N O T FO R PUB L ICAT IO N
UNITED STATES C OUR T OF APPEALS
FOR THE NINTH C IR C UIT

OLIN C OR POR

ATION a nd PIONEER AM E R IC AS LLC d/b/a

OLIN C HLOR ALKALI PR ODUC TS,
Pla intiffs-Appe lle e s,

v.
C ONTINENTAL C ASUALTY C OM PANY,
De fe nda

nt-Appe lla

nt. No. 14-15017

D.C . Nos. 2:10-c v-00623-GMNNJK a nd 2:10-c v-01298-GM

NNJK

M EM OR ANDUM *

Appe a l from

the Unite d

Sta t e s Distric t C ourt for the Distric t of Ne v a da Gloria M . Na va rro, Distric t Judge , Pre siding Argue d a nd Subm itte d Fe brua

ry 11, 2016 Sa n Fra n c isc o , C a lifornia

B e fore : SC HR OEDER

a nd NGUYEN, C irc uit Judge s, a nd ADELM AN, ** Distric t Judge

. Olin C orpora tion a nd i ts a ffilia te , Pione e r Am e ric a s LLC (c olle c tive ly , “ Olin” ),

ope ra t e a pla

nt in He nde rson, Ne va da , tha t produc e s industria l c he m i c a ls. C o ntine nta l 

# FIL E D

MAR 17 2016

M OLLY C. DW Y ER, CLERK U. S. CO URT O F APPEALS

* This disposition is not a ppropria te for public a t ion a

nd is not pre c e de nt e xc e pt a s provide d

by 9th C ir. R . 36-3.

** The Honora

ble Ly nn S. Ade lm a n , Distric t Judge for the U.S. Distric t C ourt for the Ea ste rn Distric t of W isc onsin, sitting by de signa tion.C a sua lty C o m p an y i ssue d a n insura

n c e polic y c ove ring the pla nt’ s boile rs a

n d

m a c hine ry
. In l a te 2008, a se rie s of inc ide nts c a u se d da m a ge to t

he m a c hin er y.
C ontine n ta l de nie d c ove ra g e for da m a ge re la ting t o Olin's dia phra gm c e l ls, whic h a re

ta nks c onta ining, a m ong othe r things, m e ta l c a thode s c ove re d by a sbe stos dia phra gm s.
C ontine n ta l a rgued t h a t the da m a ge to the c e l ls wa s not c o ve re d be c a use it wa s not

c a use d by a n " a c c i de nt" within the m e a ning of the polic y
. At sum m a ry judgm e nt, the
distric t c ourt de te rm ine d tha t pa rt of the polic y wa s a

m biguous a nd ide ntifie d othe r
issue s of fa c t for t

he jury

. T he jury re turned a v er d ic t in fa v o r o f Olin. The distric t

c ourt e nte re d judgm e nt f o r O l i n ba se d on the ve rdic t a nd a pa rtia l se ttle m e nt

a gre e m e nt in whic h the pa rtie s stipula

te d t o the a m ount o f da m a ge s
. C o ntine nta l

a ppe a ls. It a rgue s tha t the distric t c ourt's inte rpre ta tion o f the polic y wa s inc orre c t a s

a m a t t er of Ne v a da la

w a nd tha t it is e ntitle d to judgm e nt a s a m a tte r o f la w. In the

a lte rna tive , C ontine n tal ar gue s tha t it is e ntitle d to a ne w tria l b e c a u se the c ourt's
instruc tions t o the jury , whic h we re ba se d on its e rrone ous inte rpre ta tions of the polic y , w e re like wise e rrone ous. C ontine nta l a lso a rgue s tha t the distric t c ourt a buse d
its disc re tion in e xc luding c e rta in e vide nc e u nde r Fe de ra l R ule of Evide nc e 407. W e
ha ve jurisdic tion unde r 28 U.S.C . § 1291, a nd we a ffirm

. 1. The first issue C ontine nta l ra ise s pe rta ins to the “ e ffic ie nt proxim a te c a use ”
doc trine

. Unde r this doc trine , whe re c o v e re d a n d nonc ove re d pe rils c ontrib u t e t o a

2loss, the pe ril tha t se t i n m otion the c ha in of e ve nts le a d i ng t o the loss or the

“ pre dom ina ting c a

use ” is d e e m e d the e ffic ie nt p roxim a t e c a use o r l e ga l c a

use of loss.
Se e Fourth St. Plac e

, LLC v

. Trav e le rs Inde m. C o. , 270 P.3d 1235, 1243 (Ne v
. 2012).
C ontine nta l c onte nds tha t, for two re a sons, the distric t c ourt e rre d by a pply ing
this doc trine to this c a se . First, C ontine nta l a rgue s tha t the doc trine is lim i te d to “ a l l
risk” polic i e s a

n d doe s not a

pply to spe c i fie d-pe rils polic ie s suc h a s C ontine nta l’ s
boile r-a nd-m a c hine ry polic y
. Howe ve r, we c a n find no support in Ne va d a la w (or the
la w of othe r j urisdic tions) for this a rgum e nt. Nor c a n we ide ntify a ny re a son why the
doc trine would be lim ite d t o a ll-risk policie s. A c c ordingly , we c onc lude tha t the

e ffic ie nt proxim a te c a

use doc trine is not lim

ite d to a ll-risk polic ie s.
S eco n d , C ontine nta l c onte nds tha t b e c a u se its polic y c ove rs only " dire c t
da m a ge " to c ove re d prope rty c a use d by a c o v ere d c a

use of loss, the polic y la

ngua ge
pre c lude s use of the e ffic ie nt proxim a te c a use doc trine

. C ontine n ta l c onte nds tha t t his polic y la ngua ge m e a

ns tha t c o ve ra ge e xists only

whe n a c ove re d pe ril is the la st link
i n t h e cau sa l c ha in tha t t e rm ina te s in the da m a ge , a nd not whe n a c ove re d pe ril only

se ts in m otion the c ha in of e ve nts le a ding to the loss. Howe ve r, C ontine nta l doe s not

c ite a ny c a se s holding tha t a c ove re d pe ril c a use s “ dire c t da m a ge ” only whe n it is the
la st l ink in the c a

usa l c ha in tha

t te rm ina te s in the d a m a g e
. And we c onc lude tha t the

use of “ direct d am ag e” i n the polic y is c onsiste nt with the e ffic i e nt proxim a te c a use
doc trine

. 32. C ontine nta l ne xt c onte nds tha t t he distric t c ourt e rre d in de t e rm i ning tha t the
word “ c orrosion” i n the p olic y is a m biguous a s ap p lie d to the fa c ts of this c a se
. An
insura nc e p o li cy is a m

biguous if “ it c re a te s m ultiple re a sona

ble e xpe c ta tions of

c ove ra ge a s dra fte d.” C

e ntury Sur. C

o. v

. C asino W e st, Inc

. , 329 P.3d 614, 616 (Ne v. 2014) (a lte ra tion om i tte d). “ A se e m ingly c le a r polic y c a n be re nde re d a m bi g u ou s
whe n a pply ing the polic y to the fa c ts le a ds to m ultiple re a sona

ble inte rpre ta tions.” Id.

In this c a se , the issue is whe the r the te rm “ c orrosion” inc lude s the pe n e tra tion
of m a g ne tite de n d r i te s into a sbe stos dia phra g m s t ha t a re ba ke d onto m e ta l c a thode s
inside the c e lls. W e c o nc lude tha t the d istric t c ourt c orre c tly de te rm i ne d t ha t whe the r
this proc e ss wa s “ c orrosi o n ” is am biguous. The polic y d oe s not de fine “ c orrosion.”

M ore o ve r, the a sbe s tos d i a phra gm s d i d n ot the m se lve s c orrode

. R a the r, t he m e ta l

c a thode s c orrode d, a n d by produc ts of this c orrosion (i.e ., the m a gne tite d en d rite s)

pe ne tra te d the dia

phra gm s, c a

using t he m da m a ge
. On t he one ha

nd, it would be

re a s ona ble to unde rsta

nd the p olic y a s m e a ning tha t the da m a ge to the dia phra gm s wa s

“ c o rrosion” be c a

use the d a m a ge wa s c a

use d by a c orrosion by

p roduc t. On the othe r
ha nd, it would be

re a sona ble to unde rsta

n d the polic y

a s m e a ning tha

t the da m a ge to
the dia p hra gm s wa s not “ c orrosion” be c a use the dia

phra gm s d id not the m se lve s

c orrode

. Thus, t h e w o rd “ c orrosion” a s a pplie d to this c a se l e a ds to m ultiple

re a s ona ble inte rpre ta tions, a nd the distric t c ourt c orre c tly de te rm ine d tha t the te rm is

a m biguous.
43. The re m a i n ing issue is whe the r distric t c ourt c om m itte d pre

judic ia l er r o r
whe n it e xc lude d ev i den ce o f Olin’ s ha ving c ha nge d its polic y gove rning the use of
sodium b isulfite during e m e rge ncy s ys t em shutdowns in 2010, two y e a rs a fte r the
inc i de nts tha t ga ve rise to this suit. W e will re ve rse a distric t c ourt’ s e vide ntia ry ruling only if the c ourt a

buse d its disc re tion a nd the e rror wa s pre j udic ia l

. Harpe r v

. C

ity of

Los Ange le

s , 533 F.3d 1010, 1030 (9th C i r. 2 0 0 8 )

. T h e c ourt m a y a ffirm a distric t

co urt’ s e vide ntia

ry ruling o n a n y grounds supporte d by t he re c o rd. Unite d State

s v

. Orm Hie ng , 679 F.3d 1131, 1141 (9th C ir. 2012).
The distric t c o urt e xc lude d e vide n c e o f the polic y c ha nge on the g round tha t i t

wa s e vide nc e of a subse que nt re m e dia l m e a sure
. Se e Fe d. R

. Evid. 4 07. C o ntine nta l

a rgue s tha t it did not se e k to introduc e e vide nc e of the polic y c ha n ge to prove Olin’ s

ne glige nc e or for a ny ot h er o f t h e othe r prohibite d re a s ons in R ule 407. R a the r, i t sought to introduc e the e v ide nc e to im pe a c h the te stim ony o f C ontine n ta l’ s e xpe rt
witne s se s. W e a gre e with C ontine nta l tha t if t his wa s t he purpose of introduc ing the

e vide nc e , the e vide nc e would not ha ve be e n ina dm issible unde r R ule 4 07. Se e Fe d.

R . Evid. 407 (“ the c ourt m a y a d m it [e vide nc e of a

subse que nt re m e dia l m e a sure ] for

a nothe r purpose , suc h a s im p e a c hm e nt” ). H owe v e r, we c onc lude the e vide nc e ha d n o
im pe a c h m e nt va lue

. Although one e xpe rt during his te stim ony m e ntione d the origina l polic y , the fa c t tha t Olin la te r c ha n ge d the polic y wou l d n o t h av e unde rc ut his

te stim ony
. T he e xpe rt te s tifie d tha t a dding sodium bisulfite during the e m e rge nc y
5shutdown would ha v e m a de no diffe re nc e be c a use the m a gne tite would ha ve “ a lre a dy
form e d” be fore the b isulfite ha d ta k e n e ffe c t. 5 E. R. 5 2 3–24 (te stify ing t ha t a dding

s o d i u m bisulfite “ wa sn’ t going to do a ny thing e x c e p t provide a dditiona l sa tisfa c tion
tha t , w e ll, if y ou ha d it y o u did it. B ut it w a s not e ffe c t ive .” ). T he fa c t tha t Olin la te r

c ha nge d its polic y to m a ke the a ddition o f s o d i um bisulfite m a nda t ory during

e m e rge n c y shutdowns doe s not im ply tha t a dding it in 2008 would h a ve pre v e nte d the

m a gne tite da m a ge
. Ac c ordingly , we c onc l ude tha t t he distric t c ourt did not a

buse its
disc re tion in e xc luding e v ide n c e of this fa c t.
AFFIR M ED.

6