              NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                         File Name: 10a0152n.06

                                       No. 09-3096

                       UNITED STATES COURT OF APPEALS
                            FOR THE SIXTH CIRCUIT

                                                                                FILED
ABERCROMBIE & FITCH CO.,                                                     Mar 11, 2010
                                                                       LEONARD GREEN, Clerk
       Plaintiff-Appellee,

              v.                                               On Appeal from the United
                                                               States District Court for the
FEDERAL INSURANCE COMPANY,                                     Southern District of Ohio at
                                                               Columbus
       Defendant-Appellant.


                                                         /

       Before:       GUY, CLAY, and KETHLEDGE, Circuit Judges.

       RALPH B. GUY, JR., Circuit Judge.          This is a diversity breach of contract action

in which plaintiff Abercrombie & Fitch Co. claims defendant Federal Insurance Company

improperly refused to pay legal defense costs under an executive protection insurance policy.

On summary judgment, the district court ruled in favor of Abercrombie, interpreting the

contract to require coverage of its defense costs. Finding no error in the district court’s

interpretation, we affirm.

                                             I.

       Plaintiff Abercrombie & Fitch (Abercrombie) contests defendant Federal Insurance

Company’s (Federal) refusal to pay defense costs of securities class actions, shareholder
No. 09-3096                                                                                                  2

derivative suits, and SEC investigation initiated against Abercrombie beginning in 2005.1

Abercrombie had $10 million in coverage for such claims under a Federal policy, with an

effective period covering the dates the claims against Abercrombie were filed. After Federal

refused to pay Abercrombie’s insurance claim, Abercrombie filed a five-count federal

diversity action in 2006, seeking a declaration of Federal’s obligation to pay certain defense

costs under the Federal Policy, and damages for its breach of contract.2 Federal’s answer to

the complaint included a third-party complaint against National Union Fire Insurance Co.,

issuer of a separate insurance policy to Abercrombie, and a counterclaim against

Abercrombie. In the counterclaim, Federal asserted Abercrombie’s breach of the Federal

Policy, and sought declaratory judgment that it was not obligated to provide coverage for the

Ross claims and SEC investigation. In February 2008, Federal filed a motion for summary

judgment, which was denied by the district court in September 2008.3

        Neither party contests the facts and sequence of events set out in the district court’s

Opinion and Order denying Federal’s motion for summary judgment, repeated below:

        Federal issued Executive Protection Portfolio Policy No. 8159-6213 (the
        “Federal Policy”) to Abercrombie for the Policy Period of September 1, 2004


        1
         The securities class actions and shareholder derivative suits, filed in the Southern District of Ohio,
were consolidated in the district court as Ross v. Abercrombie & Fitch Co., No. 2:05-cv-819 and In re:
Abercrombie & Fitch Co. Derivative Litigation, Lead Case No. 2:05-cv-00819-EAS-TPK, and are
collectively referred to as “the Ross claims.”
        2
          In May 2007, Abercrombie filed an amended complaint, adding a count of bad faith for Federal’s
refusal to pay defense costs.
        3
          While this motion was pending, Abercrombie filed a motion for partial summary judgment, seeking
the district court’s determination that it was entitled to advancement of certain defense costs. The district
court’s order on Federal’s motion for summary judgment indicated that it had taken Abercrombie’s motion
“under advisement” and would rule on it in a separate opinion and order.
No. 09-3096                                                                                           3

       to September 1, 2005. The Federal Policy includes an Executive Liability and
       Entity Securities Liability Coverage Section, which provides up to $10 million
       of coverage for Abercrombie, its officers and directors, for “loss . . . on
       account of any Claim first made . . . against [an insured] during the Policy
       Period or, if exercised, during the Extended Reporting Period, for a Wrongful
       Act committed, attempted or allegedly committed or attempted by [an insured]
       before or during the Policy Period.” As the end of the Federal Policy Period
       approached, Abercrombie purchased a new claims-made policy from National
       Union Fire Insurance Company of Pittsburgh (“National Union”), with
       coverage effective from September 1, 2005 to September 1, 2006.

              On September 2, 2005, one day after the expiration of the Federal
       Policy, Abercrombie was sued, along with several of its officers and directors,
       in a class action complaint alleging violations of federal securities laws.
       Certain Abercrombie shareholders subsequently filed several derivative suits,
       and the Securities and Exchange Commission commenced a formal
       investigation on November 30, 2005.

              The Federal Policy permitted Abercrombie to purchase a one-year
       extended reporting period (the “ERP”) that would cover claims arising after
       the end of the initial Policy Period, but involving conduct that occurred during
       the Policy Period. Abercrombie exercised the option to purchase the ERP and
       paid the $820,000 premium[ 4 ] on September 30, 2005, within the 30-day
       window provided by the Federal Policy. Abercrombie formally notified
       Federal of the Ross Claims by letter dated October 5, 2005.

              There is no dispute that after the Ross claims were filed, and before
       purchasing the ERP, Abercrombie renegotiated the National Union Policy,
       providing that the new coverage would be excess to Federal’s primary
       coverage under the ERP. The agreement between National Union and
       Abercrombie was later memorialized in an Endorsement to the National Union
       Policy.[ 5 ] Endorsement No. 17 reads as follows:




       4
           This premium was twice the premium for the original one-year policy.
       5
         The agreement was negotiated between representatives for Abercrombie and National Union in late
September 2005, prior to Abercrombie’s election of the Federal ERP. However, the actual issuance of
Endorsement No. 17 to the National Union policy did not occur until November. In exchange for electing
the Federal ERP, Abercrombie received benefits from National Union in the form of a reduced deductible
and the potential for no increase in premium for subsequent policy years.
No. 09-3096                                                                             4

              In the event a Claim is made against an Insured under the policy
              and also under Policy No. 8159-6213 issued by Federal
              Insurance Company (hereinafter “Federal Policy”), alleging any
              Wrongful Act committed or allegedly committed prior to
              9/01/2005, then such insurance as is provided by this policy
              shall apply only as excess over any Loss paid under such Federal
              Policy.

             The parties agree that, had Abercrombie purchased the ERP and not
      written the National Union Policy to be excess, the National Union and Federal
      policies would both be primary. Federal maintains that, by shifting the burden
      of primary coverage to Federal, Abercrombie prejudiced Federal’s right to
      recover from National Union, and that such conduct constitutes a material
      breach of the insurance contract and a bar to coverage. Specifically, Federal
      claims that Abercrombie breached Section 16(d) of the Policy, which states:

              The Insureds agree to provide the Company [Federal] with all
              information, assistance and cooperation which the Company
              may reasonably require and agree that in the event of a Claim
              the Insureds will do nothing that could prejudice the Company’s
              position or its potential or actual rights of recovery.

            Abercrombie contends that the Federal Policy expressly permitted
      Abercrombie to structure additional or subsequent coverage as excess to
      Federal’s primary coverage. Specifically, the Federal Policy states, in Section
      18:

              If any Loss under this coverage section is insured under any
              other valid insurance policy(ies), then this coverage section shall
              cover such Loss, subject to its limitations, conditions, provisions
              and other terms, only to the extent that the amount of such Loss
              is in excess of the applicable retention (or deductible) and limit
              of liability under such other insurance, whether such other
              insurance is stated to be primary, contributory, excess,
              contingent or otherwise, unless such other insurance is written
              only as specific excess insurance over the Limits of Liability
              provided in this coverage section [the Executive Liability and
              Entity Securities Liability Coverage section].

      (Federal Policy, Doc. #85-2).
No. 09-3096                                                                                5

              The parties differ over the meaning of this provision. Federal maintains
       that the provision applies only to coverage that is exclusively excess;
       Abercrombie contends that this section gives it the right to purchase primary
       coverage that would be excess only as to the Federal ERP.

               Importantly, the parties do not disagree on several key facts relating to
       coverage. For example, there is no dispute that the Ross Claims fall within the
       coverage provided by the ERP, as they allege wrongful conduct occurring
       during the initial Policy Period. Also, Federal does not allege that
       Abercrombie failed to exercise the ERP option in accordance with Section12
       of the Policy, or to provide timely notice of the Ross Claims under Section 15.

              Federal now seeks judgment as a matter of law and a declaration that
       the Federal Policy does not provide coverage to Abercrombie for the Ross
       Claims, based solely on Abercrombie’s conduct in writing the National Union
       Policy to be excess to that of Federal, allegedly cutting off Federal’s right of
       contribution in purported breach of Section 16(d) of the Federal Policy.

(Footnote omitted).

       Applying Ohio law to the interpretation of the Federal Policy, the district court

determined that the sections of the insurance contract in dispute could reasonably be

interpreted “in such a manner that requires Federal to provide coverage for the Ross claims.”

The district court also found it could not dismiss the bad faith claim contained in

Abercrombie’s amended complaint. Accordingly, the district court denied Federal’s motion

for summary judgment.

       Following its ruling on Federal’s motion for summary judgment, the district court

requested memoranda from the parties briefing any issues remaining in connection with

Abercrombie’s pending motion for partial summary judgment. In January 2009, the district

court granted Abercrombie’s motion, entering its declaration that Abercrombie was entitled
No. 09-3096                                                                                                      6

to advancement of four categories of costs from Federal.6 Federal filed its timely notice of

appeal from the district court’s January order and “all interlocutory orders leading thereto,

including but not limited to the Order dated September 30, 2008, denying Federal’s motion

for summary judgment.”

                                                       II.

A.      Jurisdiction

        A preliminary issue raised by this appeal is our jurisdiction over it. After Federal filed

this appeal, Abercrombie moved to dismiss, asserting that the district court’s January 2009

interlocutory order was not an appealable injunction under 28 U.S.C. § 1292(a)(1).7

        A motions panel first considered this issue and in June 2009 denied the motion

without prejudice, noting decisions from the Ninth and Eleventh Circuits allowing the


        6
            The order states:

        Subject to the $1 million retention and the $10 million limit in Federal Policy No. 8159-62-
        13, Federal is hereby ORDERED to advance payment for the following categories of costs
        that Plaintiff has incurred and will incur in the future: 1) All reasonable costs incurred by
        Abercrombie or its current or former officers or directors to defend Ross v. Abercrombie,
        No. 2:05-cv-819 (S.D. Ohio); 2) All reasonable costs incurred by Abercrombie or its current
        or former officers or directors to defend In re Abercrombie & Fitch Co. Derivative
        Litigation, Lead Case No. 2:05-cv-819 (S.D. Ohio); and 3) All reasonable costs incurred by
        Abercrombie to investigate or evaluate whether it is in Abercrombie’s best interest to
        prosecute the claims raised in the shareholder derivative suits, up to the Policy’s $250,000
        limit (see Federal Policy, pp. 1 and 12); 4) All reasonable costs incurred by Abercrombie
        in connection with the Order Directing Private Investigation and Designating Officers to
        Take Testimony, SEC File No. P-1305, after November 30, 2005, the date of the Order, to
        the extent such costs were incurred with respect to a Claim, as defined by the Federal Policy.

(Citation omitted.)
        7
          The final judgment rule, codified at 28 U.S.C. § 1291, generally limits federal courts of appeals’
jurisdiction to final decisions of the district courts; in the next section, certain interlocutory decisions of the
district courts are excepted from the rule, giving us jurisdiction over orders “granting, continuing, modifying,
refusing or dissolving injunctions, or refusing to dissolve or modify injunctions . . . .” 28 U.S.C. §
1292(a)(1).
No. 09-3096                                                                                              7

immediate appeals of interlocutory orders directing insurers to advance litigation expenses.8

Abercrombie maintains in its merits brief that the January 2009, non-final order of the district

court is neither injunctive nor meets the requirements of Carson v. American Brands, Inc.,

450 U.S. 79 (1981) for other non-final orders: that a district court’s appealable interlocutory

order have a “serious, perhaps irreparable consequence,” and can only be “effectually

challenged” by immediate appeal. Id. at 84 (quoting Baltimore Contractors v. Bodinger, 348

U.S. 176, 181 (1955)).

        In Pacific Insurance Co. v. General Development Corp., 28 F.3d 1093, 1096 (11th

Cir. 1994), the Eleventh Circuit considered whether an interlocutory partial summary

judgment order directing insurance payments to insureds, pending resolution of the insurer’s

claim for rescission of the policy, was appealable under § 1292(a)(1). In its summary ruling

that it had jurisdiction over the appeal, the court relied on National Union Fire Insurance Co.

v. Sahlen, 999 F.2d 1532 (11th Cir. 1993).

        Sahlen is a case in which the plaintiff insurer filed a complaint for rescission of an

insurance contract based on the defendants’ alleged misrepresentations in the application for

insurance, which was ultimately resolved in the insurer’s favor on its motion for summary

judgment. Although it entered judgment, the district court reserved jurisdiction over the

insurer’s claim for reimbursement of payments for defense costs it had made prior to filing

its suit for recission. On appeal, concerned that this reservation of jurisdiction over the

reimbursement issue precluded appellate jurisdiction, the Eleventh Circuit submitted a sua

        8
         See Pac. Ins. Co. v. Gen. Dev. Corp., 28 F.3d 1093, 1096 (11th Cir. 1994); Gon v. First State Ins.
Co., 871 F.2d 863, 875 (9th Cir. 1989).
No. 09-3096                                                                                                 8

sponte question of jurisdiction to the litigants. Citing Gon v. First State Ins. Co., 871 F.2d

863 (9th Cir. 1989), the panel determined that the district court’s rulings in connection with

the insureds’ motion for partial summary judgment requesting payment of defense costs

pending a decision on the complaint for rescission constituted grants of or modifications of

an injunction, over which it had jurisdiction under § 1292(a)(1). Gon similarly held that a

district court’s order modifying its own earlier direction to an insurer to pay defense expenses

in certain litigation as they were incurred was an appealable order under § 1292(a)(1). See

Gon, 871 F.2d at 866.9

        As argued by Federal, the relief sought by Abercrombie’s amended complaint includes

a judgment “enjoining Federal from failing and refusing to pay” certain defense costs.

(Emphasis added.) Additionally, the order appears to fit the requirements set forth in

Gon—citing 16 C. Wright, A. Miller, E. Cooper, & E. Gressman, Federal Practice &

Procedure: Jurisdiction § 3922 at 29 (1977)—that it is enforceable by contempt, and is

“designed to accord or protect some or all of the substantive relief sought by a complaint in

more than temporary fashion.” Gon, 871 F.2d at 865. In line with Gon and Sahlen, we

determine that the district court’s grant of partial summary judgment was an injunctive order,

over which we have jurisdiction under 28 U.S.C. § 1292(a)(1).

B.      Breach of Contract



        9
          Additionally, in Medcom Holding Co. v. Baxter Travenol Laboratories, Inc., 984 F.2d 223, 224-25
(7th Cir. 1993), the court held that it had jurisdiction over a non-final order requiring specific performance
of a contract provision, but see Saber v. FinanceAmerica Credit Corp., 843 F.2d 697, 702 (3d Cir. 1988)
(holding an order to pay money under a settlement was a “legal remedy” and not an injunction within scope
of § 1292(a)(1)).
No. 09-3096                                                                                                   9

        We next turn to the merits of the appeal. Under Fed. R. Civ. P. 56(c), summary

judgment is appropriate where there are no genuine issues of material fact and the moving

party is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317,

322-23 (1986). Our review of both the district court’s interpretation of the insurance contract

and its summary judgment determinations is de novo.10 See Duane Mgmt. Co. v. Prudential

Ins. Co., 29 F.3d 245, 248 (6th Cir. 1994). There is no dispute here that Ohio law governs

the interpretation of the Federal Policy. As quoted by the district court, under Ohio law, “[i]n

order to defeat coverage, the insurer must establish not merely that the policy is capable of

the construction it favors, but rather that such an interpretation is the only one that can fairly

be placed on the language in question.” Andersen v. Highland House Co., 757 N.E.2d 329,

332 (Ohio 2001) (internal quotation marks and citation omitted).

        Federal relies on Federal Policy provision 16(d) for its claim that the district court

erred in finding that Abercrombie did not commit a breach of the Federal Policy. Federal

repeatedly invokes the language in § 16(d) that “in the event of a Claim the Insureds will do

nothing that could prejudice [Federal’s] position or its potential or actual rights of recovery,”

asserting that Abercrombie’s actions in electing the extension of coverage from Federal,

while also negotiating with National Union that Federal’s liability for coverage would be

        10
          Although Federal filed its appeal following the district court’s decision on Abercrombie’s motion
for partial summary judgment, its arguments address the September 2008 decision of the district court on
Federal’s motion for summary judgment. Federal notes that the September order was neither final nor timely
appealed, but concedes that “an appellate court, in its discretion, [may] exercise jurisdiction over issues that
are not independently appealable when those issues are ‘inextricably intertwined’ with matters over which
the appellate court properly and independently has jurisdiction,” quoting Hadix v. Johnson, 228 F.3d 662,
669 (6th Cir. 2000). Because we have determined we have jurisdiction over this appeal, and the January
2009 order incorporates rulings made in the September 2008 order, we find we may consider the issues
presented as “inextricably intertwined.”
No. 09-3096                                                                              10

primary, violated that provision.    Federal asserts that it had a “well-settled right to

contribution” from National Union at the time Abercrombie learned of the claims against it,

as without amendment to the National Union policy, the two insurers would have been

equally liable for coverage. See Buckeye Union Ins. Co. v. State Auto. Mut. Ins. Co., 361

N.E.2d 1052, 1055 (Ohio 1977). Federal contends that Abercrombie “abrogated” its right

to contribution, by retroactively “colluding” with National Union to make Federal

responsible for primary coverage of defense costs. Federal states that “Section 16(d), in

short, takes a snapshot of Federal’s rights on the day a Claim is made; Abercrombie is from

that point obligated not to do anything that could undermine those rights.”

       Abercrombie argues that Federal has selectively quoted from the policy, taking the

clause it relies on out of context. Provision (d) is the fourth of five parts of Section 16,

labeled “Defense and Settlement:”

       Defense and Settlement

       16.    (a) It shall be the duty of the Insureds and not the duty of the Company
       to defend Claims made against the Insureds.

              (b) The Insureds agree not to settle or offer to settle any Claim, incur
       any Defense Costs or otherwise assume any contractual obligation or admit
       any liability with respect to any Claim without the Company’s prior written
       consent. The Company shall not be liable for any element of Loss incurred,
       for any obligation assumed, or for any admission made, by any Insured without
       the Company’s prior written consent. Provided the Insureds comply with
       Subsections 16(c) and (d) below, the Company shall not unreasonably
       withhold any such consent.

              (c) With respect to any Claim that appears reasonably likely to be
       covered in whole or in part under this coverage section, the Company shall
       have the right and shall be given the opportunity to effectively associate with
       the Insureds, and shall be consulted in advance by the Insureds, regarding the
No. 09-3096                                                                                             11

        investigation, defense and settlement of such Claim, including but not limited
        to selecting appropriate defense counsel and negotiating any settlement.

               (d) The Insureds agree to provide the Company with all information,
        assistance and cooperation which the Company may reasonably require and
        agree that in the event of a Claim the Insureds will do nothing that could
        prejudice the Company’s position or its potential or actual rights of recovery.

               (e) Any advancement of Defense Costs shall be repaid to the Company
        by the Insureds, severally according to their respective interests, if and to the
        extent it is determined that such Defense Costs are not insured under this
        coverage section.

Federal Policy, § 16. Abercrombie insists that this section of the policy covers its and

Federal’s rights and obligations only in connection with the defense and settlement of claims

made against Abercrombie, and not Abercrombie’s negotiations or agreements regarding

insurance contracts and carriers.11

        In its opinion, the district court agreed with Abercrombie that § 16 of the Federal

Policy related only to the defense and settlement of claims, and was not violated by

Abercrombie’s actions in amending the National Union policy. The district court similarly

found no bar to Abercrombie’s actions in § 18, determining that the section’s “plain

language” allowed the amendment. Pointing out that § 7 of the Federal Policy (entitled

“Subrogation”) governed Federal’s rights of recovery “in the event of payment under this

policy,” the district court determined that “Section 16(d) can reasonably be interpreted to



        11
           Abercrombie also highlights the “deeming clause” language of § 12 of the Federal Policy, which
states that claims falling within the extended coverage are deemed made during the original period of the
Federal Policy (i.e. during September 1, 2004 - September 1, 2005). Abercrombie asserts that because the
National Union Policy was not in effect during the 2004-05 time period, National Union would have no
obligation to cover a claim deemed made during that period, and Federal is sole primary insurer of the Ross
claims.
No. 09-3096                                                                                               12

require the cooperation of Abercrombie in connection with the defense of a Claim, and no

more.” 12

        Federal argues that the district court’s decision, in agreeing with Abercrombie, did not

give effect to the Federal Policy as a whole, but improperly interpreted § 18 in isolation,

without the limitation it argues is imposed by § 16. Federal cites to Ohio law standing for

the proposition that courts must apply the terms of a contract as written, and cannot “read

into a contract” meaning not given to the document by the parties. See Motorists Mut. Ins.

Co. v. Tomanski, 271 N.E. 2d 924, 927 (Ohio 1971). Federal contends that the amendment

of an existing policy (the National Union policy), that was not originally “specifically excess

to the Federal Policy,” while not violative of § 18 did breach § 16’s proscription of actions

which could “prejudice” Federal’s “potential or actual rights of recovery.” 13 We disagree.

        Under Ohio law, we must “give the words in the policy their plain and ordinary

meaning.” Minor v. Allstate Ins. Co., Inc., 675 N.E.2d 550, 553 (Ohio Ct. App. 1996). We

read the policy as a whole, giving effect to all of its provisions, and not interpreting any


        12
          The district court cited Storer v. Ocean Accident & Guarantee Corp., 80 F.2d 470, 472 (6th Cir.
1935), an action brought under Ohio law on an insurance contract, for the purposes of a cooperation clause:
“(1) To require the insured to aid in preparing the case for trial and in making proper defense; and (2) to
prevent collusion between the insured and a friendly claimant.” See also Lee R. Russ and Thomas F. Segalla,
14 Couch on Insurance § 199:4 (3d ed.) (“The main purpose of a cooperation clause is to prevent collusion
while making it possible for the insurer to make a proper investigation.”).
        13
           Federal cites Champion Spark Plug Co. v. Fidelity & Casualty Co., 687 N.E.2d 785, 793 (Ohio Ct.
App. 1996) for the holding that an insured who breaches a consent-to-settle provision is automatically barred
from coverage, making the unconvincing analogy that Abercrombie’s alleged breach of § 16(d) bars it from
coverage for the Ross claims and related investigation. However, as shown by Abercrombie, the case of
Ferrando v. Auto-Owners Mut. Ins. Co., 781 N.E.2d 927 (Ohio 2002) added the required element of
prejudice to an insurer’s defense based on the cooperation clause. Abercrombie argues, and the district court
found, Abercrombie’s actions did not prejudice Federal’s “ability to defend the Ross Claims on the merits.”
Given our determination that Abercrombie did not breach the Federal Policy, we need not further address
this issue.
No. 09-3096                                                                                13

section in isolation. Foster Wheeler Enviresponse, Inc. v. Franklin County Convention

Facilities Auth., 678 N.E. 2d 519, 526 (Ohio 1997). Section 16 of the Federal Policy sets

forth (a) whose duty it is to defend Claims; (b) that Abercrombie cannot offer to settle any

Claim without Federal’s consent; (c) Federal’s involvement in investigating and settling

Claims; (d) that Abercrombie will fully assist with such investigation, including doing

“nothing that could prejudice [Federal’s] position or its potential or actual rights of

recovery;” and (e) that Abercrombie will repay defense costs advanced by Federal if it is

determined there was no coverage. It is clear that the purpose of §16 is to enumerate the

parties’ respective rights and obligations when a claim is made against an insured, and the

insured is covered by the policy. It does not address the parties’ rights and obligations when

a policy has elapsed, a claim has been brought against a (formerly) insured, and the insured

is deciding whether to elect—and how best to structure—extended insurance coverage.

       As Abercrombie highlights in its briefing, Federal’s position that §16(d) proscribes

its actions in amending the insurance policy with National Union makes little sense when

viewed in the context of Abercrombie’s initial decision to elect the ERP coverage. At the

time the Ross claims were filed, Federal had no coverage responsibility whatsoever, as its

policy had just expired. The decision by Abercrombie to elect the ERP after claims had been

made could certainly be said to “prejudice” Federal’s “position,” under the interpretation

advanced by Federal, but Federal makes no such argument. The idea that the §16(d)

language should apply to Abercrombie’s negotiation with National Union, but not to
No. 09-3096                                                                                   14

Abercrombie’s election of the ERP, undermines Federal’s argument that §16(d) applies to

the situation at all.

         There is no question that the interpretation advanced by Federal is not the only one

that can “fairly be placed on the language in question.” Andersen, 757 N.E.2d at 332. We

find that the district court’s interpretation of §16, limiting the provision’s application to the

defense and settlement of claims, to be entirely reasonable and supported by the language of

the contract. There is nothing about §16 that prevents Abercrombie from making fiscally

driven business decisions about its insurance coverage, even if such a decision is

unanticipated by an existing or past insurer. Certainly §12 of the Federal Policy, giving

Abercrombie a 30-day window in which to elect the extended coverage following the

expiration of its 2004-2005 policy, contained no language limiting Abercrombie’s ability to

elect that coverage in the event that claims were made during the window period. We also

note that the premium—double the premium for the first year—likely took this risk into

account. As noted above, Federal nowhere contends that Abercrombie was not allowed to

elect the ERP under those circumstances. Moreover, as argued by Abercrombie, a contract’s

specific provisions, such as § 12 of the Federal Policy, control over a more general provision

such as § 16. See Monsler v. Cincinnati Cas. Co., 598 N.E.2d 1203, 1209 (Ohio Ct. App.

1991).

         We note further that while Federal dates Endorsement 17 as occurring in November

2005, entirely after Abercrombie’s purchase of the extended Federal coverage, it is clear that

negotiation of the amendment occurred as a part of the decision to elect the ERP. Such a
No. 09-3096                                                                                                15

business negotiation was not prohibited by the Federal Policy.14 As the district court stated,

in rejecting Federal’s arguments about § 16, “[i]t is an unreasonable interpretation of Section

16(d) to find that it requires Abercrombie to structure its insurance needs based not on its

own needs and in its own best interests, but rather to minimize its insurer’s potential

exposure.” In any event, even if we were to determine that § 16(d) was susceptible to more

than one interpretation, strict construction of the language against the insurer is mandated by

Ohio law. See Lane v. Grange Mut. Cos., 543 N.E.2d 488, 490 (Ohio 1989).

        Because the Federal Policy does not impose limitations on allowable terms of

insurance agreed to between Abercrombie and additional insurers, we find no error in the

district court’s interpretation of the Federal Policy.

        The district court is AFFIRMED.




        14
          We are also not persuaded by Federal’s argument, citing Moskowitz v. Progressive Ins. Co., 811
N.E.2d 174, 183 (Ohio Com. Pl. 2004), that these business decisions constituted a breach of the duty of good
faith and fair dealing. Moreover, Federal has waived this argument, as it did not bring it before the district
court. See St. Marys Foundry, Inc. v. Employers Ins. of Wausau, 332 F.3d 989, 995 (6th Cir. 2003).
No. 09-3096                                                                               16

       KETHLEDGE, Circuit Judge, dissenting.

       In construing a contract, the words matter. The words of § 16(d) make clear that it

is not merely a “cooperation clause.” To read the provision that way—which is how

Abercrombie reads it—is to render nearly half the words of § 16(d) meaningless. Such an

interpretation is neither reasonable nor permissible under Ohio law.

       Instead, in plain and simple terms, § 16(d) imposes on Abercrombie a separate duty

not to prejudice Federal’s position after a claim is filed. Abercrombie breached that duty

here. I think we ought to enforce the contract to which Abercrombie freely agreed. I would

therefore reverse the orders at issue in this appeal.

                                              A.

       The chronology in this case is important. In 2004, Federal issued Abercrombie an

insurance policy with $10 million in coverage for claims asserted within the policy period.

That period expired on September 1, 2005. Abercrombie chose not to renew the policy for

the following year, but instead purchased a $10 million policy from a different insurer, AIG.

That policy’s coverage began on September 1, 2005. The very next day—by happenstance,

apparently—the Ross claims were filed against Abercrombie in federal district court.

       It is undisputed that the AIG policy, as originally written, afforded Abercrombie

primary coverage for those claims. Predictably, then, Abercrombie reported the claims to

AIG. But what happened next was less predictable. On September 29, 2005, Abercrombie

elected, under § 12 of the Federal Policy, to purchase ERP coverage from Federal. That

election was Abercrombie’s right; and it extended the Federal Policy period to September 30,
No. 09-3096                                                                               17

2005, thereby encompassing the Ross claims.              The election cost Abercrombie

$820,000—twice the cost of the original Federal policy—and seemed merely to afford

Abercrombie duplicative coverage for claims already covered under its new policy with AIG.

So the election seemed a strange thing to do.

       Behind the scenes, however, Abercrombie was negotiating with AIG to revise its AIG

policy—which again by its terms was primary as to the Ross claims—to be excess as to any

claim covered by the now-extended Federal policy.            The record makes clear that

Abercrombie went to considerable lengths to hide from Federal the fact of those negotiations.

Finally, on November 22, 2005—nearly three months after the AIG policy took

effect—Abercrombie and AIG executed Endorsements 17 and 18 to the AIG policy.

Endorsement 17 retroactively made the AIG policy excess as to a single species of claim:

namely, claims made “under this policy and also under Policy No. 8159-6213 issued by

Federal Insurance Company.” Those claims, of course, were the Ross claims; and the effect

of that change was retroactively to foist on Federal the entire burden of coverage for the

claims, up to the $10 million policy limit. Absent that change, Federal and AIG would have

shared that burden equally. The endorsement thereby saved AIG up to $5 million. But

Abercrombie benefitted from the deal as well: in Endorsements 17 and 18, AIG waived

Abercrombie’s $2 million retention for the Ross claims and promised not to increase

Abercrombie’s premiums for a renewal policy the following year. It appears those changes

effectively repaid Abercrombie the cost of its $820,000 ERP election, likely several times
No. 09-3096                                                                                  18

over. The cost of all this largesse, of course, fell to the party not in the room—namely,

Federal.

                                              B.

       Federal says that Abercrombie’s participation in this scheme—the pejorative is earned

here—violated § 16(d) of Federal’s policy. That section provides:

       The Insureds [i.e., Abercrombie] agree to provide the Company [i.e., Federal]
       with all information, assistance and cooperation which the Company may
       reasonably require and agree that in the event of a Claim the Insureds will do
       nothing that could prejudice the Company’s position or its potential or actual
       rights of recovery.

       As shown above, the AIG policy took effect on September 1, 2005; the Ross claims

were filed on September 2; and Abercrombie made its ERP election on September 29. As

of the latter date, then, Federal was obligated to pay only 50% of the costs of the Ross claims,

with AIG, per the express terms of its policy, on the hook for other half. Moreover,

Abercrombie does not dispute that, had AIG thereafter not borne its share of those costs,

Federal could have asserted a contribution claim against AIG for any amounts that Federal

paid above 50%. See Buckeye Union Ins. Co. v. State Auto. Mut. Ins. Co., 361 N.E.2d 1052,

1055 (Ohio 1977). That was the status quo on September 29; and at that point it was

Abercrombie’s undisputed obligation to “do nothing that could prejudice [Federal’s] position

or its potential or actual rights of recovery.” Federal Policy § 16(d) (emphasis added).

       But Abercrombie then did something—in the form of Endorsement 17—that both

obligated Federal to pay 100% of the costs of the Ross claims and extinguished Federal’s

potential right of recovery against AIG. The effect of that action was to prejudice Federal’s
No. 09-3096                                                                                 19

position to the extent of $5 million, which Abercrombie and AIG then spread amongst

themselves. That seems to me a patent violation of the terms of § 16(d).

       Abercrombie disagrees with that conclusion.         In its view, § 16(d) is merely a

“cooperation clause”; and, Abercrombie says, “there is considerable legal authority

demonstrating that the purposes of cooperation clauses are to prevent collusion between the

insured and the claimant”—as opposed, apparently, to collusion between the insured and

another insurance company—“and to permit the insurer to participate in the defense and

settlement of claims.” Aber. Br. at 28.

       The short answer to this argument is that we do not construe contractual provisions

in gross. That one provision contains the word “cooperation” does not mean that we treat it

as identical to every other contractual provision that contains that word. And it is pointless,

therefore, to talk about “cooperation clauses” categorically, without discussing the specific

language in each of them. Abercrombie does not mention, much less discuss, a single word

of the “cooperation clauses” whose meaning it would graft onto § 16(d) here.

       But Abercrombie makes a more serious omission as well. Abercrombie does not

explain—anywhere in its brief—what meaning, exactly, it attaches to the language that

Federal relies upon in this appeal. The law requires Abercrombie to do so. “In construing

a contract,” we “must give meaning to every paragraph, clause, phrase and word, omitting

nothing as meaningless, or surplusage[.]”       Affiliated FM Ins. Co. v. Owens-Corning

Fiberglas Corp., 16 F.3d 684, 686 (6th Cir. 1994) (applying Ohio law). Again, § 16(d)

provides:
No. 09-3096                                                                                 20

       The Insureds [i.e., Abercrombie] agree to provide the Company [i.e., Federal]
       with all information, assistance and cooperation which the Company may
       reasonably require and agree that in the event of a Claim the Insureds will do
       nothing that could prejudice the Company’s position or its potential or actual
       rights of recovery.

(Emphasis added.)

       The reality is that Abercrombie does not give any meaning to the language italicized

above. Rather, it says only that § 16(d) as a whole “can reasonably be interpreted to require

the cooperation of Abercrombie in connection with the defense of a Claim, and no more[.]”

Aber. Br. at 19 (internal quotation marks omitted). That interpretation is not reasonable,

however, because it violates the rule laid down in Owens-Corning. Standing alone, the first

part of § 16(d)—“[t]he Insureds agree to provide the Company with all information,

assistance and cooperation which the Company may reasonably require”—already requires

Abercrombie to cooperate “in connection with the defense of a Claim, and no more.”

Abercrombie reads § 16(d) as if it ended there, with a period after “reasonably require.”

       But the provision does not end there. It goes on to say “and [the Insureds] agree that

in the event of a Claim the Insureds will do nothing that could prejudice the Company’s

position or its potential or actual rights of recovery.” That language describes an obligation,

in addition to cooperation, to which Abercrombie freely agreed. The law says that obligation

must mean something. Our task is to determine what it is.

       Upon examination, the two parts of § 16(d) differ in fundamental respects. The first

is a cooperation provision; the second is, for lack of a better term, an anti-prejudice

provision. To cooperate is “[t]o work or act together toward a common end or purpose.” The
No. 09-3096                                                                                21

American Heritage Dictionary 414 (3d Ed.). To prejudice is “[t]o affect injuriously or

detrimentally by a judgment or an act.” Id. at 1428. Thus one fundamental difference,

simply stated, is that the first part of § 16(d) imposes an obligation to help; the second, an

obligation not to hurt. The first obligation, moreover, is one to take certain action; the

second, an obligation to refrain from certain action. Neither the law, nor good grammar, nor

enforcement of the obligations that these sophisticated parties have chosen to assume, allow

us to conclude that § 16(d) imposes only the first obligation, “and no more.”

       So I submit that § 16(d) imposes on Abercrombie an obligation to “do nothing” to

prejudice Federal’s position, and that Abercrombie’s post-claim actions—whose very

purpose was to increase Federal’s liability by $5 million and to extinguish its contribution

claim for that amount—were in violation of that obligation. And I see nothing in the

remainder of § 16(d) to displace that common-sense conclusion. Abercrombie cites the

heading of § 16—“Defense and Settlement”—as proof that the prejudice at issue here was

not of the sort contemplated by the section. But that argument should go nowhere in a case

where Abercrombie expressly sought, and obtained, an injunction requiring Federal to pay

Abercrombie’s defense costs—so far, $8 million of them.              Moreover, contrary to

Abercrombie’s suggestion, there is nothing in § 16 generally, or § 16(d) specifically, that

creates a safe harbor for prejudicial actions taken “with another insurance carrier.” There is

not a word of text that so limits Abercrombie’s no-prejudice obligation. To the contrary, the

text that is there—that Abercrombie shall “do nothing that could prejudice Federal’s

position”—could hardly be broader. The same is true of Abercrombie’s obligation to “do
No. 09-3096                                                                                 22

nothing” that could prejudice Federal’s “potential or actual rights of recovery.” That

obligation extends not just to recovery against certain parties, but to “potential or actual

rights of recovery”—period.

       “Plain meaning” is an overused term. I believe, however, that it fairly applies here.

Section 16(d)’s no-prejudice obligation is stated in terms that are simple, broad, and common

to the law. The parties before us are sophisticated, and they freely agreed to those terms. I

submit that we should enforce them.

                                              C.

       Abercrombie also presents several arguments external to § 16(d). The first is that two

other sections of the Federal Policy—§§ 12 and 18—demonstrate that § 16(d) could not bar

the scheme at issue here. Section 12 of the Policy affords Abercrombie a 30-day window to

elect ERP coverage. And there is no disputing that Abercrombie’s ERP election—which

came after filing of the Ross claims—changed Federal’s position for the worse. Thus,

Abercrombie says, § 16(d)’s injunction to “do nothing” cannot mean what it says, which

means in turn (and here the argument fails even on its own terms) that Endorsement 17 was

permissible. Section 18, for its part, does not grant rights to Abercrombie at all, but instead

diminishes them, by limiting the instances in which Federal’s coverage is primary. But § 18

does implicitly contemplate that Abercrombie might have additional coverage for a particular

claim. So Abercrombie says that section too shows that Endorsement 17 was fair game.

       Abercrombie’s contention as to § 12 is scythed down by an elementary rule. The

existence of this rule, and that it applies here, are points on which the majority and I agree.
No. 09-3096                                                                                   23

“[A] contract’s specific provisions, such as § 12 of the Federal Policy, control over a more

general provision such as § 16.” Maj. Op. at 14 (citing Monsler v. Cincinnati Cas. Co., 598

N.E.2d 1203, 1209 (Ohio Ct. App. 1991)). The rule’s effect is to harmonize provisions that

at first seem to conflict, rather than having one of them cancel the other out.

        When we harmonize the two provisions here, § 16(d) remains a bar to conduct like

Endorsement 17. I completely agree with the majority that § 12 is more specific than § 16(d)

as to whether Abercrombie was free to extend its coverage within the 30-day ERP window,

and that § 12 therefore controls that issue. But that only means that Abercrombie’s ERP

election was legal, not that Endorsement 17 was. That § 12 prescribes a highly specific right

to elect ERP coverage, to which § 16(d) must yield, does not mean that § 16(d)’s “do

nothing” language itself means nothing at all. That, in truth, is what Abercrombie intimates

here.   But the law is otherwise:        Subject only to the right to elect ERP coverage,

Abercrombie’s no-prejudice obligation remains enforceable, to the full extent of its plain,

broad terms, except to the extent it conflicts with some other provision that more specifically

governs conduct like Endorsement 17.

        There is no such provision. Abercrombie cites § 18, but that section—apart from

being one that grants rights to Federal, not Abercrombie—contemplates decisions by

Abercrombie as to how to layer its coverage only before a claim is filed. Section 18 provides

in relevant part:

        If any Loss under this coverage section is insured under any other valid
        insurance policy(ies), then this coverage section shall cover such Loss, subject
        to its limitations, conditions, provisions and other terms, only to the extent that
        the amount of such Loss is in excess of the applicable retention (or deductible)
No. 09-3096                                                                                24

       and limit of liability under such other insurance, whether such other insurance
       is stated to be primary, contributory, excess, contingent, or otherwise[.]

       This section confirms rather than refutes Federal’s interpretation of § 16(d). Section

18 says that, if another company’s policy provides coverage for a claim that is also covered

by Federal’s policy, the Federal coverage is excess (rather than primary) unless the other

policy is by its terms exclusively excess.       This provision would be an exercise in

stultification, however, if the insured could amend the other policy to be exclusively excess

after a claim is filed. That, of course, is what Abercrombie did in executing Endorsement

17.

       Section 18 thus implies only that Abercrombie can structure its other insurance before

a claim is filed. It has nothing to imply about afterwards. To read § 18 as Abercrombie

does—as affirmatively, if implicitly, authorizing conduct that makes § 18 itself

unenforceable—is beyond ironic. It is to interpret § 18 as meaningless, as a provision

without effect, except to the extent § 18 renders § 16(d) meaningless as well. The law does

not permit that interpretation.

       Only two arguments of significance remain. First, that Abercrombie paid a lot of

money to obtain ERP coverage does not mean it was entitled to do what it did here. As an

initial matter, this argument requires a certain suspension of disbelief, since Endorsement 17

effectively repaid Abercrombie its money several times over. But even if one disregards that

reality: What Abercrombie bought, under § 12, was a right of adverse selection—the right

to obtain coverage from Federal after a claim is filed against Abercrombie, rather than
No. 09-3096                                                                                   25

before. That right is valuable, and was priced accordingly. What Abercrombie did not buy,

however, was a right of post-claim collusion. Section 16(d) says that right was not for sale.

        Second, the rule that ambiguities are resolved against the insurer does not apply here.

That § 16(d)’s terms are broad, does not mean they are ambiguous. See Nationwide Mut.

Fire Ins. Co. v. Wittekind, 730 N.E.2d 1054, 1058 (Ohio Ct. App. 1999) (“a term is not

ambiguous simply because it includes a wide variety of objects or concepts in its definition”).

And that a contract is complicated, does not mean it is unclear. See Value City, Inc. v.

Integrity Ins. Co., 508 N.E.2d 184, 189 (Ohio Ct. App. 1986) (“[a] contract is not ambiguous

merely because it is complex or difficult to read as a whole”). I think the terms of the

parties’ agreement, when examined closely, provide a clear answer to the question presented

here.

        It is with no small irony, moreover, that Abercrombie cites the rule that ambiguities

should be resolved against the insurer. The policies behind that rule, presumably, include the

relative bargaining power and sophistication of insurer and insured. It is hard to imagine a

case in which those policies are less apposite than they are here. If there was a wolf in this

story, it was not Federal.

                                          *     *     *

        Although I write alone, I think it fair to say that the majority’s decision does not lend

to this scheme the imprimatur of this court. What is legal is sometimes different from what

is right. Today Abercrombie is the beneficiary of that distinction.

        I respectfully dissent.
