Court Opinion

ID: 2964476
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:26:16.590991+00
Date Added: 2024-06-11T09:32:57.131030
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USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

        No. 96-1596

                          CONTINENTAL INSURANCE COMPANY AND
                           HARTFORD FIRE INSURANCE COMPANY,

                               Plaintiffs, Appellants,

                                          v.

                         ARKWRIGHT MUTUAL INSURANCE COMPANY,

                                 Defendant, Appellee.

                                                     
                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                      [Hon. Patti B. Saris, U.S. District Judge]
                                            ___________________

                                                     
                                 ____________________

                                        Before

                                Cyr, Boudin and Stahl,

                                   Circuit Judges.
                                   ______________

                                                     
                                 ____________________

             James T. Hargrove, with whom Thomas M. Elcock, Richard W. Jensen
             _________________            ________________  _________________
        and Morrison, Mahoney & Miller were on brief for appellants.
            __________________________
             William Gerald McElroy, with whom Catherine M. Colinvaux and
             ______________________            ______________________
        Zelle & Larson LLP were on brief for appellee.
        __________________

                                                     
                                 ____________________

                                  December 19, 1996
                                                     
                                 ____________________

                    CYR, Circuit Judge.   Appellants Continental  Insurance
                    CYR, Circuit Judge.   
                         _____________

          Company   ("Continental")   and   Hartford    Insurance   Company

          ("Hartford") (collectively:  "C&H" or "appellants") challenge the

          district court's summary  judgment ruling under New York law that

          damage from flooding was not  covered under the insurance  policy

          issued  by  Arkwright Mutual  Insurance  Company ("Arkwright"  or

          "appellee").  As  the district court  correctly applied New  York

          law, we affirm. 

                                          I
                                          I

                                      BACKGROUND
                                      BACKGROUND
                                      __________

                    In 1992,  Olympia  and York  Development Company,  L.P.

          ("Olympia") owned a high-rise office building at 55 Water Street,

          New York, New York  ("Water Street Building").  On  December 11th

          of  that year, a  severe storm struck New  York City, causing the

          Hudson and East  Rivers to  overflow their banks.   Flood  waters

          entered the basement of the Water  Street Building through cracks

          in  its foundation, resulting in more than one million dollars in

          property damage.   Slightly  more than  half the  damage involved

          energized electrical switching panels which had come into contact

          with the flood waters.  The water immediately caused a phenomenon

          known as "electrical arcing"1    an electrical short  circuit, in

          lay terms     which in  turn caused an  immediate explosion  that
                              
          ____________________

               1Electrical arcing is defined  as "the movement of electrons
          from one point  to another."   Aetna Ins.  Co. v. Getchell  Steel
                                         _______________    _______________
          Treating  Co.,  395  F.2d 12,  17  (8th  Cir.  1968) (citing  Van
          _____________
          Norstrand, International Dictionary  of Physics and  Electronics;
                     _____________________________________________________
          Palmer, Craig  and Easton, World Book  Encyclopedia).  Electrical
                                     ________________________
          arcing "produces  heat  and  light,  but  does  not  involve  the
          combustion of matter."  Id.
                                  ___

                                          2

          blew  large holes  in the  switching panels.   C&H  appraised the

          damage  to the  switching  panels  at  $581,225.    Much  of  the

          remaining damage, appraised at  $445,592, occurred when the flood

          waters  came in contact  with non-energized electrical equipment;

          it involved no electrical arcing.

                    At  the  time of  the  storm,  three separate  policies

          provided various coverages for the Water Street Building.  Two of

          the policies     identical "all risk"  policies separately issued

          by appellants  Continental and  Hartford    insured  against "all

          risks  including  Flood and  Earthquake"  up  to $75,000,000  per

          occurrence for the one-year period beginning March 3, 1992.  Each

          policy  underwrote fifty  percent of  the $75,000,000  "all risk"

          coverage  on  identical terms  and  conditions,  and contained  a

          $100,000 deductible for any  loss and damage arising out  of each

          covered occurrence.  In addition, each "all risk" policy excluded

          coverage  for  mechanical  or   electrical  breakdown  caused  by

          artificially generated electrical currents.2
                              
          ____________________

               2The policies stated, in pertinent part:

                    8.  Perils Insured Against
                        ______________________
                    This  policy  insures  against  all  risk  of
                    direct physical loss of or damage to property
                    described   herein   except  as   hereinafter
                    excluded.

                    9.  Perils Excluded
                        _______________
                    This policy does not insure:
                                        *   *   *
                    c. against electrical  injury or  disturbance
                    to electrical appliances, devices,  or wiring
                    caused  by  electrical currents  artificially
                    generated unless loss or  damage from a peril
                    insured ensues  and  then this  policy  shall
                    cover for such ensuing loss or damage.

                                          3

                    The  third  policy,  issued by  appellee  Arkwright,  a

          Massachusetts  corporation,  afforded  $3,000,000,000   in  total

          liability coverage  for the three-year period  between January 1,

          1992 and January  1, 1995, on approximately forty buildings owned

          by  Olympia around  the  world.   As  concerns the  Water  Street

          Building  in  particular, the  Arkwright  policy  afforded up  to

          $100,000,000 in covered property loss from flooding, subject to a

          $75,000,000 deductible.   Thus, the Arkwright  policy principally

          served  as  excess  "all  risk" coverage  above  the  $75,000,000
                      ______                        _____

          liability limit on the two separate "all risk" policies issued by

          appellants Continental and Hartford.  

                    The  Arkwright  policy  on  the  Water  Street Building

          included  a  "Special  Deductible  Endorsement,"  which  afforded

          primary insurance coverage for mechanical or electrical breakdown
          _______

          by  substituting a  $50,000 deductible  for the  $75,000,000 "all

          risk" deductible in  the Arkwright policy.   The $50,000  Special

          Deductible    Endorsement   was   subject    to   the   following

          qualifications:

                    In the event of  insured loss or damage under
                    __ ___ _____ __  _______ ____ __ ______ _____
                    the  policy  to  which  this  endorsement  is
                    ___  ______
                    attached, the Loss or Damage  described below
                              ___ ____ __ ______  _________ _____
                    shall  be subject to the following deductible
                    _____  __ _______ __ ___ _________ __________
                    amount(s)  in   lieu  of  any   other  Policy
                    ________   __   ____  __  ___   _____  ______
                    deductible amount(s) except those  for Flood,
                    __________ ________  ______ _____  ___ _____
                    Earthquake   or   Service   Interruption   if
                                                               __
                    applicable:  
                    __________
                                
                                   [$50,000.00]
                                    __________

                                   *    *    *
                    3.   Loss  or  damage   from  mechanical   or
                         ____  __  ______   ____
                         electrical  breakdown (except  by direct
                         __________  _________
                         lightning  damage)   of  any  equipment,
                         unless  physical   damage  not  excluded

                                          4

                         results,  in  which  event this  Special
                         Deductible  shall  not  apply   to  such
                         resulting damage.  (Emphasis added.)
           
                    Olympia submitted claims  to appellants Continental and

          Hartford  for  the total  loss  sustained  at  the  Water  Street

          Building.  It maintained that the  entire loss had been caused by

          flooding and  therefore came  within the coverage  afforded under

          the  two  primary  "all  risk"  policies  issued  by  appellants.

          Continental  and  Hartford  promptly paid  $937,557  to  Olympia,

          representing  coverage  for  the  entire  loss  less  a  $100,000

          deductible,  then  claimed reimbursement  from Arkwright  for the

          $581,225 loss to the electrical switching panels allegedly caused

          by  electrical   arcing.    Arkwright   refused  to   contribute,

          contending  that all damage to the Water Street Building had been

          caused by, or resulted  directly from, flooding.  Relying  on the

          Special Deductible  Endorsement language    "in lieu of any other

          Policy deductible amount(s) except  those for Flood"    Arkwright

          insisted that since the damage had been due to flood, the $50,000

          deductible in  its endorsement  did not displace  the $75,000,000

          deductible in its policy. 

                    Continental  and  Hartford  instituted  this  diversity

          proceeding in  United States District  Court for the  District of

          Massachusetts, seeking a judicial  declaration that Arkwright was

          liable for the portion of the electrical switching panel loss due

          to  electrical  arcing.   After  all  parties  moved  for summary

          judgment  based  on  their  respective  interpretations   of  the

          applicable New  York caselaw,  the district court  concluded that

                                          5

          under  the Arkwright  insurance contract,  including its  Special

          Deductible Endorsement, as viewed by a reasonable business person

          in the relevant circumstances, see Bird v. St. Paul Fire & Marine
                                         ___ ____    ______________________

          Ins. Co., 120 N.E.  86 (N.Y. 1918), the damage  to the electrical
          ________

          switching panels had been caused by flooding.3

                    The district court  determined that in  identifying the

          cause  of the  storm-related damage  to the  electrical switching

          panels, a  reasonable business  person would not  have segregated

          the flooding from the arcing.  The court based its  conclusion on

          the fact  that the  $50,000  deductible is  made inapplicable  to

          flood  loss by  the express  language in  the Special  Deductible

          Endorsement excluding electrical breakdown  due to flood, as well

          as the fact that all the damage occurred virtually simultaneously

          at the same site.

                                          II
                                          II

                                     DISCUSSION4
                                     DISCUSSION
                                     __________

                              
          ____________________

               3The parties stipulated, consistent with established "choice
          of law" principles, that New York law governs.  Under  the law of
          Massachusetts, the  forum state,  the applicable  substantive law
          would be supplied  by New  York, the jurisdiction  with the  most
          significant  relationship  to  the  transaction.     See  Bi-Rite
                                                               ___  _______
          Enterprises  v. Bruce Miner Co.,  757 F.2d 440,  442-43 (1st Cir.
          ___________     _______________
          1985).

               4We  review a grant of summary  judgment de novo.  Alexis v.
                                                        __ ____   ______
          MacDonald's  Restaurants of Mass.,  Inc., 67  F.3d 341,  346 (1st
          ________________________________________
          Cir. 1995).  It will be upheld if the record, viewed in the light
          most  favorable to the nonmoving  party, shows that  "there is no
          genuine issue as  to any material fact and that  the moving party
          is entitled to a judgment as  a matter of law."  Fed. R.  Civ. P.
          56(c).  Moreover, we  may affirm the district court  judgment "on
          any  independently sufficient  ground."   Polyplastics,  Inc.  v.
                                                    ___________________
          Transconex, Inc., 827 F.2d 859, 860-61 (1st Cir. 1987). 
          ________________

                                          6

                    Appellants  Continental  and  Hartford   challenge  the

          district  court  ruling  that   the  flooding,  rather  than  the

          electrical  arcing, constituted the legal cause  of the damage to

          the  electrical  switching  panels.    Their proximate  causation

          analysis focuses  upon  what point  in the  "proverbial chain  of

          causation" a particular cause ceases to be remote and becomes the

          "legal  cause" of the damage.   See Richard  A. Fierce, Insurance
                                          ___                     _________

          Law--Concurrent   Causation:      Examination    of   Alternative
          _________________________________________________________________

          Approaches, 1985 S. Ill. U. L.J. 527, 534 (1986).  
          __________

          1.   Causation under New York Law
          1.   Causation under New York Law
               ____________________________

                    Appellants  first  contend  that  the   district  court

          misapplied  New York  law  in ruling  that a  reasonable business

          person  would consider the switching  panels to have been damaged

          by  flood rather than  electrical arcing.   Under established New

          York law governing  insurance contract interpretation, appellants

          maintain, the district  court was required  to identify the  most

          direct,  physical cause  of the  damage, or  what is  termed "the

          dominant and  proximate cause."   Novick  v. United  Servs. Auto.
                                            ______     ____________________

          Ass'n,  639 N.Y.S.2d  469, 471  (App. Div.  1996).   According to
          _____

          appellants, the most direct,  physical cause of a loss  under New

          York law  "is that which is  nearest to the loss  because [it] is

          invariably the most direct and obvious cause."  

                    Appellants predicate their contention  principally upon

          Home  Ins. Co. v. American Ins. Co.,  537 N.Y.S.2d 516 (App. Div.
          ______________    _________________

          1989), where water and steam precipitated electrical arcing which

          in  turn damaged  electrical equipment  in a  high-rise building.

                                          7

          There the  New York Supreme Court, Appellate  Division, held that

          electrical arcing, not steam, caused  the damage, since the steam

          "merely set  the stage" for  the subsequent arcing  and therefore

          constituted  the remote, rather than  the proximate, cause of the

          loss.    Id.  at 517  ("'[T]he  causation  inquiry  stops at  the
                   ___

          efficient  physical cause of the  loss; it does  not trace events

          back  to their metaphysical beginnings. . . .'") (quoting Pan Am.
                                                                    _______

          World Airways,  Inc. v. Aetna Cas. & Sur. Co., 505 F.2d 989, 1006
          ____________________    _____________________

          (2d  Cir.  1974)).    Similarly,  appellants  maintain  that  the

          efficient, legal cause of  the damage to the switching  panels in

          the present case was the  electrical arcing, whereas the flooding

          merely  set the stage for the  arcing.5  Consequently, appellants

          conclude, the district court need have looked no further than the

          phenomenon of electrical arcing for the legal cause of the damage

          to the switching panels.
                              
          ____________________

               5Appellants cite numerous cases for the proposition that the
          efficient,  legal  cause  of  a  loss  invariably  is  the  cause
          "nearest" the loss.  See, e.g., Kosich v. Metropolitan Property &
                               ___  ____  ______    _______________________
          Cas.  Ins. Co., 626 N.Y.S.2d 618 (App. Div. 1995) ("efficient and
          ______________
          dominant cause" of damage from asbestos contamination  held to be
          contamination itself  and not the chain-saw's  cutting into floor
          which  precipitated  asbestos  release); Album  Realty  Corp.  v.
                                                   ____________________
          American Home Assur. Co.,  607 N.E.2d 804, 805 (N.Y.  1992) (loss
          ________________________
          following rupture of frozen sprinkler head not caused by freezing
          but  by resulting  flooding); Loretto-Utica  Properties  Corp. v.
                                        ________________________________
          Douglas Corp.,  642  N.Y.S.2d 117,  118  (App. Div.  1996)  (loss
          _____________
          following  heaving of frozen ground not caused by freezing but by
          movement  of earth); Morgan Guar. Trust  Co. v. Aetna Cas. & Sur.
                               _______________________    _________________
          Co.,  604 N.Y.S.2d 952,  953 (App.  Div. 1993)  (damage following
          ___
          flooding, caused not by flooding but by resulting corrosion); Pan
                                                                        ___
          Am. World Airways, Inc., 505 F.2d at 1006-07 (settled caselaw has
          _______________________
          established  a   "mechanical  test  of  proximate  causation  for
          insurance  cases, a test that  looks only to  the 'causes nearest
          the  loss,'" and not to "remote causes of causes") (quoting Queen
                                                                      _____
          Ins. Co.  v. Globe &  Rutgers Fire  Ins. Co., 263  U.S. 487,  492
          ________     _______________________________
          (1924) (Holmes, J.)).  

                                          8

                    We  turn to  the  language in  the Arkwright  insurance

          contract to determine whether the  damage to the switching panels

          was legally caused by  flooding or electrical arcing.   Under New

          York law, insurance  policies are to be interpreted in accordance

          with their  terms.  See,  e.g., Frey  v. Aetna Life  & Cas.,  633
                              ___   ____  ____     __________________

          N.Y.S.2d 880, 882 (App. Div. 1995).  

                    In cases involving an  electrical breakdown not  caused

          by lightning,  the Special  Deductible Endorsement  substitutes a

          $50,000  deductible   for  the  $75,000,000  deductible   in  the

          Arkwright  liability policy  proper,  except in  cases where  the

          higher deductible for "Flood"  is "applicable."  Appellants would

          have the court interpret the operative provision ("in lieu of any

          other   Policy  amount(s)  except  those  for  Flood  .  .  .  if

          applicable")  to  mean that  the  $75,000,000  deductible in  the

          Arkwright liability  policy proper  applies only  if  there is  a

          separate, specific  policy deductible  for flood damage.   Absent

          such  a specific deductible for flood damage, appellants say, the

          exception for  loss from  flooding found  in the  $50,000 Special
          _________

          Deductible  Endorsement  is   never  triggered;  therefore,   the

          electrical breakdown damage to  the switching panels comes within

          the  $50,000  Special   Deductible  Endorsement,  displacing  the

          $75,000,000 deductible in the Arkwright policy itself. 

                    Appellants  misinterpret  the  plain  language  in  the

          Special  Deductible  Endorsement,  which unambiguously  indicates

          that the $50,000 deductible does not  apply if another deductible
                                           ___  _____

          for  flooding damage  does apply.    Furthermore, the  "all risk"
                                ____ _____

                                          9

          general  liability  coverage  in   the  Arkwright  policy  itself

          expressly insures against "loss or damage resulting from a single

          occurrence," including flood.   Thus, the plain language employed

          in  both the  Special  Deductible Endorsement  and the  Arkwright

          general  liability  policy  itself,  compatibly   interpreted  in

          context, means that damage  to mechanical or electrical equipment

          proximately caused by flooding comes within  the exception to the
                                                           _________

          $50,000 Special Deductible Endorsement  and hence the $75,000,000

          deductible in  the Arkwright general liability  policy applies in

          such a situation.   See, e.g., Harris  v. Allstate Ins.  Co., 127
                              ___  ____  ______     __________________

          N.E.2d 816,  817 (N.Y. 1955) ("words of the policy are to be read

          in context, the language construed fairly and reasonably  with an

          eye to the object  and purpose to be  achieved by the  writing");

          Moshiko,  Inc. v.  Seiger &  Smith, Inc.,  529 N.Y.S.2d  284, 287
          ______________     _____________________

          (App.  Div. 1988) (policy endorsements  to be read  in context of

          general  liability provisions).    "Where the  provisions of  the

          policy are 'clear and unambiguous, they must be given their plain

          and ordinary  meaning . . .  .,'" United States  Fidelity & Guar.
                                            _______________________________

          Co.  v. Annunziata,  492 N.E.2d 1206,  1207 (N.Y.  1986) (quoting
          ___     __________

          Government Employees Ins. Co. v. Kligler, 42 N.Y.2d 863, 864, 397
          _____________________________    _______

          N.Y.S.2d 777, 366 N.E.2d 865 (1977)).6  
                              
          ____________________

               6Appellants' interpretation, on the other hand, renders  the
          exception to  the Special Deductible Endorsement  mere surplusage
          and  therefore is  disfavored.    See  Technicon Elec.  Corp.  v.
                                            ___  ______________________
          American Home  Assur. Co., 542  N.E.2d 1048, 1050-51  (N.Y. 1989)
          _________________________
          (rejecting interpretation  which  would render  exclusion  clause
          meaningless in context);  Utica Mut. Ins.  Co. v. Preferred  Mut.
                                    ____________________    _______________
          Ins. Co.,  583 N.Y.S.2d 986, 987 (App.  Div. 1992) (similar).  In
          ________
          cases  involving an  electrical  breakdown, the  language of  the
          Special  Deductible Endorsement  triggers the  $50,000 deductible

                                          10

          2.   Legal Cause of Loss
          2.   Legal Cause of Loss
               ___________________

                    Given  the plain  language in  the Arkwright  insurance

          contract, we must determine  the proximate or legal cause  of the

          damage  to  the switching  panels,  bearing in  mind  that "[t]he

          concept of proximate cause when applied to  insurance policies is

          a limited one," especially under New York law.  Great N. Ins. Co.
                                                          _________________

          v. Dayco, 637 F. Supp.  765, 778 (S.D.N.Y. 1986).7   Moreover, in
             _____

          the context of an insurance contract, our inquiry may not proceed

          beyond the dominant, efficient, physical cause of the loss.  Home
                                                                       ____

          Insurance,  537 N.Y.S.2d at 517.   Ultimate causation     or what
          _________

          the  Second   Circuit  has  referred  to   as  the  "metaphysical

          beginnings"    is  not our concern.  Pan  Am. World Airways, Inc.
                                               ____________________________

          v. Aetna Cas. & Sur. Co., 505 F.2d 989, 1006 (2d Cir. 1974).
             _____________________

                    That  is not to  say, as  appellants suggest,  that the

          court  is constrained to settle  upon the cause  nearest the loss

                              
          ____________________

          "in lieu of any other Policy amount(s) except those for Flood . .
          .  if applicable."   As  noted above,  appellants argue  that the
          phrase  "other  Policy  amounts"  should be  read  to  mean other
          specific deductible amounts not including the $75,000,000 general
          deductible in  the Arkwright general liability policy.  But since
          no  other deductible  amount for  flood exists  in the  Arkwright
          policy covering  the Water  Street Building, and  appellants have
          not been able to  demonstrate the existence of any  other special
          flood deductible in the  entire Arkwright policy covering Olympia
          properties in  general, their interpretation would  mean that the
          phrase  "in lieu of other Policy amounts" is "mere surplusage"   
          as, indeed, appellants concede in their brief.

               7Arkwright  maintained  at oral  argument  that  the Special
          Deductible  Endorsement  excludes  arcing whenever  flood  is the
          remote as  well  as the  proximate  cause  of the  damage.    Its
          contention   fails,    since   the   required    plain   language
          interpretation  dictates  an  end  to our  inquiry  at  proximate
          causation. 

                                          11

          without regard to other factors.8  Rather, we are "'to follow the

          chain of causation so far,  and so far only as the  parties meant

          that we should follow it.'"  Album Realty  Corp. v. American Home
                                       ___________________    _____________

          Assur. Co., 607 N.E.2d 804, 805 (N.Y. 1992) (quoting Goldstein v.
          __________                                           _________

          Standard Acc.  Ins. Co.,  236 N.Y.  178, 183,  140 N.E.  235, 236
          _______________________

          (1923)).    In  its seminal  discourse  on  the  "loss causation"

          inquiry  under  an  insurance contract,  the  New  York Court  of

          Appeals charted  the  course:   "[O]ur  guide is  the  reasonable

          expectation and purpose of the  ordinary business man when making

          an ordinary business contract.  It is his intention, expressed or

          fairly to be inferred, that counts.  There are times when the law

          permits us to go far back in tracing events to  causes."  Bird v.
                                                                    ____

          St.  Paul Fire  & Marine Ins.  Co., 120  N.E. 86,  87 (N.Y. 1918)
          __________________________________

          (Cardozo, J.).9

                              
          ____________________

               8Nor  does  Pan Am.  World  Airways,  Inc., supra.,  support
                           ______________________________  ______
          appellants'  position.    It  held that  proximate  causation  is
          determined by  a "mechanical .  . . test  that looks only  to the
          causes nearest to the  loss."  565 F.2d at 1007 (emphasis added).
          ______
          Its  use  of  the  plural  permits more  than  one  cause  to  be
          considered.   Moreover,  even the  language used by  the district
          court  in  Great  N.  Ins.  Co.  v.  Dayco  is  qualified;  viz.,
                     ____________________      _____                  ___
          "generally  [we] are to stop our inquiries with the cause nearest
           _________
          to  the loss,"  637  F. Supp. 765,  778 (S.D.N.Y.  1986) (emphasis
          added),making the rule something less than a mechanical mandate. 

               9As appellants  acknowledge, Bird  remains good law  to this
                                            ____
          day, and continues to be cited for its discussions on intent  and
          proximate causation.  See R. Dennis Withers, Proximate Cause  and
                                ___                    ____________________
          Multiple Causation in First-Party  Insurance Cases, 20 Forum 256,
          __________________________________________________
          261  (January 1985) (citing Atlantic Cement Co., Inc. v. Fidelity
                                      _________________________    ________
          & Cas. Co. of N.Y., 459 N.Y.S.2d 425 (App. Div. 1983); Ace Wire &
          __________________                                     __________
          Cable Co. v. Aetna Cas. &  Sur. Co., 457 N.E.2d 761 (N.Y. 1983));
          _________    ______________________
          see also  Album Realty Corp.,  607 N.E.2d at  804; Pan Am.  World
          ___ ____  __________________                       ______________
          Airways, Inc., 505 F.2d at 1006.   
          _____________

                                          12

                    The Bird  case involved a fire insurance  contract on a
                        ____

          vessel.  Within the policy period, a fire of unknown origin broke

          out beneath some freight cars loaded with explosives  and located

          at a considerable distance from the pier where the insured vessel

          was docked.    After burning  for approximately  30 minutes,  the

          freight cars exploded, causing another fire, which in turn caused

          a second explosion, the concussion from which damaged the insured

          vessel  located some  1,000  feet from  the  site of  the  second

          explosion.  No  fire reached the vessel.  Id.  at 86.  Then-Judge
                                                    ___

          Cardozo,  writing  for  New  York's  highest  court,  employed  a

          pragmatic,  "commonsense appraisement" of  the circumstances, id.
                                                                        ___

          at  87  (citation  and  internal  quotation  marks  omitted),  in

          determining  as a matter of  law that coverage  of the concussion

          damage  sustained by the  vessel could not  be said  to have been

          within the "range of  probable expectation" under a policy  which

          protected against fire.  Id. at 88. 
                                   ___

                    The critical consideration in  Bird was the "element of
                                                   ____

          proximity in space."  Id.  at 87.  As the initiating event    the
                                ___

          fire in  the freight cars     occurred a great distance  from the

          insured  vessel, the court held that "there was never exposure to

          its direct perils" and  that the exposure to its  indirect perils

             i.e., the concussion  from the second explosion     came "only

          through the presence of extraordinary conditions, the release and

          intervention  of  tremendous   forces  of   destruction."     Id.
                                                                        ___

          Consequently,  the  court concluded,  reasonable  business people

          would  not  have  expected  that an  insurance  policy  affording

                                          13

          protection against fire would cover damage to a vessel  following

          successive concussions  precipitated by explosions caused  by the

          fire in the distant freightyard.  As the Court of Appeals stated:

                    The case  comes,  therefore, to  this.   Fire
                                                             ____
                    must reach the thing  insured, or come within
                    ____ _____ ___ _____  ________ __ ____ ______
                    such proximity  to it that  damage, direct or
                    ____ _________  __ __ ____  _______ ______ __
                    indirect, is within the compass of reasonable
                    _________ __ ______ ___ _______ __ __________
                    probability.  Then  only is it  the proximate
                    ___________   ____  ____
                    cause, because then only may  we suppose that
                                             ___  __ _______ ____
                    it   was  within  the  contemplation  of  the
                    __   ___  ______  ___  _____________  __  ___
                    contract.
                    ________
          Id. at 88 (emphasis added).  
          ___

                    In sum,  absent an  explicit policy declaration  of the

          parties' intention, the contemplation of their insurance contract

          must  be  inferred  by  the  court  from  all  the  circumstances

          surrounding the  loss, including whether a  peril insured against

          came directly or indirectly within such proximity to the property

          insured  that the damage  it sustained  fairly can  be considered

          "within the compass of  reasonable probability."  Id.   Among the
                                                            __

          factors  which  must be  assessed  are the  spatial  and temporal

          proximity between the insured peril and the claimed loss.  See R.
                                                                     ___

          Dennis Withers, Proximate Cause  and Multiple Causation in First-
                          _________________________________________________

          Party  Insurance Cases, 20 Forum  256, 260   (January 1985) (Bird
          ______________________                                       ____

          considers "proximity of  a cause as  a judgment to  be made  upon

          matters of fact," including "proximity in space.").  

                    Our case involves no spatial or temporal attenuation at

          all comparable to that  present in Bird.   The flood waters  came
                                             ____

          directly in  contact with the  electrical equipment in  the Water
          ________

          Street Building, instantaneously  precipitating the arcing  which
                           _______________

          in turn caused the  immediate short-circuiting and explosion that
                              _________

                                          14

          damaged the switching panels.   At most, mere seconds  would have

          elapsed from  the time  the flood  waters directly  contacted the

          electrical  equipment  until   the  electrical  switching  panels

          exploded. 

                    Where any  spatial and temporal  separation between the

          covered  peril and  the  ensuing loss  is  so  minimal as  to  be

          virtually nonexistent, Bird clearly contemplates that the loss be
                                 ____

          considered well  within the  "compass of  reasonable probability"

          and  therefore  inferentially  within the  contemplation  of  the

          parties to  the insurance  contract.  See  Bird, 120 N.E.  at 88.
                                                ___  ____

          Consequently,  given  the  absence  of  any  significant  spatial

          separation  or temporal  remoteness  between the  insurgent flood

          waters, the electrical  arcing and the explosion of the switching

          panels, we  believe the  district court correctly  concluded that

          flooding proximately caused the loss.  

                    More recent  New York  caselaw continues  implicitly to

          recognize the significance of  what the Court of Appeals  in Bird
                                                                       ____

          called  the "element  of proximity in  space," see id.  at 87, as
                                                         ___ __

          well  as the temporal element.   In Home  Insurance, for example,
                                              _______________

          the  Court of Appeals recently  held electrical arcing  to be the
                                               __________ ______

          proximate cause of damage where arcing had been precipitated by a

          gradual  intrusion of moisture.    The court  elucidated upon its

          analysis as follows: 

                    There was no flow  of water directly onto the
                    _____ ___ __ ____  __ _____ ________ ____ ___
                    bus   duct   system.  Rather,   the  moisture
                    ___   ____   _______  ______         ________
                    saturated the duct  insulation and  supports,
                    _________           __________
                    which  had   deteriorated  due  to   age  and
                    _____  ___   ____________  ___  __   ___  ___
                    environment,  resulting  in breakdown  of the
                    ___________
                    insulation and permitting an  arc to result .
                                   __________ __  ___ __ ______

                                          15

                    . .  . Upon review of the  record before this
                    Court, we  find that .  . . the  steam merely
                                                ___  _____ ______
                    set the stage for the later event.
                    ___ ___ _____ ___ ___ _____ _____

          Home  Ins. Co.,  537  N.Y.S.2d at  517  (emphasis added).    This
          ______________

          passage  distinguishes an  intrusion of  water and  steam  into a

          basement,   gradually   causing   moisture   to    seep   through

          deteriorating building materials into a duct, from a situation in

          which  water flows  directly onto  an electrical  system, causing

          immediate  arcing and damage to  the electrical system.   In Home
                                                                       ____

          Insurance, substantial  time and  space separated the  peril (the
          _________

          water  and  steam  entering   the  basement)  from  the  eventual

          electrical damage to the duct  system resulting from the moisture

          gradually  generated by  the  water and  steam.   Also interposed

          between  the  peril and  the damage  in  Home Insurance  were the
                                                   ______________

          deteriorating  insulation  and supports,  which  gave  rise to  a

          considerably  greater  spatial  separation  than  occurred  here.

          "There  is no use in arguing that  distance ought not to count if

          life and experience tell us that it does."  Bird, 120 N.E. at 87.
                                                      ____

                    Thus,   neither  Bird   nor  Home   Insurance  involved
                                     ____        ________________

          circumstances similar  to the present, where  flood waters flowed

          directly onto electrical equipment, immediately  precipitating in

          turn the  instantaneous electrical arcing,  the short-circuiting,

          and   the  explosion   which   damaged   the  switching   panels.

          Accordingly, as the district court correctly ruled, the insurgent

          flood waters cannot reasonably be thought simply to have "set the

          stage"   for  a  remote  event,  or  to  have  been  merely  some

                                          16

          metaphysical  beginning  to  a succession  of  temporally  remote

          events.  

                    Temporal remoteness and spatial  separation distinguish

          many  recent New  York cases  cited by  appellants.10   Given the

          importance placed upon temporal remoteness and spatial separation

          in  Bird, 120 N.E. at 88,  the wellspring decision under New York
              ____

          law,  we conclude that the district court correctly held that the

          legal  cause of the damage to the electrical switching panels was

          the  flooding, not electrical arcing.11  We therefore hold that a

          reasonable  business  person  would  consider   that  the  damage

          sustained by the electrical switching  panels in the Water Street
                              
          ____________________

               10See, e.g., Morgan  Guar. Trust  Co. v. Aetna  Cas. &  Sur.
                 ___  ____  ________________________    ___________________
          Co., 604  N.Y.S.2d 952, 953 (App.  Div. 1993) (microbiologically-
          ___
          induced  corrosion  occurring over  one-year period,  rather than
          remote flooding which initiated  corrosion, held proximate  cause
          of  damage to electrical duct); Album Realty Corp., 607 N.E.2d at
                                          __________________
          805 (electrical damage precipitated by water which was emitted by
          frozen sprinkler  and filled basement,  held to have  been caused
          not  by freezing  but  by the  more  proximate flooding).    Such
          temporal  and spatial  considerations likewise  distinguish other
          New  York cases not  involving electrical breakdown.   See, e.g.,
                                                                 ___  ____
          Kosich v. Metropolitan Property & Cas. Ins. Co., 626 N.Y.S.2d 618
          ______    _____________________________________
          (App. Div.  1995) (contractor's cutting into  vinyl flooring with
          chain saw merely "set in motion a chain of events that ultimately
          resulted"  in loss  from asbestos  contamination); Pan  Am. World
                                                             ______________
          Airways, Inc.,  505 F.2d at  1006-07 (in airline  hijacking case,
          _____________
          general history  of  unrest  throughout  Middle  East,  extending
          through three wars  and several  countries, is too  remote to  be
          considered  cause for  loss  under "war  risk"  insurance due  to
          "reasonable expectations of  businessmen"). 

               11Although  the  district  court  relied  upon  a conversion
          theory  derived  from Bird     i.e.,  that  the exception  to the
                                ____
          Special Deductible Endorsement converted a more remote cause into
          the proximate cause    it concluded as well that any temporal and
          spatial  separation  between the  flood  and  the damage  to  the
          switching panels had been virtually nonexistent.   In all events,
          we  may   affirm  on  any   ground  supported   by  the   record.
          Polyplastics, Inc. v. Transconex, Inc., 827 F.2d 859, 860-61 (1st
          __________________    ________________
          Cir. 1987). 

                                          17

          Building, just as  any other  water damage to  the building,  was

          caused by  flood.   That is  to say,  as then-Judge Cardozo  did,

          since the  flood  waters surged  onto  the site  of the  loss,  a

          reasonable  business  person would  consider  the  damage to  the

          electrical switching panels to have been "within  the danger zone

          of ordinary  experience," see id.  at 87, and  consequently would
                                    ___ __

          expect the  Continental and Hartford flood  policy coverages, not

          the Arkwright  Special Deductible Endorsement, to  afford Olympia

          indemnification  for  the  loss.   Thus,  the  exception  to  the

          Arkwright Special Deductible Endorsement applies.  

          3.   Appropriateness of Summary Judgment 
          3.   Appropriateness of Summary Judgment 
               ___________________________________

                    Finally,  we  turn  briefly  to  appellants'  alternate

          contention.  Continental and Hartford argue that the inquiry into

          the  dominant and efficient cause of the loss presents a question

          of  fact inappropriate  for  summary judgment.    Once again,  we

          disagree.

                    Generally speaking, the  determination as  to which  of

          two causes was the dominant and  efficient cause of a loss is for

          the factfinder.   See, e.g., Molycorp, Inc. v. Aetna  Cas. & Sur.
                            ___  ____  ______________    __________________

          Co.,  431 N.Y.S.2d  824,  825-26 (App.  Div.  1980); Novick,  639
          ___                                                  ______

          N.Y.S.2d at 471.  The trial  courts in the cited cases,  however,

          were presented with  a factual question  as to  which of the  two

          perils  physically caused the  loss.  In  our case, on  the other
                  __________ ______

          hand,   there  is   no  dispute   concerning  the   physical,  as
                              __  _______

          distinguished from the legal,  cause of the damage     i.e., what

          physical phenomenon precipitated the alteration to the electrical

                                          18

          switching panels.12  As  the New York Court of  Appeals explained

          in Bird:   "For the physicist one thing is cause, for the jurist,
             ____

          another."  Bird, 120 N.E. at  88.  Thus, the question before this
                     ____

          court, as in Bird, is the question of law already resolved above:
                       ____                     ___

          What would the  New York courts determine to have  been the legal

          or proximate cause of the loss?  Like the district court, we hold

          that flood was the legal cause of the loss in this case.

                                         III
                                         III

                                      CONCLUSION
                                      CONCLUSION
                                      __________

                    As the district court correctly applied the controlling

          New York law,  the judgment is  affirmed.   Costs are awarded  to
                                          ________    _____ ___ _______  __

          appellee.
          ________

                    SO ORDERED.
                    SO ORDERED.
                    __ _______

            

                              
          ____________________

               12As support for their claim that trialworthy issues of fact
          remain,  appellants point  to  a letter  written to  Arkwright by
          David  Passman, an  insurance broker  for  Olympia.   The Passman
          letter  is said  to contradict  the affidavit  of  Olympia's risk
          manager,  David  Roth,  who  filed the  claim  for  loss  against
          appellants only, based on his  understanding that all the  damage
          stemmed from flooding within the contemplation of their policies.
          But though  the Passman letter contends that the Arkwright policy
          affords coverage, it does not assert that the physical damage was
          facilitated  by any phenomenon other than flood, nor does it take
          issue with the sequence of events as found by the district court.
          Thus,  the  Passman letter  raised  no  trialworthy  issue.   See
                                                                        ___
          Guzman-Rivera v. Rivera-Cruz, 29 F.3d 3, 4 (1st Cir. 1994).
          _____________    ___________

                                          19