____________ No. 95-1597

____________ House of Lloyd, Inc., * * Appellee, *

* v. * * Versa Corporation, doing * Appeal from the United States business as Versa, Ferguson * District Court for the Conveyor Corporation, * Western District of Missouri * Defendant. *

* Federal Insurance Company, * * Appellant. *

____________ Submitted: November 15, 1995 Filed: June 25, 1996

____________ Before McMILLIAN, FLOYD R. GIBSON, and LOKEN, Circuit Judges.

____________ McMILLIAN, Circuit Judge.

Fed eral Insurance Company (Federal) appeals from a fina l judgme nt entered in the United States District Court for th e Western District of Missouri in favor of House of Lloyd, Inc

. (Ll oyd), on Lloyd's claim for insurance proceeds to cover th e replacement cost of certain eq uipment that was destroyed by a fire
on L loyd's property while being installed by Federal's insured , Versa Corporation (Versa). House of Lloyd, Inc. v. Versa Corp. , No. 89-0943-CV-W-6 (W.D. Mo. Jan. 26, 1995). For reversal, Federal argues that the district court erred in holding that (1) the loss-2-

of property was covered by the policy Federal issued to Versa (the Federal policy) even though th e risk of loss had passed from Versa-3-

to Lloyd, id. (June 7, 1993) (magistrate judge's order dispo sing of risk of loss issue), and (2) Federal's share of the insuranc e liability was 83%, as compared to 17% attributed to Lloyd' s insurer, Travelers Indemnity Company (Travelers). Id. (Sept. 26, 1994) (district court order disposing of coverage issue); id

. (Jan

. 26, 1995) (district court order disposing of monetar y allocation issue). For the reasons discussed below, we hold that the Federal policy did not cover the loss of property at issue in the present case. Accordingly, we reverse the judgment of th e district court in favor of Llo yd against Federal, decline to reach the allocation issue as moot, and remand this case to the district court with instructions to enter judgment for Federal.

Background

The background facts are stated in detail in the magistrat e judge's order dated June 7, 1993. Id. , slip op. at 1-12 (June 7, 1993). The following is a brief summary of the facts. O n April 28, 1987, Lloyd entered into a contract with Versa whereb y Versa agreed to supply and install conveyor subsystems at Lloyd's distribution facility under co nstruction, located on Botts Road in Grandview, Missouri. On November 27, 1987, after the conveyo r subsystems had been delivered, but before installation wa s compl ete, they were damaged or destroyed in a fire at the Lloy d dis tribution facility. The Federal policy insuring Versa was i n effect at the time of the fire. The Federal policy contained a n "Installation Floater," which included the following provision:

1. PROPERTY COVERED:
Th is policy insures the property of th e Ins ured and the property of others for which the Insured may be liable, consistin g-4- pr incipally of mechanical material[, ] handling equipment and metal products.Lloyd asserts, however, that there was dual coverage unde r 1 the Federal policy and the Travelers policy.
In an order dated July 19, 1993, the magistrate judge hel d 2 that the June 7, 1993, ruling was interlocutory and not a fi nal and appealable judgment or order. House of Lloyd, Inc. v. Versa Corp. , No. 89-0943-CV-W-6 (W.D. Mo. July 19, 1993). Later, after th e district court entered judgment in favor of Lloyd on the issue of
-5- Joi nt Appendix, Vol. II, at 600 (attachment to parties' join t stipulation of facts). Lloyd also had an insurance policy issued by Travelers (the Travelers policy), which was in effect at th e time of the fire and undisputedly covered Lloyd's loss. 1

Lloyd brought the present action in feder al district court on the ba sis of diversity jurisdiction, asserting two breach o f contract claims against Versa (Counts I and II) and a contrac t claim against Federal (Count III). As to Versa's liability, Counts I and II of the complaint alle ged that Versa bore the risk of loss of the conveyor subsystems at the time of the fire. As t o Federal's liability, Count III alleged that, under the terms of the Installation Floater in the Federal policy, the conveyor sub systems were "property of others for which [Versa] may be liable."

In the cour se of the litigation, the parties stipulated to a separation of issues for trial purposes. The parties agreed t o first ha ve the risk of loss issue tried by the court; afterward , depending on the outcome in that bench trial, a jury trial w ould be held on the remaining liability issues. House of Lloyd, Inc. v

. Versa Corp. , slip op. at 2 (Apr. 16, 1992) (order incorporatin g parties' stipulation). By con sent of the parties, the first trial
was conducted by a magistrate judge. The magistrate judge hel d that Versa was not liable to L loyd because the risk of loss of the conveyor subsystems passed to Lloyd upon delivery. Id. , slip op. at 12-28 (June 7, 1993). 2Federa l's liability, the magistrate judge ordered entry of fina l

judgm ent in favor of Versa in accordance with the June 7, 1993 , order. Id. (Mar. 17, 1995). Lloyd has not cross-appealed with re spect to the risk-of-loss issue. Accordingly, the fina l determination that the risk of loss passed from Versa to Llo yd upon delive ry of the conveyor subsystems is not reviewable in th e pre sent appeal and must be accorded appropriate deference as th e law of the case.

These procedural steps were taken by the district cour t 3 despite the court's earlier ruling that, if Lloyd were foundin the initial bench trial to have borne the risk of loss vis-a-vis Versa, then a jury trial would be hel d on Lloyd's remaining claim against Federal. Id. , slip op. at 2 (Apr. 16, 1992). It is unclear from the materials provided on appeal how the 4 district court procedurally reached the issue of Federal' s liability in the manner it did. As noted above, the distric t court's order of April 16, 1992, stated that the issue of Fe deral's liabil ity would be tried by a jury if Lloyd were found to hav e borne the risk of loss. Id. No jury trial or bench trial wa s held, however, and instead the district court ruled on the merits, app arently relying solely on the facts stipulated by the partie s and the magistrate judge's findings. Id. (Sept. 26, 1994 ) (memorandumand order). Federal asserts in its brief on appea l that this is an "appeal from a civil bench trial." Brief fo r Appellee at 6. Lloyd, by contrast, asserts that "the Distric t Court's judgments . . . were in the nature of summary judgment. " Supplement to Brief of Appellant (filed May 16, 1995).
-6- Following t he magistrate judge's June 7, 1993, ruling on the risk-of-loss issue, the district court required the parties to file stipul ated facts and ordered briefing on the issue of Federal' s li ability. The district court then disposed of the issue o f 3 Feder al's liability without a jury trial or a bench trial. Id

. (S ept. 26, 1994) (memorandum and order). In its order date d 4 September 26, 1994, the district court held that the Federal policy
cov ered Lloyd's loss because coverage under the Installatio n Floater was triggered by Versa's equitable responsibility for the conveyor subsystems, notwithstanding the fact that the risk of loss had passed from Versa to Lloyd. Id. at 3. The district cou rt then invite d briefing regarding the amount of money owed by Federal

.-7-

Following that briefing, the d istrict court found that Federal was lia ble for $1,045,884.05 of the total loss, and Travelers wa s liabl e for the remaining $214,217.21. Id. at 7 (Jan. 26, 1995 ) (allocating liability according to a ratio of relative liability-8-

derived by comparing applicabl e limits in two policies). Judgment
was en tered. Id. (Jan. 26, 1995); id. (Mar. 17, 1995). Federa l appealed.

Discussion
We first consider our standard of appella te review. As noted above (see note 3 supra), neither the district court's orders nor any other documentation in the record on appeal reveals th e spec ific procedural mechanism employed by the district court i n decidi ng the issue of Federal's liability. However, whether w e treat the district court's decision as a summary judgmen t disposition or the equivalent of a bench-tried matter, the s tandard of review is essentially the same. Assuming as true the facts to which the parties have stipulated, and the magistrate judge' s uncontested finding that the r isk of loss had passed from Versa to Lloyd upon delivery of the conveyor subsystems, we determine d e
novo w hether, as a legal matter of contract interpretation, th e Federal policy covered Lloyd's loss. For the reasons statedbelow, we hold that it did not.
The disposition of this case turns on the legal effect of the following words in the Install ation Floater of the Federal policy: "this policy insures . . . the property of others for which th e Insur ed may be liable, consisting principally of mechanica l material[,] handling equipment and metal products." In arri ving at the legal conclusion that these words required Federal's coverage for Ll oyd's loss of the conveyor subsystems, the district cour t relied on Folger Coffee Co. v. Great Am. Ins. Co. , 333 F. Supp

. 12 72 (W.D. Mo. 1971) ( Folger Coffee ) (where bailee's insuranc e policy provided "the policy covers . . . property of others held by the insured for which the insu red is liable," personal property of-9-

bailor damaged while in bailee's possession was covered unde r bailee's insurance policy regardless of whether the damage r esulted from bailee's negligence or ot her wrongdoing). The district court-10-

held that the coverage provide d under the Installation Floater for property of others for which V ersa "may be liable" was not limited to losses for which Versa woul d be legally liable, but rather more broadly referred to losses of or damage to property of others for which the insured was legally or equitably responsible. House of Lloyd, Inc. v. Versa Corp. , slip op. at 2-3 (Sept. 26, 1994 ) (citing Folger Coffee , 333 F. Supp. at 1274-75 ("it is conclude d that Missouri courts would fol low the prevailing view and construe the word `liable' in the policy in the case at bar to be syn onymous with `responsible'")).

The district court then reasoned:

If it seems adequately established, as i n Folger Coffee , that "liable" should include th e practical responsibili ties of a bailee, regardless of legal liability, it will be acknowledged tha t the pre sent case requires going a step or tw o beyond bailment situations. Unlike a bailment , there was here shared possession of the subsyste m components, not exclus ive possession in Versa, the party which had contra ct obligations but no longer owned the property. However, the duty to install was a continuing respo nsibility of Versa's, and in that sense it remained at least "equitably " responsible for the property that it was to instal l and for which it would presumably have actua l pr iority in handling, despite technically share d possession. Moreover, the specified duration o f cov erage definitely included the installatio n period, which strongly indicates that the perio d during which Versa would be "liable" wa s contemplated as extend ing through installation and until acceptance.

Id. at 3.

In the present appeal, Federal argues that the distric t
co urt's liability determination contradicts the plain meaning o f-11-

the Installation Floater. Federal maintains that the language of the Installation Floater plainly indicates that Federal onl y provided coverage for damages that Versa was obligated to pay

. Because the risk of loss passed to Lloyd upon delivery, FederalThe Underwriting Guidelines provided in pertinent part: 5 The interest of the ow ner, seller or contractor is covered against loss or damage to machinery , eq uipment, building materials or supplies bein g us ed with and during the course of installation , testing, building, renovating or repairing. Suc h policies provide coverage at points or places wher e work i s being performed, while in transit, an d during temporary storage or deposit. Joint Appendix, Vol. II, at 614. Elsewhere the Underwritin g Guidelines state:
1. Property Covered

-12- argues, Versa was not obligated to pay damages; thus, there is no coverage under the Federal policy. Federal further argues t hat the distri ct court erred in interpreting Folger Coffee . Unlike th e bailee-insured in Folger Coffe e , Versa, the insured in the present case, did not bear the risk of loss at the relevant time. T he mere fact that Versa was responsible for installing the conveyo r subsystems at the time of the fire, Federal argues, does no t legally or equitably create responsibility to protect against the loss of or damage to that property, particularly where the p roperty was not within Versa's exclusive custody and control.

Lloyd, by contrast, maintains that Federal's propose d inter pretation of the Installation Floater suffers from th e mi staken assumption that Federal provided coverage for liabilit y when, in fact, Federal provide d coverage for the loss of or damage to p roperty. That covered property, Lloyd argues, include d property of others for which Versa was responsible, including the conveyor subsystems. In support of this argument, Lloyd hig hlights the fact that the Installation Floater contains numerous ref erences to the i nsured "property." Lloyd also relies on language in th e Underwriting Guide lines for the Installation Floater and a letter 5Our Builders Risk/Installation floater cover s ph ysical loss or damage to property durin g instal lation. It does not cover nor is i t intended to cover the General Liability of the Insured . Every contractor and sub-contractor should b e expected to have a General Liability policy to protect thi s exposure.
Joint Appendix, Vol. II, at 616 (emphasis in text).

When this lawsuit was initially brought by Lloyd, Vers a 6 con tacted Federal and demanded that Federal provide Versa with a defense; Federal responded by letter stating that the Installation Form was "not a liability form, and therefore there is no duty to defend the insured against actions such as those alleged in th e complaint, for breach of contr act." See Joint Appendix, Vol. III, at 738 (letter). -13- from Federal to Versa's attorney in which Federal disclaimeda duty to defend Versa against Lloyd's claims on grounds that th e Instal lation Form was "not a liability form." Responding t o 6 Federal's contention that the district court erred in it s application of Folger Coffee , Lloyd disputes the notion, advanced by Federal, that Folger Coffee implicitly recognizes a distinction between bailment cases and non-bailment cases. Lloyd defends the district court's reasoning on grounds that Folger Coffee rests on a more fundamental distinction between coverage for liability and
covera ge for property. Finally, Lloyd argues that the distric t
co urt's interpretation of the Installation Floater is consisten t wi th Missouri state court cases which have recognized tha t insurance contract language referring to "property of others" for which the insured may be liabl e expresses an intent by the insurer to be nefit parties other than the named insured and to pay the m directly. Brief for Appellee at 18-23 (citing Peters v. Employers Mut. Casualty Co. , 853 S.W.2d 300 (Mo. 1993) (en banc) ( Peters ) (policy provided coverage to c ollege faculty members, not named in-14-

the policy, whose personal pro perty was destroyed in a fire in the insured college's theater); Mitchell v. K.C. Stadium Concessions, Inc. , 865 S.W.2d 779 (Mo. Ct. App. 1993) ( Mitchell ) (policy o f lessee provided coverage to lessor, for damage to lessor's p ersonal-15-

property resulting from a fire on the leased property); Boatmen's First Nat'l Bank v. Hawkeye-Se curity Ins. Co. , 861 S.W.2d 600 (Mo. Ct. App. 1993) ( Boatmen's v. Hawkeye-Security ) (where insure d sought coverage for personal property stolen from a warehouse and the actual title owner of the stolen property was not a name d insured but was a corporation jointly owned by the insured and his wife, judgment for insurance company was reversed on grounds that ambiguities existed precluding determination of coverage issue at summary judgment stage)).
We agree with Lloyd that the InstallationFloater at issue in the present case expresses an intent to benefit directly partie s not named in the policy, where appropriate. However, upon careful de novo review, we hold that the district court erred in con cluding that the Federal policy covered Lloyd's loss in the present case. Specifically, the district court's interpretation of th e Installation Floater is inconsistent with that provision's o rdinary and plain meaning. As the Missouri Court of Appeals explained in Boatmen's v. Hawkeye-Security , 861 S.W.2d at 602,

[t]he rules of construction applicable t o insurance contracts re quire that the language used be given its plain meaning. Robin v. Blue Cros s Hosp. Serv., Inc. , 637 S.W.2d 695, 698 (Mo. ban c 198 2) (citations omitted). If the policy i s unambiguous, it must be enforced according to it s terms. Id. If the la nguage is ambiguous, it will be construed against the insurer. Id. Language i s ambi guous if it is reasonably open to differen t constructions; and lan guage used will be viewed in light of the meaning that would ordinarily b e under stood by the layman who bought and paid fo r the policy. Id.
Applying th e above-stated principles to the undisputed facts of the present case, we hold that Lloyd's loss was not covered by the Federal policy by virtue o f the Installation Floater. We hold-16-

that the relevant language of the Installation Floater ("thi s policy insures . . . the property of others for which the Insured-17-

may be liable") is clear and unambiguous: Federal must indemnif y Versa for its liability arising out of the loss of or damage t o proper ty of others during installation. Furthermore, notwith

standing Federal's stated asse rtion that it did not have a duty to defend Versa, we read the words "may be" in the Installatio n Floater as signifying Federal's duty to defend Versa against claims arising out of the loss of or damage to property of others during Versa's installation. We interpret the words "may be" for th e purpos e of eliminating the possibility that those specific word s indicate that Federal must cover Lloyd's losses regardless o f Versa's obligation to pay. Federal's duty to defend Versa is not otherwise at issue in the present appeal.

Moreover, t he meaning that would ordinarily be understood by the p arty which bought and paid for the policy (i.e., Versa) i s that the Installation Floater operates as an indemnity provision. The letter from Federal to Versa upon which Lloyd relie s dem onstrates, not only that Federal refused to provide a defens e for Versa, but also that Versa understood the Installation Floater to be an indemnity provision. Significantly, Versa, not Lloyd, is the party which "bought and pa id for the insurance." Boatmen's v. Hawkeye-Security , 861 S.W.2d at 602. Accordingly, we hold as a matter of law that, under the facts of the present case, th e Installation Floater imposed upon Federal no more than a duty t o defend Versa and to indemnify Versa for its legal obligations t o pay for the loss of or damage to property of others during Versa's installation.

Finall y, our interpretation of the Installation Floater i s consistent with Folger Coffee . Unlike Versa in the present case, the insure d in Folger Coffee retained the risk of loss at al l relevant times because of the parties' bailment relationship. In a bailment situation, the bail or can recover for loss of or damage-18-

to the bailment property upon proof that the loss or damag e occurred while in the bailee's possession because an inference of-19-

negligence is raised under the res ipsa loquitur doctrine. Royster v. Pittman , 691 S.W.2d 305, 308 (Mo. Ct. App. 1985). Versa was not
a b ailee in the present case. The mere fact that Versa had a contractual obligation to install the conveyor subsystems was not the same, for liability purposes, as a bailee's responsibility to protect against damage or loss, particularly in light of the fact that the conveyor subsystems were not even within Versa's ex clusive custody and control but were located on Lloyd's property at th e time of the fire. Cf. Peters , 853 S.W.2d at 302-03 (wher e building-owner's policy provided coverage for "contents" o f building, loss of personal property of plaintiffs who were no t named insureds was covered "property of others" because it wa s destroyed while contained within the insured's building)

. Moreover, Lloyd is bound by the district court's determinati on that the risk of loss had passed to Lloyd at the time of the fire. We th erefore hold that Versa was not legally or equitabl y "res ponsible" for the conveyor subsystems within the meaning o f Folger Coffee

. Accordingly, we reverse the judgment of t he district court in favor of Lloyd against Federal, decline to reach the allocatio n is sue as moot, and remand this case to the district court wit h instructions to enter judgment for Federal.

A true copy.
Attest: CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.