NOT 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 o. 09- 3136

_____________ P E R M A S T E E L IS A C S C O R P ., f /k /a G la s s a lu m In tl. C o rp . A p p e l l a n t

v. CO L UM BI A C AS UAL T Y C OM P ANY O n A p p ea l from the U n it ed S tat es D istri ct C o u rt

f o rth e D i s tr i c to f

N e w J e r s e y ( D . C . N o. 2- 06- cv- 02439) D istri ct Ju d g e: H o n o rab le Jo sep h A . G ree n aw ay , Jr. Subm i t t ed U nderT hi r d C i r cui tL A R 34. 1( a)

M ar ch 12, 2010 B efor e: A M B R O , SM I T H and A L D I SE R T , C i r cui tJ udges

( O pi ni on Fi l ed: A pr i l 27, 2010)

OPI NI ON OF TH E CO UR T A L D I SE R T , C i r cui tJ udge. T hi s di ver s i tyact i on r equi r es us t o deci de, underN ew J er s eyl aw , the meani ng of a n in su ra n c e p o licyter m th a t co v e rs th e in su re d a g a in st a m o u n ts it b e c o m e s “ leg a llyTh e Di s tr i c tCo u r th a d j u r i s d i c t i o n p u r s u a n tt o 2 8 U. S . C. § 1 4 4 1 ( a ) a n d 2 8 U. S . C. 1 § 1332( a) ( 1) . W e have j ur i s di ct i on pur s uantt o 28 U . S. C . § 1291. 2 obl i gat ed t o pay . ” C ons trui ng thatt erm , the D i s tr i ctC our tgr ant ed s um m aryj udgm ent agai ns tthe i ns ur ed, Pl ai nt i ff- A ppel l antPer m as t eel i s a C S C orpor at i on f/k/ a G l as s al um In ter n a tio n a l C o rp o ra tio n (“ P e rm a ste e lisa ” ), an d in f a v o r o f th e in su re r, D e f

e n d a n tA ppel l ee Col um bi a C as ual tyC om pany( “C N A ”) , rul i ng thatunderB acon v. A m er i can Insur ance C o. , 33 0 A . 2d 38 9 (N . J. S up er. C t . L aw D i v. 19 74 ), aff’d, 35 1 A . 2d 77 1 (N . J. S u p e r. C t. A p p . D iv . 1 9 7 6 ), an in su re d d o e s n o t b e c o m e “ leg a llyo b lig a ted to p a y ” u n til th e e n tryo f

a j u d g me n ta g a i n s ti t . We c o n c l u d e th a tth e Di s tr i c tCo u r td i d n o te rr , a n d we wi l l a f f i r m. 1 I. B eca us e the part i es ar e fa m i l i arw i th the fa ct s and pr ocee di ngs i n the D i s tr i ct C our t , w e w i l l r eci t e them onl yas nece s s aryt o the di s cus s i on. A . T he C ur t ai n W al l Pr oj ect I n J anuary2000, G ol dm an Sachs hi r ed Turne rC ons truct i on C om panyas the g en era l con tr ac tor fo r th e c o n stru cti o n o f a fo rty -tw o -st o ryo ff ice tow er (the “ P rojec t”). A s c o n c e iv e d , the e x ter io r o f th e b u ild in g w a s to b e c o v e re d b ya d e c o ra tiv e “ c u rta in w al l ” compr i s ed of gl as s panel s and an e xt ernal al um i num “gr i l l w or k” s y s t em. T urner s ubcontr act ed the des i gn, fabr i cat i on and i ns t al l at i on of thi s curt ai n w al l t o Per m as t eel i s a. B y e a r l y J a n u a r y 2 0 0 2 , i n s t a l l a t i o n o f th e c u r t a i n w a l l w a s u n d e rw a y.3

A ccor di ng t o C N A , defe ct s i n the curt ai n w al l fi r s tcame t o l i ghtas ear l yas M ar ch 2 0 0 2 , w h en P rojec t con su lt an t I srae l B erg er A sso ciates o b serv ed that ce rt ain g ri ll w o rk c o m p o n e n ts k n o w n a s “ s a g ro d s ” h a d b e c o m e lo o s e o r d e ta c h e d f ro m th e ir“ c o lla rs .” T hes e pr obl ems per s i s t ed, and on M ay4, 2004, T urner , atthe di r ect i on of G ol dm an Sachs , i ns truct ed Perm as t eel i s a “t o i m m edi at el ys t op al l w or k per form ed on [i t s ] s caf fol ds atthe bui l di ng per i m et erdue t o s afe tyconce rns , ” i ncl udi ng “al l ext er i orw or k thatm ay caus e fa l l i ng debr i s and/ orm at er i al s . ” ( A pp. 753. ) Fol l ow i ng the w or k s t oppage, P e rm a ste e lisa m e t w ith T u rn e r, G o ld m a n S a c h s a n d G o ld m a n S a c h s’s c o n su ltan ts to di s cus s the condi t i on of the curt ai n w al l . A ccor di ng t o Per m as t eel i s a, T urnerand G o ldm an S ac h s d em an d ed o n n u m ero u s o cc asio n s tha t Pe rm astee li sa re p air th e g ri ll w o rk d e f e c ts a t it s o w n c o st. B . Per m as t eel i s a’ s I ns ur ance U pon r ece i vi ng the curt ai n w al l contr act , Per m as t eel i s a enr ol l ed i n the O w ner C ontr ol l ed I ns ur ance Pr ogr am (“ O C I P”) thatG ol dm an Sachs pr ocur ed and i m pl ement ed forthe Pr oj ect . T he O C I P Pol i cyw as i s s ued byL exi ngt on I ns ur ance C om panyand cover ed Perm as t eel i s a onl yforthi r d- partycl ai m s and cl ai m s byand aga i ns tG ol dm an S achs. Per m as t eel i s a al s o obt ai ned a Cont r act or s ’ Pr ofes s i onal L i abi l i tyPol i cyi s s ued by C N A ( the “CN A Pol i cy ”) , w i th a pol i cyper i od fr om N ovember1, 2003 thr ough N o v e m b e r 1 , 2 0 0 4 . T h e C N A P o licy ’s c o v e ra g e a g re e m e n t p ro v id e s in re lev a n t p a rt:4

W e w i l l payal l amount s i n exce s s of the s el f- i ns ur ed r et ent i on up t o our lim it o f lia b ility, w h ic h y o u b e c o m e le g a lly o b lig a te d to p a ya s a re s u lt o f . .. a w ro n g f u l a c t . . . th a t r e s u lts in a c la im a n yw h e re in th e w o rl d . . . . ( A pp. 237. ) U nderthe Pol i cy , a “w r ongful act ” i s defi ned as “a ne gl i gentact , err oror o m is s io n in th e p e rf

o rm a n c e o f

p ro f e s s io n a l s e rv ic e s f

o r o th e rs b yy o u . . . .” (A p p . 2 4 1 .) T h e ter m “ p ro f

e ss io n a l se rv ice s” is d e f in e d a s “ se rv ice s th a t y o u . . . are q u a lifie d to per form forot her s . . . i n t he capaci tyof an a r chi t ect , engi neer , l and s ur vey or , or l and scape archi t ect . . . . ” (A pp . 24 1. ) A “cl ai m ” i s “a dem and for m on eyor services , n a mi n g y o u a n d a l l e g i n g a wr o n g f u l a c t . ” ( Ap p . 2 4 0 . ) An o th e rp r o v i s i o n ma k e s th e CN A P o lic ye x c e s s in s u ra n c e o v e r a n y“ o th e r c o lle c tib le in s u ra n c e .” (A p p . 2 4 4 -2 4 5 .) I n A pr i l 2004, Per m as t eel i s a i nform ed C N A byl ett erof a “ pot ent i al cl ai m ” ar i s i ng fr om pr obl ems w i th t he curt ai n w al l . I n the l ett er , Per m as t eel i s a r eques t ed C N A ’ s pr eclaim s ass ist an ce , b u t st ated that “n o fo rm al claim h as y et be en fil ed . ” (A p p . 1 8 3 . ) In r es pons e, on J une 3, 2004, C N A s entPer m as t eel i s a a l ett err es ervi ng i t s r i ghtt o deny c o v e ra g e . L a ter , at a jo b site m e e tin g in Ju ly2 0 0 4 , C N A d ire c ted P e rm a ste e lisa n o t to

“ a d m it lia b ility . . . [ o r] s a yy o u ’r e g o in g to d o a n yth in g .” (A p p . 2 5 5 .) C . R e m e d iatio n o f

th e C u rta in W a ll M eanw hi l e, Per m as t eel i s a cont i nued i nves t i gat i ng the ca us e of a nd pos s i bl e fi xes forthe gr i l l w or k pr obl ems. B yA ugus t23, 2004, Per m as t eel i s a had ne ar l yfi nal i zed a “f ixing m etho d ” p rop o sal, w ith w h ich T u rne r, G o ldm an S ac h s an d G o ldm an S ac h s’s cons ul t ant s w er e i n agr eement . T he part i es i ncorpor at ed the agr eed- upon r epai r s and5

des i gn m odi fi cat i ons i nt o Subcontr actC hange O r derA - 34, dat ed A ugus t25, 2004. T h e re a f ter , P e rm a ste e lisa c o m m e n c e d its re m e d iatio n o f th e c u rta in w a ll. O n J a n u a r y 1 0 , 2 0 0 5 , C N A p r o v i d e d P e r m a s t e e l i s a w i th i t s “ p r e l i m i n a ry” d e te rm in a tio n th a t “ n o c la im y e t h a s b e e n a s s e rt e d a g a in s t P e rm a s te e lis a .” (A p p . 8 8 9 .) T h e lett er a d d it ion all ysu g g ested that co v era g e w as f o rec lose d b ythe C N A P o li cy ’s “othercol l ect i bl e i ns ur ance ” cl aus e, w hi ch made the C N A Pol i cyexce s s i ns ur ance over Per m as t eel i s a’ s pr oj ect - s peci fi c i ns ur ance w i th L exi ngt on. ( A pp. 890. ) O n O ct ober4, 2 0 0 5 , C N A se n t P e rm a ste e lisa a “ su p p lem e n tal” c o v e ra g e d e ter m in a tio n , es se n tially r epea t i ng C N A ’ s i ni t i al pos i t i on thatthe r emedi at i on w as notcover ed bythe pol i cy . ( A pp. 1171- 1173. ) A ccor di ng t o Per m as t eel i s a, r emedi at i on of the curt ai n w al l w as compl et e on or abou tD ecem ber 31, 2005 , for a t otal costof ap proxim at el y$5 . 5 m i l l i on do l l ars . (A p p ell an t’ s B r. 1 9 . ) D . P roc ed u ral H ist o ry F o llo w in g its re p a ir o f

th e c u rta in w a ll, P e rm a ste e lisa so u g h t to re c o v e r its r emedi at i on cos t s fr om L exi ngt on, appar ent l yt o defe atC N A ’ s ar gum entthatcover age w as barr ed bythe C N A Pol i cy ’ s “othercol l ect i bl e i ns ur ance ” cl aus e. L exi ngt on deni ed c o v e r a g e o n th e g r o u n d th a tn o “ c l a i m ” h a d b e e n m a d e , a s r e q u i r e d u n d e rth e p o l i c y. A ft erPer m as t eel i s a demanded arbi tr at i on, the arbi tr at or s found i n favorof Lexi ngt on, rul i ng thatG ol dm an Sachs had notm ade a “cl ai m ” aga i ns tPer m as t eel i s a. O n A pr i l 21, 2006, Per m as t eel i s a fi l ed s ui tagai ns tC N A i n the Super i orC our tof6

N ew J er s ey , L aw D i vi s i on, H uds on C ounty , al l egi ng br eac h of contr act , br eac h of the i m pl i ed cove nantof good fa i th and fa i rdeal i ng, and s eeki ng a dec l ar at oryj udgm entthat C N A is ob li g ated to d ef en d , ind em n ify , an d co v er P erm astee li sa f o r th e re m ed ial w o rk d o n e to th e c u rt ain w all . O n M ay3 0 , 2 0 0 6 , C N A rem o v ed the a cti o n to the D istri ct C o u rt f o rth e D i s tr i c to f

N e w J e r s e y. O n O ct ober24, 2008, aft erthe cl os e of di s covery , both part i es fi l ed mot i ons for s um m aryj udgm ent . Per m as t eel i s a s oughts um m arydi s m i s s al of var i ous aff i r m at i ve d e f e n se s ra ise d b yC N A , an d in tu rn , C N A so u g h t a r u lin g th a t itw a s n o t u lti m a telyliab le t o i ndemni fyPer m as t eel i s a fori t s r emedi at i on of the curt ai n w al l . I n an opi ni on dat ed J une 29, 2009, the D i s tr i ctC our tdecl ar ed thatthe di s pos i t i ve i s s ue w as the i nt erpr et at i on under N ew J er s eyl aw of the C N A Pol i cyphr as e “[ w ] e w i l l payal l amount s . . . w hi ch y ou become l egal l yobl i gat ed t o pay . ” Perm as t eel i s a C S C orp. v. C ol um bi a C as . C o. , N o. 06- 2439, 2009 W L 1874087, at*5 ( D . N . J . J une 29, 2009) . R el y i ng on B acon v. A m er i can I n s u r a n c e C o . , th e D i s tr i c tC o u r tru l e d th a tth e p o l i c y t e r m “ l e g a l l y o b l i g a t e d t o p a y” r equi r es “‘ the pr es ent at i on of pr oofs i n a courtof compet entj ur i s di ct i on and a f i ndi ng by the co urtor j uryof li abil i ty . ’” I d. (quoti ng B acon , 33 0 A . 2d at39 3). B ecause Per m as t eel i s a w as nots ubj ectt o a fi nal j udi ci al j udgm ent , the C our trul ed thati tw as not

“ leg a llyo b lig a ted ” to re p a ir o r p a yf o r re p a irs to th e c u rta in w a ll. Id . at * 6 . A c c o rd in g to the C our t , Per m as t eel i s a had vol unt ar i l yand uni l at er al l yas s um ed r es pons i bi l i tyforthe re p a irs, a n d w a s p re c lu d e d f ro m re c o u p in g th e c o sts o f th e re p a ir w o rk . Id . T h is tim e ly7

appea l fol l ow ed. II. T h i s Co u r te x e r c i s e s d e n o v o r e v i e w o v e ra g r a n to f s u mm a ryj u d g me n t , a n d we ap p lythe s am e stan d ard u sed b ythe D istri ct C o u rt . S tat e A u to P rop . & C as. Ins. C o . v . P ro D e sig n , P .C ., 5 6 6 F .3 d 8 6 , 8 9 (3 d C ir. 2 0 0 9 ). A c o u rt m a yg ra n t su m m a ryju d g m e n t o n ly i f, aft erdr aw i ng al l i nfer ence s i n favorof the non- m ovi ng party , “the pl eadi ngs , the di s coveryand di s cl os ur e mat er i al s on fi l e, and anyaff i davi t s s how thatther e i s no genui ne i s s ue as t o anym at er i al fac tand thatthe movanti s ent i t l ed t o j udgm entas a mat t erof l a w. ” Ru l e 5 6 , F e d e r a l Ru l e s o f Ci v i l P r o c e d u r e . Ad d i t i o n a l l y , u n d e rNe w J e r s e yl a w, “[t ] he i nt erpr et at i on of an i ns ur ance pol i cyi s one of l aw . ” N at ’ l U ni on Fi r e I ns . C o. of P ittsbu rgh P A v . T ran sp . Ins. C o . , 7 6 5 A . 2 d 2 4 0 , 2 4 3 (N . J. S u p er. C t. A p p . D iv. 20 0 1 ).

“ W e e x e rc ise p len a ryre v iew o v e r a d istric t co u rt’s in terp re tatio n o f sta te la w , as w e ll as its c on c l us i on a s t o the l e ga l op e r a t i on of a n i ns ur a nc e po l i c y . ” Roy a l I ns . Co. of A m. v. K SI T rad ing C o rp., 5 6 3 F . 3 d 6 8 , 7 3 (3d C ir . 2 0 0 9 ). III . Per m as t eel i s a’ s pr i nci pal cont ent i on i s thatthe D i s tr i ctC our terr ed i n appl y i ng B a c o n , 3 3 0 A .2 d 3 8 9 , to h o ld th a t u n d e r N e w Je rse ylaw a n in su re d b e c o m e s “ leg a lly o b l i g a t e d t o p a y” o n l y a f t e re n tr y o f

a f i n a l j u d g m e n te s t a b l i s h i n g i t s l i a b i l i ty. Per m as t eel i s a fi r s tar gues thatB acon i s di s t i ngui s habl e, and nextar gues thatB acon w as w r ongl ydeci ded. W e ca nnotagr ee w i th ei thercont ent i on.8

B efor e pr ocee di ng w e mustacknow l edge ourr ol e as a fe der al courtadj udi cat i ng a cas e underN ew J er s eyl aw . A fede r al courtexer ci s i ng di ver s i tyj ur i s di ct i on m us tappl yt he s ubs t ant i ve l aw as deci ded bythe hi ghes tcourtof the s t at e w hos e l aw governs the ac t i on. O rso n , In c . v . M ira m a x F ilm C o rp ., 7 9 F .3 d 1 3 5 8 , 1 3 7 3 n .1 5 (3 d C ir. 1 9 9 6 ) (c iti n g E rie R . R . C o. v. T om pki ns , 304 U . S. 64, 78 ( 1938) ) . “W hen the s t at e’ s hi ghes tcourthas not ad d resse d the p rec ise q u esti o n p rese n ted, [w e] m u st pred icth o w the s tat e’s h igh est co u rt w ou l d resol ve the i ssue, ” i d. , and t o d o so, “w e m ustcon si der r el evan tst at e preceden t s, anal ogous deci s i ons , cons i der ed di ct a, s chol ar l yw or ks , and anyotherr el i abl e dat a t endi ng c o n v in c in g ly to s h o w h o w th e h ig h e s t c o u rt in th e s ta te w o u ld d e c id e th e is s u e a t h a n d ,” C o v ing ton v . C o n t’ l G en . T ir e, Inc . , 3 8 1 F . 3 d 2 1 6 , 2 1 8 (3d C ir . 2 0 0 4 ) (qu o tat ion o m itted). M os ts i gni fi cant l y , the “de ci s i ons of s t at e i nt erm edi at e appe l l at e court s s houl d be ac cor ded sig n if ica n t w e ig h t in th e a b se n c e o f a n in d ica tio n th a t th e h ig h e st s tate c o u rt w o u ld ru le otherw i s e. ” O r s on, 79 F. 3d at1373 n. 15. A l though notdi s pos i t i ve, “[t ] he dec i s i on of an in ter m e d iate sta te c o u rt . . . ‘is n o t to b e d isre g a rd e d b ya f e d e ra l co u rt u n les s it is convi nced byot herper s uas i ve dat a thatthe hi ghes tcourtof the s t at e w oul d deci de otherw i s e. ’ ” C ovi ngt on, 381 F. 3d at218 ( quot i ng C . I . R . v. B os ch’ s E s t at e, 387 U . S. 456, 4 6 5 (19 6 7 )). G i ven ourdutyt o as cert ai n N ew J er s eyl aw , w e agr ee w i th the D i s tr i ctC our tthat the s t art i ng poi ntforthi s anal y s i s i s the tr i al courtdeci s i on i n B acon v. A m er i can Insur ance C o. , 33 0 A . 2d 38 9, the lone N ew Jer seycase con strui ng the p oli cyph ras e9

“l egal l yobl i gat ed t o pay . ” M or eover , beca us e B acon w as aff i r m ed percur i am bya pane l of the A ppel l at e D i vi s i on “s ubs t ant i al l yforthe r eas ons s etfor th i n the opi ni on of the [tr i al court ] , ” s ee Bacon, 351 A . 2d 771 ( N . J . Super . C t . A pp. D i v. 1976) , w e vi ew i tas an ap p ell ate d ec isi o n “w h ich is n o t t o b e d isr eg ard ed b ya f ed era l cou rtu n less [w e a re per s uaded] thatthe hi ghes tcourtof the s t at e w oul d deci de otherw i s e. ” C ovi ngt on, 381 F. 3d at218. I n B acon, 330 A . 2d 389, the courthel d thatan i ns ur ed bec om es “l egal l yobl i gat ed t o pay ” onl yaft erentr yof a f i nal j udgm entes t abl i s hi ng i t s l i abi l i ty . See i d. at393. T her e, the pl ai nt i ff pa perdi s tr i but orw as i ns ur ed undera l i abi l i typol i cycover i ng “al l s um s w hi ch the i ns ur ed s hal l become l egal l y obl igat ed

t o payas damages . . . . ” I d. at391, 392 (e m p h a sis in o rig in a l). T u rn in g to th a t p o licy , the in su re d f iled a c laim to re c o v e r c e rta in paym ent s w i thhel d bya buy er( “U ni on”) t o offs etpr opertydamage al l egedl ycaus ed by defe ct s i n the i ns ur ed’ s paperpr oduct s . I d. at391. A ft eri t s cl ai m w as deni ed, the i ns ur ed su e d th e in su re r, ar g u in g th a t u n d e r a v a rie tyo f N e w Je rse ysta tu tes , itb e c a m e “ leg a lly o b li g ated ” to U n ion as so o n as it s p ap er d am ag ed U n ion ’s pro p erty . Id. at 39 2 . T h e c o u rt r ej ect ed thatar gum ent , expl ai ni ng that [t ] he t es tof [l egal ] l i abi l i tyi s notthe exi s t ence of a r emedyi n the buy er agai ns tthe s el l erunderthe r el evant[l aw ] , buta det erm i nat i on of re sp o n sib ili tyf

o r sa tisf y in g su c h a re m e d y . T h e re is a c lea r im p lica tio n in [the pol i cy ] thatpaym entbythe i ns ur erw as pr edi cat ed upon an a dj udi cat i on of the i ns ur ed’ s l i abi l i tyt o pay“damages . ” . . . A bs entthe pr es ent at i on of p roo fs in a c o u rto f c o m p eten t j u ri sd ict ion an d a f ind ing b ythe c o u rto r j u ry of l i abi l i ty , i tcannotbe s ai d t hatthe s el l eri s “l egal l yobl i gat ed” t o pay dam ages.10

I d. at393. B eca us e the i ns ur ed’ s l i abi l i tyt o U ni on had notbecome fi xed and e s t abl i s hed b ya f in a l ju d g m e n t, th e c o u rt ru led th a t th e in su re d h a d n o t b e c o m e “ ‘le g a llyo b lig a ted ’ to paydamages t o U ni on. ” See i d. at394. P erm astee li sa u rge s u s to d ist ing u ish this ca se, arg u ing that the C N A P o li cyterm “l egal l yobl i gat ed t o pay ” i s m at er i al l ydi ffe r entfr om thati n B acon, w hi ch cove r ed a m o u n ts th e in su re d b e c a m e “ leg a llyo b lig a ted to p a ya s d a m a g e s.” A c c o rd in g to P erm ast eel i sa, B acon ’s “j ud gm ent rule” deri ves from the ad dit i on al “as dam ages” l a n g u a g e c o n t a i n e d i n th e Ba c o n p o l i c y , a n d th e a b s e n c e o f th a tl a n g u a g e i n th e CN A P o lic yc o m p e ls a d if

f e re n t r e s u lt. W e d is a g re e . B ac o n p lai n lyad d resse s the q u esti o n o f w h en a leg al ob li g ati o n arises, an inq u iry under t aken w i thoutr el i ance on the pol i cy ’ s “as damages ” l anguage . T hi s focus i s evi dent fr om the fi r s ts ent ence of the court ’ s anal y s i s , w hi ch ca r eful l yart i cul at es the i s s ue under cons i der at i on: W hi l e the t erm “l egal l yobl i gat ed” i s undefi ned i n the pol i cyorbyour c o u rts, c o u rts in o th e r ju risd ictio n s h a v e d e f in e d th e ter m a s u se d in liab ili ty p o l i c i e s t o s i g n i f

y e x i s t e n c e o f

a l e g a l l i a b i l i ty. I d. at393. T he court ’ s s i ngul arfocus on the phr as e “l egal l yobl i gat ed” i s cl earthr oughout the o pini on . S ee i d. (four t i m es pl aci ng the term “l egall yob l i gated” i n q uo t at i on m arks, butus i ng no m arks ar ound “damages ”) ; i d. at394 ( once doi ng the s ame) . B uts ee i d. at 3 9 3 (plac ing “d am ag es” in q u o tat ion m ark s). T h at fo cu s is co n firm ed as th e c o u rt announce d i t s concl us i on, w hi ch bea r s r epea t i ng her e:11

A bs entthe pr es ent at i on of pr oofs i n a courtof compet entj ur i s di ct i on and a f in d in g b yth e c o u rt o r ju ryo f liab ili ty , itc a n n o t b e sa id th a t th e se ller is “l egall yob l i gated” t o p aydam ages. I d. A ddi t i onal l y , Per m as t eel i s a off er s no author i tyforthe ar gum entthatthe phr as e “a s dam ages” ch ang es the m eaning o f “l egall yob l i gated. ” T o the con trary , P erm ast eel i sa r eadi l yconce des thatthe t erm “damages ” means ei ther“‘ [m ] oneycl ai m ed by , oror der ed t o be pai d t o, a per s on as compensa t i on fora l os s ori nj ury . ’ ” ( A ppel l ant ’ s B r . 31 ( quot i ng B l ack’s L aw D i ct i on ary44 5 (9t h ed . 20 09 )) . ) B ecause the t erm “dam ages” co ntem plat es a ei ther a cl ai m or a j ud i ci al order for com pen sat i on , w e fai l t o see ho w the ad dit i on al ph ras e

“ a s d a m a g e s ” c o u ld h a v e c o n c e iv a b ly co m p e lle d th e “ ju d g m e n t ru le ” in B a c o n . P e rm a ste e lisa a d d iti o n a llyc o n ten d s th a t th e B a c o n p o licyis d istin g u ish a b le b e c a u se it co n tain e d a “ n o -a c tio n ” c lau se b a rrin g th e in su re d f ro m su in g th e in su re r u n til entryof a f

i nal j udgm ent . W e di s agr ee. O n ourr eadi ng, the court ’ s anal y s i s of the noa c t i o n c l a u s e p l a i n l yd i d n o tr e l a t e t o i t s d e t e r mi n a t i o n o f wh e n a l e g a l o b l i g a t i o n b e c a me fi xed, as i tw as w hol l ycont ai ned i n a s epar at e s ect i on conce rni ng the “t i m el i nes s ” of the sui t . T he co urtbeg an it s anal y si s, [q] ui t e apa r tfr om anyi s s ues of l i abi l i tyi s the ques t i on of the t i m el i nes s of p lai n ti ff[’s] ac ti o n ag ains t i ts i n su rer. B a c o n , 3 3 0 A .2 d a t 3 9 4 . In terp re tin g th e n o -a c tio n c lau se , the c o u rt h e ld th a t [t ] he l anguage of the s o- cal l ed “no- act i on” cl aus e i s expr es s and unambi guous , cl ear l ys ett i ng outcondi t i ons pr ece dentt o the i ns ur ed’ s r i ght of ac t i on againsti t s carri er. . . . [P ]r i or t o suing i t s carri er the insur ed m ust12

h a v e in h a n d a f

in a l ju d g m e n t o f

d a m a g e s o r a s e ttle m e n t a g re e m e n t . . . in v o lv in g th e in su re r a s w e ll as th e c laim a n t. Id. at 39 4 -39 5 . A lth o u g h the n o -ac ti o n clau se h ad the p o tential to af fe ct th e c o u rt ’s anal y s i s of the t erm “l egal l yobl i gat ed, ” i tpl ai nl ydi d not . I n ourvi ew , B acon u n e q u iv o c a lly d e c id e s th e q u e s tio n o f w h e n a n in s u re d b e c o m e s “ le g a lly o b lig a te d to p a y ,” a n d w e r e

j e c tP e r m a s t e e l i s a ’ s a r g u m e n t s t o th e c o n tr a ry. N o tw ith sta n d in g B a c o n , P e rm a ste e lisa a rg u e s th a t th e p lain m e a n in g o f “ leg a lly obl i gat ed” i ncl udes contr actual obl i gat i ons , and nec es s ar i l yi ncl udes i t s contr actual o b lig a tio n to p ro v id e a f u n c tio n in g c u rta in w a ll. N o t so . A lth o u g h a c o n tra c t is i ndi s put abl ya l egal obl i gat i on, underN ew J er s eyl aw , a pr ofes s i onal l i abi l i typol i cydoes nottr ans ferthe r i s k of br eac h of contr actfr om the i ns ur ed t o the i ns ur er . A s the N ew Jer seyS up rem e C ou rtexp l ai ned i n W eedo v. S t on e-E-B ri ck, Inc. , 40 5 A . 2d 78 8 (N . J. 1 9 7 9 ), [t ] he i ns ur ed- contr act orcan t ake pa i ns t o contr ol the qual i tyof the goods and s ervi ces s uppl i ed. A tthe s ame t i m e he unde r t akes the r i s k thathe may fai l i n t hi s endea vorand ther ebyi ncurcontr actual l i abi l i tyw hether expr es s ori m pl i ed. T he cons equenc e of notper form i ng w el l i s partof everybus i nes s ventur e; the r epl ace m entorr epai rof fa ul tygoods and w or ks i s a bus i nes s expens e, t o be borne bythe i ns ur ed- contr act ori n or der t o sat i sfycust om ers . Id . a t 7 9 1 . Fur ther , al though W eedo w as m ot i vat ed i n partbythe s peci fi c pol i cyl anguage at i s s ue i n thatcas e, i thas gener al l ybeen c ons trued t o for ecl os e an i ns ur ed fr om s eeki ng i ndemni fi cat i on forbr eac h of contr act . I n A t l ant i c M utual I ns ur ance C o. v. H i l l s i de13

B ot t l i ng C o. , 903 A . 2d 513, 519 ( N . J . Super . C t . A pp. D i v. 2006) , forexampl e, the A ppel l at e D i vi s i on ci t ed W eedo f orthe pr opos i t i on that the r i s k of one’ s ow n faul tyw or k i s al w ay s borne bythe partyper form i ng the w or k. T hatparty ’ s l i abi l i tyt o other s fori t s ow n faul tyw or k i s a mat t erof w a rr a n ty an d n o t a m a tte r o f in s u ra n c e c o v e ra g e . Id . at 5 1 9 (c iti n g W e e d o , 4 0 5 A .2 d a t 7 9 1 ). In y e t an o th e r c a se , a N e w Je rse ya p p e llate courtci t ed W eedo f

orthe bl ack- l ett erpr opos i t i on that“cl ai m s forbr eac h of contr actand w a rra n tya n d b re a c h o f

f id u c iar yd u tyc lea rlyd o n o t as se rt c laim s f o r w h ich c o v e ra g e is provided. ” G rand C ov e II C on do . A ss’ n, Inc. v. G i nsberg, 67 6 A . 2d 11 23 , 11 30 (N . J. Super . C t . A pp. D i v. 1996) ( ci t i ng W eedo, 405 A . 2d 788) . I ti s nots urpr i s i ng, ther efor e, thatPer m as t eel i s a i s unabl e t o ci t e anycas e i n w hi ch a c ontr actual obl i gat i on betw een the i ns ur ed and a pot ent i al thi r d- partycl ai m antfurni s hed a “ l egal obl i gat i on t o pay ” w i thi n t he m eani ng of a c om m er ci al l i abi l i typol i cy . ( See A ppel l ant ’ s B r . 28- 46; R epl y1- 12. ) A bs ent m andat oryoreven pe r s uas i ve author i tyt o the contr ary , w e conc l ude thatthe N ew J er s ey S u p re m e C o u rt w o u ld re jec t P e rm a ste e lisa ’s a rg u m e n t th a t it s c o n tra c t to p ro v id e a c u rta in w a l l c o n s t i tu t e d a “ l e g a l o b l i g a t i o n t o p a y” w i th i n th e m e a n i n g o f th e C N A P o l i c y. S earchi ng for supp ortbey on d the decis i on s of N ew Jer seycou rt s, P erm ast eel i sa nextr el i es on I ndus tr i al Par k W at erC o. v. N at i onal Fi r e I ns ur ance C o. , N o. 98- 4263, 2005 W L 372298 ( R . I . Super . C t . Feb. 9, 2005) , an unpubl i s hed opi ni on i n w hi ch a Rhode Isl an d tr ial co u rtd ec li n ed to req u ir e a fin al j u d g m en t as a p red icate to c o v era g e u n d er a pol i cycover i ng amount s the i ns ur ed bec ame “l egal l yobl i gat ed t o pay . ” I d. at*5. B utt hatSee 7A C ouch on I ns ur ance § 103: 14 ( “The t erm ‘ l egal l i abi l i ty , ’ as us ed i n a 2 p o licyo f in su ra n c e , m e a n s a liab ili tysu c h a s a c o u rt o f c o m p e ten t ju risd ictio n w ill r e c o g n i z e a n d e n f

o r c e b e twe e n p a r t i e s l i t i g a n t . ” ) ; s e e a l s o , e . g . , De tr o i tWa t e rT e a m J . V. v. A gr i c. I ns . C o. , 371 F. 3d 336 ( 6th C i r . 2004) ( “[T] he t erm ‘ l egal obl i gat i on’ r equi r es ei thera j udi ci al det erm i nat i on of l i abi l i tyora s ett l ementbetw een the i ns ur er , i ns ur ed and the cl ai m ant . ” ( appl y i ng M i chi gan l aw ) ( i nt ernal quot at i on m arks om i t t ed) ) ; R i pepi v. A m . In s. C o s., 3 4 9 F .2 d 3 0 0 , 3 0 3 (3 d C ir. 1 9 6 5 ) (n o tin g th a t th e “ m o re n a tu ra l” cons truct i on of “the t erm ‘ l egal l yobl i gat ed’ i n the i ns ur ance contr actcompre hends the lega l ob li g ati o n w h ich f low s fro m a jud g m en t” (ap p ly ing P en n sy lvan ia l aw )); M & M E l ec. v. C om m ’ l U ni on I ns . C o. , 670 N . Y . S. 2d 909, 910 ( A pp. D i v. 1998) ( cons trui ng t he t erm “l egal l yobl i gat ed t o pay ” i n l i ne w i th N ew Y or k’ s gener al rul e that“[l ] i abi l i tyof the i ns ur eratt ache s w hen ther e i s a fi nal j udgm entagai ns tthe i ns ur ed as a r es ul tof an obl i gat i on i m pos ed byl aw ” ( i nt ernal quot at i on m arks om i t t ed) ) ; J ones M as onry , I nc. v. W . A m . In s. C o ., 7 6 8 S .W .2 d 6 8 6 , 6 8 8 (T e n n . C t. A p p . 1 9 8 8 ) (“ [ I]t se e m s c lea r to th is courtthatthe pr ovi s i on of the pol i cyr equi r i ng the i ns ur ert o pays um s w hi ch ‘ the i ns ur ed h a s b e c o me l e g a l l yo b l i g a t e d t o p a ya s d a ma g e s , ’ i s s yn o n ymo u s wi th ‘ t o p a ya l l s u ms estab li sh ed b yjud g m en t entere d ag ains t th e ins u red . ’”). 14 deci s i on, t oo, i s unavai l i ng. Per m as t eel i s a’ s ci t at i on of I ndus tr i al Par k W at ers ucce eds onl yi n convi nci ng us of the pauc i tyof ca s es fi ndi ng a “l egal obl i gat i on t o pay ” i n the abs ence of a f

i nal j udgm entors ett l ement . B acon’ s j udgm entrul e, bycontr as t , comm ands a pal pabl e fol l ow i ng and l i kel yr epr es ent s the vi ew of a maj or i tyof court s . T hus , al though 2 I n d u s tr i a l P a r k Wa t e rma yd e mo n s tr a t e s o me c o u r t s ’ r e s i s t a n c e t o th e “ j u d g me n tru l e , ” we do notbel i eve N ew J er s ey ’ s Supr eme C our tw oul d overrul e B acon on the author i tyof a s in g le u n p u b lis h e d tr ia l c o u rt d e c is io n f ro m a f o re ig n ju ri s d ic tio n . I V. A s a f e d e ra l co u rt a p p ly in g sta te la w , w e m u st n o t d isre g a rd th e A p p e llate D i vi s i on’ s adopt i on of the hol di ng and r eas oni ng of B acon unl es s w e ar e “‘ convi nced by o ther p ersu asiv e d ata tha t th e h igh est co u rto f th e state w o u ld d ec ide o therw ise. ’”15

C o v ing ton , 3 8 1 F . 3 d at 21 8 (qu o ti n g C . I. R . v . B o sch ’s E stat e, 38 7 U . S . 4 5 6 , 4 6 5 (19 6 7 )). A ft err evi ew i ng the part i es ’ cont ent i ons and the r el evantcas e l aw , w e pr edi ctthatthe N ew J er s eySupr eme C our tw oul d nei theroverrul e nordi s t i ngui s h B acon i f conf r ont ed w i th t he fac t s of thi s cas e. A ccor di ngl y , w e conc l ude thatthe D i s tr i ctC our tdi d noterri n appl y i ng B a c o n to h o ld th a t, i n th e a b se n c e o f a f in a l ju d g m e n t, P e rm a ste e lisa w a s n o t “le g a lly o b lig a te d to p a y ” f

o r t h e re m e d ia tio n o f

th e c u rt a in w a ll. T he j udgm entof the D i s tr i ctC our tw i l l be af fi r m ed.