PUBLISH
UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT

________________ _________________ MTI, INC., formerly Midwest Towers, Inc., Plaintiff - Appellant

v. EMPLOYERS INSURANCE COMPANY OF WAUSAU, Defendant - Appellee. No. 17-6206

________________ _________________ Appeal from the United States District Court for the Western District of Oklahoma (D.C. No. 5:15-CV-00716-R)

________________ _________________ F. Thomas Cordell, Frailey, Chaffi n, Cordell, Perryman & Sterke l, LLP, Chickasha, Oklahoma, (Mort G. Welch, Welch& Smith, P.C., Oklahoma City, O klahoma, with him on the briefs), for Plaintiff-Appellant. Jeffrey Gerish, Plunkett Cooney , P.C., Bloomfield Hills, Michig an, (Joseph R. Farris and Emily D. Pearson, Franden, Farri s, Quillin, Goodnight & Roberts , Tulsa, Oklahoma, with him on the briefs), for Defendant-Appellee.

________________ _________________ Before LUCERO , McKAY , and MATHESON , Circuit Judges.

________________ _________________ LUCERO , Circuit Judge.

________________ _________________ FILED United States Court of Appeals Tenth Circuit 

### January 25, 2019
Elisabeth A. Shumaker Clerk of Court2 In this appeal, we consider two exclusions from a commercial ge neral liability policy that bar coverage for damag e to “that particular part” o f the property on which an insured is performing operati ons, or which must be repaired or replaced due to the insured’s incorrect work. Under Oklahoma law, our analysis pro ceeds in two steps. First, we must determi ne as a matter of law whether the exclusi ons are ambiguous. Kerr-McGee Corp. v. Admiral Ins. C o., 905 P.2d 760, 762 (Okla. 1995). We conclude the phrase “that partic ular part” is susceptible to mo re than one reasonable construction: it could refer to the distinct component upon wh ich an insured works or to all parts ultimately impacted by that work. Because the language at issue is ambiguous we proceed to the se cond step, in which “the contract will be inter preted consistent with the mut ual intent of the parties, with the ambiguity resol ved most favorably to the insu red and against the insurance carrier.” Id. We thus adopt the narrower interpreta tion of the phrase “that particular part,” under which th e exclusion extends only to the distinct components upon which work was performed. E xercising jurisdiction under 2 8 U.S.C. § 1291,

we reverse. I Western Farmers Electrical Coope rative (“WFEC”) owns cooling to wers in Oklahoma, which were serviced by MTI, Inc. (“MTI”), the appella nt in this case. Employers Insurance Company of W ausau (“Wausau”), the appellee, provided a commercial general liability pol icy (the “Policy”) to MTI at al l times material to this appeal.3 A 2011 inspection by MTI revealed that the anchor bolts in Cool ing Tower 1 were corroded. MTI and WFEC agr eed to a new repair contract, w hich included the following work: Unit 1 Tower Anchors Throughout the entire basin, ins tall new 304 SS anchor castings

. Included will be 304SS anchor b olts and Hilti anchor adhesive. Unit 1 Louvers On four (4) cells, remove exist ing louvers and install a (3) ro w louver system. New louvers will consist of 12oz. 4.2” corrugated FRP panels supported on 2”x4” Douglas Fir s upports. Included will be new polypropylene support arms. Als o included will be all necessary 304 stainless steel hardware. Repairs on a separate cooling towe r were also listed in the Tow er 1 contract. The cooling towers at issue are mos tly wood structures, approximate ly 50 feet wide, 150 feet long, and 70 feet tall. They are set in sump pits approxi mately 12 feet deep. The towers are stabilized with later al wooden bracing beams, which are connected to the concrete foundation of the sump pit with anchor bolts. On May 23, 2011, MTI employees removed all 64 corroded anchor b olts in Tower 1. Because the adhesive app licator had not yet arrived, MTI did not immediately install new anchor b olts. Further, MTI did not pro vide any temporary support to ensure the stability of the tower. On the night of May 24, extremely high winds struck the tower, causing it to lean and several structur al components to break. Due to the extent of the structu ral damage, removal and replace ment of the tower was determined to be the only viab le option. Although at least som e internal operational4 equipment was not damaged, this equipment was deemed too danger ous to access and

recover. WFEC demanded MTI pay the cost o f removing and replacing the en tire tower, which totaled over $1.4 mi llion. MTI file d a claim for coverage with its insurer, Wausau, under the Polic y. After Wausau declined to pr ovide coverage, MTI directly negotiated a settlement of $350, 000 with WFEC. The ba lance of the tower replacement cost was borne by WF EC’s insurer. MTI then sought recoupment of its settlement amount from Wausau. The parties agree that the Polic y was active at the time of the incident. Wausau denied coverage under tw o exclusions. Those provisions bar coverage for: j. Damage To Property “Property damage” to:

. . . . (5) That particular part of real property on which you or any cont ractors or subcontractors working directly or indirectly on your behalf are performing operations, if the “pr operty damage” arises out of t hose operations; or (6) That particular part of any prope rty that must be restored, re paired or replaced because “your work” was inc orrectly performed on it. MTI eventually filed suit agains t Wausau in Oklahoma state cour t for breach of contract. Wausau removed the case to federal court. On Wau sau’s motion for summary judgment, the district c ourt held that the events descr ibed fell within the scope of both exclusion j(5) and j(6), and entered judgment in favor of Wausau. MTI timely appealed.5 II We review a district court’s gr ant of summary judgment de novo. Greystone Constr., Inc. v. Nat’l Fire & Ma rine Ins. Co., 661 F.3d 1272, 1 277 (10th Cir. 2011), as amended on reh’g in part (D ec. 23, 2011). Summary judgment is appropriate only if there is no genuine issue of m aterial fact and the moving pa rty is entitled to judgment as a matter of law. Id. We also review a district co urt’s interpretation of state contract law de novo. City of Wichita v. S w. Bell Tel. C o., 24 F.3d 1282, 1286 (10th Cir. 1994). Because this is a diversity acti on, we “apply the substantive l aw of the forum state.” Pepsi-Cola Bottling Co. o f Pittsburg, Inc. v. PepsiCo, Inc., 431 F.3d 1241, 1255 (10th Cir. 2005). The parties agree that MTI’s claim is g overned by Oklahoma contract law, and that there are no binding decisions on this p recise issue from the state courts. We accordingly s eek to predict how the Oklahoma Supreme Court would rule. See Carl v. City of Overland Park, 65 F.3d 866, 87 2 (10th Cir. 1995).
A Under Oklahoma law, “[w]hen addr essing a dispute concerning the language of an insurance policy our first s tep is to determ ine as a matt er of law whether the policy language at issue is ambig uous.” Cranfill v. Aetna Life Ins. Co., 49 P.3d 703, 706 (Okla. 2002). A provision is ambiguous if it is facially s usceptible to two interpretations, considered from the standpoint of a reasonably prudent layperson. Id. If the language is not ambiguous , “we accept the language in it s plain, ordinary and popular sense.” Id.6 Our initial inquiry is thus wheth er exclusions j(5) and j(6) ar e ambiguous. Exclusion j(5) exclude s coverage for propert y damage to “[t]hatparticular part . . . on which you . . . are performing op erations, if the ‘property dam age’ arises out of those operations.” Similarly, exclusion j(6) excludes property damag e to “[t]hat particular part of any property that must be restored, repaired or replace d because ‘your work’ was incorrectly perfo rmed on it.” The key phrase for this appe al is “that particular part.” Although the Oklahoma Supreme C ourt has not explicitly addresse d this language, these specific exclusi ons have received inconsistent treatment from a number of other state and federa l courts. See, e.g., Roaring L ion, LLC v. Nautilus Ins. Co., No. CV 11-2-M-DWM-JCL , 2011 WL 3956132, at *5-7 (D. M ont. July 15, 2011) (unpublished) (noting the va ried interpretations of these exclusions). The fact that jurisdictions have differed in their evaluation of terms d oes not, however, establish that the language in question is necessarily ambiguou s. BP Am., Inc. v. State Auto Prop. & Cas. Ins. Co. , 148 P.3d 832, 836 (Okla. 2005 ), as corrected (Oct. 30, 2006). As several courts have explained , “that particular part” is narrowing language. See Fortney & Weygandt, Inc. v . Am. Mfrs. Mut. Ins. Co., 595 F. 3d 308, 311 (6th Cir. 2010) (describing the words “that particular part” as “tre bly restrictive, straining to the point of awkwardness to m ake clear that the exclusion ap plies only to building parts on which defective work w as performed, and not to the bui lding generally”); Mid-Continent Cas. Co. v. JHP Dev., Inc., 557 F.3d 207, 215 (5t h Cir. 2009) (noting7 “[t]he narrowing ‘that particula r part’ language”); Columbia Mu t. Ins. Co. v. Schauf, 967 S.W.2d 74, 80 (Mo. 1998) (“B y using the words particular pa rt, the provision evidences the intent to narrow th e scope of the exclusion as mu ch as possible.” (emphasis omitted)); ACUITY v . Burd & Smith Constr., Inc., 721 N.W.2d 33, 41 (N.D. 2006) (pointing to “the li miting language ‘particular par t of real property’”); Glob. Modular, Inc. v. Kadena P ac., Inc., 222 Cal. Rptr. 3d 819 , 829 (Cal. Ct. App. 2017) (holding that “the phrase is intended to be a narrowing e lement, one that limits the provision’s application to a distinct part of a constructio n project”). These courts have thus determined the scope o f coverage by looking to the “d istinct component parts” on which an insured con ducts operations. Mid-Continent, 557 F.3d at 217. Several of these cases are instructive. In Mid-Continent, the Fifth Circuit held that exclusion j(6) did not bar c overage for damage to interiorwork caused by the failure to properly water seal e xterior finishes and retaining walls because “[t]he exterior finishes and retaining walls were distinct component p arts that were each the subject of separate construction processes and are severable fr om the” interior components. Id. Similarly, in Fo rtney & Weygandt, the Sixth C ircuit concluded that exclusion j(6) did not bar covera ge for a restaurant that had t o be completely rebuilt due to faulty foundation work b y the insured. 595 F.3d at 309- 11. In ACUITY, the North Dakota Supreme Court held t hat a contractor hired to do w ork on a roof could recover for damage to the interi or of an apartment building cau sed by defective work on the roof. 721 N.W.2d at 42. A nd in Shauf, the Missouri Sup reme Court concluded that only kitchen cabin ets were excluded when a machi ne being used on8 those cabinets caused a fire that resulted in damage throughout a home. 967 S.W.2d at 76, 81. Other courts have adopted a bro ader reading. For example, in W illiam Crawford, Inc. v. Travelers Ins. C o., 838 F. Supp. 157 (S.D.N.Y . 1993), the court rejected the argument that “(j )(5) only excludes coverage for t he damage to that specific part of the apartment on which [the insured] was actua lly doing work when the accident occurred, ” instead holding that damage to the enti re apartment was excluded. Id. at 158. Similarl y, in Jet Line Services, Inc. v . American Employers Ins. Co., 537 N.E.2d 107 (Mass. 1989), the court remarked that “whether at the time of the property damage an employ ee of the insured is or is not in one area or another of the property on which the insu red has agreed to perform oper ations is not significant to the coverage question.” Id. at 111. Under Oklahoma law, it is the r esponsibility of th e insurer des iring to limit liability to employ clear language in the contract. Haworth v. Jantzen, 172 P.3d 193, 197 (Okla. 2006). Wausau has fa iled to do so in this case. Th e phrase “that particular part” could be read to refer solely to the direct ob ject on which the insured was operating. Alternatively, it could apply to those parts of the project directly impacted by the insured party’ s work. We agree with those cour ts that have held the former interpretation is a rea sonable one, although we acknowle dge that the latter is also reasonable. Because both r eadings are permissible, the ex clusions are facially ambiguous. Cranfill, 49 P.3d at 706.9 B “If the language is ambiguous, we apply well-settled rules of c onstruction to determine the meaning of the a mbiguous language.” Id. Specifi cally, it is our mandate to “construe the policy to give a reasonable effect to all of its provisions, and we liberally construe words o f inclusion in favor of the in sured and strictly construe words of exclusion agai nst the insurer.” Id. (citatio n omitted); see also Dodson v. St. Paul Ins. Co., 812 P.2d 372, 377 (Okla. 1991) (“I n case of doubt, exclusions exempting certain spe cified risks are construed stri ctly against the insurer.”). Because the exclusions are ambi guous, they must be strictly and narrowly construed in a manner favorable t o the insured party. Haworth, 172 P.3d at 197. “In construing an ambiguity or uncer tainty against the insurer and in favor of the insured, Oklahoma looks to the objectively reasonable expectations of th e insured to fashion a remedy.” Id. Further, “an inter pretation which makes a contra ct fair and reasonable is selected over that which yie lds a harsh or unreasonable resu lt.” Max True Plastering Co. v. U.S. Fid. & Gua r. Co., 912 P.2d 861, 865 (Okl a. 1996). In this case, interpreting “that particul ar part” to refer to the disti nct components upon which work is performed best comports w ith these rules of interpretat ion. Even under this definition, deter mining the “particular part” o n which an insured works “will vary with t he facts and circumstances of ea ch particular case.” Vinsant Elec. Contractors v. Aet na Cas. & Sur. Co., 530 S.W.2d 76, 77 (Tenn. 1975). In some instances, a larger un it will properly be considered th e particular part. See,10 e.g., Jet Line Servs., 537 N.E. 2d at 111 (concluding exclusion j(5) barred coverage for entire fuel tank rather tha n only the bottom portion of the tank because insured “was retained to clean the en tire tank, and it was the entire t ank on which operations were being performed within the m eaning of the policy language” ). In some cases, an entire structure may qualify. For example, several cases ha ve held that the exclusions so apply when an insu red was hired to raise the enti re structure. See, e.g., Lafayette Ins. Co. v. Peerboom, 813 F. Supp. 2d 823, 834 (S.D. Miss. 2011); Grinnell Mut. Reinsurance Co. v. Lynne, 686 N.W.2d 118, 125 (N.D. 2004). As applied to the facts of this case, we conclude the “particul ar part” on which MTI was “performing operations” and upon which work “was incorr ectly performed” should reasonably be understood a s the anchor bolts. Those bol ts constitute “distinct component parts” of the tower, a nalogous to items like “interio r drywall, stud framing, electrical wiring, and wo od flooring.” Mid-Continent, 557 F.3d at 217. MTI performed work incorrectly by removing them without promptl y replacing them or bracing the structure. We f urther conclude it is objectivel y reasonable that MTI would expect coverage for the c ost of replacing the entire towe r, including all of its operational elements, given the ambiguous language of exclusion s j(5) and j(6).
C Contrary to Wausau’s assertion, i nterpreting the Policy in this manner does not convert it into a performance bond. See generally Black & Veat ch Corp. v. Aspen Ins. (Uk) Ltd, 882 F.3d 952, 969 (10th Cir. 2018) (“Both insura nce policies and performance bonds are used to spr ead risk, but they differ in f undamental ways. An11 insurance policy spr eads the contractor’s risk. A performance bond guarantees completion of the contract upon th e contractor’s default.”). I n Dodson, the Oklahoma Supreme Court, interpr eting a different policy provisi on, noted that it would be inappropriate to “effec tively convert [a] policy into a performance bond or guarantee of contractual performan ce” by reading a policy to co ver “the repair and replacement of the insured’s ow n faulty workmanship.” 812 P.2d at 378 (quotation omitted). But that concern is not at issue here. MTI is not r equesting that Wausau cover the cost of replacing the anchor bolts, which would be th e heart of any faulty workmanship claim. The Dodson decision recognized this distinc tion, stating that a policy would provide coverage if the insured’s faulty workmansh ip “results in damage to property other than the insured’s work or product.” Id. (quotation omitted). The monetary values at issue underline this point. MTI agreed to complete certain work for $46,273. A perfo rmance bond for such a projec t would not likely result in liability of over $1.4 million. Similarly, we are not persuaded by Wausau’s argument that the P olicy contains an implied “business ri sk exclusion” that would otherw ise override the express language. Absent a viola tion of public policy, busines ses are free to contract to their preferred degree of r isk embodied by the precise terms by which they choose to articulate the in surance relationship . See generally Siloam Springs Hotel, LLC v. Century Sur. Co., 392 P.3d 262, 2 68 (Okla. 2017). Oklahoma cou rts do not, as a matter of course, read broad bus iness risk exclusions into cont racts, and this court will not do so when it would ove rride the express language of t he contract. See Mid-12 Continent, 557 F.3d at 216 (dis missing similar argument because “whether there is coverage in a particular case depends on the language contained in the policy at issue”). Finally, we reject Wausau’s cont ention that this court has prev iously decided the issue presented. Our court has considered these exclusions , albeit under Kansas law. See Advantage Homebuilding , LLC v. Maryland Cas. Co., 470 F.3d 1003 (10th Cir. 2006). In that case, we held that exclusions j(5) and j(6 ) apply when property damage occurs while the insured’s work is ongoing regardless of when the damage is discovered. Id. at 1010-12. Wausa u focuses on two sentences o f that opinion. We stated that exclusion j(5) applie s “whenever property damage ar ises out of the work of the insured, its contractors, or its subcontractors while pe rforming operations.” Id. at 1011 (quotation and italics omi tted). We also stated that e xclusion j(6) “was intended to exclude ‘property da mage’ that directly or conseque ntially occurs from the faulty workmanship of the insured.” Id. at 1012. But Advantage did not address the meaning of the phrase “that p articular part.” It had no occasion to do so becau se the insured there contracte d to build entire homes. Id. at 1009. Accordingly , any statement made in Advant age as to that question would constitute dicta . And as we have previously not ed, dicta, “being peripheral, may not have receiv ed the full and careful consider ation of the court that uttered it.” OXY USA, Inc. v. Babbitt, 230 F.3d 1178, 1184 (10 th Cir. 2000) (quotation omitted). Further, W ausau’s argument based on Advan tage plainly goes too far. If, for example, por tions of Tower 1 broke free durin g the windstorm and13 destroyed nearby homes, that dama ge would fit within the descri ption offered in Advantage. 470 F.3d at 1011, 101 2. But there is no argument t o be made that nearby homes would qualify as “that partic ular part” of the property o n which MTI was working.
III For the forgoing reasons, we REVERSE the district court’s grant of summary judgment in favor of Wausau and remand for further proceedings construing the ambiguous exclusions in favor of MTI.