storm struck New  York City, causing the          Hudson and East  Rivers to  overflow their banks.   Flood  waters          entered the basement of the Water  Street Building through cracks          in  its foundation, resulting in more than one million dollars in          property damage.   Slightly  more than  half the  damage involved          energized electrical switching panels which had come into contact          with the flood waters.  The water immediately caused a phenomenon          known as "electrical arcing"1    an electrical short  circuit, in          lay terms     which in  turn caused an  immediate explosion  that                                        ____________________               1Electrical arcing is defined  as "the movement of electrons          from one point  to another."   Aetna Ins.  Co. v. Getchell  Steel                                         _______________    _______________          Treating  Co.,  395  F.2d 12,  17  (8th  Cir.  1968) (citing  Van          _____________          Norstrand, International Dictionary  of Physics and  Electronics;                     _____________________________________________________          Palmer, Craig  and Easton, World Book  Encyclopedia).  Electrical                                     ________________________          arcing "produces  heat  and  light,  but  does  not  involve  the          combustion of matter."  Id.                                  ___                                          2          blew  large holes  in the  switching panels.   C&H  appraised the          damage  to the  switching  panels  at  $581,225.    Much  of  the          remaining damage, appraised at  $445,592, occurred when the flood          waters  came in contact  with non-energized electrical equipment;          it involved no electrical arcing.                    At  the  time of  the  storm,  three separate  policies          provided various coverages for the Water Street Building.  Two of          the policies     identical "all risk"  policies separately issued          by appellants  Continental and  Hartford    insured  against "all          risks  including  Flood and  Earthquake"  up  to $75,000,000  per          occurrence for the one-year period beginning March 3, 1992.  Each          policy  underwrote fifty  percent of  the $75,000,000  "all risk"          coverage  on  identical terms  and  conditions,  and contained  a          $100,000 deductible for any  loss and damage arising out  of each          covered occurrence.  In addition, each "all risk" policy excluded          coverage  for  mechanical  or   electrical  breakdown  caused  by          artificially generated electrical currents.2                                        ____________________               2The policies stated, in pertinent part:                    8.  Perils Insured Against                        ______________________                    This  policy  insures  against  all  risk  of                    direct physical loss of or damage to property                    described   herein   except  as   hereinafter                    excluded.                    9.  Perils Excluded                        _______________                    This policy does not insure:                                        *   *   *                    c. against electrical  injury or  disturbance                    to electrical appliances, devices,  or wiring                    caused  by  electrical currents  artificially                    generated unless loss or  damage from a peril                    insured ensues  and  then this  policy  shall                    cover for such ensuing loss or damage.                                          3                    The  third  policy,  issued by  appellee  Arkwright,  a          Massachusetts  corporation,  afforded  $3,000,000,000   in  total          liability coverage  for the three-year period  between January 1,          1992 and January  1, 1995, on approximately forty buildings owned          by  Olympia around  the  world.   As  concerns the  Water  Street          Building  in  particular, the  Arkwright  policy  afforded up  to          $100,000,000 in covered property loss from flooding, subject to a          $75,000,000 deductible.   Thus, the Arkwright  policy principally          served  as  excess  "all  risk" coverage  above  the  $75,000,000                      ______                        _____          liability limit on the two separate "all risk" policies issued by          appellants Continental and Hartford.                      The  Arkwright  policy  on  the  Water  Street Building          included  a  "Special  Deductible  Endorsement,"  which  afforded          primary insurance coverage for mechanical or electrical breakdown          _______          by  substituting a  $50,000 deductible  for the  $75,000,000 "all          risk" deductible in  the Arkwright policy.   The $50,000  Special          Deductible    Endorsement   was   subject    to   the   following          qualifications:                    In the event of  insured loss or damage under                    __ ___ _____ __  _______ ____ __ ______ _____                    the  policy  to  which  this  endorsement  is                    ___  ______                    attached, the Loss or Damage  described below                              ___ ____ __ ______  _________ _____                    shall  be subject to the following deductible                    _____  __ _______ __ ___ _________ __________                    amount(s)  in   lieu  of  any   other  Policy                    ________   __   ____  __  ___   _____  ______                    deductible amount(s) except those  for Flood,                    __________ ________  ______ _____  ___ _____                    Earthquake   or   Service   Interruption   if                                                               __                    applicable:                      __________                                                                   [$50,000.00]                                    __________                                   *    *    *                    3.   Loss  or  damage   from  mechanical   or                         ____  __  ______   ____                         electrical  breakdown (except  by direct                         __________  _________                         lightning  damage)   of  any  equipment,                         unless  physical   damage  not  excluded                                          4                         results,  in  which  event this  Special                         Deductible  shall  not  apply   to  such                         resulting damage.  (Emphasis added.)                               Olympia submitted claims  to appellants Continental and          Hartford  for  the total  loss  sustained  at  the  Water  Street          Building.  It maintained that the  entire loss had been caused by          flooding and  therefore came  within the coverage  afforded under          the  two  primary  "all  risk"  policies  issued  by  appellants.          Continental  and  Hartford  promptly paid  $937,557  to  Olympia,          representing  coverage  for  the  entire  loss  less  a  $100,000          deductible,  then  claimed reimbursement  from Arkwright  for the          $581,225 loss to the electrical switching panels allegedly caused          by  electrical   arcing.    Arkwright   refused  to   contribute,          contending  that all damage to the Water Street Building had been          caused by, or resulted  directly from, flooding.  Relying  on the          Special Deductible  Endorsement language    "in lieu of any other          Policy deductible amount(s) except  those for Flood"    Arkwright          insisted that since the damage had been due to flood, the $50,000          deductible in  its endorsement  did not displace  the $75,000,000          deductible in its policy.                     Continental  and  Hartford  instituted  this  diversity          proceeding in  United States District  Court for the  District of          Massachusetts, seeking a judicial  declaration that Arkwright was          liable for the portion of the electrical switching panel loss due          to  electrical  arcing.   After  all  parties  moved  for summary          judgment  based  on  their  respective  interpretations   of  the          applicable New  York caselaw,  the district court  concluded that                                          5          under  the Arkwright  insurance contract,  including its  Special          Deductible Endorsement, as viewed by a reasonable business person          in the relevant circumstances, see Bird v. St. Paul Fire & Marine                                         ___ ____    ______________________          Ins. Co., 120 N.E.  86 (N.Y. 1918), the damage  to the electrical          ________          switching panels had been caused by flooding.3                    The district court  determined that in  identifying the          cause  of the  storm-related damage  to the  electrical switching          panels, a  reasonable business  person would not  have segregated          the flooding from the arcing.  The court based its  conclusion on          the fact  that the  $50,000  deductible is  made inapplicable  to          flood  loss by  the express  language in  the Special  Deductible          Endorsement excluding electrical breakdown  due to flood, as well          as the fact that all the damage occurred virtually simultaneously          at the same site.                                          II                                          II                                     DISCUSSION4                                     DISCUSSION                                     __________                                        ____________________               3The parties stipulated, consistent with established "choice          of law" principles, that New York law governs.  Under  the law of          Massachusetts, the  forum state,  the applicable  substantive law          would be supplied  by New  York, the jurisdiction  with the  most          significant  relationship  to  the  transaction.     See  Bi-Rite                                                               ___  _______          Enterprises  v. Bruce Miner Co.,  757 F.2d 440,  442-43 (1st Cir.          ___________     _______________          1985).               4We  review a grant of summary  judgment de novo.  Alexis v.                                                        __ ____   ______          MacDonald's  Restaurants of Mass.,  Inc., 67  F.3d 341,  346 (1st          ________________________________________          Cir. 1995).  It will be upheld if the record, viewed in the light          most  favorable to the nonmoving  party, shows 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).  Moreover, we  may affirm the district court  judgment "on          any  independently sufficient  ground."   Polyplastics,  Inc.  v.                                                    ___________________          Transconex, Inc., 827 F.2d 859, 860-61 (1st Cir. 1987).           ________________                                          6                    Appellants  Continental  and  Hartford   challenge  the          district  court  ruling  that   the  flooding,  rather  than  the          electrical  arcing, constituted the legal cause  of the damage to          the  electrical  switching  panels.    Their proximate  causation          analysis focuses  upon  what point  in the  "proverbial chain  of          causation" a particular cause ceases to be remote and becomes the          "legal  cause" of the damage.   See Richard  A. Fierce, Insurance                                          ___                     _________          Law--Concurrent   Causation:      Examination    of   Alternative          _________________________________________________________________          Approaches, 1985 S. Ill. U. L.J. 527, 534 (1986).            __________          1.   Causation under New York Law          1.   Causation under New York Law               ____________________________                    Appellants  first  contend  that  the   district  court          misapplied  New York  law  in ruling  that a  reasonable business          person  would consider the switching  panels to have been damaged          by  flood rather than  electrical arcing.   Under established New          York law governing  insurance contract interpretation, appellants          maintain, the district  court was required  to identify the  most          direct,  physical cause  of the  damage, or  what is  termed "the          dominant and  proximate cause."   Novick  v. United  Servs. Auto.                                            ______     ____________________          Ass'n,  639 N.Y.S.2d  469, 471  (App. Div.  1996).   According to          _____          appellants, the most direct,  physical cause of a loss  under New          York law  "is that which is  nearest to the loss  because [it] is          invariably the most direct and obvious cause."                      Appellants predicate their contention  principally upon          Home  Ins. Co. v. American Ins. Co.,  537 N.Y.S.2d 516 (App. Div.          ______________    _________________          1989), where water and steam precipitated electrical arcing which          in  turn damaged  electrical equipment  in a  high-rise building.                                          7          There the  New York Supreme Court, Appellate  Division, held that          electrical arcing, not steam, caused  the damage, since the steam          "merely set  the stage" for  the subsequent arcing  and therefore          constituted  the remote, rather than  the proximate, cause of the          loss.    Id.  at 517  ("'[T]he  causation  inquiry  stops at  the                   ___          efficient  physical cause of the  loss; it does  not trace events          back  to their metaphysical beginnings. . . .'") (quoting Pan Am.                                                                    _______          World Airways,  Inc. v. Aetna Cas. & Sur. Co., 505 F.2d 989, 1006          ____________________    _____________________          (2d  Cir.  1974)).    Similarly,  appellants  maintain  that  the          efficient, legal cause of  the damage to the switching  panels in          the present case was the  electrical arcing, whereas the flooding          merely  set the stage for the  arcing.5  Consequently, appellants          conclude, the district court need have looked no further than the          phenomenon of electrical arcing for the legal cause of the damage          to the switching panels.                                        ____________________               5Appellants cite numerous cases for the proposition that the          efficient,  legal  cause  of  a  loss  invariably  is  the  cause          "nearest" the loss.  See, e.g., Kosich v. Metropolitan Property &                               ___  ____  ______    _______________________          Cas.  Ins. Co., 626 N.Y.S.2d 618 (App. Div. 1995) ("efficient and          ______________          dominant cause" of damage from asbestos contamination  held to be          contamination itself  and not the chain-saw's  cutting into floor          which  precipitated  asbestos  release); Album  Realty  Corp.  v.                                                   ____________________          American Home Assur. Co.,  607 N.E.2d 804, 805 (N.Y.  1992) (loss          ________________________          following rupture of frozen sprinkler head not caused by freezing          but  by resulting  flooding); Loretto-Utica  Properties  Corp. v.                                        ________________________________          Douglas Corp.,  642  N.Y.S.2d 117,  118  (App. Div.  1996)  (loss          _____________          following  heaving of frozen ground not caused by freezing but by          movement  of earth); Morgan Guar. Trust  Co. v. Aetna Cas. & Sur.                               _______________________    _________________          Co.,  604 N.Y.S.2d 952,  953 (App.  Div. 1993)  (damage following          ___          flooding, caused not by flooding but by resulting corrosion); Pan                                                                        ___          Am. World Airways, Inc., 505 F.2d at 1006-07 (settled caselaw has          _______________________          established  a   "mechanical  test  of  proximate  causation  for          insurance  cases, a test that  looks only to  the 'causes nearest          the  loss,'" and not to "remote causes of causes") (quoting Queen                                                                      _____          Ins. Co.  v. Globe &  Rutgers Fire  Ins. Co., 263  U.S. 487,  492          ________     _______________________________          (1924) (Holmes, J.)).                                            8                    We  turn to  the  language in  the Arkwright  insurance          contract to determine whether the  damage to the switching panels          was legally caused by  flooding or electrical arcing.   Under New          York law, insurance  policies are to be interpreted in accordance          with their  terms.  See,  e.g., Frey  v. Aetna Life  & Cas.,  633                              ___   ____  ____     __________________          N.Y.S.2d 880, 882 (App. Div. 1995).                      In cases involving an  electrical breakdown not  caused          by lightning,  the Special  Deductible Endorsement  substitutes a          $50,000  deductible   for  the  $75,000,000  deductible   in  the          Arkwright  liability policy  proper,  except in  cases where  the          higher deductible for "Flood"  is "applicable."  Appellants would          have the court interpret the operative provision ("in lieu of any          other   Policy  amount(s)  except  those  for  Flood  .  .  .  if          applicable")  to  mean that  the  $75,000,000  deductible in  the          Arkwright liability  policy proper  applies only  if  there is  a          separate, specific  policy deductible  for flood damage.   Absent          such  a specific deductible for flood damage, appellants say, the          exception for  loss from  flooding found  in the  $50,000 Special          _________          Deductible  Endorsement  is   never  triggered;  therefore,   the          electrical breakdown damage to  the switching panels comes within          the  $50,000  Special   Deductible  Endorsement,  displacing  the          $75,000,000 deductible in the Arkwright policy itself.                     Appellants  misinterpret  the  plain  language  in  the          Special  Deductible  Endorsement,  which unambiguously  indicates          that the $50,000 deductible does not  apply if another deductible                                           ___  _____          for  flooding damage  does apply.    Furthermore, the  "all risk"                                ____ _____                                          9          general  liability  coverage  in   the  Arkwright  policy  itself          expressly insures against "loss or damage resulting from a single          occurrence," including flood.   Thus, the plain language employed          in  both the  Special  Deductible Endorsement  and the  Arkwright          general  liability  policy  itself,  compatibly   interpreted  in          context, means that damage  to mechanical or electrical equipment          proximately caused by flooding comes within  the exception to the                                                           _________          $50,000 Special Deductible Endorsement  and hence the $75,000,000          deductible in  the Arkwright general liability  policy applies in          such a situation.   See, e.g., Harris  v. Allstate Ins.  Co., 127                              ___  ____  ______     __________________          N.E.2d 816,  817 (N.Y. 1955) ("words of the policy are to be read          in context, the language construed fairly and reasonably  with an          eye to the object  and purpose to be  achieved by the  writing");          Moshiko,  Inc. v.  Seiger &  Smith, Inc.,  529 N.Y.S.2d  284, 287          ______________     _____________________          (App.  Div. 1988) (policy endorsements  to be read  in context of          general  liability provisions).    "Where the  provisions of  the          policy are 'clear and unambiguous, they must be given their plain          and ordinary  meaning . . .  .,'" United States  Fidelity & Guar.                                            _______________________________          Co.  v. Annunziata,  492 N.E.2d 1206,  1207 (N.Y.  1986) (quoting          ___     __________          Government Employees Ins. Co. v. Kligler, 42 N.Y.2d 863, 864, 397          _____________________________    _______          N.Y.S.2d 777, 366 N.E.2d 865 (1977)).6                                          ____________________               6Appellants' interpretation, on the other hand, renders  the          exception to  the Special Deductible Endorsement  mere surplusage          and  therefore is  disfavored.    See  Technicon Elec.  Corp.  v.                                            ___  ______________________          American Home  Assur. Co., 542  N.E.2d 1048, 1050-51  (N.Y. 1989)          _________________________          (rejecting interpretation  which  would render  exclusion  clause          meaningless in context);  Utica Mut. Ins.  Co. v. Preferred  Mut.                                    ____________________    _______________          Ins. Co.,  583 N.Y.S.2d 986, 987 (App.  Div. 1992) (similar).  In          ________          cases  involving an  electrical  breakdown, the  language of  the          Special  Deductible Endorsement  triggers the  $50,000 deductible                                          10          2.   Legal Cause of Loss          2.   Legal Cause of Loss               ___________________                    Given  the plain  language in  the Arkwright  insurance          contract, we must determine  the proximate or legal cause  of the          damage  to  the switching  panels,  bearing in  mind  that "[t]he          concept of proximate cause when applied to  insurance policies is          a limited one," especially under New York law.  Great N. Ins. Co.                                                          _________________          v. Dayco, 637 F. Supp.  765, 778 (S.D.N.Y. 1986).7   Moreover, in             _____          the context of an insurance contract, our inquiry may not proceed          beyond the dominant, efficient, physical cause of the loss.  Home                                                                       ____          Insurance,  537 N.Y.S.2d at 517.   Ultimate causation     or what          _________          the  Second   Circuit  has  referred  to   as  the  "metaphysical          beginnings"    is  not our concern.  Pan  Am. World Airways, Inc.                                               ____________________________          v. Aetna Cas. & Sur. Co., 505 F.2d 989, 1006 (2d Cir. 1974).             _____________________                    That  is not to  say, as  appellants suggest,  that the          court  is constrained to settle  upon the cause  nearest the loss                                        ____________________          "in lieu of any other Policy amount(s) except those for Flood . .          .  if applicable."   As  noted above,  appellants argue  that the          phrase  "other  Policy  amounts"  should be  read  to  mean other          specific deductible amounts not including the $75,000,000 general          deductible in  the Arkwright general liability policy.  But since          no  other deductible  amount for  flood exists  in the  Arkwright          policy covering  the Water  Street Building, and  appellants have          not been able to  demonstrate the existence of any  other special          flood deductible in the  entire Arkwright policy covering Olympia          properties in  general, their interpretation would  mean that the          phrase  "in lieu of other Policy amounts" is "mere surplusage"             as, indeed, appellants concede in their brief.               7Arkwright  maintained  at oral  argument  that  the Special          Deductible  Endorsement  excludes  arcing whenever  flood  is the          remote as  well  as the  proximate  cause  of the  damage.    Its          contention   fails,    since   the   required    plain   language          interpretation  dictates  an  end  to our  inquiry  at  proximate          causation.                                           11          without regard to other factors.8  Rather, we are "'to follow the          chain of causation so far,  and so far only as the  parties meant          that we should follow it.'"  Album Realty  Corp. v. American Home                                       ___________________    _____________          Assur. Co., 607 N.E.2d 804, 805 (N.Y. 1992) (quoting Goldstein v.          __________                                           _________          Standard Acc.  Ins. Co.,  236 N.Y.  178, 183,  140 N.E.  235, 236          _______________________          (1923)).    In  its seminal  discourse  on  the  "loss causation"          inquiry  under  an  insurance contract,  the  New  York Court  of          Appeals charted  the  course:   "[O]ur  guide is  the  reasonable          expectation and purpose of the  ordinary business man when making          an ordinary business contract.  It is his intention, expressed or          fairly to be inferred, that counts.  There are times when the law          permits us to go far back in tracing events to  causes."  Bird v.                                                                    ____          St.  Paul Fire  & Marine Ins.  Co., 120  N.E. 86,  87 (N.Y. 1918)          __________________________________          (Cardozo, J.).9                                        ____________________               8Nor  does  Pan Am.  World  Airways,  Inc., supra.,  support                           ______________________________  ______          appellants'  position.    It  held that  proximate  causation  is          determined by  a "mechanical .  . . test  that looks only  to the          causes nearest to the  loss."  565 F.2d at 1007 (emphasis added).          ______          Its  use  of  the  plural  permits more  than  one  cause  to  be          considered.   Moreover,  even the  language used by  the district          court  in  Great  N.  Ins.  Co.  v.  Dayco  is  qualified;  viz.,                     ____________________      _____                  ___          "generally  [we] are to stop our inquiries with the cause nearest           _________          to  the loss,"  637  F.Supp. 765,  778 (S.D.N.Y.  1986) (emphasis          added),making the rule something less than a mechanical mandate.                9As appellants  acknowledge, Bird  remains good law  to this                                            ____          day, and continues to be cited for its discussions on intent  and          proximate causation.  See R. Dennis Withers, Proximate Cause  and                                ___                    ____________________          Multiple Causation in First-Party  Insurance Cases, 20 Forum 256,          __________________________________________________          261  (January 1985) (citing Atlantic Cement Co., Inc. v. Fidelity                                      _________________________    ________          & Cas. Co. of N.Y., 459 N.Y.S.2d 425 (App. Div. 1983); Ace Wire &          __________________                                     __________          Cable Co. v. Aetna Cas. &  Sur. Co., 457 N.E.2d 761 (N.Y. 1983));          _________    ______________________          see also  Album Realty Corp.,  607 N.E.2d at  804; Pan Am.  World          ___ ____  __________________                       ______________          Airways, Inc., 505 F.2d at 1006.             _____________                                          12                    The Bird  case involved a fire insurance  contract on a                        ____          vessel.  Within the policy period, a fire of unknown origin broke          out beneath some freight cars loaded with explosives  and located          at a considerable distance from the pier where the insured vessel          was docked.    After burning  for approximately  30 minutes,  the          freight cars exploded, causing another fire, which in turn caused          a second explosion, the concussion from which damaged the insured          vessel  located some  1,000  feet from  the  site of  the  second          explosion.  No  fire reached the vessel.  Id.  at 86.  Then-Judge                                                    ___          Cardozo,  writing  for  New  York's  highest  court,  employed  a          pragmatic,  "commonsense appraisement" of  the circumstances, id.                                                                        ___          at  87  (citation  and  internal  quotation  marks  omitted),  in          determining  as a matter of  law that coverage  of the concussion          damage  sustained by the  vessel could not  be said  to have been          within the "range of  probable expectation" under a policy  which          protected against fire.  Id. at 88.                                    ___                    The critical consideration in  Bird was the "element of                                                   ____          proximity in space."  Id.  at 87.  As the initiating event    the                                ___          fire in  the freight cars     occurred a great distance  from the          insured  vessel, the court held that "there was never exposure to          its direct perils" and  that the exposure to its  indirect perils             i.e., the concussion  from the second explosion     came "only          through the presence of extraordinary conditions, the release and          intervention  of  tremendous   forces  of   destruction."     Id.                                                                        ___          Consequently,  the  court concluded,  reasonable  business people          would  not  have  expected  that an  insurance  policy  affording                                          13          protection against fire would cover damage to a vessel  following          successive concussions  precipitated by explosions caused  by the          fire in the distant freightyard.  As the Court of Appeals stated:                    The case  comes,  therefore, to  this.   Fire                                                             ____                    must reach the thing  insured, or come within                    ____ _____ ___ _____  ________ __ ____ ______                    such proximity  to it that  damage, direct or                    ____ _________  __ __ ____  _______ ______ __                    indirect, is within the compass of reasonable                    _________ __ ______ ___ _______ __ __________                    probability.  Then  only is it  the proximate                    ___________   ____  ____                    cause, because then only may  we suppose that                                             ___  __ _______ ____                    it   was  within  the  contemplation  of  the                    __   ___  ______  ___  _____________  __  ___                    contract.                    ________          Id. at 88 (emphasis added).            ___                    In sum,  absent an  explicit policy declaration  of the          parties' intention, the contemplation of their insurance contract          must  be  inferred  by  the  court  from  all  the  circumstances          surrounding the  loss, including whether a  peril insured against          came directly or indirectly within such proximity to the property          insured  that the damage  it sustained  fairly can  be considered          "within the compass of  reasonable probability."  Id.   Among the                                                            __          factors  which  must be  assessed  are the  spatial  and temporal          proximity between the insured peril and the claimed loss.  See R.                                                                     ___          Dennis Withers, Proximate Cause  and Multiple Causation in First-                          _________________________________________________          Party  Insurance Cases, 20 Forum  256, 260   (January 1985) (Bird          ______________________                                       ____          considers "proximity of  a cause as  a judgment to  be made  upon          matters of fact," including "proximity in space.").                      Our case involves no spatial or temporal attenuation at          all comparable to that  present in Bird.   The flood waters  came                                             ____          directly in  contact with the  electrical equipment in  the Water          ________          Street Building, instantaneously  precipitating the arcing  which                           _______________          in turn caused the  immediate short-circuiting and explosion that                              _________                                          14          damaged the switching panels.   At most, mere seconds  would have          elapsed from  the time  the flood  waters directly  contacted the          electrical  equipment  until   the  electrical  switching  panels          exploded.                     Where any  spatial and temporal  separation between the          covered  peril and  the  ensuing loss  is  so  minimal as  to  be          virtually nonexistent, Bird clearly contemplates that the loss be                                 ____          considered well  within the  "compass of  reasonable probability"          and  therefore  inferentially  within the  contemplation  of  the          parties to  the insurance  contract.  See  Bird, 120 N.E.  at 88.                                                ___  ____          Consequently,  given  the  absence  of  any  significant  spatial          separation  or temporal  remoteness  between the  insurgent flood          waters, the electrical  arcing and the explosion of the switching          panels, we  believe the  district court correctly  concluded that          flooding proximately caused the loss.                      More recent  New York  caselaw continues  implicitly to          recognize the significance of  what the Court of Appeals  in Bird                                                                       ____          called  the "element  of proximity in  space," see id.  at 87, as                                                         ___ __          well  as the temporal element.   In Home  Insurance, for example,                                              _______________          the  Court of Appeals recently  held electrical arcing  to be the                                               __________ ______          proximate cause of damage where arcing had been precipitated by a          gradual  intrusion of moisture.    The court  elucidated upon its          analysis as follows:                     There was no flow  of water directly onto the                    _____ ___ __ ____  __ _____ ________ ____ ___                    bus   duct   system.  Rather,   the  moisture                    ___   ____   _______  ______         ________                    saturated the duct  insulation and  supports,                    _________           __________                    which  had   deteriorated  due  to   age  and                    _____  ___   ____________  ___  __   ___  ___                    environment,  resulting  in breakdown  of the                    ___________                    insulation and permitting an  arc to result .                                   __________ __  ___ __ ______                                          15                    . .  . Upon review of the  record before this                    Court, we  find that .  . . the  steam merely                                                ___  _____ ______                    set the stage for the later event.                    ___ ___ _____ ___ ___ _____ _____          Home  Ins. Co.,  537  N.Y.S.2d at  517  (emphasis added).    This          ______________          passage  distinguishes an  intrusion of  water and  steam  into a          basement,   gradually   causing   moisture   to    seep   through          deteriorating building materials into a duct, from a situation in          which  water flows  directly onto  an electrical  system, causing          immediate  arcing and damage to  the electrical system.   In Home                                                                       ____          Insurance, substantial  time and  space separated the  peril (the          _________          water  and  steam  entering   the  basement)  from  the  eventual          electrical damage to the duct  system resulting from the moisture          gradually  generated by  the  water and  steam.   Also interposed          between  the  peril and  the damage  in  Home Insurance  were the                                                   ______________          deteriorating  insulation  and supports,  which  gave  rise to  a          considerably  greater  spatial  separation  than  occurred  here.          "There  is no use in arguing that  distance ought not to count if          life and experience tell us that it does."  Bird, 120 N.E. at 87.                                                      ____                    Thus,   neither  Bird   nor  Home   Insurance  involved                                     ____        ________________          circumstances similar  to the present, where  flood waters flowed          directly onto electrical equipment, immediately  precipitating in          turn the  instantaneous electrical arcing,  the short-circuiting,          and   the  explosion   which   damaged   the  switching   panels.          Accordingly, as the district court correctly ruled, the insurgent          flood waters cannot reasonably be thought simply to have "set the          stage"   for  a  remote  event,  or  to  have  been  merely  some                                          16          metaphysical  beginning  to  a succession  of  temporally  remote          events.                      Temporal remoteness and spatial  separation distinguish          many  recent New  York cases  cited by  appellants.10   Given the          importance placed upon temporal remoteness and spatial separation          in  Bird, 120 N.E. at 88,  the wellspring decision under New York              ____          law,  we conclude that the district court correctly held that the          legal  cause of the damage to the electrical switching panels was          the  flooding, not electrical arcing.11  We therefore hold that a          reasonable  business  person  would  consider   that  the  damage          sustained by the electrical switching  panels in the Water Street                                        ____________________               10See, e.g., Morgan  Guar. Trust  Co. v. Aetna  Cas. &  Sur.                 ___  ____  ________________________    ___________________          Co., 604  N.Y.S.2d 952, 953 (App.  Div. 1993) (microbiologically-          ___          induced  corrosion  occurring over  one-year period,  rather than          remote flooding which initiated  corrosion, held proximate  cause          of  damage to electrical duct); Album Realty Corp., 607 N.E.2d at                                          __________________          805 (electrical damage precipitated by water which was emitted by          frozen sprinkler  and filled basement,  held to have  been caused          not  by freezing  but  by the  more  proximate flooding).    Such          temporal  and spatial  considerations likewise  distinguish other          New  York cases not  involving electrical breakdown.   See, e.g.,                                                                 ___  ____          Kosich v. Metropolitan Property & Cas. Ins. Co., 626 N.Y.S.2d 618          ______    _____________________________________          (App. Div.  1995) (contractor's cutting into  vinyl flooring with          chain saw merely "set in motion a chain of events that ultimately          resulted"  in loss  from asbestos  contamination); Pan  Am. World                                                             ______________          Airways, Inc.,  505 F.2d at  1006-07 (in airline  hijacking case,          _____________          general history  of  unrest  throughout  Middle  East,  extending          through three wars  and several  countries, is too  remote to  be          considered  cause for  loss  under "war  risk"  insurance due  to          "reasonable expectations of  businessmen").                11Although  the  district  court  relied  upon  a conversion          theory  derived  from Bird     i.e.,  that  the exception  to the                                ____          Special Deductible Endorsement converted a more remote cause into          the proximate cause    it concluded as well that any temporal and          spatial  separation  between the  flood  and  the damage  to  the          switching panels had been virtually nonexistent.   In all events,          we  may   affirm  on  any   ground  supported   by  the   record.          Polyplastics, Inc. v. Transconex, Inc., 827 F.2d 859, 860-61 (1st          __________________    ________________          Cir. 1987).                                           17          Building, just as  any other  water damage to  the building,  was          caused by  flood.   That is  to say,  as then-Judge Cardozo  did,          since the  flood  waters surged  onto  the site  of the  loss,  a          reasonable  business  person would  consider  the  damage to  the          electrical switching panels to have been "within  the danger zone          of ordinary  experience," see id.  at 87, and  consequently would                                    ___ __          expect the  Continental and Hartford flood  policy coverages, not          the Arkwright  Special Deductible Endorsement, to  afford Olympia          indemnification  for  the  loss.   Thus,  the  exception  to  the          Arkwright Special Deductible Endorsement applies.            3.   Appropriateness of Summary Judgment           3.   Appropriateness of Summary Judgment                ___________________________________                    Finally,  we  turn  briefly  to  appellants'  alternate          contention.  Continental and Hartford argue that the inquiry into          the  dominant and efficient cause of the loss presents a question          of  fact inappropriate  for  summary judgment.    Once again,  we          disagree.                    Generally speaking, the  determination as  to which  of          two causes was the dominant and  efficient cause of a loss is for          the factfinder.   See, e.g., Molycorp, Inc. v. Aetna  Cas. & Sur.                            ___  ____  ______________    __________________          Co.,  431 N.Y.S.2d  824,  825-26 (App.  Div.  1980); Novick,  639          ___                                                  ______          N.Y.S.2d at 471.  The trial  courts in the cited cases,  however,          were presented with  a factual question  as to  which of the  two          perils  physically caused the  loss.  In  our case, on  the other                  __________ ______          hand,   there  is   no  dispute   concerning  the   physical,  as                              __  _______          distinguished from the legal,  cause of the damage     i.e., what          physical phenomenon precipitated the alteration to the electrical                                          18          switching panels.12  As  the New York Court of  Appeals explained          in Bird:   "For the physicist one thing is cause, for the jurist,             ____          another."  Bird, 120 N.E. at  88.  Thus, the question before this                     ____          court, as in Bird, is the question of law already resolved above:                       ____                     ___          What would the  New York courts determine to have  been the legal          or proximate cause of the loss?  Like the district court, we hold          that flood was the legal cause of the loss in this case.                                         III                                         III                                      CONCLUSION                                      CONCLUSION                                      __________                    As the district court correctly applied the controlling          New York law,  the judgment is  affirmed.   Costs are awarded  to                                          ________    _____ ___ _______  __          appellee.          ________                    SO ORDERED.                    SO ORDERED.                    __ _______                                                    ____________________               12As support for their claim that trialworthy issues of fact          remain,  appellants point  to  a letter  written to  Arkwright by          David  Passman, an  insurance broker  for  Olympia.   The Passman          letter  is said  to contradict  the affidavit  of  Olympia's risk          manager,  David  Roth,  who  filed the  claim  for  loss  against          appellants only, based on his  understanding that all the  damage          stemmed from flooding within the contemplation of their policies.          But though  the Passman letter contends that the Arkwright policy          affords coverage, it does not assert that the physical damage was          facilitated  by any phenomenon other than flood, nor does it take          issue with the sequence of events as found by the district court.          Thus,  the  Passman letter  raised  no  trialworthy  issue.   See                                                                        ___          Guzman-Rivera v. Rivera-Cruz, 29 F.3d 3, 4 (1st Cir. 1994).          _____________    ___________                                          19
