                                                                              FILED
                                                                  United States Court of Appeals
                                      PUBLISH                             Tenth Circuit

                      UNITED STATES COURT OF APPEALS                   February 13, 2018

                                                                      Elisabeth A. Shumaker
                             FOR THE TENTH CIRCUIT                        Clerk of Court
                         _________________________________

BLACK & VEATCH CORPORATION,

      Plaintiff - Appellant,

v.                                                          No. 16-3359

ASPEN INSURANCE (UK) LTD;
LLOYD’S SYNDICATE 2003,

      Defendants - Appellees.
                      _________________________________

                     Appeal from the United States District Court
                              for the District of Kansas
                           (D.C. No. 2:12-CV-02350-SAC)
                       _________________________________

David T. Dekker of Pillsbury Winthrop Shaw Pittman LLP, Washington, D.C. (David L.
Beck of Pillsbury Winthrop Shaw Pittman LLC, Washington, D.C. , and Roy Bash of
Polsinelli PC, Denver, Colorado, with him on the brief) for Plaintiff – Appellant.

Robert J. Franco (Andrew C. Patton and Scott O. Reed with him on the brief), of Franco
& Moroney, LLC, Chicago, Illinois, for Defendants – Appellees.
                       _________________________________

Before BRISCOE, MATHESON, and PHILLIPS, Circuit Judges.
                  _________________________________

MATHESON, Circuit Judge.
                   _________________________________

      This case is an insurance coverage dispute between Plaintiff-Appellant Black &

Veatch Corporation (“B&V”) and Defendants-Appellees Aspen Insurance (UK) Ltd. and

Lloyd’s Syndicate 2003 (collectively, “Aspen”). The issue is whether Aspen must
reimburse B&V for the costs B&V incurred due to damaged equipment that its

subcontractor constructed at power plants in Ohio and Indiana. The district court held

that Aspen need not pay B&V’s claim under its commercial general liability (“CGL”)

insurance policy (the “Policy”) because B&V’s expenses arose from property damages

that were not covered “occurrences” under the Policy. Because the only damages

involved here were to B&V’s own work product arising from its subcontractor’s faulty

workmanship, the court concluded that the Policy did not provide coverage and granted

Aspen’s motion for partial summary judgment. B&V appealed.

       The district court had diversity jurisdiction under 28 U.S.C. § 1332. We exercise

appellate jurisdiction under 28 U.S.C. § 1291. Because we predict that the New York

Court of Appeals would decide that the damages here constitute an “occurrence” under

the Policy, we vacate the court’s summary judgment decision and remand for further

consideration in light of this opinion.

                                    I. BACKGROUND
                                  A. Factual Background
       B&V is a global engineering, consulting, and construction company. A portion of

its work involves “EPC contracts.” “EPC” stands for engineering, procurement, and

construction. Under an EPC contract, B&V delivers services under a single contract. It

supervises the project and typically subcontracts most—if not all—of the actual

procurement and construction work.

1. Underlying Claim Against B&V for Property Damages




                                            2
       In 2005, B&V entered into EPC contracts with American Electric Power Service

Corporation (“AEP”) to engineer, procure, and construct several jet bubbling reactors

(“JBRs”), which eliminate contaminants from the exhaust emitted by coal-fired power

plants.1 For at least seven of these JBRs, which were located at four different power

plants in Ohio and Indiana, B&V subcontracted the engineering and construction of the

internal components to Midwest Towers, Inc. (“MTI”). Deficiencies in the components

procured by MTI and constructed by MTI’s subcontractors caused internal components

of the JBRs to deform, crack, and sometimes collapse.

       After work on three of the JBRs was completed, and while construction of four

others was ongoing, AEP alerted B&V to the property damage arising from MTI’s

negligent construction. AEP and B&V entered into settlement agreements resolving their

disputes relating to the JBRs at issue here. Under the agreements, B&V was obligated to

pay more than $225 million in costs associated with repairing and replacing the internal

components of the seven JBRs.

2. The B&V-Aspen CGL Policy

       B&V had obtained several insurance policies to cover its work on these JBRs.2

Zurich American Insurance Company (“Zurich”) provided the primary layer of coverage


       1
       AEP entered the EPC contracts in its own capacity and as an agent for other
power companies. We refer to these companies collectively as “AEP.”
       2
          B&V entered the Lloyd’s of London (“Lloyd’s”) insurance market to negotiate
an insurance policy that would cover its potential liability as an EPC contractor. Lloyd’s
is not an insurance company but rather a specialist insurance market within which
multiple financial backers come together to pool and spread risk. U.S.-based insurance
brokers cannot directly access the Lloyd’s insurance market, so B&V’s brokers were
                                            3
for up to $4 million for damage to completed work. Under the CGL Policy at issue here,

Aspen provides the first layer of coverage for claims exceeding the Zurich policy’s

limits.3 The Policy limits coverage up to $25 million per occurrence and $25 million in

the aggregate. The structure of the Policy consists of (a) a basic insuring agreement

defining the general scope of coverage, (b) exclusions from coverage, and (c) exceptions

to the exclusions.

       a. Basic insuring agreement

       The Policy’s basic insuring agreement reads:

       We [the Insurer] will pay on behalf of the “Insured” those sums in excess of
       the [liability limit provided by other insurance policies] which the
       “Insured” by reason of liability imposed by law, or assumed by the
       “Insured” under contract prior to the “Occurrence”, shall become legally
       obligated to pay as damages for:

              (a) “Bodily Injury” or “Property Damage” . . . caused by an
                  “Occurrence” . . .

ROA, Vol. 1 at 68.

       It defines the key terms as follows:

    Occurrence: “an accident, including continuous or repeated exposure to
     substantially the same general harmful conditions, that results in ‘Bodily Injury’ or
     ‘Property Damage’ that is not expected or not intended by the ‘Insured’.” Id.
     at 71.

    Property Damage: “physical injury to tangible property of a ‘Third Party’,
     including all resulting loss of use of that property of a ‘Third Party’ . . . .” Id.
     at 72.


required to use an intermediary known as a “wholesale” broker to negotiate the insurance
policy.
        3
          Liberty Mutual Insurance Europe (UK), Ltd. provided the second layer of excess
coverage.
                                              4
    Third Party: “any company, entity, or human being other than an ‘Insured’ or
     other than a subsidiary, owned or controlled company or entity of an ‘Insured’.”
     Id.

       In sum, the Policy covers damages arising from an “occurrence,” which includes

an accident causing damage to the property of a third party. It does not define “accident.”

       b. Exclusions

       Following the basic insuring agreement, the Policy then scales back coverage

through several exclusions, two of which are relevant here. The first, known as the

“Your Work” exclusion, or “Exclusion F,” excludes coverage for property damage to

B&V’s own completed work. It reads:

       This policy does not apply to . . . ‘Property Damage’ to ‘Your Work’
       arising out of it or any part of it and included in the ‘Products/Completed
       Operations Hazard.’

Id. at 74. “Products/Completed Operations Hazard” refers to property damage or

bodily injury arising out of completed work. Id. at 72. “Your Work” is defined as

“work operations performed by you or on your behalf” by a subcontractor. Id. at

73. References to B&V’s own work thus include work done by B&V as well as

MTI.

       The second exclusion, known as “Endorsement 4,” excludes coverage for

property damage to the “particular part of real property” that B&V or its

subcontractors were working on when the damage occurred. Id. at 83. This

exclusion pertains only to ongoing, rather than completed, work.

       c. Exception



                                            5
       The “Your Work” exclusion is subject to an exception, thus restoring some

coverage. The exception provides that “[the ‘Your Work’ exclusion] does not

apply if the damaged work or the work out of which the damage arises was

performed on [B&V’s] behalf by a subcontractor.” Id. at 74 (emphasis added).

In other words, the Policy does not cover property damage to B&V’s own

completed work unless the damage arises from faulty construction performed by a

subcontractor. We refer to this as the “subcontractor exception.”

                                  B. Procedural History

       B&V submitted claims to its liability insurers for a portion of the $225 million it

cost to repair and replace the defective components. After B&V recovered $3.5 million

from Zurich, its primary insurer,4 it sought excess recovery from Aspen. Aspen denied

coverage. B&V sued Aspen in federal district court for breach of contract and

declaratory judgment as to B&V’s rights under the Policy. B&V sought coverage for

approximately $72 million, a portion of the total loss. On cross-motions for partial

summary judgment on the coverage issue, the court sided with Aspen, holding that

damage arising from construction defects was not an “occurrence” under the Policy

unless the damage occurred to something other than B&V’s own work product. Because




       4
        Zurich paid its full completed operations aggregate limit of $4 million, less the
$500,000 deductible, for the damages incurred.

                                             6
the damages here occurred only to the B&V’s own work product—the JBRs—the court

found they were not covered.5 This appeal followed.

                                    II. DISCUSSION

       We begin with our standard of review. We then discuss standard-form CGL

policies, relevant New York law regarding CGL policies and insurance contract

interpretation, and the relevance of our decision in Greystone Construction, Inc. v.

National Fire & Marine Insurance Co., 661 F.3d 1272, 1289 (10th Cir. 2011), which

addressed a similar coverage issue. Interpreting the Policy in light of applicable law, we

conclude the district court erred in determining that a subcontractor’s faulty workmanship

causing damage to an insured’s own work can never be an “occurrence.”

       The threshold and primary question is whether the New York Court of Appeals,

the highest court in the State of New York, would hold that the Policy’s basic insuring

agreement covers the property damage to the JBRs as an “occurrence.” Greystone, 661

F.3d at 1282 (explaining that in the absence of a decision by the highest court of a state,

we follow a decision by an intermediate court unless we find a convincing reason to do

otherwise). We conclude the damages constitute an “occurrence” under the Policy

because they were accidental and harmed a third party’s property. Further, a contrary

reading would render the “subcontractor exception” and “Endorsement 4” mere

surplusage, in violation of New York law. The subcontractor exception does not create

coverage. Only the basic insuring agreement can do that. But the subcontractor


       5
      As described above, the Policy defines B&V’s “work” as work performed by
B&V or by a subcontractor on B&V’s behalf. See ROA, Vol. 1 at 73.
                                             7
exception informs our understanding of an “occurrence” based on New York’s rule that

we should read the insurance policy as a whole and avoid interpretations that render

provisions meaningless. Applying these analytical tools, we predict the New York Court

of Appeals would conclude that the damages at issue here are “occurrences” under the

Policy’s basic insuring agreement.

       New York state court decisions have not resolved whether subcontractor damages

can be deemed an “occurrence” under a CGL policy containing a subcontractor

exception. The district court and Aspen contend that New York courts have answered

this question, relying heavily on George A. Fuller Co. v. United States Fidelity and

Guaranty Co., 613 N.Y.S.2d 152, 153 (N.Y. App. Div. 1994), and other intermediate

appellate court decisions. But they ignore a critical distinction between Fuller and the

present case. The court in Fuller considered a CGL policy that excluded coverage for

damages to an insured’s own work, whether the damage was caused by the contractor or

a subcontractor. Unsurprisingly, Fuller concluded that the particular policy in that case

was not intended to insure against faulty workmanship in the work product itself. Id.

at 155. The decision offered no analysis regarding policies, such as the one here,

explicitly stating that damages to an insured’s own work are covered when a

subcontractor, rather than the contractor itself, performed the faulty workmanship. In

other words, Fuller does not stand for the proposition that damages caused by a

subcontractor’s faulty workmanship can never constitute an “occurrence” under a CGL

policy. For this and other reasons more fully explained below, Fuller and the cases that



                                             8
rely on it are inapt and distinguishable. We thus reverse the district court’s holding that

denied coverage and remand for further proceedings in light of this opinion.6

                                    A. Standard of Review

       We review summary judgment de novo and apply the same legal standard as the

district court. Cornhusker Cas. Co. v. Skaj, 786 F.3d 842, 849 (10th Cir. 2015). A court

“shall grant summary judgment if the movant shows that there is no genuine dispute as to

any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ.

P. 56(a); see also Cornhusker, 786 F.3d at 850. We also review legal questions de novo,

including the district court’s interpretation of New York law, which the parties agree

governs here. See Bird v. West Valley City, 832 F.3d 1188, 1199 (10th Cir. 2016).

“Where the state’s highest court has not addressed the issue presented, the federal court

must determine what decision the state court would make if faced with the same facts and

issue.” Id. (quotations omitted).

                             B. Standard-Form CGL Policies

       A CGL policy covers the costs a policyholder incurs due to property damage and

bodily injury. See Donald S. Malecki, Commercial General Liability Coverage Guide,

The National Underwriter Company at 9 (10th ed. 2013) (“CGL Coverage Guide”). In

this section, we describe: (1) the structure and (2) the history and development of CGL

policies.


       6
        The district court held only that the damages at issue here could not constitute a
coverage-triggering “occurrence” under the Policy, so it did not proceed to the next step
of determining the effect of any Policy exclusions or exceptions to the exclusions. It
should do so on remand.
                                              9
1. Structure of Standard-Form CGL Policies

       Most CGL policies are drafted using standardized forms developed by the

Insurance Services Office, Inc. (“ISO”), an association of insurance carriers. See

Hartford Fire Ins. Co. v. California, 509 U.S. 764, 772 (1993). ISO maintains a large

portfolio of “endorsements,” language that can be used to amend a standard CGL policy

to suit the needs of the insured or insurer. CGL Coverage Guide at 177. Policies that

deviate from the standard CGL policy forms and endorsements are called “manuscript”

policies. See Gabarick v. Laurin Mar. (Am.), Inc., 650 F.3d 545, 554 (5th Cir. 2011)

(explaining that manuscript policies are tailored to the unique coverage needs of the

insured); Bangert Bros. Const. Co. v. Americas Ins. Co., 66 F.3d 338, at *2 (10th Cir.

1995) (unpublished table decision).

       The basic structure of standard CGL policies mirrors the three-part structure of the

B&V-Aspen Policy described above. CGL policies begin with the “basic insuring

agreement” defining the initial scope of coverage. An insured cannot recover for

property damages that fall outside this definition. The basic insuring agreement is then

subject to exclusions, which narrow the scope of coverage. The exclusions are then

subject to exceptions, which restore coverage—but only to the extent coverage was

initially included in the basic insuring agreement.

       a. Basic insuring agreement

       CGL policies begin with a broad grant of coverage in the basic insuring

agreement. An “occurrence” triggers coverage. CGL policies—including the Policy

here—define an “occurrence” as “an accident, including continuous or repeated exposure

                                             10
to substantially the same general harmful conditions.” CGL Coverage Guide, App. K:

2013 Claims-Made Form, at 558. Neither the standard CGL policy nor the Policy in this

case defines the term “accident.”

       b. Exclusions—and exceptions to exclusions

              i. Overview

       The scope of the basic insuring agreement for damages caused by an “occurrence”

is then limited by any exclusions from coverage that the parties include in the policy. In

other words, a CGL policy starts with a broad grant of coverage for damages arising from

an “occurrence.” Exclusions narrow the scope of coverage. For example, CGL policies

generally exclude coverage for damages that the insurer “expected or intended.” See id.

at 543. Exceptions to the exclusions may restore—but do not create—coverage.

              ii. The “Your Work” exclusion and “subcontractor exception”

       One of the standard-form CGL exclusions and its corresponding exception is

identical to the “Your Work” exclusion and “subcontractor exception” in the Policy here.

See CGL Coverage Guide, App. K: 2013 Claims-Made Form, at 547.7 In the standard-

form CGL policy, this exclusion is listed as “Exclusion L.” Id. In the Policy, it is listed

as “Exclusion F.” For consistency, we refer to this provision as the “Your Work”

exclusion.



       7
        Under this exclusion, a CGL insurance policy does not apply to “‘[p]roperty
damage’ to ‘your work’ arising out of it or any part of it and included in the ‘products-
completed operations hazard.’” CGL Coverage Guide, App. K: 2013 Claims-Made
Form, at 547.

                                             11
       As in the Policy and the standard-form CGL policy, the “subcontractor exception”

follows the “Your Work” exclusion. This exception provides that the “Your Work”

exclusion “does not apply if the damaged work or the work out of which the damage

arises was performed on your behalf by a subcontractor.” Id.

2. History and Development of CGL Policies

       The history and development of CGL policies guide our interpretation of the

Policy at issue here.8 The standard-form CGL policy has undergone several revisions

since the first one was promulgated in 1940. The 1973 standard-form CGL policy

precluded coverage for property damage to an insured’s own completed work, regardless

of whether the damages were caused by work completed by the contractor or “on [its]

behalf” by a subcontractor. CGL Coverage Guide, App. A: 1973 CGL Form (excluding

coverage for “property damage to work performed by or on behalf of the named insured”

(emphasis added)); see Christopher C. French, Revisiting Construction Defects as

“Occurrences” Under CGL Insurance Policies, 19 U. Pa. J. Bus. L. 101, 107 (2016)

(“French”). The 1973 version of the “Your Work” exclusion did not contain a

subcontractor exception. Instead, subcontractor-caused damage was considered a risk

inherent to the construction business and explicitly excluded from coverage in CGL

policies.

       By 1976, general contractors, who were increasingly reliant on subcontractors’

work, had become dissatisfied with the lack of CGL policy coverage when the general


       8
         As explained above, the key policy language at issue in this case is materially
identical to the language used in standard-form CGL policies.
                                            12
contractor was not directly responsible for defective work. See Steven Plitt et al., 9A

Couch on Ins. § 129:19 (3rd ed. 2017) (“Plitt”). In response, the 1976 standard-form

CGL policy eliminated the phrase “or on behalf of” from the “Your Work” exclusion.

The policy thus broadened coverage by no longer excluding damages arising from faulty

subcontractor work. Contractors could pay a higher premium to add additional coverage

for property damage arising from completed work that had been performed by

subcontractors. Id.; see also French at 107. This optional coverage provision was known

as the “Broad Form Property Damage Endorsement” (“BFPD Endorsement”) and

provided that the policy only excluded “property damage to completed work performed

by the named insured.” CGL Coverage Guide, App. A: Broad Form Endorsement,

at 295; see also Plitt at § 129:19. “Unfortunately, the courts [have failed to] recognize

the importance of this language change.” Philip L. Bruner, et al., § 11:259 Completed

operations work exclusion—Generally, Bruner & O’Connor Construction Law (2017)

(“Bruner”).

       In 1986, the ISO attempted to clear up this confusion by expressly stating in the

standard-form CGL policy that the “Your Work” exclusion does not apply “if the

damaged work . . . was performed . . . by a subcontractor.” See CGL Coverage Guide,

App. B: 1986 Occurrence Form, at 299; see also Bruner at § 11:259. Since then, the ISO

standard-form CGL policy has contained materially identical language to the “Your

Work” exclusion and “subcontractor exception” language that appears in the Policy here.

The ISO explained that this revision was intended to clarify that CGL policies “cover[ed]

. . . damage to, or caused by, a subcontractor’s work after the insured’s operations are

                                             13
completed.” Ins. Servs. Office, Inc., Commercial General Liability Program

Instructions Pamphlet, Circular No. GL-86-204 (July 15, 1986) (“ISO 1986 Circular”)

(emphasis added). The “Your Work” exclusion, in other words, is inapplicable when

damage arises from a subcontractor’s faulty workmanship.

       As one commentator explained, by 1986, insurance carriers and policyholders

agreed that CGL policies should cover defective construction claims “so long as the

allegedly defective work had been performed by a subcontractor rather than the

policyholder itself.” French at 108 (quoting 2 Jeffrey W. Stempel, Stempel on Insurance

Contracts § 14.13[D], at 14-224.8 (3d ed. Supp. 2007) (“Stempel”)). “This resulted both

because of the demands of the policyholder community (which wanted this sort of

coverage) and the view of insurers that the CGL was a more attractive product that could

be better sold if it contained this coverage.” Id. (quoting Stempel at 14-224.8).

       In the context of ongoing work, the standard-form CGL policy excludes coverage

for property damage to “[t]hat particular part of real property on which you or any

contractors or subcontractors working . . . on your behalf are performing operations, if the

‘property damage’ arises out of those operations.” CGL Coverage Guide, App. B: 1986

Occurrence Form, at 298; see also ISO 1986 Circular (explaining that the policy covers

“damage caused by faulty workmanship to . . . parts of work in progress” other than what

the contractor or subcontractors were working on). In other words, the policy excludes

damage to “that particular part” of the project upon which the insured’s operations were

being performed at the time the damage occurred, but it covers damage to property other

than “that particular part.” This is the current understanding of the phrase “that particular

                                             14
part” in the insurance industry today. Scott C. Turner, “That particular part” limitation,

Insurance Coverage of Construction Disputes § 29:7 (2d ed. 2017).

       In sum, since 1986, the standard-form CGL policy has covered the cost of

property damage to (1) completed projects, when the damage is due to subcontractors’

faulty work, and (2) ongoing work, when faulty workmanship damages property other

than “that particular part” on which the contractor or subcontractor was working at the

time the damage occurred. Again, this assumes that a CGL policy’s basic insuring

agreement provides coverage for such damages in the first instance.

                      C. New York Law Interpreting CGL Policies

1. Definition of “Accident”

       Neither the standard-form CGL policy nor the Policy here defines the term

“accident.” The New York Court of Appeals has held that damages are accidental so

long as they are “unexpected and unintentional.” Cont’l Cas. Co. v. Rapid-American

Corp., 609 N.E.2d 506, 510 (N.Y. 1993). These terms are to be construed as barring

coverage “only when the insured intended the damages.” Id. (emphases added). The fact

that an insured might have foreseen the possibility that its subcontractor would build a

defective product does not render the resulting damages intentional—and thus not

covered—under the policy. See id. (acknowledging that a policyholder might take a

“calculated risk” without expecting or intending the resulting damages).

2. General Principles of Contract Interpretation

       New York courts recognize that “[a]n insurance agreement is subject to principles

of contract interpretation.” Burlington Ins. Co. v. NYC Transit Auth., 79 N.E.3d 477, 481

                                            15
(N.Y. 2017) (quotations omitted). “[I]n determining a dispute over insurance coverage,

[courts] first look to the language of the policy.” Roman Catholic Diocese of Brooklyn v.

Nat’l Union Fire Ins. Co. of Pittsburgh, 991 N.E.2d 666, 671 (N.Y. 2013) (quotations

omitted). In doing so, they must “construe the [CGL] policy in a way that affords a fair

meaning to all of the language employed by the parties in the contract and leaves no

provision without force and effect.” Id. at 671-72 (quotations omitted) (applying the rule

in determining whether separate incidents constituted one or multiple “occurrences”

under a CGL insurance policy). The New York Court of Appeals recently reiterated this

rule in In re Viking Pump, Inc., explaining that an interpretation of a contract that renders

a provision surplusage is one “that cannot be countenanced under [New York courts’]

principles of contract interpretation.” 52 N.E.3d 1144, 1154 (N.Y. 2016) (citing Roman

Catholic Diocese, 991 N.E.2d at 666).

                                D. Relevance of Greystone

       The parties discuss this court’s Greystone decision in their briefs, and we wish to

address its relevance to this case. In Greystone, the issue was “whether property damage

caused by a subcontractor’s faulty workmanship is an ‘occurrence’ for purposes of a

[CGL] policy.” 661 F.3d at 1276. Homeowners had sued a general contractor, asserting

defective construction by a subcontractor that had installed the foundation of the home.

The claim was premised on the theory that the house was damaged due to a

subcontractor’s negligent design and construction of the home’s soil-drainage and

structural elements, which exposed the foundation to shifting soils. Id. Over time, soil

expansion caused the foundation to shift, resulting in extensive damage to the upper

                                             16
living area. Id. The contractor sought coverage from its insurer. Id. We determined that

some of the damages constituted an “occurrence” under the policy.

       Although Colorado law applied, a significant portion of the opinion was not tied to

Colorado law. Interpreting the policy, which was materially the same as the Policy here,

this court followed the strong trend of state supreme court case decisions interpreting the

term “occurrence” to encompass accidental damage to property resulting from poor

workmanship. Id. at 1282-83 (collecting cases). The panel also relied on general

principles of contract interpretation—such as construing the policy in accordance with its

plain meaning and avoiding surplusage—which are the same principles under New York

law and equally applicable here. In this regard, Greystone is relevant and helpful to our

analysis in this case.9


       9
         Greystone, however, is inapplicable here to the extent it relied on Colorado law
that varies from New York law. Colorado, for example, defines “accident” more
narrowly—damages are accidental when they are “unanticipated” or “unforeseeable.”
See Greystone, 661 F.3d at 1285 (citing Union Ins. Co. v. Hottenstein, 83 P.3d 1196,
1201 (Colo. App. 2003)). Because a contractor’s “obligation to repair defective work is
neither unexpected nor unforeseen,” damage to the contractor’s work arising from
defective construction was not accidental. Id. at 1286. Applying Colorado law,
Greystone concluded that such damages—i.e., to the home’s soil-drainage and structural
elements—were not a covered “occurrence” under the policy. Id. “Conversely, when a
subcontractor’s faulty workmanship causes unexpected property damage to otherwise
nondefective portions of the builder’s work, the policies provide coverage.” Id.
(emphasis added). Greystone defined “nondefective property” as “property that has been
damaged as a result of poor workmanship.” Id. at 1284. The damage to the home’s
upper living areas was thus a covered “occurrence.”
       New York law, by contrast, provides that damages are non-accidental “only when
the insured intended the damages.” Cont’l Cas. Co., 609 N.E.2d at 510 (emphases
added). Thus, even if damages were anticipated or foreseeable, they would still be
accidental—unless the contractor intended that they occur. Greystone’s definition of
“accident,” and its resulting distinction between defective and nondefective work, is thus
linked to Colorado law that differs from New York’s broader construction of the term
                                            17
                                      E. Analysis

       The issue is whether the New York Court of Appeals would find that B&V’s

policy with Aspen covers a portion of the payments that B&V made to AEP to repair and

replace the damaged JBRs. Our analysis concludes that it would, based on (1) the

Policy’s language and New York’s rule against surplusage, (2) the history and

development of CGL policies, (3) the trend among state supreme courts, and (4) the lack

of New York appellate court decisions precluding a finding of “occurrence” under this

particular Policy.10

1. Damage to the JBRs Was an “Occurrence” Under the Policy

       We first address whether, under New York contract law, B&V is seeking payment

from Aspen for a covered “occurrence”—the first step necessary for obtaining coverage

under a CGL insurance policy. See Greystone, 661 F.3d at 1281. CGL insurance

policies are contracts, see Roman Catholic Diocese, 991 N.E.2d at 671, which New York

courts interpret in light of their plain meaning, Callahan v. Carey, 909 N.E.2d 1229, 1233

(N.Y. 2009). We start with the Policy terms and definitions, which are materially


“accident.” In any event, counsel for B&V said at oral argument that “all of the damage
[B&V] seek[s] in this case is to nondefective work,” see Oral Arg. at 2:41-46, so any
distinction between defective and nondefective work is immaterial here.
       10
          The dissent contends that in determining how the New York Court of Appeals
would decide this case, “we must apply relevant New York case law,” Dissent at 3. We
agree. The dissent overlooks that this opinion draws from cases decided by the New
York Court of Appeals to support its analysis, including cases defining “accident” for
purposes of determining CGL policy coverage and providing principles of contract
interpretation to understand CGL policy terms. For example, in Viking Pump, the New
York Court of Appeals reaffirmed the key principle that contracts must be read to avoid
rendering any provision surplusage.
                                           18
identical to the ISO’s standard-form CGL policy. Under the Policy, an “occurrence” is

an “accident . . . that results in ‘Bodily Injury’ or ‘Property Damage’ that is not expected

or not intended by the ‘Insured.’” An occurrence triggers coverage. We examine each

part of this definition.

       a. Accidental damages

       The Policy does not define “accident,” but the New York Court of Appeals has

explained that a CGL policy covers damages only when they were “unexpected and

unintentional.” Cont’l Cas. Co., 609 N.E.2d at 510 (holding that these terms are to be

construed narrowly as barring coverage “only when the insured intended the damages”);

see also Consol. Edison Co. of N.Y. v. Allstate Ins. Co., 774 N.E.2d 687, 692 (N.Y. 2002)

(“Insurance policies generally require ‘fortuity’ and thus implicitly exclude coverage for

intended or expected harms.”). A policyholder might take a “calculated risk”—such as

hiring a subcontractor—without “expecting” damages to occur. See Cont’l Cas. Co., 609

N.E.2d at 510. “[I]n fact, people often seek insurance for just such circumstances.” Id.

       Whether or not B&V took a “calculated risk” by delegating work on the JBRs to a

subcontractor, Aspen does not argue—nor does the record support—that B&V “expected

or intended” MTI or any other subcontractor to cause damage. Nor is there evidence that

B&V increased the likelihood of such damages through reckless cost-saving or other

measures. See Fuller, 613 N.Y.S.2d at 155 (finding no “occurrence” where damages




                                             19
arose from “intentional cost-saving or negligent acts”). Thus, the damages at issue here

satisfy the Policy’s accidental requirement.11

       b. Property damage to a third party

       The Policy covers costs arising from property damage.12 “Property Damage” is

defined as “physical injury to tangible property of a ‘Third Party.’” ROA, Vol. 1 at 72.

A “Third Party” is defined as “any company, entity, or human being other than an

‘Insured.’” Id. The damage to the JBRs was physical injury to tangible property. Aspen

argues, however, that the Policy designates AEP—the energy company that hired B&V to

construct the JBRs—as an “Additional Insured,” and thus AEP cannot be a third party.

See Aplee. Br. at 45 (citing ROA, Vol. 7 at 1311). This argument fails.

       Under the Policy, an “Insured” is defined as any entity listed as a “Named

Insured” or designated as an “Additional Insured.” The Policy lists B&V as the “Named




       11
           We acknowledge that the definition of “occurrence” in the Policy at issue here
differs slightly from the definition in ISO’s standard-form CGL policy, but this difference
is not substantive and is immaterial to our analysis. The Policy here defines “occurrence”
as an accident that was not “expected or intended.” The “expected or intended” language
is part of the definition of “occurrence.” Until 1986, standard-form CGL policies also
included the “expected or intended” language as part of the definition of “occurrence.”
See CGL Coverage Guide, App. A: GL Policy Jacket Provisions, at 287. But because
courts had been treating the language as an exclusion, in 1986 the ISO formally moved
the language out of the “occurrence” definition and into the exclusions section of CGL
policies. See id. App. B: 1986 Occurrence Form, at 297; see also French at 106. “This
move, however, did not change the analysis of whether there has been an occurrence.”
French at 106.
       12
            The Policy also covers “bodily injury.” See ROA, Vol. 1 at 81.

                                             20
Insured.”13 ROA, Vol. 1 at 63. Under Endorsement 33, AEP is designated as an

“Additional Insured,” thereby adding AEP to B&V’s existing insurance policy. See id.

at 114. Granting one party additional insured status on another’s CGL policy is a

“common risk-shifting technique” used in construction contracts. Samir Mehta,

Additional Insured Status in Construction Contracts and Moral Hazard, 3 Conn. Ins. L.J.

169, 170 (1997). But it does not mean the Policy precludes coverage of the damages

at issue here.

       First, AEP is an “Additional Insured” only with respect to liability for property

damage “arising out of operations performed by the Named Insured.” ROA, Vol. 1 at

114 (emphasis added). But here the work performed by a subcontractor (MTI), not by

the “Named Insured” (B&V), caused the damages.14

       Second, Endorsement 33 contains a “separation of insureds” condition, which

provides that the Policy “applies separately to each Insured against whom claim is made

or suit is brought.” Id. Its purpose is to preserve coverage for damage claims made by

one insured (here, AEP) against another (B&V). See West Am. Ins. Co. v. AV&S, 145

F.3d 1224, 1227 (10th Cir. 1998) (providing that under a “separation of insureds”

condition, each insured is “entitled to have the [p]olicy construed as to it as if the [p]olicy

were issued only as to it alone”); see also Greaves v. Pub. Serv. Mut. Ins. Co., 155


       13
         Endorsement 34 adds additional entities to the “Named Insured” list (e.g., Black
& Veatch Europe Inc., Black & Veatch (UK) Limited, and Black & Veatch Thailand
Limited). AEP is not listed.
       14
        Endorsement 34 does not add MTI as another “named insured,” and thus the
endorsement is immaterial to our analysis.
                                              21
N.E.2d 390, 392 (N.Y. 1959) (same). In other words, when AEP claimed damages

against B&V, the separation of insureds clause rendered AEP a third party with respect to

its claims for property damage against B&V. This understanding of the Policy aligns

with common sense: The principle risk B&V faced as an EPC contractor, and thus a

main reason for obtaining CGL insurance, was the potential for claims alleging damages

made by the property owner—AEP.

       c. Rule against surplusage

       The foregoing discussion establishes that the property damage to the JBRs

constitutes an “occurrence” under the Policy. Concluding otherwise would violate the

New York Court of Appeal’s rule against surplusage—a point the dissent ignores. In

other words, Aspen’s interpretation of “occurrence” as excluding the damages at issue

here would render several Policy provisions meaningless in violation of New York

contract interpretation rules. See Roman Catholic Diocese, 991 N.E.2d at 671.

              i. The “Your Work” exclusion and “subcontractor exception”

       The “Your Work” exclusion (listed as “Exclusion F”) in the Policy excludes

coverage for property damage to the insured’s own completed work. ROA, Vol. 1 at 74

(providing that the Policy “does not apply to . . . ‘Property Damage’ to ‘Your Work’

arising out of it or any part of it and included in the ‘Products/Completed Operations

Hazard’”). The next sentence, however, provides an exception—the “subcontractor

exception”—restoring some coverage. Id. It states that the “Your Work” exclusion

“does not apply if the damaged work or the work out of which the damage arises was

performed on your behalf by a subcontractor.” Id.

                                            22
       Aspen’s interpretation of “occurrence” would render these provisions superfluous

in violation of New York law requiring that CGL policies be construed “in a way that

affords a fair meaning to all of the language . . . in the contract and leaves no provision

without force and effect.” Roman Catholic Diocese, 991 N.E.2d at 671-72 (quotations

omitted) (applying rule against surplusage to CGL policies); see Viking Pump, 52 N.E.3d

at 1154. It would be redundant to say the Policy does not cover property damage to

B&V’s own work (as stated in the “Your Work” exclusion) if the definition of

“occurrence” categorically and preemptively precludes coverage for such damages in the

first instance.15

       Similarly, there would be no reason for the Policy to state that it covers damages

to the insured’s work when “the damaged work . . . was performed . . . by a

subcontractor” if the basic insuring agreement does not encompass these damages. See

ROA, Vol. 1 at 74; see also Greystone, 661 F.3d at 1289 (“[T]he only way [the ‘Your

Work’ exclusion and ‘subcontractor exception’ have] effect is if we find that physical

injury caused by poor workmanship . . . may be an occurrence under standard CGL

policies.”); see also Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 12

(Tex. 2007) (“By incorporating the subcontractor exception into the ‘your-work’

exclusion, the insurance industry specifically contemplated coverage for property damage

caused by a subcontractor’s defective performance.”); Great Am. Ins. Co. v. Woodside

Homes Corp., 448 F. Supp. 2d 1275, 1282 (D. Utah 2006) (“[I]t is undeniable that

       15
         Again, the Policy defines “Your Work” as work performed either by B&V or its
subcontractors. The JBRs are thus B&V’s “work” under the Policy, even though MTI
engineered and constructed them.
                                             23
excluding faulty subcontractor work from the definition of ‘occurrence’ would reduce the

operation of the subcontractor exception so drastically that the language would virtually

cease to be of any meaningful effect.”)

       Aspen argues B&V cannot rely on the “subcontractor exception” because—as an

exception to an exclusion—it cannot create coverage that does not already exist under the

Policy’s basic insuring agreement. But as we have explained, the “subcontractor

exception” does not create coverage, the Policy’s basic insuring agreement does. Its

definition of “occurrence” encompasses damage to B&V’s own work arising from faulty

subcontractor workmanship. The “Your Work” exclusion and “subcontractor exception,”

which would lose their meaning under Aspen’s definition of “occurrence,” only provide

further evidence that our reading of the Policy is correct. Neither Aspen nor the district

court adequately squares their position with New York’s rule against surplusage.

              ii. “Endorsement 4”

       Aspen’s interpretation of an “occurrence” would also render “Endorsement 4”

surplusage. As described above, “Endorsement 4” pertains to ongoing work and excludes

coverage for property damage to “that particular part of real property” on which B&V or

its subcontractors were actively working. See ROA, Vol. 1 at 83 (emphasis added). If

faulty workmanship resulting in damage to B&V’s own work could never trigger

coverage as an “occurrence,” this part of “Endorsement 4” would be meaningless. In

other words, there would be no reason for “Endorsement 4” to exclude coverage only for

damage to a “particular part” of the JBRs if the Policy could never cover damage to the

insured’s work in the first instance.

                                            24
                                         ****

      In sum, the property damages at issue were caused by an “occurrence,” as that

term is defined in the Policy, because (1) B&V neither intended nor expected that its

subcontractor would perform faulty work, so the damages were accidental, (2) the

damages involved physical harm to the property of a third party, and (3) a contrary

conclusion would render various Policy provisions meaningless in violation of New

York’s rule against surplusage.

2. History of CGL Policies Supports Finding of “Occurrence”

      The history of standard-form CGL policies further demonstrates that the Policy

covers the costs arising from the property damages here. As described in greater detail

above, early versions of the “Your Work” exclusion precluded coverage for property

damages due to the faulty work of the general contractor or its subcontractor. By 1976,

general contractors had become more reliant on subcontractors and were frustrated by the

lack of coverage offered by CGL policies for damages caused by subcontractor’s work.

Plitt § 129:19. In response, the ISO narrowed the exclusion by removing the reference to

subcontractors and thus implicitly extending coverage for contractors when the property

damage alleged was caused by the work of subcontractors. Id.

      After courts failed to recognize the importance of this language change, the ISO

attempted to clarify its 1976 revisions by adding the “subcontractor exception” to

standard-form CGL policies. See id.; Bruner § 11:259; French at 108 (explaining this

change was driven by agreement between contractors and insurers that CGL policies

should cover defective construction claims “so long as the allegedly defective work had

                                            25
been performed by a subcontractor rather than the policyholder itself” (quoting Stempel

at § 14.13[D]) (emphasis added)). Aspen and the cases it cites, which we discuss below,

ignore these changing dynamics and ISO’s own explanation that the 1986 changes

clarified that CGL policies covered “damage to, or caused by, a subcontractor’s work

after the insured’s operations are completed.” ISO 1986 Circular (emphases added).

3. Trend Among State Supreme Courts Supports Finding of “Occurrence”

       State supreme courts that have considered the issue since 2012 have reached “near

unanimity” that “construction defects can constitute occurrences and contractors have

coverage under CGL policies at least for the unexpected damage caused by defective

workmanship done by subcontractors.” French at 122-23 (emphasis added); see Thomas

E. Miller, et al., § 6.02 Third Party Coverage, Handling Construction Defect Claims:

Western States 123 (2018) (“The majority of state supreme courts that have decided

whether inadvertent faulty workmanship is an accidental ‘occurrence’ potentially covered

under the CGL policy have ruled that it can be an ‘occurrence.’”) (“Miller”). According

to Miller, 21 state supreme courts have adopted this position, with some of these courts

reversing their own contrary precedent. Miller at § 6.02; see, e.g., Cherrington v. Erie

Ins. Prop. & Cas. Co., 745 S.E.2d 508, 417 (W. Va. 2013) (reversing court’s precedent

precluding faulty workmanship from constituting an “occurrence,” finding it “outdated”).

       Before 2012, state supreme courts adopted “wildly” different approaches. See

Miller at § 6.02. A minority of states—14, according to Miller—had determined that

“defective workmanship (i.e., construction defects) do[es] not constitute an

‘occurrence.’” Id. But at least one, New Jersey, has since migrated to the majority view

                                            26
that faulty workmanship by a subcontractor can be an occurrence under CGL insurance

policies. See Cypress Point Condo. Ass’n v. Adria Towers, LLC, 143 A.3d 273, 287 (N.J.

2016). Miller also notes that some of these state decisions finding no “occurrence” have

been superseded by local statutes requiring CGL policies issued in those states to include

coverage for defective workmanship. Miller at § 6.02; see, e.g., Essex Ins. v. Holder, 261

S.W.3d 456, 460 (Ark. 2008) (holding that defective construction resulting in damage

only to the insured’s work product itself is foreseeable and thus not an “occurrence”

under the CGL policy), superseded by statute, Ark. Code Ann. § 23-79-155(a)(2) (2011)

(requiring CGL insurance policies to define “occurrence” to include “[p]roperty damage

or bodily injury resulting from faulty workmanship”).16

4. New York Intermediate Appellate Court Decisions Do Not Preclude Coverage

       The Policy language and other state supreme court decisions support a finding of

“occurrence.” Would the New York Court of Appeals agree? We think it would, though

       16
          The dissent criticizes the majority opinion for “‘turning to the law of other
jurisdictions’ to determine what the New York Court of Appeals ‘would probably’ decide
in this case.” Dissent at 4 (quoting Lehman Bros. v. Schein, 416 U.S. 386, 389 (1976))
(brackets omitted). But Lehman does not preclude us from considering other
jurisdictions in attempting to predict how the New York Court of Appeals would decide
this case. Moreover, we are aware of no rule that would prevent the New York Court of
Appeals from considering—as it has before and as we have here—“how CGL policies are
generally drafted, scholarly sources, and persuasive authority from courts applying the
law of other jurisdictions,” id. at 4, to assist in determining an issue on which it has not
ruled. See, e.g., Great N. Ins. Co. v. Mount Vernon Fire Ins. Co., 708 N.E.2d 167, 169
(N.Y. 1996) (discussing standard form CGL policy); Cont’l Cas. Co. v. Rapid-American
Corp., 609 N.E.2d 506, 508, 510-11 (N.Y. 1993) (same); Davis v. S. Nassau Cmty.
Hosp., 46 N.E.3d 614, 622 (N.Y. 2015) (relying on legal treatise); Viking Pump, 52
N.E.3d at 1152 (relying on law review articles); People v. Leonard, 970 N.E.2d 856, 860
(N.Y. 2012) (relying on supreme court decisions from other states); In re D., 261 N.E.2d
627, 630 (N.Y. 1970) (same).

                                            27
it has yet to address this question. Where, as here, “jurisdiction rests solely on diversity

of citizenship and there is no controlling decision by the highest court of a state, a

decision by an intermediate court should be followed by the Federal court, absent

convincing evidence that the highest court would decide otherwise.” Greystone, 661

F.3d at 1282 (quotations omitted). We therefore consider decisions of New York

intermediate appellate courts interpreting standard-form CGL policies and conclude they

do not preclude coverage under the Policy here.17

       Aspen relies on decisions from New York’s intermediate appellate courts,

contending they preclude coverage for the damages at issue here. But these cases (1) did

not involve or failed to analyze the “subcontractor exception,” (2) involved CGL policies

that predated the critical revisions ISO made in 1986, (3) relied on cases that have since

been overturned, (4) involved faulty work by a contractor rather than a subcontractor, or

(5) contained some combination of the above. These distinguishing factors provide

ample “convincing evidence” that New York’s Court of Appeals would decline to find no




       17
          B&V suggests the Policy is different from the standard-form CGL policy, and
thus New York cases interpreting the standard policy are inapplicable. See Aplt. Br. at 10
(stating that the parties’ negotiation resulted in a “manuscript policy,” meaning that it
“contains negotiated terms and is not a standard ISO form policy”); see also id. at 27.
But as Aspen points out, B&V never explains how the Policy’s language differs from the
standard language. See Aplee. Br. at 32; see also Black & Veatch Corp. v. Aspen Ins.
(UK) Ltd., No. 12-2350-SAC, 2016 WL 6804894, at *8 (D. Kan. Nov. 17, 2016) (“The
parties do not argue that [the ‘occurrence’] definition is unusual or atypical for a CGL
policy.”). We find that the Policy’s language is materially the same as the language
found in ISO’s standard-form CGL policies. We nevertheless agree with B&V that New
York case law does not foreclose coverage.

                                             28
“occurrence” under the Policy here. See id. The remainder of this section discusses—

and distinguishes—the cases on which Aspen relies.18

       a. George A. Fuller Co. v. U.S. Fiduciary & Guaranty Co.

       Aspen relies heavily on Fuller for the proposition that CGL insurance policies are

“not intended to insure against faulty workmanship or construction” and thus cannot

cover the damages at issue here. See Aplee. Br. at 21. But Fuller is inapplicable here,

and it relied on cases that involved CGL policies drafted before ISO’s 1986 changes.

       Fuller involved a coverage dispute over damages to a building that a developer

had hired a contractor to build. 613 N.Y.S.2d at 154. Due to a subcontractor’s faulty

workmanship, the building suffered water damage. Id. The contractor’s CGL insurance

carrier refused to pay the claim, and the contractor sued. Id. The question was whether

the contractor’s faulty workmanship constituted an “occurrence,” which was defined

under the policy as “an accident, including continuous or repeated exposure to

substantially the same general harmful conditions.” Id. at 153. The court determined the

damages were not an “occurrence” because they were not accidental but rather had been



       18
          The dissent refers to New York intermediate appellate court decisions carrying
“precedential weight,” Dissent at 3, which they do in appropriate circumstances. But a
court decision does not necessarily carry precedential weight when it is materially
distinguishable from the case at hand. As we have shown, the New York cases that
Aspen relies on, starting with Fuller, contain no discussion of CGL policies that contain a
“subcontractor exception.” Moreover, as the New York Court of Appeals has said,
Appellate Division decisions “are certainly not binding upon this court.” People v.
Roche, 379 N.E.2d 208, 216 (N.Y. 1978). Nor are we required to follow such decisions
when “other authority convinces us that the state supreme court would decide otherwise.”
Daitom, Inc., v. Pennwalt Corp., 741 F.2d 1569, 1574 (10th Cir. 1984); see also Comm’r
v. Estate of Bosch, 387 U.S. 456, 465 (1967).
                                            29
caused by “intentional cost-saving” acts. Id. at 155. Fuller is inapposite here for four

reasons.

       First, Fuller does not address the issue here—whether damages caused by a

subcontractor are covered by a CGL policy that expressly provides coverage for damages

to an insured’s work arising from a subcontractor’s faulty workmanship. The policy in

Fuller excluded damages to “that particular part of any property that must be restored,

repaired or replaced” due to work that was performed incorrectly either by “you [the

insured] or on your behalf [by a subcontractor].” Id. at 153. The court thus concluded

that the CGL policy in that case did not intend to cover damages to an insured’s own

work, regardless of whether the contractor or its subcontractor caused the damages. The

dissent reads Fuller to mean that any CGL policy employing the standard definition of

“occurrence” necessarily excludes subcontractor-caused damages to an insured’s own

work. See Dissent at 1. But this is overly broad. Fuller says only that the particular

policy in that case “d[id] not insure against faulty workmanship in the work product

itself.” Fuller, 613 N.Y.S.2d at 155. The dissent takes this single passage out of context

and concludes that New York intermediate appellate courts have held that the damages at

issue here can never be an occurrence, see Dissent at 2, ignoring this critical distinction

between the two cases.19


       19
          The dissent also reads too much into this opinion’s discussion of Fuller when it
says “the majority concludes the Fuller rule only applies where the CGL policy does not
include a Subcontractor Exception, even though no New York court has limited the rule
in this way.” Dissent at 3. Our holding is not so prescriptive. We conclude only that
Fuller does not preclude the damages at issue here from constituting a coverage-
triggering “occurrence” under the Policy.
                                             30
       Second, Fuller relied on two cases from New York’s intermediate appellate courts

to support its statement that CGL policies are not intended to cover damages to the

insured’s own defective work product—Village of Newark v. Pepco Contractors,

Inc., 472 N.Y.S.2d 66 (N.Y. App. Div. 1984), aff’d, 465 N.E.2d 1261 (N.Y. 1984),

and Parkset Plumbing & Heating Corp. v. Reliance Ins. Co., 448 N.Y.S.2d 739 (N.Y.

App. Div. 1982). But both of these cases were decided before 1986, when the ISO

clarified that standard-form CGL policies covered insureds for property damage to—or

caused by—subcontractors’ work.

       Third, Fuller’s primary rationale for finding no “occurrence” is absent here.

Fuller held that the damages at issue were not accidental but rather resulted from

intentional cost-cutting measures and thus could not constitute an “occurrence.” Here,

Aspen does not argue—nor does the record suggest—that the damage to the JBRs arose

from any intentional or negligent acts by B&V or MTI.

       Fourth, Aspen cites Fuller to argue that B&V’s interpretation would transform the

Policy into a surety for the performance of B&V’s work. Aplee. Br. at 21; see Fuller,

613 N.Y.S.2d at 155 (holding that the CGL policy was not “intended to insure [the

general contractor’s] work product”). But allowing CGL policies to cover damage from

subcontractor-caused construction defects would not convert insurance policies into

surety performance bonds. See French at 139-40; see also Greystone, 661 F.3d at 1288-

89. Both insurance policies and performance bonds are used to spread risk, but they

differ in fundamental ways. An insurance policy spreads the contractor’s risk. A

performance bond guarantees completion of the contract upon the contractor’s default.

                                            31
See French at 139-40 (“Performance bonds protect the property owner, while liability

insurance protects the contractor.”). The “principal purpose[]” of insurance is to transfer

financial responsibility from the policyholder to an insurer for damage caused by the

policyholder’s negligence. Id. at 140. Allowing CGL policies to cover construction

defects caused by a subcontractor comports with the purpose of liability insurance—to

protect the contractor, not the property owner.

       b. Other New York cases

       Aspen also cites Baker Residential Limited Partnership v. Travelers Insurance

Co., 782 N.Y.S.2d 249, 250 (N.Y. App. Div. 2004), for the proposition that an

“occurrence” happens under CGL policies only when damage to property is “distinct

from the plaintiffs’ own work product.” See Aplee. Br. at 23. The Baker opinion, which

consists of two paragraphs, cites only two cases. The first, Fuller, is inapt for the reasons

explained above. The second, Pavarini Construction Co. v. Continental Insurance Co.,

relies solely on Fuller. See 759 N.Y.S.2d 56, 57-58 (N.Y. App. Div. 2003). Neither of

these opinions provides any discussion or guidance on interpreting policies with a

“subcontractor exception.”

       Aspen next cites Ohio Casualty Insurance Co. v. Lewis & Clinch, Inc., No. 7:12-

CV-1872, 2014 WL 6078572, at *9 (N.D.N.Y Nov. 13, 2014), for the same

proposition—that damage to the insured’s own work is not a covered “occurrence” under

CGL policies. Once again, however, Ohio Casualty relied entirely on the inapposite

language in Fuller. See id. Ohio Casualty is also an unpublished case from a federal



                                             32
district court rather than a New York state court. Further, it did not involve a

subcontractor’s faulty workmanship.

       Finally, Aspen provides a three-page string cite of cases from New York’s

intermediate appellate courts and federal district courts, but these cases are unavailing for

largely the same reasons addressed above. Every one of the 15 cases relied on Fuller.

See, e.g., Eurotech Constr. Corp. v. QBE Ins. Corp., 26 N.Y.S.3d 703, 703 (N.Y. App.

Div. 2016); Nat’l Union Fire Ins. Co. of Pittsburgh v. Turner Constr. Co., 986 N.Y.S.2d

74, 77 (N.Y. App. Div. 2014) (“National Union”); Maxum Indem. Co. v. A One Testing

Labs., Inc., 150 F. Supp. 3d 278, 284 (S.D.N.Y. 2015). One of the cases, Exeter Building

Corp. v. Scottsdale Insurance Co., 913 N.Y.S.2d 733, 735 (N.Y. App. Div. 2010), did not

cite to Fuller directly but rather cited to Baker, which in turn relied on Fuller.

       Another of Aspen’s aforementioned cases, National Union, relied heavily on what

used to be the seminal case regarding the issue of whether CGL policies cover

construction defects—the New Jersey Supreme Court’s opinion in Weedo v. Stone-E-

Brick, Inc, 405 A.2d 788 (N.J. 1979). See National Union, 986 N.Y.S.2d at 77; see also

French at 117. But Weedo has been overturned. Weedo held that CGL policies “do not

cover an accident of faulty workmanship but rather faulty workmanship which causes an

accident.” 405 A.2d at 796. The New Jersey Supreme Court “effectively overruled”

Weedo in Cypress Point, holding that damages caused by the subcontractor’s faulty

workmanship can constitute property damage under CGL policies. See French at 119




                                              33
(“For numerous reasons, the Weedo decision is obsolete and of little value today in

analyzing whether construction defects can constitute occurrences.”).20

                                                  ***

       In sum, we conclude that New York intermediate appellate court decisions would

not persuade the New York Court of Appeals to find that the damages at issue here were

not an “occurrence”—particularly in the face of the other reasons discussed above. The

dissent submits that if there is “any debate regarding the clarity of New York Law, we

should certify the question.” Dissent at 5 n.6. In Lehman, the Supreme Court said that

when a federal court faces a novel state law question in an area where state law is highly

unsettled, it may be appropriate to certify the question to the state’s highest court. 416


       20
            In Revisiting Construction Defects, French further explains why Weedo is
obsolete:
              One, the [Weedo] court did not analyze the definition of
       “occurrence” in the policy at issue and did not even address whether the
       faulty stucco work constituted an occurrence.
              Two, the court did not analyze the definition of “property damage”
       in the policy at issue and did not address whether the faulty stucco work
       was property damage or caused property damage.
              Three, [a 1971 law review article] on which the court relied, did not
       analyze or address the issues of whether construction defects constitute
       occurrences or property damage. Instead, [the] article focused on the
       business risk exclusions contained in the 1966 CGL policy form, and []
       then offered . . . unsupported conclusions regarding the intent of the
       exclusions.
               Four, . . . the business risk exclusions at issue in the case were
       redrafted in 1986 to provide much narrower reductions in coverage than the
       earlier versions of such exclusions.
       French at 119 (paragraph breaks added) (citations omitted).

                                             34
U.S. at 390-91 (“We do not suggest that where there is doubt as to local law and where

the certification procedure is available, resort to it is obligatory.”) As noted in Lehman,

whether to certify a question “rests in the sound discretion of the federal court.” Id. at

391. We have declined to do so here.

5. Second Circuit Case Law is Distinguishable

       Aspen also relies on a Second Circuit decision, J.Z.G. Resources, Inc. v. King, 987

F.2d 98 (2d Cir. 1993), which applied New York law to a construction dispute. See

Aplee. Br. at 22. In J.Z.G., a real estate developer sued a contractor for building roads at

the wrong elevation and location. 987 F.2d at 100. The contractor sought coverage for

damage to the roads themselves. Id. The Second Circuit held the contractor’s CGL

policy did not encompass the road damage, explaining that “this circuit has held that a

CGL policy did not provide coverage for a claim against an insured for the repair of

faulty workmanship that damaged only the resulting work product.” Id. at 102-03.

       J.Z.G. is not persuasive here. First, it did not involve faulty subcontractor work.

Second, it relied on cases and commentary either predating or failing to take into account

ISO’s 1986 changes.21 In particular, it relied on the following passage from a 1971 law

review article: “The risk intended to be insured is the possibility that the goods, products

or work of the insured, once relinquished or completed, will cause bodily injury or

damage to property other than to the product or completed work itself, and for which the


       21
         As explained above, in 1986, ISO revised the standard CGL insurance policy to
clarify—in ISO’s words—that the policy “cover[ed] . . . damage to, or caused by, a
subcontractor’s work after the insured’s operations are completed.” ISO 1986 Circular.

                                             35
insured may be found liable.” Id. (quoting Roger C. Henderson, Insurance Protection for

Products Liability and Completed Operations-What Every Lawyer Should Know, 50 Neb.

L. Rev. 415, 441 (1971)).

       But this article analyzed the business risk exclusion contained in the ISO’s 1966

standard-form CGL policy, which precluded coverage for damage to construction

projects caused by subcontractors. See French at 107, 118. By 1986, the ISO had

acceded to contractors’ demands to provide coverage for faulty subcontractor work and

replaced that exclusion with the current language. Commentators have noted that this

article is outdated and “of little value today in understanding . . . whether construction

defects can constitute occurrences.” Id. at 119. “Following [ISO’s] 1986 changes . . . ,

one would expect that . . . [the] 1971 law review article would be cited by courts only as a

historical note regarding the evolution of the policy language and law in this arena.” Id.

“Surprisingly, however, . . . [the] article continue[s] to be relied upon by some courts

from time to time, particularly in decisions where the court misinterprets the issue before

it.” Id. The analysis underlying J.Z.G. is therefore outdated and of no use here.

                                   III. CONCLUSION

       Under the Policy, the damages at issue here were caused by a coverage-triggering

“occurrence.” First, the damages were accidental and resulted in harm to a third-party’s

property, thus meeting the Policy’s definition of an “occurrence.” Second, the district

court’s interpretation would violate New York’s rule against surplusage by rendering the

“subcontractor exception” meaningless. Third, the changes ISO has made to standard-

form CGL policies demonstrate that the policies can cover the damages at issue here.

                                             36
Fourth, the overwhelming trend among state supreme courts has been to recognize such

damages as “occurrences.” Fifth, New York intermediate appellate decisions are

distinguishable, outdated, or otherwise inapplicable. We predict the New York Court of

Appeals would decline to follow these decisions and instead would join the clear trend

among state supreme courts holding that damage from faulty subcontractor work

constitutes an “occurrence” under the Policy. For the foregoing reasons, we vacate the

district court’s summary judgment decision and remand for reconsideration in light of

this opinion. 22




22
     We grant Appellees’ August 4, 2017 motion for leave to file additional authority.
                                              37
No. 16-3359, Black & Veatch Corporation v. Aspen Insurance, et al.
BRISCOE, Circuit Judge, dissenting.

                                              I

       I respectfully dissent because I believe New York law forecloses insurance

coverage for damage to the work product of an insured, which is precisely the type of

damage at issue here. Therefore, because I agree with the district court’s conclusion that

“New York law’s governing definition of ‘occurrence’ does not recognize liability

coverage” in this instance, D. Ct. Order at 56, I would affirm the district court.

       The rule among intermediate appellate courts in New York has been that a CGL

policy that includes a standard definition of “occurrence”:

              does not insure against faulty workmanship in the work
              product itself but rather faulty workmanship in the work
              product which creates a legal liability by causing bodily
              injury or property damage to something other than the work
              product.

George A. Fuller Co. v. U.S. Fid. & Guar. Co., 613 N.Y.S.2d 152, 155 (N.Y. App. Div.

1st Dep’t. 1994).1

       In recent years, New York courts have applied this rule to hold that the insured can

only recover when the “damage caused by faulty workmanship [is] to something other

than [to] the work product.” I.J. White Corp. v. Columbia Cas. Co., 964 N.Y.S.2d 21, 23

(N.Y. App. Div. 1st Dep’t. 2013) (coverage applied because the damage was to cakes, not

the freezer that the insured built). Further, intermediate state appellate decisions have

       1
        See also Eurotech Constr. Corp. v. QBE Ins. Corp., 26 N.Y.S.3d 703 (N.Y. App.
Div. 1st Dep’t. 2016); Bonded Concrete, Inc. v. Transcon. Ins. Co., 784 N.Y.S.2d 212,
213 (N.Y. App. Div. 3d Dep’t. 2004); Baker Residential Ltd. P’ship v. Travelers Ins. Co.,
782 N.Y.S.2d 249, 250 (N.Y. App. Div. 3d Dep’t. 2004).
held that even when a subcontractor caused the damage, an insured general contractor

cannot be covered for damage to its own work product because it is “responsible for the

entire project[,] and all work done by [any] subcontractor was done on” behalf of the

general contractor. Pavarini Constr. Co. v. Cont’l Ins. Co., 759 N.Y.S. 2d 56, 57 (N.Y.

App. Div. 1st Dep’t. 2003); see also Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Turner

Constr. Co., 986 N.Y.S.2d 74, 77 (N.Y. App. Div. 1st Dep’t. 2014).

       New York intermediate appellate courts have therefore developed a rule that a

CGL policy using the standard definition of “occurrence” cannot cover damage to the

insured’s own work product, even when errors by the insured or its subcontractors cause

the damage. Applying that rule to this case, there was no “occurrence”—which would

trigger coverage—because the damage was to the jet bubbling reactors, which were

B&V’s own work. Because B&V has not satisfied its “initial burden of proving that the

damage was the result of an ‘accident’ or ‘occurrence,’” we need not proceed to examine

whether an exclusion and an exception to that exclusion apply. Consol. Edison Co. of

N.Y. v. Allstate Ins. Co., 774 N.E.2d 687, 692 (N.Y. 2002).

       Given this analysis, I would affirm the district court.

                                             II

       The majority, however, reverses the district court. In doing so, the majority

concludes there is an insured “occurrence” in this case, in part because it does not apply

the New York cases. It instead determines that the rule applied in Fuller, Pavarini, I.J.

White and other New York appellate cases is “outdated” and inapplicable to this case

because the rule’s logic preceded the Insurance Services Office, Inc.’s 1986 revisions to

                                              2
the standard CGL policies, Op. at 37, making the cases “materially distinguishable.” Id.

at 29 n.19. In other words, the majority concludes the Fuller rule only applies where the

CGL policy does not include a Subcontractor Exception, even though no New York court

has limited the rule in this way. See D. Ct. Order at 31 (concluding there is no indication

in New York law that a Subcontractor Exception would alter New York law, and noting

that an unpublished federal district court case involving a Subcontractor Exception “does

not reflect any argument or discussion of this exception as having the effect of modifying

New York’s law”) (citing Ohio Cas. Ins. Co. v. Lewis & Clinch, Inc., No. 7:12-CV-1872

(GTS/TWD), 2014 WL 6078572 (N.D.N.Y. Nov. 13, 2014)).2

       I conclude, however, that in declining to apply the rule that New York’s

intermediate appellate courts have applied we exceed our proper role as a court of review

in a diversity action. Our role is to determine how the New York Court of Appeals would

decide this case. To accomplish this task, we must apply relevant New York case law. If

the New York courts have held that damage to the insured’s own work product is not an

“occurrence,” even if the damage results from a subcontractor’s error, it is not our role to

tell the New York courts that their rulings do not carry any precedential weight or are

limited to their facts.




       2
         See also Thruway Produce, Inc. v. Mass. Bay Ins. Co., 114 F. Supp. 3d 81, 97
(W.D.N.Y. 2015) (denying coverage, despite a Subcontractor Exception); Aquatectonics,
Inc. v. Hartford Cas. Ins. Co., No. 10-CV-2935 (DRH) (ARL), 2012 WL 1020313, at *8
(E.D.N.Y. Mar. 26, 2012) (relying on Fuller to deny coverage, despite a Subcontractor
Exception).

                                             3
       Instead, in the circumstances presented here, where “there is no controlling

decision by the highest court of a state, a decision by an intermediate court should be

followed by the Federal court, absent convincing evidence that the highest court would

decide otherwise.” United Fire & Cas. Co. v. Boulder Plaza Residential, LLC, 633 F.3d

951, 957 (10th Cir. 2011) (quotation omitted). The majority, however, believes we do

have convincing evidence that the New York Court of Appeals would not apply the

Fuller rule to a CGL policy with a Subcontractor Exception. The majority reviews

extrinsic evidence about how CGL policies are generally drafted, scholarly sources, and

persuasive authority from courts applying the law of other jurisdictions. Armed with

these authorities, the majority “predict[s] the New York Court of Appeals would decline

to follow [the Fuller rule] and instead would join the clear trend among state supreme

courts holding that damage from faulty subcontractor work constitutes an ‘occurrence.’”

Op. at 37.

       This is a bridge too far. In reaching its conclusion, the majority takes the sort of

step the Supreme Court has criticized by “turn[ing] to the law of other jurisdictions” to

determine what the New York Court of Appeals “would probably” decide in this case.

Lehman Bros. v. Schein, 416 U.S. 386, 389 (1974). This might be acceptable if existing

New York law were “difficult or uncertain.” Colony Ins. Co. v. Burke, 698 F.3d 1222,

1235 (10th Cir. 2012) (quotation omitted). But that is not the case here. It is not difficult

to ascertain how New York courts would decide the issues presented here—nor does the

majority say it would be difficult. The majority merely attempts to distinguish New York

case law, and then describes New York law as if “this case apparently raises an issue of

                                              4
first impression.” Walker v. BuildDirect.com Techs., Inc., 733 F.3d 1001, 1005 (10th

Cir. 2013).3

         Even assuming, arguendo, that we could legitimately distinguish Fuller and its

progeny, meaning there are “no controlling precedents,” Elkins v. Moreno, 435 U.S. 647,

662 (1978),4 and “a state court has not yet had the opportunity to interpret the pertinent”

question, Kansas Judicial Review v. Stout, 519 F.3d 1107, 1119 (10th Cir. 2008)

(quotation omitted),5 I do not believe we should exercise our discretion to decide how the

New York Court of Appeals would rule.6 Rather, if there are truly no New York cases to

guide us, certifying the question to the New York Court of Appeals acknowledges that

“[w]hen federal judges [outside New York] attempt to predict uncertain [New York] law,

they act . . . as ‘outsiders’ lacking the common exposure to local law which comes from

sitting in the jurisdiction.” Lehman Bros., 416 U.S. at 391. In other words, I do not

believe federal courts should predict what a state court will likely do, without any state

         3
             Certified question answered, 349 P.3d 549 (Okla. 2015).
         4
             Certified question answered sub. Nom., Toll v. Moreno, 397 A.2d 1009 (Md.
1979).
         5
        Certified question answered, 196 P.3d 1162 (Kan. 2008), opinion after certified
question answered, 562 F.3d 1240 (10th Cir. 2009).
         6
         The majority is correct that, as an initial matter, we are tasked with discerning
what the New York Court of Appeals would decide if this case came before it. Op. at 9
n.7 (citing Bird v. W. Valley City, 832 F.3d 1188, 1199 (10th Cir. 2016)). Yet, if—
hypothetically—a review of New York cases does not indicate what the New York Court
of Appeals would likely decide, it is not our place to guess about the result. Though the
majority portrays this dissent as treating the two forms of analysis interchangeably, see
id., I emphasize that I believe we can discern how the New York Court of Appeals would
rule based on existing New York case law. But if there is any debate regarding the clarity
of New York law, we should certify the question.
                                               5
guidance, because “a State can make just the opposite [determination of what the federal

court predicts] her law” to be. Id. at 389.7

       Therefore, even if New York law were distinguishable—which, as stated above, I

do not believe it is—I would not reverse the district court, but would certify the question

to the New York Court of Appeals.




       7
        The parties have not moved to certify, but it is within our authority to certify sua
sponte. See State Farm Mut. Auto. Ins. Co. v. Fisher, 609 F.3d 1051, 1058 (10th Cir.
2010).
                                               6
