2010 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 4-1-2010 

# NE C ontr Inc v

. Fi she r C ontr Intl LL C P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 08-1357

F o llow thi s and a dd it ion al work s at : http://d i git alc ommon s .l a w . vi ll anova . e du/thir dc ir c uit_2010

Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

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" NE C ontr Inc v

. F i she r C ontr Intl LL C " (2010). 2010 D e cisio n s . P ape r 1577. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2010/1577NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT
N os . 08- 1357/ 1820
N O R T H E A S T C O N T R O L S , IN C .; S T . P AUL M E RC UR Y I NS UR ANC E CO M P ANY
v. F I S HER CONTR OLS I NTE RNATI ONA L L LC, A ppel l ant
A p p ea l from the U n it ed S tat es D istri ct C o u rt fo r th e D istri ct of

D elaw are ( D . C
. N o. 06- cv- 00412) D i s t r i ctJ udge: H on. Sue L
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A r gued on O ct ober1, 2009 B efor e: A M B R O , G A R T H and R O T H , C i r cui tJ udges

( O pi ni on fi l ed: A pr i l 1, 2010)
P au l A
. B rad ley , E sq u ir e M a ro n , M a rv e l, B ra d le y& A n d e rs o n , P . A
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. B ox 288 W i l m i ngt on, D E 19801-2-

M ark C
. H an sen , E sq u ir e M i chae l K . K el l og, E s qui r e ( A r gue d) G reg o ryG
. R ap aw y , E sq u ir e Ke l l o g g , Hu b e r , Ha n s e n , To d d , Ev a n s & Fi g e l , P . L. L. C. 1615 M St r eet , N . W . , Sui t e 400 W as hi ngt on, D . C
. 20036

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### Fisher Co ntrolsInte rnational, LL C (“Fis her” ) a pp ea ls from

the Dis tric t Court ’s de ni a lof Fi s he r ’ s m ot i on t o am e nd i t s c ount e r c l a i m , a s we l la s the Di s tri c t Court ’ s gr ant of summ ar y ju dg m ent a gainst

Fisher and in f avor of appell ee s Northea st

Co ntrols , Inc. and St
. PaulMe r c ury

I ns ur anc e Co. For

the r e a s ons that

fol l ow, we wi l lr e ve r s e and
rem an df o r f urth er p ro ceed in g s.T h e o ther a p p ell ee , S t. P au l M erc u ryInsu ran ce C o . , is N o rth ea st’ s insu rer. In 1 d ef en d ing an d sett li n g the U n d erly ing L it igation , N o rth ea st an d S t. P au l i n cu rred m o re that $1. 2 m i l l i on i n legal fees and cost s. -3- 

### I. O n M ay20, 2000, t her e w as an expl os i on and fi r e ( “Expl os ion”) ata pow erpl ant l ocat ed i n D el aw ar e C i t y , D el aw ar e ( “Pow erPl ant ”)
. T h e E x p los i on s er i ous l yi nj ur ed an
e m p lo y e e o f

th e P o w e r P lan t a n d d a m a g e d m a c h in e rysu rro u n d in g th e lo c a tio n o f th e b las t. T he i nci dentgave r i s e t o fourl aw s ui t s , col l ect i vel yr efe r r ed t o her ei naft eras t he “U nder l y i ng L it igation. ” The pl ai nt i ffs i n t he fours ui t s compri s i ng the U nder l y i ng L i t i gat i on w er e,
r es pect i vel y , ( 1) Pr axai rI nc. ( “Pr axai r ”) , an engi neer i ng companyr es pons i bl e fort he des i gn and cons truct i o n of an a i rs epar at i on uni tt hatw as damaged i n t he Expl os i on; ( 2) M ot i va E n t e rp r i s e s L L C , t h e o p e r a t o r o f t h e P o w e r P l a n t ; ( 3 ) G r e a t A m e r i c a n A s s u r a n c e C o m p a n y, an i ns ur erfors ever al part i es t hat s uffe r ed l os s es fr om t he Expl os i on, i ncl udi ng Pr axai r , I nc. and M ot i va Ent erpr i s es L L C ; and ( 4) R onal d O l s on ( “O l s on”) , an empl oy ee of t he Pow er Pl antw ho w as i nj ur ed i n t he Expl os i on. A m o n g t he part i es named as defe ndant s i n t he U nder l y i ng L i t i gat i on w er e appe l l antFi s herand appe l l ee N or t heas tC ont r ol s , I nc. 1 A ccor di ng t o al l egat i ons i n t he U nder l y i ng L i t i gat i on, the Expl os i on w as caus ed by a fa ul tyval ve ( “V al ve”) t hathad bee n fabr i cat ed byFi s herus i ng m at er i al s uns ui t abl e fort he V al ve’ s i nt ended us e. N or t heas t C ont r ol s , w hi ch r ece i ved the or i gi nal or derforthe V al ve i n i t s capa ci t yas a s al es r epr es ent at i ve forFi s her , w as al l eged t o have i ncorr ect l yt r ans m i t t ed the des i r ed s peci fi cat i ons t o Fi s her , w hi ch then produc ed t he V al ve i n acc or dance w i t h t he

### W e n o t e th at th e A g r e e me nt

c o nt a i n s ac h o i c e - o f

- l awp r o v i s i o n , an dw e a s s ume 2 

### that the Dis tric t Court

onre m and w il l have the partie s det er mine the approp ri at e l aw gove rni ng the Agr e e m e nt , gi ve n the e xi s t e nc e of that pr ovi s i on. -4- err on eou s i nst ruct i on s. F i sher fabri cat ed the V al ve acc ordi ng t o the erroneou s i nst ruct i on s, ut i l i zi ng the l es s combust i on- r es i s t antm at er i al s , and s ubs equent l y del i ver ed i tt o the Pow er P la n t, w h e re it m e t its e n d ju s t m o m e n ts a f te r f ir s t b e in g a c tiv a te d
. Fi s her obt ai ned sum m ary j udgm ent i n t he act i ons br oughtbyPr axai rand O l s on, and
w as di sm i ssed as a defen dan ti n the ot h er tw o suit s. W i t ho ut adm i t t i ng fault , N ortheast C ontr ol s pai d $601, 000. 00 t o s ett l e al l cl ai m s agai ns ti t . N or t heas t al s o vol unt ar i l ydi s m i s s ed its c ro s s -c la im s a g a in s t F is h e r i n th e O ls o n s u it. O n M a y2 8 , 2 0 0 6 , a p p e llee s N o rth e a st C o n tro ls a n d S t. P a u l ( c o llec tiv e lyre f e rre d to h e re in a f ter a s “ N o rth e a st” ) f

iled a c o m p lain t ag a in st F ish e r, se e k in g to re c o v e r th e c o sts i ncurr ed i n defe ndi ng agai ns tand s et t l i ng t he U nder l y i ng L i t i gat i on. N or t heas tal l eged that it w a s en tit led to in d e m n if ica tio n f ro m F ish e r pu rsu a n t to th e in d e m n ityc lau se c o n tain e d in th e p a rties ’ 1 9 9 8 R e p re se n tativ e A g re e m e n t (“ A g re e m e n t”)
. In re sp o n se , F ish e r d e n ied its 2 contr actual obl i gat i on t o ind em n ifyN or t heas t , and al s o fi l ed a c ount er cl ai m s eeki ng as damages i t s ow n cos t s i n defe ndi ng agai ns tt he U nder l y i ng L i t i gat ion , all egi ng t hat N or theas t ’ s err oneous t r ans m i t t al of the V al ve or ders peci fi cat ions c ons t i tut ed a br eac h of the A gr eement , t her ebyent i t l i ng Fi s hert o t he dam ages i ti ncurr ed as a r es ul t

— namel y , the
c o s ts o f d e f e n d in g a g a in s t th e U n d e rl y in g L itig a tio n .. In its in iti a l co u n ter c laim , file d o n A u g u st 1 8 , 2 0 0 6 , F ish e r so u g h t its d e f e n se c o sts-5-

onl y as an offs et t o any pos s i bl e r ecove r y by N or t heas t , but di d not s ee k an af fi r m at i ve
m onet aryr ecove r y . J us tunderone y earl at er, o n A ugus t15, 2007, Fi s herfi l ed a mot i on
se e k in g lea v e to a m e n d its c o u n ter c laim to se e k a n a f f irm a tiv e m o n e tar yre c o v e rya s w e ll,
r egar dl es s of w hetherornotN o rt h ea st w as aw ar ded damages on i t s cl ai m . O n N ovember 1, 2007, t he D i s t r i ctC our ti s s ued an or derdeny i ng Fi s her ’ s m ot i on t o amend. L at er , bot h part i es m oved fors um m aryj udgm enton t hei rr es pect i ve cl ai m s , and on Ja n u a ry1 8 , 2 0 0 8 , the D istric t C o u rt g ra n ted su m m a ryju d g m e n t f o r N o rth e a st o n its c laim fori ndemni t yfr om Fi s her , and aga i ns tFi s heron it s co unt er cl ai m agai ns tN or t heas tfor br eac h of contr act . O n M ar ch 12, 2008, the D ist ri ct C o u rtent er ed j udgm enti n favorof N o rth e a st a n d a g a in st F ish e r in th e a m o u n t o f $ 1 ,2 0 7 ,8 3 3 .5 0 , p lu s p re ju d g m e n t in ter e st. Fi s hert i m el yappea l ed the D i s t r i ctC our t ’ s deni al of i t s m ot i on t o amend, as w el l as the D istri ct C o u rt ’s gra n t of su m m aryjud g m en t i n fa v o r of N o rth ea st an d ag ains t Fish er. II. T h e Di s t r i c t Cou r th a d s u b j e c tma t t e rj u r i s d i c t i o n u n d e r2 8 U. S
. C. § 1 3 3 2 , a n d we have a ppel l at e j ur i s di ct i on pur s uantt o 28 U
. S. C
. § 1291. III . W e now tur n t o t he mer i t s of the ca s e. N or t heas tal l eges thatFis herbr eac hed the part i es ’ A gr eementi n r efus i ng t o i ndemni fyN or t heas t for t he cos t s i ti ncurr ed i n defe ndi ng agai ns tand set t l i ng t he U nder l y i ng L i t i gat i on, and i s ther efor e l i abl e t o N or t heas tfor d a m a g e s in th e a m o u n t o f th o se c o sts . N o rth e a st’s c laim is b a se d u p o n a rig h t to-6-

i ndemni fi cat i on cr eat ed pur s uantt o t he i ndemni t y cl aus e i ncl uded i n the A gr eementbetw een it a n d F is h e r. T he i ndemni t ycl aus e i s composed of tw o par t s . T he fi r s tpart , r efe r r ed t o her ei naft er
a s th e “ O b lig a tio n C lau se ,” p ro v id e s th e situ a ti o n s in w h ich F ish e r b e c o m e s o b lig a ted to in d e m n if yN o rth e a st. It re a d s, in p e rtin e n t p a rt: Subj ectt o t he l i m i t at i ons s et for t h i n t he i m m edi at el ys ucce edi ng par agr aph of t hi s Sect i on. . . Fi s heragr ees t h at it sh al l , ati t s ow n expens e, pr ot ect , defe nd, in d e m n if ya n d h o ld h a rm les s R e p r e s e n ta tiv e f ro m a n d a g a in st a n ya n d a ll cl ai m s , demands, act i ons , l os s es , damages , l i abi l i t i es , cos t s and expe ns es (c o llec tiv e ly“ L o ss e s” ) w h ich m a y a rise o u t o f o r b e m a d e in c o n n e c tio n w ith t he death or i nj ur y of any per s on, or damage t o pr oper t y , byw h o m soever s uffe r ed, r es ul t i ng orcl ai m ed t o r es ul tfr om anyactual oral l eged de fec t i n any P ro d u c t. A p p . a t 5 3 9
. T he s econd pa r tof the i ndemni t ycl aus e, ref erred t o her ei naft eras t he “Esc ape C lau se ,” s e ts o u t th e situ a tio n s in w h ich F ish e r e sc a p e s f ro m it s c o n tra c tu a l o b lig a tio n to i ndemni f yNor t h e a s t , n o t wi t h s t a n d i n g a n a c t i v a t i o n o f t h a to b l i g a t i o n p u r s u a n tt o t he O b lig a tio n C lau se . T h e E sc a p e C lau se re a d s, in p e rtin e n t p a rt:

N o tw ith stan ding the p ro v isio n s o f th e im m e d iate lyp re c e d in g p a ra g ra p h o f th is Sect i on. . . oranyot herpr ovi s i on of thi s A gr eement , Fi s hers hal l n o tbe obl i gat ed t o pr ot ect , defe nd, i ndemni fyorhol d harm l es s [N or t heas t ] fr om and agai ns tanyL os s es ar i s i ng fr om the.
. . [n] egl i gent act s orom i s s i ons by [N o rth ea st]
. F i s h e rmu s t d e m o n s t r a t e t h a tN o r t h e a s t ’ s n e g l i g e n c e c a u s e d t h e E x p l o s i o n . We b elie v e that a g en u ine issu e o f m aterial fa ct ex ist s as to w h ethe r or n o t N o rth ea st’ s neg l i gen ce did i nd eed cause t he E xp l osi on , and con sequen t l y as t o w hether or no tN ortheast

### See Northeas t Bri ef at 19 (“ If the c hang e in the valve’ s s peci ficati on s had ca used 3 

### th e exp lo sio nan df

ire, an dth e resu ltin g p erso n al in j uries an dp ro p erty

d am ag es, No rtheas t a gree s that i t wou ld no t be e ntitle d to d efense andindemnity .” ). -7- i s ent i t l ed t o i m m uni t yundert he A gr eement. T he r ecor d cont ai ns atl eas tt w o pi ece s of 3 evi dence that , part i cul ar l yw hen vi ew ed i n a l i ghtm os tfavor abl e t o Fi s her , poi ntt o t he
e x is te n c e o f

a c a u s a l r e la tio n s h ip b e tw e e n N o rt h e a s t’ s n e g lig e n c e a n d th e E x p lo s io n . O ne i s t h e d e p o s i t i o n t e s t i mon yo f Gui d o Kar c h e r , P. E. , l e a d i n v e s t i g a t o rf o rG r eat A m e ric a n A ss u ra n c e C o m p a n y , o n e o f th e p lain tiff

s in th e U n d e rly in g L it ig a tio n . In h is depos i t i on, K ar chert es t i fi ed that he had c oncl uded thatt he V al ve w as a ca us e of the E xpl os i on beca us e i tcont ai ned mat er i al s t hat w er e not i n t he s peci fi cat i ons r eques t ed i n t he
or i gi nal or der
. A pp. at722. K ar cher al s o s t at ed thatthe Expl os i on w oul d nothave oc curr ed i f the V al ve had “bee n as s peci fi ed and bui l tt o the oxy gen s t andar d r equi r ement s , ” gi vi ng part i cul aremphasi s t o t he “nonmet al l i c[] ” component s of the V al ve. I d. T h e s e c o n d is a p re lim in a ry re p o rt is s u e d b yW e n d e ll H u ll & A s s o c ia te s , In c ., a pri vate engineer i ng fi rm ret ai ned byt he o perat or of t he P ow er Pl ant t o d et erm i ne the cause of the E xp l osi on . T he re p o rt (“ W e n dell H ull R epo rt ”) foun d thatthe E xp l osi on had m ost l i kel yoccurr ed i n t he pr oxi m i t yof the V al ve, and not ed the di s cr epanc ybetw een the
m aterial s tha t w ere su p p o sed to b e u sed in the V alve ’s fa b ri ca ti o n an d the m aterial s tha t w ere actual l yus ed. A pp. at566, 571. V i ew i ng t he record— i ncludi ng t he tw o m at eri al s ci t ed ab ov e— i n a li gh tm ost favor abl e t o Fi s her , w e conc l ude thata gen u i ne i s s ue of mat er i al fac texi s t s as t o w hetherS e e M e mo r a n d u m Or d e r , No r t h e a s tCo n t r o l s , I n c . v . F i s h e rCo n t r o l s I n t ’ l LL C, 4 N o . 0 6 -cv -04 1 2 (D
. D el. Jan . 1 8 , 2 0 0 8 ) at 7 n
. 4 (“ C ons i s t e nt w i t h t he abo ve r e as oni ng , the courtr ej ect s Fi s her ’ s cl ai m underM i s s our i l aw fori t s cos t s i n defe ndi ng the U n d e rl y in g L itig a tio n ....” ) ( e m p h a s is a d d e d ). -8- or not N or theas t ’ s negl i gence caus ed the Expl os i on, and ther efor e as t o w hetherornotFi s her is o b lig a ted to in d e m n if yN o rth e a st p u rsu a n t to th e A g re e m e n t. Si nce a genui ne i s s ue of mat er i al fac t exi s t s as t o w hetherFi s heri s obl i gat ed under the A gr eementt o i ndemni fy N or t heas t for i t s l os s es i n t he U nder l y i ng L i t i gat i on, t he D i s tr i ct C o u rt e rr e d in g ra n tin g s u m m a ry ju d g m e n t to N o rt h e a s t o n its in d e m n ity c la im
. I V. W e n ex t con side r w h ethe r th e D istri ct C o u rterred in f ind ing that F ishe r’s
c o u n ter c laim f

a iled a s a m a tter o f

law , the re b ye f

f e c tiv e lyg ra n tin g su m m a ryju d g m e n t in f a v o ro f No r t h e a s t . Th e Di s t r i c tCo u r tg r o u n d e d i t s f i n d i n g o n th i s i s s u e i n th e s a me
re a so n in g u p o n w h ich it relie d in g ra n tin g su m m a ryju d g m e n t to N o rth e a st o n its ind em n ityclaim
. A s n o ted a b o v e, see su p ra P art I, the D istri ct C o u rt ’s gra n t of su m m ary 4 j udgm enton t he i ndemni t ycl ai m w as err oneous due t o t he exi s t ence of a ge nui ne i s s ue of
m at er i al fac tw i t h r egar d t o t he ca us al r el at i ons hi p betw een N or t heas t ’ s negl i gence and the E x p losion
. F o r th e sa m e re aso n s tha t th e D istri ct C o u rterred in g ran ti n g su m m ary j udgm entt o N or t heas ton i t s i ndemni t ycl ai m , i tal s o err ed i n gr ant i ng s um m aryj udgm ent
a g a in s t F is h e r ( a n d in f

a v o r o f N o rt h e a s t) o n F is h e r’ s c o u n te rc la im
.F ish e r f irst f iled its c o u n ter c laim o n A u g u st 1 8 , 2 0 0 6 , an d m o v e d f o r le a v e to 5 amend on A ugus t15, 2007. Fi s herB r . at53. -9- V. W e r evi ew t he D i s t r i ctC our t ’ s deni al of Fi s her ’ s m ot i on t o amend forabus e of d is c re tio n . T o ll B ro s ., In c . v . T w p . o f R e a d in g to n , 5 5 5 F .3 d 1 3 1 , 1 3 7 (3 d C ir . 2 0 0 9 ). T h e D istric t C o u rt’s o rd e r d e n y in g F ish e r’s m o tio n to a m e n d re a d s a s f o llo w s:

“ A t W ilm in g to n th is 1 st d a yo f N o v e m b e r, 2 0 0 7 , h a v in g re v iew e d d e f e n d a n t’s m o tio n to
a me n d c o u n t e r c l a i m a n d t h e p a p e r s s u b mi t t e d i n c o n n e c t i o n th e r e wi t h ; I T I S ORD ERED th a t sa id m o tio n is d e n ied a s u n tim e ly .” O rd e r, N o rth e a st C o n tro ls In c . v . F ish e r C o n tro ls I nt ’ l L L C , N o. 06- 412 ( D . D el
. N ov. 1, 2007)
. A footnot e adds : “A m endment s t o t he p lea d in g s w e re d u e to b e f iled o n o r b e f

o re M a rc h 1 2 , 2 0 0 7 . D e f e n d a n t’s m o tio n to
am en d it s co u n terclai m w as f il ed o n A u g u st 15 , 2 0 0 7 . ” Id
. (i n terna l ci tat ion s o m itted).

“ [ D ]e la ya lo n e is n o t s u f f ic ie n t to ju s tif

yd e n ia l o f

le a v e to a m e n d ” a c o m p la in t. A rthu r v. M aers k, Inc. , 43 4 F
. 3d 19 6, 20 4 (3d C i r. 20 06 ). In part i cular , a delayof les s th a n a y e a r— a s w a s th e c a se h e re
— is n o t su f f icie n t g ro u n d s to ju stif

yd e n ial o f

lea v e to 5 amend, abs entaddi t i onal fac t or s m i l i t at i ng fora deni al
. I d. ( fi ndi ng thata del ayof el even
m o n ths is “n o t, o n it s fa ce , so ex ce ssive as to b e p resu m p ti v elyu n rea so n ab le”). R athe r, to ju stif ya d e n ial to a m e n d , the re m u st b e so m e f in d in g th a t “th e p lain tiff ’s d e lay i n
s eeki ng t o amend i s undue, m ot i vat ed bybad fa i t h, orpr ej udi ci al t o t he oppos i ng par ty . ” B jo rg u n g v . W h ite ta il R e s o rt , L P , 5 5 0 F .3 d 2 6 3 , 2 6 6 (3 d C ir . 2 0 0 8 ).-10-

In a sm u c h a s th e D istric t C o u rt c ites o n lyth e u n tim e lin e ss o f F ish e r’s m o tio n to amend i t s compl ai nt , and off er s no ot hergr ounds fori t s deci s i on, w e conc l ude i n l i ghtof M a e rsk , su p ra , tha t th e D istric t C o u rt a b u se d its d isc re tio n in d e n y in g F ish e r’s m o tio n to amend. V I. F o r th e f o reg o ing rea so n s, w e w il l r ev erse the D istri ct C o u rt ’s gra n t of su m m ary ju d g m e n t f

o r N o rth e a st a n d th e D istric t C o u rt’s d e n ial o f F ish e r’s m o tio n to a m e n d its count er cl ai m , and r emand forfur t herpr ocee di ngs cons i s t entw i t h t hi s opi ni on.Nor t h e a s tCon t r o l s , I n c . , e ta l
. v . Fi s h e rCon t r o l s I n t e rn a t i o n a l , LLC N os . 08- 1357 & 08- 1820
A M B R O , C i r cui tJ udge, concurr i ng W hi l e I j oi n t he maj or i t yopi ni on i n ful l and agr ee thatther e ar e i s s ues of m at er i al f a c tp r e c l u d i n g s u m m a r y j u d g m e n t , I w r i t e s e p a r a t e l y t o a d d a n a d d i t i o n a l i n q u i r y I bel i eve the D i s t r i ctC our ts houl d conduct
. T her e i s no ques t i on that , i f a j uryconcl udes thatN or theas t ’ s negl i gence caus ed the expl os i on, anyl os s es ar i s i ng fr om thatnegl i gence , i ncl udi ng i t s at t or ney s ’ fee s and s ett l ementcos t s , w oul d notbe Fi s her ’ s i ndemni fi cat i on
r es pons i bi l i t y . B utt her e i s anotheri s s ue as w el l

— w hetherN or t heas t ’ s negl i gence caus ed the l osses i ncurr ed, notw hetheri tcaus ed the explos i on . T his i s a keydis t i ncti on becau se the indem nitycl auses are concerned w i t h “L osses, ” def i ned as “cl ai m s, dem and s, act i on s, l os s es , damages , l i abi l i t i es , cos t s and expe ns es . ” A pp. 539. I ti s i m por t antt o art i cul at e the pr eci s e degr ee of caus at i on ati s s ue her e. “[A ] r i s i ng f ro m ” a n d “ a ri s in g o u t o f ” a re v e ry b ro a d u n d e r M is s o u ri la w . Schm i dtv. Ut i l s . I ns . C o. , 1 8 2 S .W .2 d 1 8 1 , 1 8 3 (M o . 1 9 4 4 ); accord C api tolI ndem
. C or

p. v. 1405 A s s ocs . , I

nc. , 450 F .3 d 5 4 7 , 5 5 0 (8 th C ir. 2 0 0 3 ). T h e se p h ra se s d o n o t re q u ire d ire c t an d p ro x im a te
c a u s a tio n , b u t in s te a d o n ly re q u ir e a s im p le c a u s a l r e la tio n s h ip
. Ca p i t o l I n d e m. , 450 F. 3d at550. I n Schm i dt , t he C our tdeal tw i t h how farthe ca us al chai n coul d go befor e the p lai n ti ff ’s i n

juryco u ld n o lon g er a ri se o u t of the u se o f th e d ef

en d an t’ s d eli v erytru ck s. It d e ter m in e d th a t th e u se o f w o o d e n b lo c k s o n th e sid e w a lk , w h o se so le p u rp o se w a s to2

f a c ili tate th e u se a n d o p e ra tio n o f th e tru c k s in th e d e liv e ryo f c o a l, w a s “ d ire c tly
connec t ed w i t h and nec es s ar i l yi nci dentt o t he oper at i on and us e of the trucks
. ” Schm i dt , 1 8 2 S
. W . 2 d at 18 5 . A s a re su lt , the C o u rtco n clud ed that, ev en tho u g h the d ri v ers w ere notoper at i ng oreven unl oadi ng t he truck, thei rnegl i gentpl ace m entof w ooden bl ocks on th e s id e w a lk d id , in f

a c t, “ a ri s e o u t o f

” th e u s e o f

th e tru c k s . I

d. at18 6. A s Schm i dt d e m o n stra tes , the u se o f “ a risin g o u t o f

” in in d e m n itya g re e m e n ts u n d e r M iss o u ri law is br oad i ndeed. I n thi s cas e, w hi l e w i t houta doubtcaus i ng the expl os i on nece s s ar i l ycaus es the l os s es , i ti s pos s i bl e forN or t heas t ’ s negl i gence nott o caus e the explos i on b u t still to
caus e the l os s es , eith e r o f w h ich e x c lu d e s F ish e r’s in d e m n ityo b lig a tio n s. If N o rth e a st is
s how n t o be negl i genti n t r ans m i t t i ng t he or dert o Fi s her , r es ul t i ng i n del i veryof an i ncorr ectval ve, a j ur ycoul d fi nd t he ca us al r el at i ons hi p r equi r ed betw een the negl i gent actand the l os s es i ncurr ed t o exempti ndemni t ycover age. Forexampl e, the “a r i s i ng fr om ” r el at i ons hi p coul d be es t abl i s hed bythe fol l ow i ng l ogi c: ( 1) the negl i gent tr ans m i s s i on byN or t heas tof the or der ; ( 2) the del i veryof an i ncorr ectval ve; ( 3) the val ve i s i nvol ved i n t he expl os i on; ( 4) t he val ve i s unexpec t edl ydamaged i n t he fi r e; ( 5) the
v a lv e ’s f ire d a m a g e p ro m p ts a n in v e stig a tio n f o c u sin g o n th e v a lv e a n d a b e lief th a t itis the ca us e of the fi r e; ( 6) t he i nves t i gat i on pr om pt s the fi l i ng agai ns tN or t heas tand Fi s her of the U nder l y i ng L i t i gat i on, w hi ch al l eges di r ectnegl i gence byboth of them caus ed the fi r e; and ( 7) N or t heas ti ncur s over$1 m i l l i on of “Loss es ” i n t he form of l egal fee s and3

se ttl e m e n t co sts re late d to d e f e n d in g a g a in st th e U n d e rly in g L iti g a tio n . T h is c a u sa l ch a in i s l es s att enuat ed then the cha i n i n Schm i dt , an d itis suf ficien t t o estab li sh N o rth ea st’ s negl i gence as t he ca us e of the l os s es , i r r es pect i ve of w hetherthe negl i gence w as the pr oxi m at e ca us e of the expl os i on. I n t hi s s cena r i o, even i f the j urydet erm i nes that
n eg li g en ce d id n o t actua ll yca u se th e e x p losion , itco u ld rea so n ab lyfin d that the d eli v ery of the i nco rr ectvalve, t he invest i gati on , the law sui t s— and m osti m po rt antl y , the loss es— al l ar os e fr om N or t heas t ’ s negl i gence . T hus , t he i nqui r ys houl d focus on t he “a r i s i ng fr om ” l anguage and the conne ct i on betw een a nynegl i gentact s orom i s s i ons comm i t t ed byN or t heas tand the l os s es i ncurr ed b yN o rth e a st. F in d in g a c a u sa l re latio n sh ip b e tw e e n th e n e g lig e n c e a n d th e e x p lo sio n is
m e re ly o n e w a yto m a k e th e c o n n e c tio n to th e lo s s e s . W ith th is a d d itio n a l c la ri f ic a tio n , I jo in th e m a

jo rityo p in io n in f

u ll.