                 NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                            File Name: 15a0364n.06

                                      Nos. 13-2686/14-1022                              FILED
                                                                                  May 18, 2015
                          UNITED STATES COURT OF APPEALS
                                                                              DEBORAH S. HUNT, Clerk
                               FOR THE SIXTH CIRCUIT

FEDERAL-MOGUL CORPORATION,                       )
                                                 )
      Plaintiff-Appellee/Cross-Appellant,        )
                                                 )     ON APPEAL FROM THE UNITED
v.                                               )     STATES DISTRICT COURT FOR THE
                                                 )     EASTERN DISTRICT OF MICHIGAN
INSURANCE COMPANY OF THE STATE                   )
OF PENNSYLVANIA,                                 )
                                                 )     OPINION
       Defendant-Appellant/Cross-Appellee.       )

—————————————————————————————————————
   Before: KEITH, MERRITT, and BOGGS, Circuit Judges.

       BOGGS, Circuit Judge. This case requires us to construe an insurance contract between

Plaintiff-Appellee Federal-Mogul and Defendant-Appellant Insurance Company of the State of

Pennsylvania (ISOCOP). The parties dispute the extent to which the contract rendered ISOCOP

liable for the damage caused by a 2011 flood. The district court granted summary judgment to

Federal-Mogul, holding that the contract did not specially limit ISOCOP’s liability for this flood.

We reverse the judgment of the district court and remand for further proceedings, including

consideration of the claim that Federal-Mogul presented on cross-appeal.

                                                 I

       Federal-Mogul operates an automobile parts factory in the Rojana Industrial Park (Rojana

Facility). The Rojana Facility is near Thailand’s Chao Phraya River, which often floods. During

one recent period of thirty years, the area in which the Rojana Facility is located flooded six

times: in 1983, 1995, 1996, 2006, 2010, and 2011.
Nos. 13-2686/14-1022, Federal-Mogul v. Ins. Co. of State of Penn.


       Prior to the 2011 flood, Federal-Mogul purchased from ISOCOP a policy insuring

factories against flood damage, among other kinds of loss. The policy consists of several

sections: (A) “Declarations,” (B) “Property Damage,” (C) “Time Element,” (D) “Loss

Adjustment and Settlement,” (E) “General Provisions,” (F) “Definitions,” and (G) “Appendix.”

       The “Property Damage” section provides for insurance against damage caused by flood,

among other perils. The subprovisions limit ISOCOP’s liability for property damage due to

flood to $200 million, except for floods in High Hazard Zones for Flood ($30 million limit) and

Moderate Hazard Zones for Flood ($70 million limit). The “Time Element” section provides for

insurance against loses including gross earnings, extra expenses, leasehold interest, rental

insurance, and commissions, profits, and royalties.

       The 2011 flood caused over $64 million worth of damage to Federal-Mogul’s property.

During the course of this litigation, the parties stipulated that, due to the flood, Federal-Mogul

lost $64.5 million. The parties further stipulated that $39,406,467 of that damage was physical

and $25,093,533 was time-element loss.       After Federal-Mogul submitted its claim for

payment, ICOSOP paid Federal-Mogul $30 million and indicated that it considered the Rojana

Facility to be in a High Hazard Zone.        Federal-Mogul disagreed and sued.       After expert

discovery and reports, Federal-Mogul moved for summary judgment. ISOCOP cross-moved for

summary judgment. The district court denied ICOSOP’s motion and granted Federal-Mogul’s.

ICOSOP timely appealed.

       Federal-Mogul cross-appealed, contending that “the Policy’s flood sublimits are

restricted to physical damage caused by flood, whereas Federal-Mogul’s loss includes . . .

separate time element loss . . . . The Policy has no ‘Time Element’ sublimit. Therefore, the

Policy’s $200 million blanket limit applies to the time element loss.” Appellee Br. 49.



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Nos. 13-2686/14-1022, Federal-Mogul v. Ins. Co. of State of Penn.


                                                         II

         We consider the district court’s grant of summary judgment to Federal-Mogul. “We

review an order granting summary judgment de novo . . . .” Ky. Commercial Mobile Radio Serv.

Emergency Telecomms. Bd. v. TracFone Wireless, Inc., 712 F.3d 905, 912 (6th Cir. 2013).

                                                         A

         The parties dispute whether the Rojana Facility was within a High Hazard Zone for

Flood, as defined by the policy. The policy defines “High Hazard Zones for Flood” as:

                  a) all property at a ‘location’ that is partially or totally situated in
                  an area which at the time of the loss or damage has been
                  designated on a Flood Insurance Rate Map (FIRM) to be a Special
                  Flood Hazard Area (SFHA), and/or
                  b) all property in areas where the National Flood Insurance
                  Program (NFIP) is not in effect, and where all property at a
                  ‘location’ is partially or totally situated in an area which is within a
                  100 year flood plain or its worldwide equivalent, and/or
                  c) all property at a “location” that is partially or totally protected
                  by dams, dikes, levees or walls which were intended to protect
                  such property from the level of a 100 year flood or its worldwide
                  equivalent, regardless of any Zone or Area designation or
                  assignment by the Federal Insurance and Mitigation
                  Administration (FIMA) or other recognized authority having
                  jurisdiction.

(emphasis added).

         In the United States, the Federal Insurance and Mitigation Administration (FIMA)

administers the National Flood Insurance Program (NFIP). NFIP publishes maps of floodplains,

using the pre-existing concept of 100-year floods and 100-year floodplains.1 Canada, Australia,

and member countries of the European Union have similar programs. But most countries do not.

If not noted on a regulatory map, can a 100-year floodplain—as mentioned in the policy

contract—exist? That question drives this dispute. We hold that it can.

1
 The policy speaks of a “flood plain,” but dictionaries indicate that the phrase is one word: “floodplain.” See, e.g.,
Webster’s Ninth New Collegiate Dictionary 474 (1986). In this opinion, we use one word, except to quote
accurately.

                                                          3
Nos. 13-2686/14-1022, Federal-Mogul v. Ins. Co. of State of Penn.


        We must “interpret contract language in accordance with its plain meaning.” Switzer v.

Hayes Wheels Intern., Inc., 205 F.3d 1342 (6th Cir. 2000) (table). “Where a contract is not

ambiguous, courts are obligated to accept . . . the plain meaning of the words used.” Tel-Towne

Props. Grp. v. Toys “R” Us–Del., Inc., 123 F. App’x 656, 660 (6th Cir. 2005) (internal citations

and quotation marks omitted). Section 2(b) provides that property situated in area that is within

a 100-year floodplain and not covered by NFIP is a High Hazard Zone. To determine whether

the Rojana Facility is in a High Hazard Zone, we must determine what the policy means by “100

year flood plain or its worldwide equivalent,” and whether that meaning is unambiguous.2

                                                       B

        The word “floodplain” has an unambiguous meaning. A floodplain is “level land that

may be submerged by floodwaters,” Webster’s Ninth Collegiate Dictionary (1986), i.e., “the

normally dry land area adjoining rivers, streams, lakes, bays, or oceans that is inundated during

flood events,” Ven Te Chow et al., Applied Hydrology 517 (1988). So a floodplain exists

independently of a map denoting its existence.

        An area was within a 100-year floodplain on a certain date if, on that date, it would

experience flooding during a 100-year flood, i.e., there was a 1% chance of it experiencing

flooding in any given year. Whether there was a 1% chance of an area experiencing flooding is a

question of fact. A fact is any “aspect of reality,” Black’s Law Dictionary 628 (8th ed. 2004)

(Black’s), i.e., any thing (and “not just [a] tangible thin[g], actual occurenc[e], [or]

relationshi[p],” ibid.) that has “the quality of being actual,” Webster’s Ninth New Collegiate

Dictionary 444 (1986). For example, “[a]n actual or alleged event or circumstance” can be a

fact. Black’s at 628. ISOCOP alleges a circumstance: that the Rojana Facility is in an area that

2
  The parties dispute who bears the burden of demonstrating whether the Rojana Facility was or was not in a High
Hazard Zone. But neither party suggests that the burden affects the outcome. We assume without deciding that
ISOCOP bears the burden of proof.

                                                       4
Nos. 13-2686/14-1022, Federal-Mogul v. Ins. Co. of State of Penn.


has a 1% chance of flooding each year. The statistical nature of the 100-year floodplain concept

does not undermine its use in legal documents or court proceedings, both of which often refer to

facts.

          “A finding of fact may . . . stem from an assessment of what is expected to occur in the

future. . . . The likelihood (an inferential fact) may be established through, for example,

testimony of past experience . . . or even expert opinion . . . .” Kaplun v. Attorney General,

602 F.3d 260, 269 (3d Cir. 2010). The contract that we interpret here contemplates a lower

policy limit for locations subject to a 1% likelihood of flooding each year.

         Not only does this reading of the contract accord with the plain meaning of the words at

issue, it also means that the third subsection of the relevant contract language has a clear

purpose. Section 2(c) indicates that an area may be a High Hazard Zone for Flood if, according

to floodplain projections, there is less than a 1% chance of the area experiencing flooding each

year, but where people sufficiently fear flooding that they have protected the area as if there were

at least a 1% chance of flooding. In addition, § 2(c) clarifies that, for a property within a 100-

year floodplain, the existence of protective measures may reduce the damage, but does not

reclassify the area from a High Hazard to Moderate Hazard Zone; i.e., building a dike or a dam

does not increase ISOCOP’s liability for flood damage. The parties decided to limit liability

where local knowledge indicates flooding concerns and to clarify that some of the effective cost

of protective-measures failure does not fall on the insurer; it was sensible for parties to state both

decisions in the insurance contract.

         Federal-Mogul explains the language differently.        Federal-Mogul argues that, until

denoted by an NFIP or similar map designed with the regulatory purpose of informing insurance-

collection proceedings, a floodplain is a statistical concept without reality. Appellee Br. 23-25,



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Nos. 13-2686/14-1022, Federal-Mogul v. Ins. Co. of State of Penn.


45.   To support these claims, Federal Mogul offers only “a series of assertions by its

experts . . . .” Response and Reply Br. 13. These assertions cannot change the literal meaning of

the contract.

       Federal-Mogul also objects to a literal construction of the contract on policy grounds.

See, e.g., Appellee Br. 20 (“Because any interpretation of the Policy must be workable for all

claims, not simply a single claim, the likely consequences of a proposed interpretation are

important.”); see also Decl. and Expert Report of Professor Kenneth S. Abraham at ¶ 7, (“It is

strongly in the interest of both policyholders and insurers to establish limits of liability that are

determinate . . . before a loss occurs”); id. at ¶ 20 (listing other methods of “dealing with losses

that are larger than may have been anticipated at the time of risk transfer”); id. at ¶ 34 (warning

that “difficult-to-determine limits of liability would tend to result in higher premiums, and easily

determinable limits of liability would tend to result in lower premiums”).

       But we cannot rewrite an otherwise valid contract simply because, after the fact, lawyers

can think of better ways to structure similar deals. The fact that Federal-Mogul now believes a

different policy would be superior to the policy for which it originally contracted, as construed

by ICOSOP, also does not demonstrate that the contracted policy, as construed by ICOSOP, is

unreasonable. Similarly, whether or not the sort of contract at issue reflects an intelligent or

efficient way to insure production against floods is not relevant to our decision. Besides,

Federal-Mogul’s parade down the slippery slope—untold numbers of insurance contracts

rendered useless, every policy’s premium rising to account for the uncertainty—only seems

horrible until the mechanics of that doomsday scenario are laid bare: if our holding that

“floodplains” can be determined either ex ante by a regulator or after a flood increases




                                                 6
Nos. 13-2686/14-1022, Federal-Mogul v. Ins. Co. of State of Penn.


uncertainty as much as Federal-Mogul says it will, parties to future insurance-policy contracts

simply will specify “floodplains as designated by a regulator.”

       Because we hold that a 100-year floodplain can exist absent identification on a regulatory

map, we reverse the district court’s grant of summary judgment to Federal-Mogul. “Of course,

to call a likelihood ‘fact’ is not to say that the likely outcome will necessarily occur, but the

likelihood itself remains a factual finding that can be made ex ante . . . .” Kaplun, 602 F.3d at

269-70. So an area can have, as a matter of fact, a 1% chance of flooding, even if no regulator

says so.   Applying the literal meaning of the contract to this dispute does invite the parties to

dispute whether the Rojana Facility is located in a 100-year floodplain. The district court did not

adjudicate whether ISOCOP demonstrated that the Facility is within an area that has a 1%

chance of flooding each year. We remand to the district court to adjudicate that question, after

any proceedings necessary to allow each party to present evidence on the question—for example,

by ruling on Federal-Mogul’s pending motions to exclude ISOCOP’s experts.                See, e.g.,

Plaintiff’s Motion To Exclude Expert Reports and Testimony of Dr. Lee E. Branscome. We

enjoy no advantage over the district court in ruling on those pending motions.

                                                III

       Federal-Mogul suggests that “its separate time element claim of $25,093,533 is subject to

the Policy’s blanket limit of $200 million, [so] Federal-Mogul is entitled to further payment

irrespective of the High Hazard Sublimit.” Appellee Br. 52. Perhaps Federal-Mogul’s most

substantial observation in support of this claim is that “when [the contract] limits a Time

Element loss in the context of Flood, the Policy says so explicitly.” Reply Br. 6.

       Because we have not determined whether the Rojana Facility is in a 100-year floodplain,

we do not reach Federal-Mogul’s cross-motion. On remand, the district court should consider



                                                7
Nos. 13-2686/14-1022, Federal-Mogul v. Ins. Co. of State of Penn.


whether Federal-Mogul can demonstrate that the High Hazard Zone Sublimit for Flood does not

limit time-element losses resulting from flood.




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