IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________

No. 01-30425

_____________________

PENNY HOLDEN, Etc.; ET AL.,

Plaintiffs,

versus

CONNEX-METALNA MANAGEMENT CONSULTING GMBH, Etc.; ET AL.,

Defendants.

__________________________________________________________________

RELIANCE NATIONAL INSURANCE COMPANY,

Plaintiff - Appellee - Cross-Appellant,

versus

LEXINGTON INSURANCE COMPANY; WESTCHESTER SURPLUS LINES

INSURANCE COMPANY,

Intervenors - Appellants - Cross-Appellees,

WESTCHESTER FIRE INSURANCE COMPANY; GENERAL STAR

INDEMNITY COMPANY,

Intervenors - Cross-Appellees,

versus

I C RAILMARINE TERMINAL COMPANY, INC.,

Defendant.

__________________________________________________________________

Appeals from the United States District Court

for the Eastern District of Louisiana

_________________________________________________________________

August 28, 2002

Before JOLLY, DeMOSS, and PARKER, Circuit Judges.
2

E. GRADY JOLLY, Circuit Judge:

Insurers are disputing the allocation of liability for losses

suffered by their insured, IC RailMarine Terminal Co. (“IC

RailMarine”). The losses were caused by the collapse of a crane

that had just been installed as part of the construction of IC

RailMarine’s cargo terminal on the Mississippi River. The damage

was covered by various layers of property insurance. The policies

included a builder’s risk policy issued by Reliance National

Insurance Co. (“Reliance”), a joint blanket property policy issued

by Lexington Insurance Co. (“Lexington”) and Westchester Surplus

Lines Insurance Co. (“Westchester Surplus”), and a joint excess

property policy issued by Westchester Fire Insurance Company

(“Westchester Fire”) and General Star Indemnity Company (“General

Star”). 

The central question is whether the blanket policies, which

provide nationwide coverage for all property owned by IC

RailMarine’s parent corporation, provide primary coverage for the

crane collapse or whether the builder’s risk policy, which was

purchased specifically for the construction project, must be

exhausted before coverage under the blanket policies is triggered.

To answer this question, we are required to make an Erie guess. We

determine that, under the particular circumstances of this case,

the Louisiana Supreme Court would conclude that the blanket

property policy functions as an “excess” policy with respect to a
3

loss associated with the construction project where the builder’s

risk policy purchased specifically for that project provided

primary coverage for the loss. Thus, Reliance is the sole primary

insurer of the loss at issue here. Accordingly, we reverse the

district court’s apportionment of liability to the general

insurers, Lexington and Westchester Surplus, and remand the case to

the district court for further proceedings not inconsistent with

this opinion. 

I

The relevant facts are not in dispute. In early 1998, IC

RailMarine was constructing a bulk cargo terminal in Convent,

Louisiana. As part of this project, IC RailMarine hired ConnexMetalna to design, build, and install a 240-foot gantry crane that

could load and unload cargo from ships docked at the terminal.

Connex-Metalna constructed and installed the crane at the IC

RailMarine terminal, but the crane fell into the Mississippi River

during a pre-acceptance load test performed on June 11, 1998.

Following the accident, IC RailMarine filed insurance claims for

the resulting losses under (1) the builder’s risk insurance policy

issued by Reliance, (2) the joint general property policy issued by

Lexington and Westchester Surplus, and (3) the joint excess

property policy issued by Westchester Fire and General Star. 

Although all of these policies covered the property damage

caused by the collapse of the crane, each policy covered a
1 Reliance issued the builder’s risk policy to Illinois Central

Railroad Co. Illinois Central Corp. is the ultimate parent

corporation of both IC RailMarine and Illinois Central Railroad. 

2

Illinois CentralRailroad also purchased a commercial property insurance policy fromRoyal

Surplus Lines Insurance Co. (“Royal”) to cover IC RailMarine’s $2 million deductible under

the general property policies. 

4

different range of exposures. The builder’s risk policy issued by

Reliance covered only property connected with the construction of

IC RailMarine’s bulk terminal in Convent, up to a limit of $19.42

million.1 In contrast, the blanket property policy issued by

Lexington and Westchester Surplus -- which was not connected with

the construction project -- covered all real and personal property

throughout the country held by the Illinois Central Corp. and its

subsidiaries, including IC RailMarine. The policy provided up to

$8 million in coverage for losses in excess of a $2 million selfinsured retention.2 To cover losses to its property above $10

million, Illinois Central purchased the joint excess property

policy from Westchester Fire and General Star with a coverage limit

of $15 million.

In October 1998, Reliance filed this action in the Eastern

District of Louisiana seeking a declaration of its rights and

obligations under the builder’s risk policy. A year later,

Lexington, Westchester Surplus, Westchester Fire, and General Star

intervened in the declaratory judgment action. The parties filed
3

In addition, ICRailMarine asserted claims against the intervening generalpropertyinsurers.

The declaratory judgment action was ultimately consolidated with an action filed by individuals who

were injured in the crane accident. 

4 In a separate agreement, IC RailMarine settled its claim

under Royal’s policy covering the general property policy

deductible for $1.975 million. IC RailMarine thus settled all of

its insurance claims associated with the crane accident for a total

of $13.475 million.

5

cross motions for summary judgment in September 2000.3 In its

summary judgment motion, Reliance argued that the losses caused by

the crane accident were not covered by the builder’s risk policy.

Lexington and Westchester Surplus argued that, as blanket insurers,

they were not obligated to pay for losses associated with the crane

accident until the builder’s risk policy -- which, as we have

noted, was issued by Reliance specifically for the construction

project -- reached its coverage limit. 

The district court held that, although the exclusions in the

builder’s risk policy did not bar coverage in this case, factual

issues remained concerning whether Reliance could deny coverage

under other terms of the policy. The district court further

rejected the argument advanced by Lexington and Westchester Surplus

that Louisiana law treats blanket policies as excess insurance

where the specific policy provides primary coverage.

Shortly before the trial on the remaining factual questions,

IC RailMarine settled all of its claims against Reliance,

Lexington, and Westchester Surplus for $11.5 million.4 According

to the terms of the settlement, the three insurers reserved the
5 Following Reliance’s motion to exclude, the general property

insurers proffered testimony by employees of IC RailMarine and the

blanket insurers concerning their understanding of (1) the priority

of payment between general and specific insurance policies and (2)

the interpretation of specific provisions in the blanket insurance

policies. In response, Reliance filed a counter-proffer tending to

refute the testimony proffered by the general property insurers. 

6

right to litigate each company’s share, if any, of the $11.5

million settlement amount. Before proceeding to trial, Reliance

moved to exclude extrinsic evidence of the parties’ interpretation

of the blanket policies.5 

The district court held that the proffered parol evidence was

not admissible under Louisiana law because the language in the

relevant insurance policies was unambiguous. Specifically, the

district court found that (1) the plain language of the joint

policy issued by Lexington and Westchester Surplus provided primary

coverage for the losses associated with the crane accident and (2)

the joint policy issued by Westchester Fire and General Star was a

“true” excess policy under the plain meaning of its terms and

therefore did not provide coverage until coverage under the primary

policy was exhausted. The district court then determined that the

$11.5 million settlement with IC RailMarine should be divided among

the three primary insurers in the proportion that their respective

policy limits bear to the combined policy limit. The district

court therefore allotted $8.165 million to Reliance, $2.084 million

to Lexington, and $1.251 million to Westchester Surplus. This

appeal followed.
6 The state court issued the order after the parties had filed

their notices of appeal from the district court judgment but before

oral argument was held in this Court.

7

II

Before turning to the substantive question posed in this case,

we must deal with Reliance’s motion to stay these proceedings in

deference to a Pennsylvania state court order. 

On May 29, 2001, the Commonwealth Court of Pennsylvania issued

an order placing Reliance in rehabilitation.6 Under the

rehabilitation order, the Pennsylvania Insurance Commissioner has

sole authority to dispose of assets held by Reliance and to satisfy

claims against Reliance. The order also includes a provision that

purports to stay “[a]ll actions currently pending against Reliance

in the Courts of the Commonwealth of Pennsylvania or elsewhere.”

Reliance argues that we are required to abstain from exercising

jurisdiction in this case under Burford v. Sun Oil Co., 319 U.S.

315 (1943), because our decision is likely to interfere with the

orderly administration of Reliance’s assets by state authorities.

The Burford abstention doctrine stands as a narrow exception

to the rule that federal courts “have a strict duty to exercise the

jurisdiction that is conferred upon them by Congress.” Quackenbush

v. Allstate Ins. Co., 517 U.S. 706, 716 (1996). As we observed in

Webb v. B.C. Rogers Poultry, Inc., 174 F.3d 697, 700-01 (5th Cir.

1999), the Burford doctrine requires us to “weigh the federal

interests in retaining jurisdiction over the dispute against the
7 The Supreme Court hasidentified a distinction “between abstention-based remand orders

or dismissals and abstention-based decisions merely to stay adjudication of a federal suit.”

Quackenbush, 517 U.S. at 720. In this case, Reliance has requested only an “order staying all further

proceedings in this action.”

8

state's interests in independent action to uniformly address a

matter of state concern, and to abstain when the balance tips in

favor of the latter.” 

Unlike an outright dismissal of a federal action, a stay of

federal proceedings on abstention grounds is best viewed as a

“postponement of decision for its best fruition.”7 Quackenbush,

517 U.S. at 720-21. Thus, a stay is typically warranted to await

resolution of a difficult, potentially controlling issue of state

law. See id.; see also Louisiana Power & Light Co. v. City of

Thibodaux, 360 U.S. 25, 27 (1959) (“We have increasingly recognized

the wisdom of staying actions in the federal courts pending

determination by a state court of decisive issues of state law.”).

In the appeal before us, however, there is no decisive issue

of Pennsylvania law to be decided. Neither does the issue of law

that we address implicate federalism concerns -- unlike, for

example, the exercise of the state’s power of eminent domain, the

relationship between city and state, or the application of a new

state statute of questionable constitutionality. See Thibodaux,

360 U.S. at 27-28. Although the Pennsylvania state court order may

very well preclude enforcement of any judgment against Reliance, we

fail to see how our resolution of this appeal would substantially
9

interfere in the administration of Reliance’s assets by the

Pennsylvania state authorities. In short, we conclude that a stay

of these proceedings is neither required nor appropriate. 

III

The pivotal issue in this appeal is whether the joint blanket

policy issued by Lexington and Westchester Surplus provides primary

coverage of the losses associated with the collapse of the crane.

Reliance argues that all of the general property insurers (along

with Reliance itself) are obligated to provide primary coverage for

the losses incurred by IC RailMarine because they all agreed to

insure the same property and the same risk. Thus, Reliance argues

that the losses must be allocated among all of the companies that

insured the damaged property. 

Lexington and Westchester Surplus respond that their blanket

property policy does not cover the same exposure as the builder’s

risk policy issued by Reliance. Relying principally on Fasullo v.

Am. Druggists' Ins. Co., 262 So.2d 810 (La. App. 4 Cir.), writ

denied, 266 So.2d 220 (La. 1972), they argue that Louisiana law

establishes different levels of priority for insurance coverage

depending on whether the coverage is “general” or “specific.”

According to Lexington and Westchester Surplus, under Louisiana

law, insurance coverage that applies only to specified property --

like the builder’s risk policy issued by Reliance in this case --

must be exhausted before coverage is triggered under blanket
8 Because the insurance policies at issue here do not contain

choice-of-law provisions, the district court applied the law of the

forum state, Louisiana. See Guaranty Nat. Ins. Co. v. Azrock

Industries Inc., 211 F.3d 239, 243 (5th Cir. 2000). The parties do

not challenge this decision on appeal.

10

property policies. The rationale for this rule is simple: The law

should presume that a blanket property policy is intended only to

cover losses in excess of the limits of a policy purchased for a

specific project because it is redundant to purchase a projectspecific policy that simply duplicates the coverage of the broader

blanket policy. Following this principle, Lexington and

Westchester Surplus argue that Reliance is the sole primary insurer

of losses connected with the terminal construction project, while

the general property policies provide successive layers of excess

insurance in the event that the builder’s risk policy is not

sufficient to cover the losses. 

The district court, however, agreed with Reliance and

concluded that Fasullo does not control in this case. Instead, the

district court held that the Lexington and Westchester Surplus

policy provided primary coverage for the losses at issue here. We

review the district court’s interpretation of insurance policies de

novo. See Norfolk Shipbuilding & Drydock Corp. v. Seabulk

Transmarine Partnership, Ltd., 274 F.3d 249, 252 (5th Cir. 2001).

In this diversity case, the parties agree that the substantive

law of Louisiana governs our decision.8 The Louisiana Supreme

Court, however, has not addressed whether blanket insurance
9 The district court declined to apply Fasullo because other

Louisiana courts have not followed it. It would appear, however,

that no other Louisiana court has had occasion to address this

issue. The district court also observed that the Louisiana First

Circuit Court of Appeal in Prudential Assur. Co. Ltd. v. London &

Hull Maritime Ins. Co., Ltd., 621 So.2d 1165, 1167 (La. App. 1 Cir.

1993), asserted that Fasullo is “no longer ‘good law.’” Taken in

context, however, this statement refers only to Fasullo’s separate

holding that the Louisiana proration statute does not create an

affirmative right to contribution. See also Rocha v. Landry, 615

So.2d 995, 998 & n.5 (La. App. 1 Cir. 1993) (observing that several

courts have declined to follow Fasullo’s holding that the pro rata

11

policies become “excess” policies where a more specific policy

applies. We must therefore determine, in our best judgment, how

the Louisiana Supreme Court would resolve the issue if presented

with the same case. See Rogers v. Corrosion Prod., Inc., 42 F.3d

292, 295 (5th Cir. 1995); Associated Int’l Ins. Co. v. Blythe, 286

F.3d 780, 783 (5th Cir. 2002). Although an intermediate appellate

court decision is “not controlling where the highest state court

has not spoken on the subject,” we ordinarily defer to the holdings

of lower appellate courts in the absence of guidance from the

highest court. Rogers, 42 F.3d at 295; Blythe, 286 F.3d at 783.

As always, in conducting this inquiry our task is “to predict state

law, not to create or modify it” -- that is, we are “to apply

existing [Louisiana] law, not to adopt innovative theories for the

state.” United Parcel Service, Inc. v. Weben Industries, Inc., 794

F.2d 1005, 1008 (5th Cir. 1986). 

As Lexington and Westchester Surplus point out, Fasullo is the

only Louisiana case to address the prioritization of payments

between general and specific insurers.9 The dispute in Fasullo
statute does not create a right to contribution). Finally, the

district court suggested that Fasullo is distinguishable from the

instant case because Fasullo involved the interpretation of the

Louisiana proration statute rather than a contractual proration

clause. The court’s holding in Fasullo, however, was based on

policy considerations and not on the court’s interpretation of

statutory language. In any event, the proration statute does not

come into play until the court identifies multiple insurers that

provide primary coverage for the loss. In sum, we find that

Fasullo remains persuasive authority on this issue. 

10 As Reliance observes, the builder’s risk and the blanket

property policy both contain “other insurance” provisions that

purport to convert each policy into an excess policy where another

insurer provides concurrent coverage. Where effective, such

provisions ordinarily cancel each other out, and the loss is

prorated among the insurers. See Hartford Fire Ins. Co. v. Roger

Wilson, Inc., 291 So.2d 852, 856 (La. App. 3 Cir. 1974); Jefferson

Downs, Inc. v. American General Ins. Co., 214 So.2d 244, 248 (La.

App. 4 Cir. 1968). But, under the “Pennsylvania Rule,” a specific

policy and a blanket policy do not constitute concurrent or double

insurance because they do not cover the same range of property.

12

arose out of a fire that destroyed a building housing two separate

businesses -- a retail drugstore and a wholesale drug business --

owned by the same insured. 262 So.2d at 811. The dispute centered

on the allocation of the resulting losses among three insurers.

See id. One insurer’s policy covered only the property associated

with the retail drugstore, while the other two insurers issued

blanket policies covering the entire building, including all

personal property owned by the insured. See id. In resolving this

dispute, the Louisiana Fourth Circuit Court of Appeal held that a

“specific policy must bear the entire loss on the portion of the

[property] which it covers up to its face amount, with the blanket

policy or policies affording residual or excess coverage to the

extent of their respective limits of liability.”10 Id. at 815
See Fasullo, 262 So.2d at 812. Under this view, the “other

insurance” provisions in the builder’s risk and blanket property

policy are not triggered. Because Wilson and Jefferson Downs did

not involve policies with differing scopes of coverage, they are

distinguishable from the present case.

11 Under the majority view, policies that cover the same risks with respect to the damaged

property must be treated as “concurrent insurance” -- even if the policies do not cover an identical

set of property. See, e.g., Am. Emp. Ins. Co. v. Continental Cas. Co., 512 P.2d 674, 678 (N.M.

1973) (adopting the “prevailing view” that general policies prorate with specific policies); Home v.

Great American Ins. Co., 134 S.E.2d 865 (Ga. App. 1964) (same); Indus. Indemnity Co. v.

13

(citing Sloat v. Royal Ins. Co., 49 Pa. 14 (1865); Blue Anchor

Overall Co. v. Penn. Lumbermens Mut. Ins. Co., 123 A.2d 413 (Pa.

1956)). The court reasoned that this rule, often known as the

“Pennsylvania Rule,” maximizes the scope of insurance coverage by

avoiding overlapping coverage by multiple insurers. See id.

We find the principle applied in Fasullo instructive in making

our Erie guess of how the Louisiana courts would resolve the

coverage issue in the instant case. More specifically, we believe

that the Louisiana Supreme Court would hold that, when a policy is

purchased to cover a specific loss at a specific property during

the course of a specific project, its coverage must be first

exhausted before coverage arises under a general blanket policy

that covers all property losses at all of the insured’s various

properties. 

We recognize that the “Pennsylvania Rule” applied in Fasullo

represents a minority position among the courts that have

considered the priority of coverage between general and specific

policies.11 We are nevertheless persuaded that the Louisiana
ContinentalCasualtyCo., 375 F.2d 183 (10thCir. 1967) (same under Oklahoma law);SouthCarolina

Ins. Co. v. Fidelity and Guar. Ins. Underwriters, Inc., 489 S.E.2d 200, 214 (S.C. 1997) (rejecting

distinctionbetweenspecific and generalpolicies and instead determiningwhichpolicieswere intended

to provide primary coverage);see generally 15 Couch on Insurance § 219:17 at 24-25 (3d ed. 1999)

(“As a rule, general policies prorate with specific policies. . . .”); 44 Am. Jur. 2d Insurance § 1786

(collecting cases and stating that the “majority of courts” agree that “[b]lanket policies prorate with

specific policies”).

12 Other courts have similarly found the occasion to apply the

“Pennsylvania Rule.” See United Services Auto. Ass'n v. U. S.

Fidelity & Guaranty Co., 555 S.W.2d 38, 43 (Mo. App. 1977) (“Since

the U.S.A.A. policy affords blanket or floater coverage and the

U.S.F. & G. is a specific coverage policy under the principles

above discussed, the latter affords primary coverage and the former

is only supplemental or excess coverage and responsibility attaches

under it only when the specific coverage has been exhausted.”);

Mill Factors Corp. v. Ming Toy Dyeing Co., 41 F.Supp. 467, 469

(D.C.N.Y. 1941) (holding that specific policy covering goods at a

specific location must bear loss before coverage under floater

policy is triggered although both policies contained “other

insurance” clauses); see also John A. Appleman & Jean Appleman,

Insurance Law & Practice § 3912 (1972) (“A blanket or floating

policy is only intended to supplement specific insurance, and it

cannot become operative until the specific insurance has become

exhausted.”); Continental Cas. Co. v. Suttenfield, 236 F.2d 433,

438 (5th Cir. 1956) (“We are reminded of the holding of some courts

that where two or more policies of insurance are partly coextensive

as to assumed hazards, the primary liability should be cast upon

the company whose policy affords specific insurance.”).

14

Supreme Court, if presented with the particular facts in this case,

would follow the principle applied in Fasullo.

12 We do not,

however, extend our Erie guess to predict how the Louisiana Supreme

Court might resolve coverage issues between general and specific

policies in other contexts. We only conclude that, where an

insured has in force blanket property policies that cover the same

property as a policy purchased specifically for a well-defined

project, the Louisiana Supreme Court would hold that the blanket

policies provide coverage only for losses in excess of the limits
13 Of course, the presumption would be rebutted if the insured

negotiated a lower premium from one or both of the insurers based

on the concurrent coverage. In this case, however, there is no

evidence that the insured negotiated a lower price for the

builder’s risk policy or the blanket insurance policies. Indeed,

Reliance’s position appears to be that the insured was essentially

unaware of the overlapping coverage when it purchased the Reliance

policy.

14 Reliance maintains that the policies issued by Westchester

Fire and General Star are not “excess” policies because they cover

precisely the same exposures as the other general property

15

of the project-specific policy.13

Applying this rule to the facts of the present case, we hold

that the builder’s risk policy issued by Reliance provides primary

coverage for the losses caused by the crane accident, while the

blanket property policy issued by Lexington and Westchester Surplus

provides coverage for losses in excess of the builder’s risk policy

limit. As a consequence, the district court erred in holding that

Lexington and Westchester Surplus were primary insurers of the IC

RailMarine construction project and shared in the liability for the

damages associated with that project. 

IV 

For the reasons set out above, we reverse the district court’s

judgment apportioning the losses from the crane accident among

Reliance, Lexington, and Westchester Surplus and remand to the

district court for further proceedings not inconsistent with this

opinion. We affirm the district court’s judgment insofar as it

holds that Westchester Fire and General Star are not primarily

liable for the losses caused by the crane collapse.14 
policies. We need not reach this question, however, because we

conclude that none of the general property insurers are primarily

liable for the losses at issue here. 

16

REVERSED IN PART, AFFIRMED IN PART, and REMANDED.