Court Opinion

ID: 4911213
Source: CourtListenerOpinion
Date Created: 2021-09-15 17:00:35.25049+00
Date Added: 2024-06-11T08:13:31.032654
License: Public Domain

PRECEDENTIAL

      UNITED STATES COURT OF APPEALS
           FOR THE THIRD CIRCUIT
               ______________

                  No. 20-2171
                ______________

         IN RE: W.R. GRACE & CO, et al.,
                 Reorganized Debtors

     CONTINENTAL CASUALTY COMPANY;
   TRANSPORTATION INSURANCE COMPANY,
                Appellants

                       v.

  JEREMY B. CARR; JULIE L. GIFFORD; GLORIA G.
      HARRIS; JOYCE LUNDVALL; EDWARD D.
   STEFANATZ; FRED O. BACHE; JACK L. JENSEN;
 MELBA C. WESTON; RUBY R. HAGNER; KERRY L.
BEASLEY; WILLIAM G. CORBETT; AMANDA K. FOSS;
    TAMMY SUE LANG; WILLIAM E. DESHAZER;
  JOHNNY G. JELLESED; LORRAINE B. SICHTING;
  MARTIN H. KREBS; KENNETH B. NEUBAUER; L.
     VINSON; LAURIE A. WALLER; SHIRLINE E.
    ALMEIDA; IGNACIO C. ALMEIDA; THOMAS F.
    ERICKSON; RUSSELL S. BARNES; SANDRA L.
 BARNES; PHYLLIS A. HAUGEN; DENNIS L. WELCH

                ______________
    On Appeal from the United States Bankruptcy Court
               for the District of Delaware
                   (No. 01-BK-01139)
    Bankruptcy Judge: The Honorable Ashely M. Chan
                     ______________

                 Argued: March 17, 2021
                    ______________

Before: KRAUSE, PHIPPS, and FUENTES, Circuit Judges.

               (Filed: September 15, 2021)

Brian T. Burgess [ARGUED]
Michael S. Giannotto
Goodwin Procter LLP
1900 N Street, Northwest
Washington, DC 20036

Gerard Justin Cedrone
Goodwin Procter LLP
100 Northern Avenue
Boston, MA 02210

Evan T. Miller
Bayard, PA
600 N. King Street
Suite 400
Wilmington, DE 19801

      Counsel for Appellants

                               2
Daniel C. Cohn [ARGUED]
Murtha Cullina
99 High Street
20th Floor
Boston, MA 02110

Taruna Garg
Murtha Cullina
177 Broad Street
16th Floor
Stamford, CT 06901

Michael Busenkell
Gellert Scali Busenkell & Brown, LLC
1201 N. Orange Street
Suite 300
Wilmington, DE 19801

Allan M. McGarvey
McGarvey, Heberling, Sullivan & Lacey, PC
345 First Avenue East
Kalispell, MT 59901

      Counsel for Appellees

Mark A. Behrens
Shook, Hardy & Bacon LLP
1800 K Street NW
Suite 1000
Washington, D.C. 20006

      Counsel for Amicus American Casualty Insurance
Association

                              3
Jeffrey C. Wisler
Connolly Gallagher LLP
1201 N. Market Street
20th Floor
Wilmington, DE 19801

Edward J. Longosz, II
Eckert Seamans Cherin & Mellott, LLC
1717 Pennsylvania Avenue NW
Suite 1200
Washington, DC 20006

        Counsel for Amicus Maryland Casualty Company

Robert M. Horkovich
Anderson Kill, PC
1251 Avenue of the Americas
New York, NY 10020

        Counsel for Amicus WRG Asbestos Personal Injury
Trust
                      ______________

                 OPINION OF THE COURT
                     ______________

FUENTES, Circuit Judge.

       Because of the long latency period of asbestos disease,
debtor companies in asbestos-related bankruptcies face a large

                              4
and uncertain pool of future claimants.1 This raises two related
problems: first, debtor companies may not be able to emerge
from bankruptcy without a true sense of their future liabilities;
and second, if these companies cannot emerge from
bankruptcy, future claimants may not have access to redress
for asbestos-related harm.2 Section 524(g) of the Bankruptcy
Code attempts to solve both of these problems. It enables
bankruptcy courts to establish a trust for future claimants as
part of a debtor company’s reorganization plan, and, through
the resulting channeling injunction, diverts all claims against
the debtor to the trust.3 This ensures both that future claimants
are assured restitution, and that debtor companies can survive
bankruptcy without the threat of future asbestos suits.4

       Largely in order to encourage contributions to the trust,
certain third parties may also benefit from a § 524(g)

1
 See In re W.R. Grace & Co., 729 F.3d 311, 323 (3d Cir. 2013);
H.R. Rep. No. 103-835, at 40 (1994) (“Asbestos-related
disease has a long latency period—up to 30 years or more—
and many of the exposures from the 1940’s, when asbestos was
in widespread use as an insulating material, [became] the
personal injury lawsuits of the 1970’s and 1980’s.”).
2
    See H.R. Rep. No. 103-835, at 40-41.
3
    Id.
4
 See Grace, 729 F.3d at 315; In re Combustion Eng’g Inc., 391
F.3d 190, 234 (3d Cir. 2004); In re Plant Insulation Co., 734
F.3d 900, 906 (9th Cir. 2013); In re Quigley Co., Inc., 676 F.3d
45, 48 (2d Cir. 2012).

                               5
channeling injunction.5 However, these protections do not
extend to all claims brought against third parties. In order to
conform with the statute, (1) these claims must be “directed
against a third party who is identifiable from the terms of such
injunction” and (2) the third party must be “alleged to be
directly or indirectly liable for the conduct of, claims against,
or demands on the debtor”; in addition, (3) “such alleged
liability” must arise “by reason of” one of four statutory
relationships, including, as is relevant here, “the third party’s
provision of insurance to the debtor or a related party.”6 These
requirements strike a balance between providing contributing
third parties freedom from “continued exposure to indirect
asbestos claims,” and “ensur[ing] fairness” for future
claimants.7

       Only the second and third requirements, referred to as
the “derivative liability” and “statutory relationship”
requirements, respectively, are at issue in this case. In In re
W.R. Grace & Co. (“Grace I”),8 we instructed the Bankruptcy
Court on the appropriate analysis for determining whether
these requirements were met. Because we conclude that the
Bankruptcy Court misapplied our guidance, we vacate the
decision below. We hold that the claims at issue meet the

5
    Quigley, 676 F.3d at 59; see Grace, 729 F.3d at 325.
6
    11 U.S.C. § 524(g)(4)(A)(ii).
7
 In re W.R. Grace & Co., 900 F.3d 126, 130-31 (3d Cir. 2018)
[hereinafter Grace I].
8
    Id.

                                6
derivative liability requirement, but that we cannot, on the
record before us, determine whether they meet the statutory
relationship requirement. Accordingly, we again remand to the
Bankruptcy Court for the limited purpose of developing the
record on this point so that it can determine in the first instance
whether the required statutory relationship exists here. This
panel will retain jurisdiction over any future appeals.

                               I.

       This case stems from the confirmed Chapter 11
bankruptcy plan of W.R. Grace & Co. (“Grace”). Grace’s
troubles have been well-documented in the Federal Reporters,9
so we will only recite the facts necessary for the resolution of
this appeal.

        Grace operated an asbestos mining and processing
facility in Libby, Montana from 1963 until 1990. Faced with
thousands of asbestos-related suits, Grace filed for Chapter 11
bankruptcy. When it emerged, its reorganization plan provided
for a several-billion-dollar asbestos personal-injury trust to
compensate existing and future claimants. Pursuant to
§ 524(g)(4), all asbestos-related personal injury claims against
Grace were to be enjoined and channelled through the trust (the
“Grace Injunction”).

9
  See id. at 131-32; Grace, 729 F.3d at 335-39; In re W.R.
Grace & Co., 532 F. App’x 264, 265-66 (3d Cir. 2013); In re
W.R. Grace & Co., 591 F.3d 164, 167-70 (3d Cir. 2009); In re
W.R. Grace & Co., 316 F. App’x 134, 135-36 (3d Cir. 2009);
In re W.R. Grace & Co., 115 F. App’x 565, 566-67 (3d Cir.
2004).

                                7
        Appellants (collectively, “CNA”) provided general
liability, workers’ compensation, employers’ liability, and
umbrella insurance policies to Grace at the Libby mine from
1973 to 1996. As part of its insurance contracts with Grace,
CNA was granted the right to inspect the Libby operation and
to make loss-control recommendations. After twenty-six years
of litigation regarding the scope of CNA’s coverage of Grace’s
asbestos liabilities, Grace and CNA entered into a settlement
agreement, the terms of which ensured that CNA would be
protected by Grace’s channeling injunction. In return, CNA
agreed to contribute $84 million to the trust. The terms of the
settlement also provided that the trust would indemnify CNA
for up to $13 million if it was held liable for certain asbestos-
related claims, including tort claims premised on CNA’s
alleged failure to warn third parties about the mine’s dangers.

        Appellees (collectively, the “Montana Plaintiffs”) are a
group of individuals who worked at the Libby mine and now
suffer from asbestos disease. They sued several defendants in
Montana state court, asserting various tort claims including
negligence against CNA (the “Montana Claims”). The
Montana Claims are based on allegations that CNA was aware
of the asbestos exposure at the Libby operation and the dangers
associated with it, and that it incurred a duty to protect and
warn the Libby workers of these dangers when it undertook to
provide them with “industrial hygiene services,” as well as
when it inspected the mine.10 By failing to fulfill this duty,

10
     JA 143-45.

                               8
CNA allegedly caused the Montana Plaintiffs’ asbestos-related
injuries.11

       In response to the Montana suit, CNA filed an adversary
complaint in Bankruptcy Court seeking a declaration that the
Montana Plaintiffs’ claims were barred by the Grace
Injunction. The Montana Plaintiffs filed a motion to dismiss,
and CNA filed for summary judgment. The Bankruptcy Court
denied the Montana Plaintiffs’ motion and granted CNA’s.12
The Montana Plaintiffs appealed, and we affirmed in part,
vacated in part, and remanded. In Grace I, we concluded that
the Grace Injunction, by its own terms, barred the Montana
Claims. However, we declined to decide whether these claims
met § 524(g)’s derivative liability and statutory relationship
requirements, in part because we had not been fully briefed on
what law to apply. Instead, we remanded the case back to the
Bankruptcy Court with instructions on how to analyze these
requirements. On remand, the Bankruptcy Court entered
summary judgment in favor of the Montana Plaintiffs (the
“Bankruptcy Decision”). CNA timely filed the instant appeal.

11
  CNA maintains that “[o]ver 1,500 similar claims have been
asserted against CNA [and] . . . are being held in abeyance
pending the outcome of this adversary action.” CNA Br. at 10
n.1.
12
  In re W.R. Grace & Co., No. 01-01139 (KG), 2016 WL
6068092, *1 (Bankr. D. Del. Oct. 17, 2016), aff’d in part,
vacated in part, Grace I, 900 F.3d 126.

                              9
                                 II.

        The Bankruptcy Court had jurisdiction pursuant to 28
U.S.C. §§ 157 and 1334. We have jurisdiction to review a
direct appeal from the Bankruptcy Court pursuant to 28 U.S.C.
§ 158(d)(2).13 We review the Bankruptcy Court’s grant of
summary judgment de novo.14

13
   Of note, in Grace I, we held that the Bankruptcy Court had
jurisdiction to enforce the injunction in this case under the
settlement agreement’s indemnification provision. 900 F.3d at
138-39. Because that provision meant that the claims against
CNA, if successful, would affect the assets of the bankruptcy
estate, the Bankruptcy Court had “related to” jurisdiction. Id.
at 139. “Related to” jurisdiction exists where “the outcome of
[a] proceeding could conceivably have any effect on the estate
being administered in bankruptcy.” Id. (internal quotation
marks omitted) (citing Combustion Eng’g, 391 F.3d at 226).
Specifically, “‘[r]elated to’ jurisdiction exists over actions
against non-debtors involving contractual indemnity
obligations between the debtor and non-debtor that
automatically result in indemnification liability against the
debtor.” Id. (internal quotation marks and alterations omitted)
(citing Combustion Eng’g, 391 F.3d at 226). Though the
Bankruptcy Court opined that our holding was “inherently
conflicting” and did not “make any sense,” JA 863, 874, it
properly recognized that it is bound by that holding, which we
reaffirm today.
14
     In re AE Liquidation, Inc., 866 F.3d 515, 522 (3d Cir. 2017).

                                 10
                                III.

       On appeal, CNA maintains that the Montana Claims
satisfy both the derivative liability and statutory relationship
requirements. While we agree with the former, the record is
currently insufficient to decide the latter. We will therefore
remand to the Bankruptcy Court for the limited purposes of
developing the record and making an initial determination as
to whether the statutory relationship requirement is met.

           A. Derivative Liability

       We begin our analysis where we left off in 2018. In
Grace I, the Montana Plaintiffs argued that their claims were
not derivative because they were based on CNA’s own
misconduct, and, therefore, did not seek to recover from
CNA’s insurance policies for Grace’s liabilities.15 CNA
argued that the claims were derivative because Grace’s
asbestos was indisputably the “but-for” cause of the Montana
Plaintiffs’ injuries.16 We rejected both proposed frameworks,
finding “the former [to be] overly narrow and the latter [to be]
overly broad.”17

       With respect to the Montana Plaintiffs’ argument, we
noted that while actions for insurance proceeds were surely
“attempt[s] to hold the insurer ‘directly liable’ for claims

15
     Grace I, 900 F.3d at 135-36.
16
     Id. at 136.
17
     Id.

                                11
against its insured . . . nothing in the statute’s text supports
indirect insurer liability only where a claimant seeks to recover
from insurance proceeds.”18 Moreover, “that a third party is
alleged to have engaged in some wrongdoing is not enough to
render a claim against it independent if its liability depends on
the debtor’s liability.”19

        With respect to CNA’s argument, the mere fact “that a
debtor’s product caused a plaintiff’s injury is not enough to
render a third party liable ‘for the conduct of, claims against,
or demands on the debtor’ . . . [because] [s]uch a rule, . . . has
the potential to include third-party liability that is wholly
separate from a debtor’s liability.”20 While “[t]he involvement
of the debtor’s asbestos is relevant, . . . [it] is not dispositive.”21
We elaborated on this point with the following example:

           [T]here may be cases in which the involvement
           of the debtor’s product is only incidental (for
           example, if a piece of building material
           containing Grace asbestos in a CNA office fell
           and struck someone). There . . . the presence of

18
     Id. (emphasis added).
19
     Id.
20
     Id. at 137.
21
     Id.

                                  12
           the debtor’s asbestos would not render the third-
           party’s liability derivative.22

As such, we concluded that neither approach comported with
the requirements of § 524(g).

        Instead, we held that, “[t]he proper inquiry is to review
the law applicable to the claims being raised against the third
party (and when necessary to interpret state law) to determine
whether the third-party’s liability is wholly separate from the
debtor’s liability or instead depends on it.”23 We were clear
that this approach “does not require the reviewing court to
decide state-law claims on the merits. It does, however, require
it to ascertain what liability under the relevant law demands.”24

22
     Id.
23
     Id.
24
   Id. Because the Bankruptcy Court had not determined
whether, under the relevant state law, CNA’s alleged duty to
Plaintiffs would arise under common law or under the
Restatement (Second) of Torts, we vacated this portion of the
underlying decision and remanded for it to make this
determination. On remand, the Bankruptcy Court instead
developed its own framework, relying in large part on a line of
Second Circuit cases—known as the Johns-Manville cases—
which we had distinguished in Grace I. See id. at 136 n.4.
Applying this framework, the Bankruptcy Court declined to
decide whether CNA’s alleged duty to plaintiffs arose under
Montana common law or the Restatement. Instead, it found
that under either, “CNA owes a duty to the plaintiffs which is
entirely independent of CNA’s contractual duties to Grace

                                  13
       Throughout this litigation, both parties have maintained
that Montana law applies, and we agree. To show negligence
in Montana, the Montana Plaintiffs must show that: (1) CNA
owed them a legal duty; (2) CNA breached that duty; (3) the
breach caused the Montana Plaintiffs harm; and (4) they
suffered damages.25 This case hinges exclusively on the first
element—CNA’s alleged legal duty to the Montana Plaintiffs.

       Under Montana law, there is generally no duty “to
protect others from risks of harm directly caused or created by
third parties.”26 However, there are certain exceptions to this
rule. One potential exception lies in § 324A of the Restatement
(Second) of Torts, which deals with liability to third persons
other than the intended beneficiary of the undertaking. Section
324A states that:

         One who undertakes, gratuitously or for
         consideration, to render services to another
         which he should recognize as necessary for the
         protection of a third person or his things, is

under the CNA policies.” JA 7. Because the Montana
Plaintiffs’ right to sue CNA was not based on Grace’s right to
sue CNA, it concluded that the Montana Claims were not
derivative. But in reaching this conclusion, the Bankruptcy
Court relied on reasoning we had explicitly rejected as
inconsistent with the statute. See Grace I, 900 F.3d at 136.
25
     Krieg v. Massey, 781 P.2d 277, 278-79 (Mont. 1989).
26
  Maryland Cas. Co. v. Asbestos Claims Ct., 460 P.3d 882,
895 (Mont. 2020) (hereinafter Hutt).

                               14
         subject to liability to the third person for physical
         harm resulting from his failure to exercise
         reasonable care to protect his undertaking, if (a)
         his failure to exercise reasonable care increases
         the risk of such harm, or (b) he has undertaken to
         perform a duty owed by the other to the third
         person, or (c) the harm is suffered because of
         reliance of the other or the third person upon the
         undertaking.27

Stated otherwise:

         [A] party owes a special duty of care to protect
         others from foreseeable harms caused or created
         by a third party beyond the first party’s control
         if: (1) the first party, gratuitously or for
         consideration, affirmatively undertakes to render
         aid or services to the third party; (2) the first
         party reasonably should recognize that such aid
         or services are necessary under the
         circumstances for the protection of other persons
         or property; and (3) one or more of the following
         special circumstances exist:

         (A) the failure of the first party to use reasonable
             care in the performance of the undertaking
             increases the preexisting risk of harm at
             issue;

27
     Restatement (Second) of Torts § 324A.

                                  15
         (B) the first party affirmatively assumes the third
             party’s responsibility to perform a
             preexisting legal duty of care owed by the
             third party to the other(s) at issue; or

         (C) harm occurs because the other(s), or the third
             party, relied on the first party to competently
             perform the subject undertaking.28

Until recently, it was unclear whether Montana law recognized
this exception. However, after the Bankruptcy Decision but
before briefing in this appeal, the Montana Supreme Court
adopted § 324A in a similar case brought against another of
Grace’s insurers, MCC (“Hutt”).29 There, the Court held that
MCC owed Grace workers an independent duty of care under
§ 324A based on its “knowledge of conditions and
circumstances in and about Grace facilities and operations, and
its own conduct, wholly independent of its independent
contract duty to Grace, Grace’s independent common law duty

28
  Hutt, 460 P.3d at 897 (2020) (citing Restatement (Second)
of Torts § 324A). The claims in Hutt were not barred by the
Grace Injunction because they were premised on insurance
policies not included in Grace’s reorganization plan. See In re
W.R. Grace & Co., No. 01-01139 (KG), 2016 WL 6137275, at
*13-14 (Bankr. D. Del. Oct. 17, 2016). In contrast, in Grace I,
we held that the claims at issue in this case were covered by
the Injunction’s terms. See Grace I, 900 F.3d at 134-35.
29
     Hutt, 460 P.3d at 897-98.

                                 16
to its workers, or any act or omission by either in breach
thereof.”30

         All parties agree that, as in Hutt, any alleged duty CNA
owed to the Montana Plaintiffs arises under § 324A. The
relevant inquiry, then, is whether CNA’s liability pursuant to §
324A is dependent on Grace’s liability or is instead “wholly
separate” from it.31 CNA argues that its liability is dependent
on Grace’s because § 324A only applies if the Montana
Plaintiffs can show that CNA “render[ed] services” to Grace
and “should have recognized those services as necessary for
the protection of [the Montana Plaintiffs].”32 According to the
Montana Plaintiffs, however, Grace’s “sole role” under § 324A
is to “provid[e] the context for CNA’s liability to third
persons,” meaning that Grace’s “role in creating the hazard
CNA undertook to address is irrelevant.”33 Because CNA may
still be liable for “circumstances beyond its control,” regardless
of whether the harm was caused by Grace, the Montana
Plaintiffs argue that the claims are not derivative because
“[t]heir legal basis under Montana law does not require that
Grace be liable in order for CNA to be liable.”34

30
     Id. at 907.
31
     Grace I, 900 F.3d at 137.
32
  CNA Br. at 37 (internal quotation marks and alterations
omitted) (quoting Hutt, 460 P.3d at 897).
33
     Montana Pls. Br. at 25-26.
34
     Id. at 32 (emphasis added).

                                   17
        CNA has the better argument. Here, as in Hutt, it is
indisputable that the injuries alleged in the Montana Claims
were caused by Grace’s actions. For example, the Montana
Plaintiffs allege that the Grace mine “generated substantial
airborne dust containing asbestos,” and that the Montana
Plaintiffs were ultimately harmed by this asbestos.35 They
even concede that “Grace was clearly a cause, and arguably
even a primary cause, of [their] injuries.”36 They argue,
however, that “what establishes the heightened standard [under
§ 324A] is not that Grace caused the hazard, just
‘circumstances beyond [CNA’s] control.’”37 While it may be
true that, in a different case, “those circumstances happen to
result from God, . . . another entity, or a butterfly flapping its
wings in the Amazonian jungle,” here, they result from
Grace.38 We decline to apply the law with a willful ignorance
to the facts of this case.

       It therefore cannot be that, as the Montana Plaintiffs
argue, Grace’s only role in a § 324A analysis is to “provid[e]
the context for CNA’s liability to third persons,”39 or that, more
generally, duties owed to third parties cannot satisfy the

35
     JA 119, 148.
36
     Montana Pls. Br. at 32.
37
     Id.
38
     Id.
39
     Id. at 26.

                               18
derivative liability requirement. For a duty to even exist
under §324A, there must be some “foreseeable risks of harms
caused or created by a third party beyond the first party’s
control.”40 And here, if Grace had not “caused or created” at
least some foreseeable harm through its asbestos operations,
the Montana Plaintiffs would not have the benefit of § 324A at
all. CNA’s liability, then, cannot be “wholly independent” of
Grace’s. To the contrary, the Montana Plaintiffs cannot make
out a case under § 324A without directly implicating Grace’s
wrongdoing.41

       Because they rely on § 324A, which in turn, only applies
in this case because of Grace’s risk-creating conduct, the
Montana Claims depend on Grace’s wrongdoing and therefore
meet the derivative liability requirement.

40
     Hutt, 460 P.3d at 897.
41
    The Montana Plaintiffs’ argument that our decision
necessarily creates a “but-for” causation requirement—which
we disavowed in Grace I—is unavailing. There are many
situations where Grace’s asbestos may cause injury that would
not trigger a duty under § 324A. One need look no further than
our decision in Grace I, in which we described an example of
a piece of Grace’s asbestos falling on someone on CNA’s
premises. While the asbestos would no doubt be the “but-for”
cause of any claims against CNA in that scenario, CNA’s duty
would not arise under § 324A and would therefore likely be
non-derivative. Here, however, it is not merely the case that
the Montana Plaintiffs’ injuries were caused by Grace’s
asbestos; rather, they were caused by Grace’s wrongdoing.

                              19
           B. Statutory Relationship

       We next turn to § 524(g)’s statutory relationship
requirement. In considering this requirement, Grace I directed
the Bankruptcy Court to “examine the elements necessary to
make the Montana Claims under the applicable law (here, state
law), and determine whether CNA’s provision of insurance to
Grace is relevant legally to those elements.”42 The Bankruptcy
Court interpreted this guidance as imposing a legal elements
test and found that this requirement was not satisfied because
“none of the [tort] elements reference insurance at all.”43
Instead, it reasoned that “liability is imposed on a third party,
under certain circumstances, when the third party renders
services to another,” but these services need not be insurance-
related.44 The Bankruptcy Court therefore concluded that
“CNA’s provision of insurance to Grace has no relevance to
CNA’s alleged liability to the Montana Plaintiffs under either
the Restatement or the Common Law Standards.”45

       We disagree with this interpretation. Here, it is clear
from the complaint that CNA did provide some services to
Grace, including, as is most relevant here, inspecting the Libby
mine and providing industrial hygiene services to its workers.
That the legal elements of the relevant state law torts do not

42
     Grace I, 900 F.3d at 138.
43
     JA 57.
44
     Id.
45
     Id. at 57-58.

                                 20
require these services to be insurance-related is irrelevant to
the analysis at hand. Instead, the appropriate question is
whether the Montana Plaintiffs have made a prima facie case
that CNA’s provision of insurance was legally relevant to its
allegedly negligent undertaking of industrial hygiene and
medical monitoring services. Or, put another way, whether
they have shown that the services allegedly provided by CNA
were incidental to its provision of insurance.

        CNA urges that we answer this question in the
affirmative. It directs us back to § 324A, under which “an
undertaking to provide services to another is a threshold
requirement to establish a legal duty to protect,”46 and argues
that, because its alleged undertakings arose solely due to its
insurance relationship with Grace, its provision of insurance is
therefore legally relevant for purposes of the statutory
relationship inquiry. But that would be true only if Montana
law took into consideration the basis (here, the provision of
insurance) for the alleged undertaking. Instead, it requires only
that CNA, “affirmatively undertakes to render aid or services
to the third party” and that it “should recognize that such aid or
services are necessary under the circumstances for the
protection of other persons.”47 In other words, § 324A is
unconcerned with why CNA undertook to render services; only
that it did so. Thus, while the insurance relationship is a but-

46
     CNA Br. at 48.
47
     Hutt, 460 P.3d at 897.

                               21
for cause of CNA’s undertaking, it is not necessarily legally
relevant to it.48

        CNA also draws our attention to a footnote in Grace
I where we stated that a “‘legal consequence’ connection”
exists where an insurer’s “alleged duty . . . derives directly
from its provision of insurance.”49 In that footnote, we merely
sought to explain that although CNA had styled its argument
as calling for a “but-for” causation requirement, it had actually
described and advocated for a “legal consequence” connection.
We did not mean to suggest—as CNA argues—that the
presence of an insurance relationship alone is sufficient to meet
the statutory relationship requirement. Accepting CNA’s
approach would collapse the derivative and statutory
relationship inquiries. This result is overbroad and would
potentially encompass even claims like those at issue in Hutt,
which alleged that the insurer went far above and beyond its
insurance relationship and therefore assumed independent

48
   This is consistent with the Second Circuit’s conclusion in In
re Quigley, which we explicitly stated “comports” with our
framework. Grace I, 900 F.3d at 137 n.7. There, the Court
held that although Pfizer’s ownership of the debtor was the
reason why it had branded the debtor’s products as its own,
only the branding—not the reason for it—was legally relevant
to establishing apparent-manufacturer liability under
Restatement § 400. See 676 F.3d at 62.

49
     Grace I, 900 F.3d at 138 n.8.

                                22
duties to the Grace workers.50 Again, we decline to adopt such
a categorical approach to § 524(g).

        But we are similarly unpersuaded by the Montana
Plaintiffs’ argument that these services cannot be incidental to
the “provision of insurance” because “Montana law does not
recognize a claim against an insurer based solely on
inspections and risk-management services an insurer might
customarily supply incident to its insurance policy.”51 As we
have previously noted, our analysis does not require us “to
decide state-law claims on the merits,”52 and so the potential
viability of the Montana Claims is irrelevant.

       The problem for this Court, however, is that we cannot,
on the record before us, say whether the services allegedly
provided by CNA were within the scope of its provision of
insurance to Grace because we have little to no information
about what providing that kind of insurance entailed in the
context of this particular insurance policy as interpreted under
Montana law. In spite of CNA’s urging, we have no evidence
that “[i]nspections and loss-control recommendations are
[generally] central to insurance underwriting and risk
management.” Nor do we know that inspections and

50
  Because these particular claims are not before us, we express
no opinion as to whether, under different circumstances, they
would be barred by § 524(g)’s channeling injunction. We only
leave open the possibility that this might be the case.
51
     Montana Pls. Br. at 48-49.
52
     Grace I, 900 F.3d at 137.

                                  23
industrial-hygiene services of the type alleged “were standard
insurance-related services.”53 More importantly, even if we
did, the record here reflects nothing about whether such
services were within the scope of the provision of insurance in
this case,54 and the policy itself indicates only that “[CNA] . . .
shall . . . be permitted but not obligated to inspect at any
reasonable time the workplaces, operations, machinery and
equipment covered by this policy.”55 As the Montana Plaintiffs
rightly point out, “[t]he statute refers to ‘provision of
insurance,’ not ‘provision of whatever services insurers
customarily provide.’”56

       We therefore remand to the Bankruptcy Court for the
limited purpose of making factual findings as to what services
were included in CNA’s provision of insurance to Grace, and
whether the Montana Plaintiffs have made a prima facie
showing under Montana law that CNA provided services
beyond these. If that is the case, then the Montana Claims do
not meet the statutory relationship requirement; if not,

53
     Montana Pls. Br. at 51.
54
   We do not mean to suggest that industry practice can never
be dispositive in this context, only that, based on the
allegations before us, we do not know the role that it played
here. The role of this evidence will necessarily differ based on
the individual facts of each case.
55
     900 F.3d at 131 (citation omitted).
56
     Montana Pls. Br. at 48.

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however, then the claims at issue meet all of the requirements
of § 524(g) and are barred by the channeling injunction.

                             IV.

       For the foregoing reasons, we vacate the decision below
and remand to the Bankruptcy Court for further proceedings in
accordance with this Opinion. This panel will retain
jurisdiction over any future appeals.

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