USA Gymnastics v. Liberty Insurance Underwriter

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 20-1245
USA GYMNASTICS,
Plaintiff-Appellee,
v.
LIBERTY INSURANCE UNDERWRITERS, INC.,
Defendant-Appellant.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 1:18-cv-01306-RLY-MPB — Richard L. Young, Judge.
____________________
ARGUED NOVEMBER 9, 2020 — DECIDED FEBRUARY 25, 2022
____________________
Before SYKES, Chief Judge, and HAMILTON and BRENNAN,
Circuit Judges.
PER CURIAM. Larry Nassar sexually assaulted hundreds of
girls and young women over decades during his involvement
with USA Gymnastics, Inc. (USAG), the non-profit organiza-
tion which governs the sport in the United States. As a result
of Nassar’s abuse, USAG has been sued numerous times and
investigated by Congress and federal and state authorities.
USAG sought financial help with its defense from various
2 No. 20-1245
insurers, including Liberty Insurance Underwriters, Inc. (Lib-
erty), with which USAG had a claims-made, directors and of-
ficers (D&O) liability insurance policy.
USAG’s claims ripened into an insurance-coverage law-
suit in Indiana state court which was removed to federal court
under diversity jurisdiction. The Nassar-related litigation and
investigations forced USAG into bankruptcy. In an adversary
proceeding, the bankruptcy court issued proposed findings
and conclusions, including that the initial Nassar-related
claims were timely made and that a wrongful-conduct exclu-
sion applied to only those claims for which Nassar was crim-
inally convicted. The district court adopted those findings
and conclusions in a January 13, 2020 order.
Liberty appeals, and we have jurisdiction because that or-
der has the “practical effect” of an injunction under 28 U.S.C.
§ 1292(a)(1). We conclude that USAG’s claims were timely
made during the policy period, and that the wrongful conduct
exclusion in the Liberty policy applies to ten instances of Nas-
sar’s sexual abuse, but not to all claims related to his abuse.
We also decide that a bodily injury exclusion in the policy
does not preclude coverage, and that insurance coverage is
proper for various government investigations and other mat-
ters. Finally, the policy contains a $250,000 “Third Party EPL”
sublimit. The bankruptcy court should have considered ex-
trinsic evidence about the meaning of this endorsement, so we
remand for further proceedings on that question.
No. 20-1245 3
I. Background
A. Factual 1
Larry Nassar was a physician and professor at Michigan
State University (MSU). In 1987, he began to volunteer in a
medical capacity for USAG. Over the decades, his involve-
ment in the organization grew, and he became a central figure
in USAG’s program, drafting medical guidelines, lecturing at
conferences, assisting other medical personnel, treating hun-
dreds of athletes, and traveling with the U.S. Olympic team.
The world now knows that instead of generosity or patri-
otism, Nassar’s involvement with USAG was motivated by
his desire to gain access to female athletes whom he victim-
ized. He persuaded his victims that his methods of abuse
were medically necessary, and on thousands of occasions
over almost 30 years, Nassar sexually assaulted and abused
hundreds of young women and girls under the guise of med-
ical treatments.
Some dispute exists about when and to whom allegations
against Nassar were first made. Several athletes allege they
filed complaints against him as early as 1998 and in the early
2000s. USAG says those allegations were made to individual
member gyms, not to USAG. In June 2015, a coach notified
USAG’s senior vice president that an athlete had complained
about how and where Nassar had touched her. This allegation
1 This factual background is taken from the records of the bankruptcy and
district courts. In the bankruptcy court adversary proceeding, the parties
cross-moved for summary judgment. For the issues resolved here, to the
extent factual disputes exist, inferences are drawn for the non-moving
party. Blow v. Bijora, Inc., 855 F.3d 793, 797–98 (7th Cir. 2017).
4 No. 20-1245
set off a series of events that led to the FBI’s involvement in
July 2015. USAG received its first written demand letter from
a former athlete on May 25, 2016.
In September 2016, the Indianapolis Star published an arti-
cle in which two former gymnasts accused Nassar of sexual
abuse. That month, MSU terminated Nassar. The day before
he was fired, Nassar took his work laptop to a computer store
and paid to wipe all its content. The next day, hard drives
containing thousands of images of child pornography were
found in Nassar’s trash. Nassar was arrested in December
2016, and the next year he was convicted in federal court of
possessing child pornography, including recordings he had
made of his abuse. He received consecutive sentences totaling
60 years.
Nassar was also prosecuted in Michigan state court for
criminal sexual conduct in two counties. He signed written
plea agreements in Ingham County and in Eaton County, and
he agreed under oath to their terms on the record. In Ingham
County, he pleaded guilty to seven counts of first degree
criminal sexual conduct, and in Eaton County he pleaded
guilty to three counts of first degree criminal sexual conduct.
Other charges were dismissed in exchange for compliance
with the plea agreements. 2 The state also agreed not to further
prosecute Nassar for 115 other criminal sexual conduct
charges reported to the MSU police, listed in an appendix to
the plea agreements.
The plea agreements also provided that Nassar waived
any and all defenses, including that his criminal conduct was
2 Six other counts in the Ingham County prosecution had been previously
dismissed at preliminary examination.
No. 20-1245 5
for a legitimate medical purpose. Nassar also agreed that at
sentencing, testimony from any victim could be considered,
including all victim impact statements. At the Ingham County
sentencing hearing—which lasted seven days—156 of 265 vic-
tims spoke or contributed statements to the court. At the
Eaton County sentencing—which lasted three days—65 vic-
tims spoke or contributed statements.
Nassar was sentenced to 40–175 years in Ingham County,
and to 40–125 years in Eaton County. These state sentences
were ordered to be served concurrently, but consecutive to
Nassar’s federal sentence. Both the federal and state convic-
tions resulted in effective life sentences for Nassar.
As a result of Nassar’s sexual abuse, USAG has faced nu-
merous Congressional, federal, and state investigations.
USAG has also been named in numerous lawsuits and is at
risk of decertification as the national governing body of gym-
nastics by the United States Olympic & Paralympic Commit-
tee (“USOPC”).
This appeal concerns USAG’s claims against one insurer,
Liberty. USAG purchased a claims-made D&O policy from
Liberty, which had a coverage period of May 16, 2016 through
May 16, 2017. That policy, the coverage of which is at issue
here, defines many of the terms the parties dispute. The policy
also contains what has been termed a wrongful conduct ex-
clusion (also called an intentional-acts exclusion) which bars
coverage for claims “made against any Insured” 3 “based
upon, arising from, or in any way related to” “any deliber-
ately dishonest, malicious, or fraudulent act,” “or any willful
3 Defined terms are bolded in the policy, a convention this opinion contin-
ues.
6 No. 20-1245
violation of law by any Insured,” provided such conduct was
“finally adjudicated” and “in fact occurred.”
B. Procedural
In 2018, USAG sued seven insurers, including Liberty, in
Indiana state court, alleging they had a duty to defend the
lawsuits USAG faced and to pay expenses incurred from the
investigations. The insurers removed the case to the U.S. Dis-
trict Court for the Southern District of Indiana under diversity
jurisdiction, 28 U.S.C. § 1332. The combined weight of the
lawsuits and the investigations forced USAG to file for bank-
ruptcy under Chapter 11. This insurance coverage litigation
took place in an adversary proceeding as part of that bank-
ruptcy. The district court retained jurisdiction over the matter
under 28 U.S.C. § 1334(b).
The parties cross-moved for summary judgment. USAG
sought coverage on various claims, including what are
termed, cumulatively, the “Nassar-related claims”: “athlete
lawsuits” by hundreds of gymnasts seeking to hold USAG re-
sponsible for allowing the abuse to take place, causing them
to suffer physical, mental, and emotional damage; “revoca-
tion lawsuits” by coaches and owners of gyms affiliated with
USAG alleging financial losses due to USAG’s handling of
Nassar; the costs of complying with Indiana, Congressional,
and USOPC investigations; and the costs related to the depo-
sition of and grand jury testimony by a USAG employee, Amy
White.
In response, and in its own motion, Liberty argued
(among other things) that none of the Nassar-related claims
are covered under the policy. Liberty also contended that the
first of the claims predated the coverage period. To Liberty,
No. 20-1245 7
the conduct exclusion barred coverage for all the claims be-
cause Nassar, an insured, engaged in wrongful conduct fi-
nally adjudicated in his criminal cases, or that the claims were
at least related to that conduct.
In non-core matters, a bankruptcy court is tasked with pre-
paring proposed findings of fact and conclusions of law for
the district court’s review. 28 U.S.C. § 157(c)(1). The court pro-
posed that partial summary judgment be granted to each
party. Among its findings, the bankruptcy court concluded
that the first written demand against USAG relating to Nas-
sar’s abuse occurred on May 25, 2016, within the policy pe-
riod. That court also found that Liberty had a duty to defend
all the Nassar-related claims. Rejecting Liberty’s policy inter-
pretation as too broad, the court submitted that the wrongful
conduct exclusion barred coverage for only those suits seek-
ing damages for the ten counts of sexual abuse for which Nas-
sar was convicted.
The court also considered other disputes now before us.
The policy includes a bodily injury exclusion that barred
coverage for physical, emotional, and mental damages, but an
exception limits the exclusion to certain types of cases. The
policy also had a $250,000 sublimit for “Third-Party EPL”
(Employment Practices Liability, although the acronym is not
defined in the policy). The bankruptcy court concluded that
the third-party claim exception to the bodily injury exclusion
preserved coverage for the “athlete lawsuits”; that the various
investigations were both formal and for wrongful acts, plac-
ing them within the scope of coverage; and that the $250,000
sublimit for such claims was ambiguous and unenforceable.
Under Federal Rule of Bankruptcy Procedure 9033(b), Lib-
erty objected to the bankruptcy court’s findings and
8 No. 20-1245
conclusions. The district court reviewed de novo the bank-
ruptcy court’s proposed findings and conclusions under Rule
9033(d), and overruling Liberty’s objections it adopted those
findings and conclusions in full in its January 13, 2020 written
order. Those portions of the court’s order in which summary
judgment was granted are reviewed de novo. Ace Am. Ins. Co.
v. RC2 Corp., 600 F.3d 763, 766 (7th Cir. 2010).
C. Jurisdiction
The order Liberty challenges before us is not a final deci-
sion appealable pursuant to 28 U.S.C. § 1291. Rather, Liberty
appeals under 28 U.S.C. § 1292(a)(1), which gives the courts
of appeals jurisdiction over “[i]nterlocutory orders of the dis-
trict courts … granting, continuing, modifying, refusing or
dissolving injunctions.” “We construe the statute narrowly, as
a limited exception.” Chicago Joe’s Tea Room, LLC v. Village of
Broadview, 894 F.3d 807, 812 (7th Cir. 2018) (citations omitted).
Where, as here, the district court has not entered a formal in-
junction under Federal Rule of Civil Procedure 65, appellate
jurisdiction exists if the order has the “practical effect” of an
injunction. See Abbott v. Perez, 138 S. Ct. 2305, 2319–20 (2018).
To determine whether an order is injunctive, the nature of
the order’s relief is assessed. See Ramara, Inc. v. Westfield Ins.
Co., 814 F.3d 660, 669–70 (3d Cir. 2016) (applying functional
test to determine whether order directing insurer to defend
insured was injunction and immediately appealable). The or-
der here includes legal relief, as the bankruptcy court ruled
that Liberty must reimburse USAG for its defense costs and
interest. But the primary effect of the order is to render equi-
table relief, declaring Liberty’s duty to defend the Nassar-re-
lated claims against USAG and mandating that Liberty
provide USAG a complete defense.
No. 20-1245 9
“[M]andatory interlocutory orders are considered injunc-
tions reviewable under § 1292(a)(1) only if they effectively
grant or withhold the relief sought on the merits and affect
one party’s ability to obtain such relief in a way that cannot
be rectified by a later appeal (that is, irreparably).” Jamie S. v.
Milwaukee Pub. Sch., 668 F.3d 481, 490 (7th Cir. 2012) (internal
quotation marks omitted). The order here granted relief on
the merits, as Liberty’s duty to defend USAG was the primary
topic of debate in the adversary action. Each party also offers
examples of how the order creates irreparable injury not able
to be rectified by a later appeal. Liberty is obligated to defend
USAG going forward, requiring payment of an uncertain
amount of defense costs and fees. If the order is incorrect, Lib-
erty’s chance at recovery may be limited because USAG is
bankrupt. For USAG, a nonprofit, the direction to Liberty to
defend is injunctive because it prevents or remedies irrepara-
ble harm to USAG, the policyholder, which has fronted
substantial legal fees and costs. A reversal on appeal would
reimpose serious financial stress and uncertainty. While the
parties quibble over the nature of the harm each suffers, they
reach the same conclusion that each suffers “serious and ir-
reparable harm” from the order, which is injunctive in nature.
An order “is properly characterized as an ‘injunction’
when it substantially and obviously alters the parties’ preex-
isting legal relationship.” Jamie S., 668 F.3d at 490 (quoting
Jones-El v. Berge, 374 F.3d 541, 544 (7th Cir. 2004)). The order
here does so by granting equitable relief, directing the pro-
spective duty to defend with undetermined fees and costs,
and resulting in serious and perhaps irreparable harm war-
ranting immediate review. While cautious not to overread
this exception, see Chicago Joe’s Tea Room, 894 F.3d at 812, the
nature of the equitable relief granted here effectively renders
10 No. 20-1245
the order a reviewable injunction. The “practical effect” test is
met here to invoke this court’s jurisdiction to permit this ap-
peal under 28 U.S.C. § 1292(a)(1).
Litigation in the bankruptcy and district courts is ongoing.
During the pendency of this appeal, the district court denied
Liberty’s motion for partial judgment under Federal Rule of
Civil Procedure 54(b), or in the alternative to certify the order
now before us as an interlocutory appeal under 28 U.S.C.
§ 1292(b). It also denied USAG’s motion to certify issues to the
Indiana Supreme Court, including an issue before us—the in-
terpretation of the policy’s wrongful conduct exclusion.
USAG was granted partial judgment under Rule 54(b) against
Liberty on USAG’s claim for reimbursement of past attorneys’
fees for defense of the Nassar-related matters, and that judg-
ment has been appealed. That award shows the substantial
and obvious alteration in the parties’ relationship. For these
reasons, this court has appellate jurisdiction to review the
bankruptcy court’s findings and conclusions as adopted in
the district court’s order.
D. Indiana Insurance Law
The parties agree that Indiana substantive law controls,
and given that this case comes to us under diversity jurisdic-
tion, we follow that law. Medical Protective Co. of Fort Wayne v.
American Int’l Specialty Lines Ins. Co., 911 F.3d 438, 445 (7th Cir.
2018).
Under Indiana law, insurance policies are interpreted
“from the perspective of an ordinary policyholder of average
intelligence.” Bradshaw v. Chandler, 916 N.E.2d 163, 166 (Ind.
2009) (citations and quotation omitted). “Although special
rules of construction have developed for interpreting
No. 20-1245 11
insurance policies as a result of the disparity in bargaining
power between insurers and insureds, insurance contracts are
generally governed by the same rules of construction as other
contracts.” Everett Cash Mut. Ins. Co. v. Taylor, 926 N.E.2d 1008,
1012 (Ind. 2010) (citing Bradshaw, 916 N.E.2d at 166).
“[C]lear and unambiguous language in an insurance pol-
icy should be given its plain and ordinary meaning.” Everett
Cash Mut. Ins. Co., 926 N.E.2d at 1012 (citing Cinergy Corp. v.
Assoc. Elec. & Gas Ins. Servs., Ltd., 865 N.E.2d 571, 574 (Ind.
2007)); see also Bradshaw, 916 N.E.2d at 166. “Ambiguity exists
when a policy is susceptible to two or more reasonable inter-
pretations.” Everett Cash Mut. Ins. Co., 926 N.E.2d at 1012–13
(citing Beam v. Wausau Ins. Co., 765 N.E.2d 524, 528 (Ind.
2002)). “That is, an insurance policy will be found to be am-
biguous in cases where reasonable people would differ as to
the meaning of its terms.” Id. “The fact that the parties disa-
gree over the meaning of the contract does not, in and of itself,
establish an ambiguity.” Id. (citation omitted); see also Beam,
765 N.E.2d at 528.
“[W]here there is ambiguity, insurance policies are to be
construed strictly against the insurer and the policy language
is viewed from the standpoint of the insured.” Nat’l Collegiate
Athletic Ass’n v. Ace American Ins. Co., 151 N.E.3d 754, 761 (Ind.
Ct. App. 2020) (quoting Allstate Ins. Co. v. Dana Corp., 759
N.E.2d 1049, 1056 (Ind. 2001)). “This is especially true where
the language in question purports to exclude coverage.” Id.(citation omitted). “Insurers are free to limit the coverage of
their policies, but such limitations must be clearly expressed
to be enforceable.” Id. (citation omitted). “The exclusionary
clause must clearly and unmistakably bring within its scope
the particular act or omission that will bring the exclusion into
12 No. 20-1245
play.” Everett Cash Mut. Ins. Co., 926 N.E.2d at 1012 (citations
and quotation omitted). “Proper interpretation of an insur-
ance policy, even if it is ambiguous, generally presents a ques-
tion of law that is appropriate for summary judgment.”
American Home Assur. Co. v. Allen, 814 N.E.2d 662, 666 (Ind. Ct.
App. 2004) (citing Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d
664, 667 (Ind. 1997)).
The parties brief and argue several issues in this appeal.
We begin with whether USAG’s claims predate the policy pe-
riod and therefore are not covered, and whether the policy’s
wrongful conduct exclusion bars the Nassar-related claims.
We continue with the policy’s bodily injury exclusion, and
whether insurance coverage exists for government investiga-
tions and related matters. Then, we consider the parties’ ar-
gument concerning a $250,000 “Third Party EPL” sublimit in
the policy.
II. Notice–When Claims Made
Liberty argues first that coverage under the claims-made
D&O policy is excluded because the initial Nassar-related
claims were made before the policy period of May 16, 2016
through May 16, 2017. On this question, the bankruptcy court
agreed with USAG and concluded that Liberty had failed to
designate evidence that any claims involving Nassar’s sexual
abuse were made before the policy period began.
The relevant policy provision states:
Claim means:
…
No. 20-1245 13
(c) the commencement of a formal criminal, ad-
ministrative or regulatory proceeding or for-
mal investigation against an Insured, …
…
A Claim will be deemed first made on the date
an Insured receives a written demand, com-
plaint, indictment, notice of charges, or order of
formal investigation.
Liberty submits the first claim was made no later than
2015, when the FBI interviewed two athletes in response to a
request by USAG. Those interviews constitute a formal inves-
tigation, Liberty contends, regardless of whether the FBI
deemed them part of only a “preliminary investigation.” Lib-
erty also asserts that even though Indiana law does not ex-
plain the meaning of a “formal investigation,” we should find
guidance in Indiana case law giving “suit” a “broad interpre-
tation.” To Liberty, given the FBI interviews, a Nassar-related
claim was first made before the policy period. Because that
claim arose from the same interrelated wrongful acts, none of
the Nassar-related claims are covered.
As for any evidentiary deficiencies from which its position
might suffer, Liberty criticizes the bankruptcy court for not
giving it the chance to sufficiently develop the record through
discovery. Liberty submits it did not file an affidavit under
Federal Rule of Civil Procedure 56(d)—which provides that a
litigant can show “that, for specified reasons, it cannot present
facts essential to justify its opposition”—because there had
never been a Federal Rule of Civil Procedure 26 conference.
The insurer also faults the district court for not allowing it to
conduct discovery or to present new evidence as part of its
14 No. 20-1245
objections to the bankruptcy court’s proposed findings. To
Liberty, Bankruptcy Rule 9033(d) required that the district
court consider new evidence in ruling on the parties’ motions.
USAG responds that the FBI did not conduct a “formal in-
vestigation” because it interviewed only a single witness
twice during what it calls a “preliminary investigation.” The
policy’s definition of claim requires USAG receive notice of a
formal investigation during the policy period. Liberty’s only
evidence that an athlete allegedly complained about Nassar
in the 1990s, USAG contends, consists of allegations made on
“information and belief” in some of the athlete lawsuits. As
for other complaints that an investigative report suggested
were made in the 1990s, USAG notes that they were made to
gym owners and coaches, not to USAG, and thus do not qual-
ify as claims under the policy. By Liberty missing its chance
to file a Rule 56(d) affidavit in the bankruptcy court, USAG
asserts, Liberty waived all arguments that more discovery
was needed. USAG also contests Liberty’s interpretation of
Bankruptcy Rule 9033(d).
We agree with USAG that the FBI’s actions before the pol-
icy period did not amount to a claim under the policy. The
policy deems a claim made only once “an Insured receives a
written demand, complaint, indictment, notice of charges, or
order of formal investigation.” The FBI’s interview of one ath-
lete twice, at USAG’s request, is not any of those things. Lib-
erty asks us to look to the definition of “suit” under Indiana
caselaw, but at issue here is whether there was a claim
consisting of a formal investigation. The policy’s provisions
regarding those terms are expressly defined and do not en-
compass FBI interviews.
No. 20-1245 15
As for the complaints made in the 1990s, no evidence sug-
gests they were claims. That several athlete lawsuits allege the
existence of such complaints on “information and belief” does
not help Liberty. Under Rule 56(c)(2), a party may object, as
USAG has, that evidence presented by the other party cannot
be presented in admissible form. Statements made on “infor-
mation and belief” are not admissible for their truth, 10B
WRIGHT & MILLER, FEDERAL PRACTICE AND PROCEDURE CIVIL
§ 2738 (4th ed. 2021), and they do not satisfy the personal-
knowledge requirement for affidavits. Weiss v. Cooley, 230
F.3d 1027, 1034 (7th Cir. 2000). The policy deems a claim made
upon notice to an insured, and the other complaints were
made to member gyms and coaches, not to USAG or any other
insured. Liberty has not shown a genuine issue of material
fact on this point.
Liberty complains it could have made that showing if only
the bankruptcy and district courts had allowed it to engage in
discovery. The insurer insists it was denied relief under Rule
56(d), and it argues that the district court incorrectly decided
not to hear additional evidence in its review of the bankruptcy
court’s recommendations. These decisions are reviewed for
an abuse of discretion. Smith v. OSF HealthCare Sys., 933 F.3d
859, 861 (7th Cir. 2019).
Liberty missed its chance to seek discovery in bankruptcy
court when it failed to file a Rule 56(d) affidavit explaining
how the lack of discovery had prevented it from meeting its
burden on summary judgment. That failure “alone justifies
affirmance” when a party argues on appeal that it had insuf-
ficient opportunity for discovery below. Woods v. City of
Chicago, 234 F.3d 979, 990 (7th Cir. 2000). This remains true
even when a party argued below, like Liberty did, that it
16 No. 20-1245
needed discovery. Id.; Kallal v. CIBA Vision Corp., 779 F.3d 443,
446 (7th Cir. 2015).
On this point, Liberty offers two arguments. First, it con-
tends Rule 26(d) barred it from filing a Rule 56(d) affidavit.
Rule 26(d) provides “[a] party may not seek discovery from
any source before the parties have conferred as required by
Rule 26(f), except … or when authorized by these rules, by
stipulation, or by court order.” Indeed, no Rule 26(f) confer-
ence had taken place when the bankruptcy court issued its
proposed findings and conclusions. But while a court has the
authority to oversee the discovery conference, the responsi-
bility for organizing such a conference lies with the parties.
See Rule 26(f)(2) (“The attorneys of record … are jointly re-
sponsible for arranging the conference, for attempting in good
faith to agree on the proposed discovery plan, and for submit-
ting to the court within 14 days after the conference a written
report outlining the plan.”) So, Liberty bears at least some re-
sponsibility for a Rule 26(f) conference not occurring.
Moreover, Rule 26(d) is not related to whether a party can
ask the court for the need or the right to conduct discovery
under Rule 56(d). A Rule 56(d) filing does not require that a
party ask the court for the right to conduct discovery. Such a
filing need only explain that the lack of discovery was the rea-
son for the party’s inability to carry its burden at summary
judgment. If the court is satisfied with that explanation, Rule
56(d) enumerates the ways the court can grant relief.
Second, Liberty claims Bankruptcy Rule 9033(d) com-
pelled the district court to consider new evidence, and that
the district court erred by refusing to grant the Rule 56(d) mo-
tion that Liberty filed along with its objections to the
No. 20-1245 17
bankruptcy court’s proposed findings. Rule 9033(d) provides
that in reviewing a bankruptcy court’s proposed findings:
The district judge shall make a de novo review
upon the record or, after additional evidence, of
any portion of the bankruptcy judge’s findings
of fact or conclusion of law to which specific
written objection has been made in accordance
with this rule. The district judge may accept, re-
ject, or modify the proposed findings of fact or
conclusions of law, receive further evidence or
recommit the matter to the bankruptcy judge
with instructions.
Liberty interprets Rule 9033(d) to mean that the bankruptcy
court must review the whole record, or after receiving more
evidence, of any portion of the bankruptcy court’s findings to
which specific objections were filed. Because Liberty filed spe-
cific objections, it says the district court was required to accept
new evidence.
The 1987 Advisory Committee Notes on Rule 9033 inform
its interpretation. The rule was “modeled on Rule 72 F. R. CIV.
P.,” which governs a district judge’s review of a magistrate
judge’s recommendations on pretrial motions. The Commit-
tee Notes state that Rule 9033(d) “adopts the de novo review
provisions of Rule 72(b).” Rule 72(b)(3) provides:
The district judge must determine de novo any
part of the magistrate judge’s disposition that
has been properly objected to. The district judge
may accept, reject, or modify the recommended
disposition; receive further evidence; or return
18 No. 20-1245
the matter to the magistrate judge with instruc-
tions.
This court has not addressed the question of when a dis-
trict judge’s review under Rule 72(b) of a magistrate judge’s
ruling should include new evidence. Other circuits have ruled
on this issue that the district court has discretion whether to
consider additional evidence not presented to the magistrate
judge. United States v. Howell, 231 F.3d 615, 621 (9th Cir. 2000)
(examining the statutory provision that Rule 72(b) imple-
ments—28 U.S.C. § 636(b)(1)(C)—and holding that “a district
court has discretion, but is not required, to consider evidence
presented for the first time in a party's objection to a magis-
trate judge’s recommendation.”); Carpet Grp. Int'l v. Oriental
Rug Importers Ass'n, Inc., 227 F.3d 62, 70 (3d Cir. 2000) (ruling
that “the [District] Court has discretion whether to consider
additional evidence not presented to the Magistrate Judge”),
overruled on other grounds by Animal Sci. Prod., Inc. v. China
Minmetals Corp., 654 F.3d 462, 467–68 (3d Cir. 2011); Freeman
v. Cnty. of Bexar, 142 F.3d 848, 852 (5th Cir. 1998) (observing
that the “best description” of the district court’s discretion in
this circumstance is that “it should be at least as broad as that
conferred on the district court to determine motions for recon-
sideration of its own rulings.”).
On the closely related question of whether new argu-
ments, rather than new evidence, can be made to a district
judge reviewing a magistrate judge under Rule 72(b), nearly
all the circuits have held either that those new arguments may
not be made, or that the district court has discretion as to
whether to allow them. See Williams v. McNeil, 557 F.3d 1287,
1291–92 (11th Cir. 2009) (noting and adopting the positions
taken by the First, Fifth, Ninth, and Tenth Circuits). Only the
No. 20-1245 19
Fourth Circuit has held that new arguments must always be
allowed. United States v. George, 971 F.2d 1113, 1118 (4th Cir.
1992); see also Samples v. Ballard, 860 F.3d 266, 273 n.7 (4th Cir.
2017) (“Our approach in George is a minority position, and
one that has been criticized and rejected by our sister cir-
cuits.”).
So, the overwhelming interpretation of Rule 72(b) is that
the district court’s discretion is paramount when reviewing a
magistrate judge’s proposal on whether to allow a party to
make new arguments or to introduce new evidence. This
meaning of Rule 72(b) informs our interpretation of Rule
9033(d). Two rules, both promulgated by the Supreme Court
under the authority of the Rules Enabling Act, 28 U.S.C. § 2072(as amended), using virtually identical language, and govern-
ing very analogous situations, should be interpreted in light
of each other. The related-statutes canon—that related legis-
lative enactments are in pari materia, and so should be inter-
preted harmoniously—confirms that notion. ANTONIN SCALIA
& BRYAN A. GARNER, READING LAW: THE INTERPRETATION OF
LEGAL TEXTS 252 (2012). See Erlenbaugh v. United States, 409
U.S. 239, 243 (1972) (“[A] legislative body generally uses a
particular word with a consistent meaning in a given con-
text”). Rule 9033(d) and Rule 72(b) use essentially the same
words and phrases to communicate the standard of review
and the district court’s discretion to consider new evidence.
This strongly suggests those words and phrases should be in-
terpreted the same way.
Another reason to doubt Liberty’s position is the harmo-
nious-reading canon—“[t]he provisions of a text should be in-
terpreted in a way that renders them compatible.” SCALIA &
GARNER, supra, at 180. Liberty’s interpretation of the first
20 No. 20-1245
sentence of Rule 9033(d), as requiring a district judge to accept
new evidence when presented with specific objections, stands
in contradiction to the permissive language of the next sen-
tence, which says that the “district judge may … receive fur-
ther evidence.” (emphasis added).
Whether a Rule 56(d) affidavit is evidence or an argu-
ment—it can have aspects of both—the result is the same: Lib-
erty had no good reason for not filing such an affidavit with
the bankruptcy court. Liberty’s position that it can present
such evidence for the first-time during review of the bank-
ruptcy court’s position would unduly limit the bankruptcy
court’s role. We disagree with Liberty’s interpretation of Rule
9033 and conclude that the district court did not abuse its dis-
cretion by denying Liberty’s request.
In summary, the policy deems a claim made once there has
been notice to an insured. Liberty has not shown a genuine
issue of material fact that USAG had notice before the policy
period commenced. Further, the district court did not abuse
its discretion when it decided not to hear additional evidence
in its review of the bankruptcy court’s recommendations. So
USAG is correct that none of the activities before the policy
period amounted to a claim made under the policy.
Next to consider are the parties’ arguments on the policy’s
wrongful conduct exclusion and whether it precludes insur-
ance coverage for the Nassar-related claims.
III. Wrongful Conduct Exclusion
The policy precludes coverage for claims in any way re-
lated to certain wrongful conduct by any insured. Liberty ar-
gues this exclusion bars coverage for all the Nassar-related
No. 20-1245 21
claims at issue in this appeal. USAG argues the exclusion ap-
plies to none of the claims or to only a small portion of them.
The wrongful conduct exclusion reads:
4. Claim Exclusions: This Policy does not apply
to any Claim made against any Insured:
…
4.9 based upon, arising from, or in any way re-
lated to:
…
(b) any deliberately dishonest, malicious or
fraudulent act or omission or any willful viola-
tion of law by any Insured;
provided, however, this exclusion shall only apply if
it is finally adjudicated that such conduct in fact oc-
curred.
Also included is what the parties call an anti-imputation
clause, or carve-back, as amended by an endorsement. That
provides: “For purposes of determining the applicability of
Sections 4.1 through 4.9, the Wrongful Act of any Insured
Person shall not be imputed to any other Insured Person.”
The bankruptcy court sided with USAG and concluded
that the wrongful conduct exclusion does not apply to most
of the Nassar-related claims. The exclusion is ambiguous, that
court found, and in at least one reasonable interpretation the
exclusion’s two mentions of “any Insured” must refer to the
same party. Under this reading, Nassar’s illegal actions could
affect coverage only for Nassar himself, not for USAG. The
court also determined that even if the two instances of “any
Insured” could refer to different people, the requirement that
22 No. 20-1245
the exclusion apply only to conduct that has in fact been
finally adjudicated limited the exclusion to those claims con-
cerning the ten instances of abuse for which Nassar was crim-
inally convicted, not those concerning hundreds of other
victims. Finally, again in the alternative, the court concluded
that the anti-imputation clause prevented the wrongful con-
duct exclusion from applying. Even though that clause only
bars the imputation of the wrongful acts of one “Insured Per-
son” to another “Insured Person,” the bankruptcy court con-
cluded that the anti-imputation clause did not explicitly say
that the wrongful conduct of other insureds should be im-
puted to the “Insured Organization,” USAG.
On appeal, Liberty renews its argument that the wrongful
conduct exclusion bars all the Nassar-related claims. To
Liberty, Nassar, an “Insured Person,” committed a willful vi-
olation of law, and the bankruptcy court injected ambiguity
where no reasonable person would find it. Even more, Nassar
has pleaded guilty, so his wrongful conduct has been finally
adjudicated in fact. Liberty maintains that all the Nassar-re-
lated claims qualify are “in any way related to” the ten
instances of abuse for which he was criminally convicted. Lib-
erty also argues USAG is not an “Insured Person” which the
policy defines as only natural persons. In response, USAG re-
iterates the bankruptcy court’s reasoning: “any Insured” is
ambiguous, only ten acts of sexual abuse were finally adjudi-
cated as criminal convictions in Michigan state court, and the
anti-imputation clause precludes applying the wrongful con-
duct exclusion to the Nassar-related claims. 4
4 USAG also contends Liberty should be estopped by its pre-litigation
communications in which Liberty interpreted the policy differently. But
in those communications Liberty reserved its rights, remedies, and
No. 20-1245 23
Section (A) below provides insurance law background on
a wrongful conduct exclusion in a claims-made D&O policy.
Then, four phrases in the wrongful conduct exclusion are
evaluated—(B) “any Insured”; (C) “finally adjudicated …
conduct in fact occurred“; (D) “based upon, arising from, or
in any way related to”; and (E) the anti-imputation or carve-
back clause.
A. Application in a directors’ and officers’ policy
D&O policies commonly exclude insurance coverage for
claims brought about or contributed to by fraudulent, dishon-
est, or criminal conduct. See generally S. Splitt, et al., 7A Couch
on Insurance § 103.40; 9A COUCH ON INSURANCE, § 131:35; G.
Lockwood, LAW OF CORPORATE OFFICERS & DIRECTORS: INDEM-
NIFICATION AND INSURANCE § 4.19. Some state laws mandate
such an exclusion. See, e.g., N.Y. BUS. CORP. LAW § 726(b)(1)
(2011).
Many wrongful conduct exclusions in D&O policies in-
clude a “final adjudication” requirement. L. Spector, “Insur-
ance Coverage for Business Tort Claims Alleging Intentional
Wrongdoing,” 51 TORT TRIAL & INS. PRAC. L.J. 91, 95 (2015).
For the exclusion to apply, the wrongful conduct must have
been determined to have occurred by court judgment or other
final adjudication in a separate action in which the conduct
was at issue. See Nat’l Union Fire Ins. Co. v. Continental Ill.
Corp., 666 F. Supp. 1180, 1186, 1191 (N.D. Ill. 1987); cf. 14
COUCH ON INSURANCE, § 201:59. This requirement is strictly
construed. If an underlying claim is settled, rather than adju-
dicated, then the exclusion does not apply. See Pendergest-Holt
defenses under the policy and applicable law, as well as disclaiming their
waiver.
24 No. 20-1245
v. Certain Underwriters at Lloyd’s of London, 600 F.3d 562, 572–
73 (5th Cir. 2010). The wrongful conduct exclusions in D&O
policies differ fundamentally from those in comprehensive
general liability (CGL) policies. The exclusions in a D&O pol-
icy require the insurer to show significantly more than might
suffice as an intentional act under a CGL policy. Spector, 51
TORT TRIAL & INS. PRAC. L.J. at 95. In some policies, the “final
adjudication” requirement includes an “in fact” condition—
the fraud or dishonesty must have actually occurred. D. Bor-
don & E. Van Vechten, 4 LAW AND PRAC. OF INS. COVERAGE
LITIG. § 47:32 (2021).
Claims in which the intentional wrongdoing rises to the
level of “criminal or deliberate fraud,” Spector, 51 TORT TRIAL
& INS. PRAC. L.J. at 95, are typically not covered due to the
wrongful conduct exclusion in a D&O policy. The line be-
tween intentional and predictably harmful conduct which
may fall within an intentional-acts exclusion, and reckless
conduct which may fall outside of it, can sometimes be diffi-
cult to draw. See California Amplifier, Inc. v. RLI Ins. Co., 94 Cal.
App. 4th 102, 116 (Cal. Ct. App. 2002) (considering whether
drunk driving is willful or reckless behavior for purposes of a
statutory intentional-acts exclusion).
The wrongful conduct exclusion here includes each of
these requirements common to a wrongful conduct exclusion
in a claims-made D&O policy. Coverage is excluded for “any
Claim made as to any Insured” “based upon, arising from, or
in any way related to” “any deliberately dishonest, malicious
or fraudulent act or omission or any willful violation of law
by any Insured” “provided, however, this exclusion shall
only apply if it is finally adjudicated that such conduct in fact
No. 20-1245 25
occurred.” We located no authority applying Indiana law to a
D&O policy with this type of wrongful conduct exclusion. 5
Our interpretation of this wrongful conduct exclusion is
informed by the fortuity principle, which underlies all insur-
ance. That principle addresses those situations where a loss is
not accidental, as it is against public policy to allow an insured
to collect insurance proceeds for a known or expected loss. Cf.
5200 Keystone Ltd. Realty, LLC v. Netherlands Ins. Comp., 29
N.E.3d 156, 161 (Ind. Ct. App. 2015) (explaining the “known
loss” doctrine). It would be a moral hazard to insure against
liability arising from intentional and inherently harmful con-
duct, such as criminal conduct. See Rimert v. Mortell, 680
N.E.2d 867, 873 (Ind. Ct. App. 1997).
With this background, we evaluate the various contested
phrases in the wrongful conduct exclusion.
B. “any Insured”
To paraphrase, the policy does not apply to any claim
against “any Insured” in any way related to wrongful con-
duct by “any Insured.” The bankruptcy court determined—
and neither party disputes—that USAG and Nassar are each
an “Insured” under the policy.
Liberty contends the only reasonable reading of the
wrongful conduct exclusion is that the first “any Insured” en-
compasses anyone, including USAG, and that the second
“any Insured” also encompasses anyone, including Nassar.
Under this reading, the exclusion would reach all Nassar-
5 This question does not reoccur under Indiana law and is specific to this
factual context, so it is not a good candidate to certify to the Indiana Su-
preme Court pursuant to Circuit Rule 52(a).
26 No. 20-1245
related matters. In contrast, the bankruptcy court ruled, and
USAG advances, that “any Insured” refers only to the same,
single insured. In effect, the first “any Insured” would apply
to “an Insured” and the second “any Insured” would apply
to “the Insured” or “that Insured.”
The parties spend much of their briefing on this issue dis-
cussing two decisions which interpret policies that include
the phrase “any insured”—Frankenmuth Mut. Ins. Co. v.
Williams by Stevens, 690 N.E.2d 675 (Ind. 1997), and Holiday
Hospitality Franchising, Inc. v. AMCO Ins. Co., 983 N.E.2d 574(Ind. 2013). Neither case presents a controlling interpretation
of the phrase, however.
USAG likes Frankenmuth, in which the Indiana Supreme
Court concluded that an intentional injury exclusion did not
bar coverage for a claim against a wife whose alleged negli-
gence allowed her husband to intentionally carry out a sexual
molestation. 690 N.E.2d at 678. The exclusion in that case said
that the policy did not cover liability “caused intentionally by
or at the direction of any insured.” Id. The Indiana Supreme
Court reasoned that the exclusion applied to “liability,” not
“personal injury,” and that the liability was for the wife’s neg-
ligence, not for the husband’s intentional wrongdoing. Id. at
679. Under Frankenmuth, USAG submits that the wrongful
conduct exclusion does not apply to any claims regarding
Nassar’s assaults.
Liberty asks us to focus on Holiday Hospitality. There, a mi-
nor guest was molested by a hotel employee who entered the
guest’s locked room at night. 983 N.E.2d at 576. The minor’s
mother sued the hotel franchisor, the franchisee, and the fran-
chisee’s owner for battery, emotional distress, and various
negligent employment practices. The defendants were all
No. 20-1245 27
insured under the policy and turned to it for coverage. But the
insurer argued the claims were not covered, due to exclusions
for “bodily injury,” or “personal and advertising injury” aris-
ing out of “[t]he actual or threatened abuse or molestation by
anyone of any person while in the care, custody or control of
the insured,” id., as well as negligent employment, investiga-
tion, supervision, etc. “of a person [responsible for such
conduct] for whom any insured is or ever was legally respon-
sible.” Id. at 581. In Holiday Hospitality, the Indiana Supreme
Court ruled that the use of the word “any” conclusively
barred coverage for all co-insureds. Id. The court’s analysis
would have differed, though, if instead of the exclusion ap-
plying to “any insured” it applied to “the insured.” Id. at 581
n.10.
Despite some superficial appeal, neither decision controls.
The policies in each case lack the clauses central to the mean-
ing of this wrongful conduct exclusion. Unlike the claims-
made D&O policy here, the homeowner’s policy in
Frankenmuth is an occurrence policy, which did not bar cover-
age of “any Claim” against “any Insured” “in any way re-
lated to” the conduct of “any Insured.” Just so, in Holiday Hos-
pitality the court analyzed an occurrence-based rather than
claims-made policy, 983 N.E.2d at 576, 578, that included the
phrase “any insured” as part of an express exclusion for neg-
ligent-supervision liability, a provision absent here. Id. at 581
& n.10.
With this gap in controlling Indiana authority, we focus on
the text of the policy. The wrongful conduct exclusion’s plain
and ordinary meaning, see Everett Cash Mut. Ins. Co., 926
N.E.2d at 1012, is that the modifier “any” before the dedicated
term “Insured” means “any”—not “an,” “the,” or “that.” The
28 No. 20-1245
bankruptcy court’s interpretation erases the second occur-
rence of “any” in the exclusion, which is contrary to that pro-
vision’s plain meaning. Each instance of “any Insured” can
refer to a different insured. If the two occurrences were sup-
posed to always refer to the same person, the second instance
would have said “that Insured,” or “that same Insured,” or
another such construction which would carry that meaning.
But the wrongful conduct exclusion does not say that.
Substituting “Nassar” and “USAG” for the term “In-
sured” shows how the term “any Insured” should be read
here. Nassar is “any Insured,” so the exclusion applies based
on his wrongful conduct. USAG is also “any Insured,” so the
exclusion precludes coverage for “any Claim” against USAG
(subject, of course, to the remainder of the requirements of the
wrongful conduct exclusion). USAG is not correct that if the
second “any Insured” refers to Nassar, that the first “any In-
sured” is necessarily limited to Nassar. “Any” is defined as
“one, some, or all indiscriminately of whatever quantity.”6
“Any” cannot be defined as the bankruptcy court did, so the
exclusion bars coverage only for the offending person.
USAG’s interpretation essentially asks us to rewrite the exclu-
sion, which would not be proper. Keckler v. Meridian Sec. Ins.
Co., 967 N.E.2d 18, 28 (Ind. App. 2012) (“[w]e may not rewrite
an insurance contract”) (quoting Bowen v. Monroe Guar. Ins.
Co., 758 N.E.2d 976, 980 (Ind. App. 2001)).
The double use of “any Insured”—negotiated by sophis-
ticated parties—is broad language that does not present
6 “Any.” Merriam-Webster.com Dictionary, Merriam-Webster,
https://www.merriam-webster.com/dictionary/any. Accessed Feb. 25,
2022.
No. 20-1245 29
ambiguity. “Any,” to a reasonable person, does not mean
“the” and is not limited to a particular insured’s conduct. See,
e.g., Bonin v. Westport Ins. Co., 930 So. 2d 906, 915 (Sup. Ct. La.
2006) (holding that insured against whom claim was made
need not be the same insured who committed the wrongful
act as long as the claim was based upon, arose out of, or indi-
rectly resulted from “an” insured’s wrongful act and such in-
sured had been so adjudged). Language excluding coverage
must be clearly expressed to be enforceable. Nat’l Collegiate
Athletic Ass’n. v. Ace American Ins. Co., 151 N.E.3d at 761; Ever-
ett Cash Mut. Ins. Co., 926 N.E.2d at 1012. This interpretation
meets that requirement. “Any Insured” is broad, yet clear in
its meaning, so it does not admit of ambiguity. It would
muddy the language to read “any” to mean something other
than “without restriction.” In the absence of ambiguity, this
portion of the wrongful conduct exclusion is not construed
against Liberty.
For these reasons, Liberty correctly reads the “any In-
sured” language of the wrongful conduct exclusion. The
bankruptcy court’s recommendation incorrectly found ambi-
guity in this portion of the policy.
C. “finally adjudicated … conduct in fact occurred“
The wrongful conduct exclusion “shall only apply if it is
finally adjudicated that such conduct in fact occurred.”
To the bankruptcy court, “USAG’s interpretation of the ‘fi-
nal adjudication’ requirement is reasonable and an ordinary
policy holder of average intelligence would conclude that the
exclusion only bars coverage for indemnity for costs arising
from a finally adjudicated intentional wrongful act.” “Nas-
sar’s conduct has only been adjudicated as to the ten crimes
30 No. 20-1245
on which a guilty verdict was entered,” according to that
court, not those concerning hundreds of other victims. USAG
agrees with this ruling, but Liberty pushes back, contending
that all of Nassar’s sexual abuse which underlies the Nassar-
related claims was finally adjudicated in Michigan’s courts.
The resolution of Nassar’s state criminal cases informs
whether, and how much of, his wrongful conduct has been
“finally adjudicated” for purposes of the wrongful conduct
exclusion. His prosecution culminated in Nassar and Michi-
gan entering into two written plea agreements, one in Eaton
County and one in Ingham County. Nassar signed the agree-
ments and during his guilty plea colloquies under oath he
orally admitted their terms.
Nassar pleaded guilty to and was sentenced on ten counts
of first degree criminal sexual conduct in violation of Michi-
gan Combined Law 750.520b, three in Eaton County and
seven in Ingham County. Twenty-nine other counts—10 in
Eaton County and 19 in Ingham County—were dismissed, a
majority of those when Nassar pleaded guilty (with some dis-
missed earlier at a preliminary hearing). Per the dockets in
these cases, the counts dismissed at the guilty plea hearings
were nolle prosequi—“will no longer prosecute”—a prosecu-
tor’s formal notice of abandonment of those charges. In Mich-
igan, a nolle prosequi is a dismissal without prejudice, which
does not preclude initiation of a later prosecution. But the en-
try of the order of nolle prosequi may be the final act of a bind-
ing agreement in a case on which a defendant may rely. 1A
GILLESPIE MICH. CRIM. L. & PROC. § 16:52 (2d ed. April 2021).
The plea agreements between Michigan and Nassar in-
clude several provisions relevant to the “final adjudication”
requirement. Nassar also admitted to these provisions during
No. 20-1245 31
his guilty plea colloquies. First, Nassar waived any and all de-
fenses to the conduct for which he pleaded guilty (including
that his crimes were “for a legitimate medical purpose”).
Second, the plea agreements included a non-prosecution
agreement “for all reported Criminal Sexual Conduct charges
reported to the [MSU] Police Department as of November 22,
2017.” Attached to each plea agreement was a list of 115 cases
not to be prosecuted. Third, during the plea colloquies, and in
compliance with Michigan’s Crime Victim’s Rights Act, the
prosecutor confirmed that the terms of the plea agreements
had been discussed with all the victims, who agreed with
those terms. Fourth, under the plea agreements Nassar agreed
to allow all victims or their representatives to give victim im-
pact statements at his sentencing hearings, including the 125
victims who had reported their assaults to the MSU Police De-
partment and the other-acts victims identified on the prose-
cution’s witness list. Most of Nassar’s victims made such
statements when he was sentenced, either in person, through
representatives, or in writing—65 in Eaton County, and 156
in Ingham County. Nassar’s plea agreements and sentencings
encompassed his convicted crimes, and the Michigan Court
of Appeals has affirmed Nassar’s convictions and sentences. 7
7 People v. Lawrence Nassar, 2020 WL 7636250 (Mich. Ct. App. Dec. 22, 2020)
(unpublished opinion). Nassar has applied for leave to appeal to the Mich-
igan Supreme Court, which the Michigan Attorney General has opposed,
and the Michigan Supreme Court has yet to decide. Michigan Supreme
Court Case No. 162615.
The argument that final adjudication occurs only upon exhaustion of ap-
pellate remedies has generally been rejected. See, e.g., Unencumbered Assets
Tr. v. Great Am. Ins. Co., 817 F. Supp. 2d 1014, 1033 (S.D. Ohio 2011) (reject-
ing argument that exhaustion of appellate review was required to trigger
32 No. 20-1245
So, Nassar’s wrongful acts were:
• charged and he pleaded guilty to ten counts, for
which he was sentenced;
• charged and dismissed (mostly nolle prosequi)
pursuant to the plea agreements; or
• not charged but included in the non-prosecu-
tion agreements with the list of cases attached.
Given these specifics of how Nassar’s state criminal sexual
abuse cases were resolved, the wrongful conduct that was fi-
nally adjudicated encompassed the ten counts on which he
pleaded guilty. But the Michigan state courts adjudicated
Nassar as formally guilty—beyond a reasonable doubt—of
only ten of his scores of charged and uncharged acts of sexual
abuse. The remaining wrongful conduct was dismissed with-
out prejudice or is subject to a non-prosecution agreement but
not adjudicated. So, a portion, but not all, of Nassar’s wrong-
ful conduct satisfies this “finally adjudicated … conduct in
fact occurred“ clause in the wrongful conduct exclusion.
D. “based upon, arising from, or in any way related to”
The wrongful conduct exclusion begins by prohibiting
coverage for a “claim” that is “based upon, arising from, or in
any way related to” wrongful conduct, provided that conduct
is finally adjudicated to have in fact occurred. The phrase
“based upon, arising from, or in any way related to” is not
defined in the policy. We consider its plain meaning, whether
it is ambiguous, and how courts have interpreted it and simi-
lar phrases.
dishonesty exclusion and holding that judgment of conviction for fraudu-
lent conduct was sufficient to preclude coverage under that exclusion).
No. 20-1245 33
1. Plain Meaning
Under Indiana law, “if a contract is clear and unambigu-
ous, the language therein must be given its plain meaning.”
Beam, 765 N.E.2d at 528; see also Abstract & Title Guar. Co. v.
Chicago Ins. Co., 489 F.3d 808, 811–12 (7th Cir. 2007). The plain
meaning of “based upon, arising from, or in any way related
to” includes nearly any type of connection between the claim
and the insured’s wrongful acts. That includes a wide array
of logical connections. See Gregory v. Home Ins. Co., 876 F.2d
602, 606 (7th Cir. 1989) (interpreting Indiana law and conclud-
ing that “related” covers “a very broad range of connections,
both causal and logical”); RLI Ins. Co. v. Conseco, Inc., 543 F.3d
384, 391 (7th Cir. 2008) (same).
Indiana law also provides that “the text of a disputed pro-
vision may be understood by reference to other provisions
within the four corners of the document.” Claire’s Boutiques,
Inc. v. Brownsburg Station Partners LLC, 997 N.E.2d 1093, 1098
(Ind. Ct. App. 2013) (citing City of Portage v. S. Haven Sewer
Works, Inc., 880 N.E.2d 706, 711 (Ind. Ct. App. 2008)). In the
policy here, the phrase “based upon, arising from, or in any
way related to” is used five times when delineating the pol-
icy’s claim exclusions and another four times in an endorse-
ment to the policy that adds further exclusions. In each of
these nine instances, the phrase introduces the exclusion and
broadens the circumstances that fall within it.
At each reference, its use includes most logical connec-
tions. For example, § 4.5 of the policy excludes coverage for
any claim “based upon, arising from, or in any way related
to” “any demand, suit, or other proceeding against any In-
sured which has been made, which existed, or was pending
prior to the applicable Prior Litigation Date” or “the same or
34 No. 20-1245
substantially the same facts, circumstances or allegations in-
volved in such demand, suit, or other proceeding.” As used
in this exclusion, “in any way related to” must include a logi-
cal connection. Section 4.5 cannot exclude coverage only for
claims, for example, “caused by” prior litigation. If it did, it
would not exclude coverage on claims for a later lawsuit with
nearly identical allegations as those made in a prior lawsuit
(unless it could be shown that the later lawsuit was caused by
the prior litigation, which would be highly unlikely). Such an
interpretation would defeat the purpose of a “prior litigation”
exclusion as those exclusions have been uniformly inter-
preted. 8
8 See, e.g., Fed. Ins. Co. v. Raytheon Co., 426 F.3d 491, 499–500 (1st Cir. 2005)
(rejecting a narrow reading of a prior litigation exclusion and noting that
the purpose of such exclusions is to “combat the problem of adverse se-
lection”); Johnston v. Exec. Risk Indem., Inc., No. 1:05-CV-2826-CAP, 2007
WL 9701322, at *6 (N.D. Ga. Oct. 1, 2007) (stating that a narrow reading
“wholly defeats the focus of the prior/pending litigation exclusion, that is,
to exclude coverage for lawsuits based on common facts or circumstances
present in prior or pending litigation”); Pereira v. Nat’l Union Fire Ins. Co.
of Pittsburgh, Pa., No. 04 CIV. 1134 (LTS), 2006 WL 1982789, at *4 (S.D.N.Y.
July 12, 2006) (“In determining whether a prior litigation clause excludes
coverage, courts have focused on whether there was a sufficient factual
nexus between the two lawsuits … The coverage does not depend upon
the pleader’s art but rather upon underlying facts.”); Zunenshine v. Exec.
Risk Indem., Inc., No. 97 CIV. 5525 (MBM), 1998 WL 483475, at *1, 5
(S.D.N.Y. Aug. 17, 1998), aff’d, 182 F.3d 902 (2d Cir. 1999) (noting that “the
purpose behind” claims-made insurance policies and prior litigation ex-
clusions is “to limit [the insurer’s] liability to a fixed period of time,” and
stating that to “permit an insured to recover for claims” that were “based
upon, arising out of, directly or indirectly resulting from, in consequence
of, or in any way involving” the same facts or circumstances alleged in a
pending lawsuit “would be to grant the insured more coverage than he
bargained for and paid for, and to require the insurer to provide coverage
No. 20-1245 35
The same is true for one of the exclusions in the endorse-
ment, which precludes coverage for any claim “based upon,
arising from, or in any way related to an Insured serving as a
fiduciary of any plan, fund or program which is not an In-
sured Plan, even if such service is at the direction or request
of an Insured Organization.” The only reasonable interpreta-
tion of “in any way related” in this exclusion includes a logi-
cal connection. If the exclusion applied only to claims “caused
by” an insured’s service as a fiduciary, it would not neces-
sarily cover claims where a litigant alleged the insured
breached his duty while serving a fiduciary. The insured
could then argue there is ambiguity in the exclusion because
the claim was caused by the insured’s alleged actions while
serving as a fiduciary, not by the service as a fiduciary itself.
Such an interpretation would functionally render this exclu-
sion a nullity, yet it would follow from adopting an artificially
narrow construction of “in any way related to” as “caused
by.”
Read in the context of the entire insurance policy, the plain
meaning of “based upon, arising from, or in any way related
to” includes a logical connection between the claim and the
insured’s wrongful acts.
2. Causal Connection
USAG implies that “in any way related to” should be in-
terpreted more narrowly, as requiring a causal rather than
logical connection between the claim and the insured’s
wrongful acts. This would limit the scope of the wrong-
ful conduct exclusion. Even if that interpretation did not
for risks not assumed”) (quoting United States v. A.C. Strip, 868 F.2d 181,
187 (6th Cir. 1989)).
36 No. 20-1245
always prevail, if the phrase is ambiguous, it should be inter-
preted in favor of USAG, the insured.
Yet, there is no indication here that a causal connection is
required for a claim to be “in any way related to” wrongful
conduct. If the parties had meant to limit the wrongful con-
duct exclusion to claims caused by an insured’s wrongful acts,
they would have used the terms “caused by” or “causal.” The
parties knew how to use those terms where they intended that
meaning. The policy, at § 23.13, defines “Interrelated Wrong-
ful Acts,” as those “that have as a common nexus any fact,
circumstance, situation, event, transaction, cause or series of
causally connected facts, circumstances, situations, events,
transactions, or causes.” 9 That same definition also uses the
phrase “common nexus,” which generally includes a causal
link. See Pac. Operators Offshore, LLP v. Valladolid, 565 U.S. 207,
222 (2012) (endorsing a lower court’s “substantial-nexus” test
that requires a “significant causal link” between two events);
Black’s Law Dictionary (11th ed. 2019) (defining “nexus” as
“[a] connection or link, often a causal one”).
The wrongful conduct exclusion does not use the phrases
“caused by” or “causally connected.” If the parties had in-
tended to specify that the relationship between the wrongful
conduct and the claim must be causal for coverage to be ex-
cluded, they would have done so. Nor does the wrongful con-
duct exclusion use the phrase “common nexus,” which would
have had a similar effect. “[I]n construing a contract we pre-
sume that all provisions were included for a purpose, and if
possible we reconcile seemingly conflicting provisions to give
9This definition is in the context of defining a “Claim” rather than a
“Claim Exclusion.”
No. 20-1245 37
effect to all provisions.” Ryan v. Laws. Title Ins. Corp., 959
N.E.2d 870, 875 (Ind. Ct. App. 2011) (quoting Magee v. Garry–
Magee, 833 N.E.2d 1083, 1092 (Ind. Ct. App. 2005)); see also
George S. May Int'l Co. v. King, 629 N.E.2d 257, 261 (Ind. Ct.
App. 1994) (same). To limit “in any way related to” to causal
connections would disregard that principle of contract inter-
pretation. That would require ignoring our observation that
using different language to address parallel issues in a con-
tract generally indicates that parties were referring to differ-
ent concepts. See Collins v. Univ. of Notre Dame Du Lac, 929 F.3d
830, 841 (7th Cir. 2019) (citation omitted). So, “in any way re-
lated to” cannot be limited to just causal relationships in Lib-
erty’s policy.
3. Ambiguity
The phrase “in any way related to” is quite broad. As this
court recognized in Gregory, the phrase is so broad that it
should not be taken literally: “At some point, of course, a log-
ical connection may be too tenuous reasonably to be called a
relationship, and the rule of restrictive reading of broad
language would come into play.” 876 F.2d at 606. USAG has
presented a good argument on the facts that such a principle
applies here.
There are two primary similarities among these claims: All
victims accuse the same wrongdoer, Nassar, and they all ac-
cuse him of abusing his role as a doctor to sexually assault
them. But there are also several important differences be-
tween the claims. Dozens of different individual victims suf-
fered assaults on separate occasions. Each of those assaults
stands alone as a separate and independent crime. Many of
the young women recount abuse that occurred dozens of
times over several years. Overall, the claims stem from
38 No. 20-1245
thousands of assaults over decades. And each victim’s expe-
rience and pain were her own. The consequences did not de-
pend on what happened to anyone else. There is no common
unit of measure (like dollars) that would allow someone to
assess cumulative harm the way we would with, for instance,
different shareholders’ claims for accounting fraud or a cor-
rupt self-dealing merger.
Sexual assaults are distinguishable from economic wrong-
doing. Claims by shareholders or consumers may be “re-
lated” to one another when they arise from the same course
of conduct, such as fraudulently concealing bad news about
either a company or a product that does not work as prom-
ised. Compare, for example, how the U.S. Sentencing
Guidelines aggregate economic harms suffered by multiple
claimants and victims of financial crimes but treat sexual and
violent assaults separately in evaluating harm from multiple
counts. See U.S.S.G. § 3D1.2(d) (delineating two categories of
crimes: those that are “grouped” and those that are not; sexual
assaults—even against the same victim—are not grouped).
Consider a hypothetical variation on this case. Suppose
Nassar had been convicted of sexually assaulting just one vic-
tim on just one occasion. One hundred other gymnasts then
sue USA Gymnastics and its officers and directors, alleging
that he sexually assaulted them too, over the past 20 years.
And suppose further that there were room to doubt the veracity of
some of those additional claims. Should the insured be denied a
defense and possible indemnification on all those claims be-
cause Nassar had been convicted of one assault? That would
be an improbable result, and one that would be unjust to the
insured.
No. 20-1245 39
Here, we are not interpreting policy limits or deductibles,
but rather a complete exclusion of coverage, where the de-
mands for clarity are greatest. An overly broad approach to
“in any way related” effectively nullifies the “final adjudica-
tion” requirement. That “final adjudication” requirement is
an important and often bargained-over feature of D&O poli-
cies. If just one final adjudication (or ten) can preclude cover-
age for scores or even hundreds of claims asserted by separate
victims alleging independent crimes over decades, that one
conviction becomes the tail that wags the proverbial dog. The
language of the wrongful conduct exclusion does not, in our
view, compel this result.
Only a common wrongdoer, or only a common victim, or
only a common modus operandi by different wrongdoers
against different victims, is not enough to establish a suffi-
cient relationship. This case is in the grey territory where the
policy’s broad language becomes ambiguous as applied to
these unique facts. While the insurer has a reasonable argu-
ment for excluding coverage of the other victims’ claims, the
insured also has a reasonable argument for not excluding
them. Accordingly, under the general principles of Indiana
insurance law—including that ambiguous policy language is
construed against the insurer, especially when it comes to pol-
icy exclusions—the insured, USAG, prevails on this point.
4. Case Law
Case law is sparse on this problem of relatedness for pur-
pose of the wrongful conduct exclusions in D&O policies.
What case law exists does not help determine when “related
to” is “related enough.” Those cases that confront this ques-
tion stem from relationships that were much stronger and
closer than those at issue here, making those cases more
40 No. 20-1245
straightforward. Those facts taken in context make us skepti-
cal about some of the broader verbal formulations that those
courts have offered.
Our dissenting colleague cites a number of these cases on
this question of relatedness, but we find them all distinguish-
able. Those cases presented multiple claims arising from one
financial transaction or cluster of connected transactions. In-
surers and insureds understand, for example, that an account-
ing scandal or a corrupt merger is likely to generate related
lawsuits by shareholders, securities purchasers, and others.
Gregory, 876 F.2d 602, involved claims under a legal
malpractice insurance policy. The “relatedness” question con-
cerned whether there was just one, or more than one, “occur-
rence” for purposes of a per-occurrence coverage cap. The
defendant law firm had offered advice about the tax and se-
curities law consequences of an abusive tax-shelter scheme in-
volving investments in videotapes. When the scheme fell
apart, investors sued for securities fraud, common-law fraud,
and RICO violations. All their claims, whether based on tax
advice or securities advice for the scheme, were treated as one
claim. Id. at 604–06. The straightforward determination in
Gregory of relatedness lends little to our analysis.
RLI Ins. v. Conseco, 543 F.3d 384 (7th Cir. 2008), regarding
a D&O policy, presented a similar question. A round of secu-
rities-fraud litigation against Conseco was settled with release
language that covered class members’ claims arising out of
the facts alleged in the complaint. Id. at 386. A few months
later, a dispute about insurance coverage for that underlying
settlement was resolved by another settlement. The insureds
released RLI from coverage of any claim “in any way related
to” the underlying actions that had been settled. Id. at 386–87.
No. 20-1245 41
Then another investor filed a new putative class action under
ERISA arising from the same course of conduct. Conseco de-
fended on the ground that the ERISA plaintiffs were all mem-
bers of the earlier class and could have asserted their ERISA
claims in that earlier case. The insurer said the new case was
so related to the earlier case that the insureds’ release of the
insurer applied. Id. at 388–89. Not surprisingly, the district
court—and this court—held that the ERISA claims were suf-
ficiently related to the earlier case to be covered by Conseco’s
release of RLI. 543 F.3d at 391. While it is difficult to disagree
with the result in RLI Ins. v. Conseco, that case offers little help
in determining the outer bounds of “relatedness.”
Bay Cities Paving & Grading, Inc., v. Lawyers Mutual Ins. Co.,
855 P.2d 1263 (Cal. 1993), which like Gregory concerned legal
malpractice insurance, was also, by comparison, a straightfor-
ward case. The dispute involved claims that the same lawyer
made two distinct errors in trying to enforce one mechanic’s
lien for one construction project. The single victim suffered
one injury—its lien was not enforced. The claims based on
two supposedly separate errors were so closely related that
the “per claim” policy limit could not be doubled on the the-
ory that there were two claims. (Nor could an insurer try to
separate out such closely related claims to require the insured
to pay multiple deductibles for them. 855 P.2d at 1267.)
In Bay Cities Paving, the Supreme Court of California made
the critical point that clarity or ambiguity must be decided not
in the abstract but “in the context of this policy and the cir-
cumstances of this case.” Id. at 1271. We interpret the passage,
together with the case law we have already discussed, to
mean that relatedness can be readily decided in many cases—
including Bay Cities Paving itself—but that policy language on
42 No. 20-1245
relatedness can still be ambiguous as applied to more com-
plex factual scenarios. That does not provide much guidance
for the very different facts here, which encompass hundreds
of different victims and separate crimes and injuries across
decades.
In Am. Com. Ins. Brokers, Inc. v. Minnesota Mut. Fire & Cas.
Co., 551 N.W.2d 224 (Minn. 1996), an insurance policy covered
losses from employee dishonesty. It included a per-occur-
rence limit of $10,000, and it said that all loss “involving a []
series of related acts” would be considered one occurrence for
purposes of that limit. One employee embezzled $190,000 in
155 individual transactions by using two distinct methods:
taking customers’ cash payments for herself and issuing un-
authorized checks to herself. The Minnesota court rejected the
insured’s argument that there were 155 occurrences. The
court held that there were two, but only two, occurrences for
purposes of the limit. The phrase “series of related acts” sig-
naled an intent to encompass a continuous embezzlement
scheme with the same method on a continuous basis. Id. at
228. In that case, however, there was only one victim and one
location where the acts occurred. Moreover, the different
transactions inflicted a cumulative financial harm on the em-
ployer, making the situation there very different from the
facts presented here.
The dissent states it is not dispositive that Nassar’s acts
targeted different victims. It cites decisions in which courts
have decided that the fact that an insured’s acts impact differ-
ent victims does not create an ambiguity as to whether those
acts are logically connected.
The best case the dissent cites for this point is Kilcher v.
Continental Casualty Co., 747 F.3d 983 (8th Cir. 2014), in which
No. 20-1245 43
the question was whether a financial advisor’s bad advice to
four siblings amounted to one occurrence subject to a $1 mil-
lion per occurrence limit or separate occurrences subject to a
$2 million aggregate limit. Id. at 987. The siblings were mem-
bers of a Native American tribe who received annual distri-
butions from the tribe’s gaming operations. Id. at 984. The
advisor allegedly steered all four young adults into high-com-
mission whole-life insurance policies that were unsuitable for
their financial circumstances. Id. at 986. The professional-lia-
bility insurance policy said that claims involving “interrelated
wrongful acts” would be considered just one claim, and it de-
fined interrelated wrongful acts broadly as “any wrongful
acts which are logically or causally connected by reason of
any common fact, circumstance, situation, transaction, or
event.” Id. at 987. The district court had held that treating the
siblings’ individual claims as “interrelated” “pushes the Pol-
icy’s language to unreasonable extremes.” Id. at 987–88. The
Eighth Circuit reversed, extending Am. Com. Ins. Brokers to the
four siblings taken advantage of in similar ways. Id. at 989–90.
Kilcher is distinguishable from this case based on its much
smaller numbers of (related) victims and the economic nature
of the harm that was perpetrated, as well as the fact that it was
not excluding coverage entirely but deciding only how to ap-
ply coverage limits. Even if we were to conclude that Kilcher
was correctly decided and instructive, it is a narrow ground
on which to say the policy language here is unambiguous as
applied to such different victims.
On this issue of a single versus multiple victims, the dis-
sent also cites Continental Cas. Co. v. Wendt, 205 F.3d 1258 (11th
Cir. 2000), where a legal malpractice insurer had already paid
its liability policy limits in one lawsuit arising out of its
44 No. 20-1245
insured lawyers’ role in promoting a shady investment
scheme. When a second lawsuit was brought by another in-
vestor complaining about the lawyers’ role in promoting the
same investment scheme, the insurer denied coverage be-
cause the second suit alleged “related wrongful acts.” Id. at
1260–61. The district court ruled in favor of the insurer, and
the Eleventh Circuit affirmed by adopting the district court’s
opinion, finding there was just one course of conduct in pro-
moting the shady investments to many investors. Id. at 1262–
63. Although Wendt is similar to Gregory, a lawyer’s common
course of conduct promoting a particular investment vehicle
is far different from Nassar’s repeated sexual assaults against
hundreds of victims over more than twenty years.
Our dissenting colleague also cites HR Acquisition I Corp.
v. Twin City Fire Ins. Co., 547 F.3d 1309 (11th Cir. 2008), which
involved the HealthSouth accounting fraud and self-dealing
scheme and a “prior litigation” exclusion in a D&O policy.
The first lawsuit was a qui tam action filed in 1997. The insured
then bought a “claims made” D&O policy that covered the
period from 2000 to 2004. When a shareholder derivative ac-
tion was filed in 2002 alleging the same accounting fraud, the
insurer denied coverage because the new action was “in any
way related to” the prior litigation. Id. at 1311–12. The Elev-
enth Circuit adopted a broad interpretation of the phrase and
found that the exclusion applied despite the insureds’ argu-
ments that the allegations in the two cases were not specific
enough to show they arose from the same events. Id. at 1315–
16. Although those different suits by different plaintiffs stem-
ming from the same scheme seem related, the self-dealing and
accounting fraud at issue in HR Acquisition I Corp. is substan-
tially different from Nassar’s conduct.
No. 20-1245 45
The relationships between the factual circumstances in the
cases the dissent cites are much more straightforward than
those that connect Nassar’s wrongful acts. Those cases pre-
sented multiple claims arising from one financial transaction
or a cluster of connected transactions. Insurers and insureds
understand, for example, that an accounting scandal or a
corrupt merger is likely to generate related lawsuits by share-
holders, securities purchasers, and others. Multiple sexual as-
saults are a different category entirely, especially on this scale
and over so many years. A relative handful of cases applying
such a vague standard to quite different financial wrongs
does not persuade us that the insured’s view here is unrea-
sonable. “In any way related” is too ambiguous—as applied
to these very different facts—to exclude coverage of the non-
guilty-plea claims.
5. Larger Implications
The incentives for participants in the market for insurance
may differ depending on whether the liability policy at issue
is “occurrence-based” or “claims-made.” For the insurer, an
occurrence-based policy can have a long “tail” of potential li-
ability. The insurance industry’s answer to that long risk is to
offer a claims-made policy covering claims asserted within a
specified time period. See Nat’l Union Fire Ins. Co. v. Baker &
McKenzie, 997 F.2d 305, 306 (7th Cir. 1993).
An insurer writing such a claims-made policy must ex-
clude coverage for both pending claims and looming claims
that the insured may know about, but which have not yet
been asserted formally. Those policies are written to exclude
both the pending and looming claims, but also new claims re-
lated to the pending and looming claims. But if an entirely
new claim is asserted and coverage is provided, under a
46 No. 20-1245
claims-made policy, those later “related” claims will come
within the policy coverage. In Continental Cas. Co. v. Cuda, 715
N.E.2d 663, 665 (Ill. App. 1999), for example, the policy said:
“Any claim or claims arising out of the same or related wrongful
acts, shall be considered first made during the policy term in
which the earliest claim arising out of such wrongful acts was
made.” Id. (emphasis supplied). Using a broad concept of “re-
lated,” the claims-made insurer will be exposed again to a
long “tail” of potential liability and the corresponding duty to
defend, which will require it to incur significant costs.
In this case, the insurer wants a broad interpretation and
the insured desires a narrow one. In other contexts, though,
the incentives will be flipped, including to preserve for insur-
ers the core advantage of claims-made liability policies. By
interpreting “related” too broadly in the conduct policy ex-
clusion here, we could inadvertently affect the economics of
the claims-made insurance market by broadening the scope
of coverage of these policies. These concerns about the impli-
cations of interpreting “related to” too broadly are substan-
tial, and they factor into our analysis. We must bear in mind
that this is a unique case. A holding that “related to” is unam-
biguous, even as applied in these unusual circumstances,
could have unforeseen consequences for claims-made D&O
coverage.
E. Anti-Imputation or Carve-Back Clause
The wrongful conduct exclusion’s final clause (which was
amended by an endorsement) states that for purposes of de-
termining its applicability, the wrongful act “of any Insured
Person shall not be imputed to any other Insured Person.”
The parties label this the anti-imputation, or carve-back,
clause. Such a provision is typical in D&O policies and
No. 20-1245 47
preserves the severability of this exclusion. DIRECTOR & OF-
FICER LIABILITY: INDEMNIFICATION AND INSURANCE, § 12.15.
Liberty contends the carve-back removes any imputation
only as to an “Insured Person,” not an “Insured Organiza-
tion” like USAG, so the bankruptcy court’s recommendation
was in error. USAG responds that such an argument should
not bar coverage, as any exclusion must be interpreted nar-
rowly and against the insurer. The bankruptcy court is cor-
rect, USAG argues, that if Liberty wanted to impute Nassar’s
acts to USAG, as the drafter of the policy it could have done
so, yet the policy contains no express imputation.
As noted above, an insurance policy’s language is inter-
preted according to the plain meaning of its terms. See Beam,
765 N.E2d at 528. The anti-imputation clause only bars imput-
ing the wrongful conduct of one “Insured Person” to another
“Insured Person.” Under the policy’s definitions, USAG qual-
ifies as “any Insured,” and is the “Insured Organization.”
But USAG is not an “Insured Person.” The policy’s defini-
tions limit “Insured Person” to “one or more natural persons
who were, now are, or shall hereafter be elected or appointed
directors, trustees, officers, employees, committee members
or volunteers of the Insured Organization … .” USAG does
not fall within this definition, and thus would not qualify for
this carve-back which brings some otherwise excluded claims
back into the policy.
The anti-imputation clause could have been drafted to ap-
ply to “any other Insured” rather than how it was drafted—to
not impute the wrongful act to “any other Insured Person.”
The policy’s use of “Insured Person” must be read plainly,
thus excluding USAG’s reading that would have us rewrite
the insurance contract, which we cannot do. Estate of Eberhard
48 No. 20-1245
v. Ill. Founders Ins. Co., 742 N.E.2d 1, 2 (Ind. Ct. App. 2000) (ci-
tations omitted). Our reading also follows logically—because
of the carve-back, the policy provides coverage to an innocent
“Insured Person,” but not to USAG, for which all “Insured
Persons” work or provide services.
USAG is an “Insured Organization” but not an “Insured
Person” under the policy, so the anti-imputation clause in the
wrongful conduct exclusion does not bar the imputation of
Nassar’s wrongful conduct to USAG.
* * *
In summary as to the wrongful conduct exclusion, Indiana
law requires that an exclusionary clause be clear, precise, and
specific as to the conduct it precludes. Everett Cash Mut. Ins.
Co., 926 N.E.2d at 1012. “Any Insured” is broad, yet clear in
its meaning, so it does not admit of ambiguity, contrary to the
bankruptcy court’s conclusion. The wrongful conduct that
was finally adjudicated included the ten counts on which
Nassar pleaded guilty and was sentenced, but the remainder
of his scores of charged and uncharged acts of sexual abuse
were not finally adjudicated. So only a small portion of Nas-
sar’s wrongful conduct satisfies the wrongful conduct exclu-
sion’s “finally adjudicated” clause.
The policy excludes coverage for a claim that is “based
upon, arising from, or in any way related to” wrongful con-
duct. While the plain meaning of that clause includes a logical
connection between the claim and the insured’s wrongful
acts, it is not cabined to causal relationships. Rather, we con-
clude that the phrase “in any way related to” is ambiguous as
applied to these facts, and it should therefore be construed in
favor of the insured. Case law is not to the contrary, and the
No. 20-1245 49
larger implications of this interpretation for the insurance in-
dustry also counsel this reading. The wrongful conduct exclu-
sion’s anti-imputation, or carve-back, clause removes any im-
putation only as to a natural person, not an organization like
USAG.
So, the wrongful conduct exclusion applies but only to the
ten claims for which Nassar was found guilty, and not to the
remaining Nassar-related claims, for which Liberty must pro-
vide insurance coverage.
IV. Bodily Injury Exclusion
Liberty’s next defense relies on a policy provision that the
insurer argues excludes the athlete lawsuits—a subset of the
Nassar-related claims—by hundreds of gymnasts seeking to
hold USAG responsible for allowing the abuse to take place,
causing them to suffer physical, mental, and emotional dam-
age. The policy excludes claims “made against any insured
for: (a) bodily injury, sickness, disease, death; or (b) emo-
tional distress, mental anguish …” But an exception provides
that part (b) of the exclusion “shall not apply to any claim
brought by or on behalf of any Third Person, or any past,
present, or prospective Insured Person for an Employment
Practices Wrongful Act.” The parties dispute the scope of this
exclusion.
The bankruptcy court held that the bodily injury exclusion
did not apply for multiple reasons, including because the ex-
ception specifies that the exclusion does not apply to emo-
tional distress claims brought by third parties. We review the
bankruptcy court’s summary judgment decision de novo, and
Indiana authority on the general principles for the interpreta-
tion of insurance contracts, described above, apply.
50 No. 20-1245
We are to give unambiguous policy language “its plain
and ordinary meaning.” Everett Cash Mut. Ins. Co., 926 N.E.2d
at 1012. Applying that rule to the exclusion and the exception,
we conclude that the exception does apply, so the claims are
not excluded to the extent they seek recovery for emotional
distress, mental anguish, and the like. The comma in the
exception—after “Third Person” and before “or any past,
present, or prospective Insured Person”—is disjunctive. If
the remainder of that clause—“for an Employment Practices
Wrongful Act”—were read to modify the entirety of “any
Third Person, or any past, present, or prospective Insured
Person,” the exclusion would bar every emotional-distress
claim by any person. That would be a strange and oddly spe-
cific way of saying “any person.” Such an interpretation
would also nullify the entirety of part (b) of the exclusion, as
a contract would not include a clause that two lines later is
entirely nullified by another clause.
The only reasonable interpretation of the exception is that
part (b) of the exclusion shall not apply to any claim brought
by or on behalf of any third person, or any past, present, or
prospective insured person for an employment practices
wrongful act. The exception to the bodily injury exclusion is
written broadly, so it is applied broadly. So, the exception re-
quiring coverage for an Employment Practices Wrongful Act
would apply to the “athlete lawsuits,” the bodily injury exclu-
sion would not apply, and the exclusion would not relieve
Liberty of its duty to defend those lawsuits.
Because the duty to defend applies even to claims that
in part seek excluded relief, Liberty would have a duty to
defend the athlete lawsuits seeking relief for emotional dis-
tress and/or mental anguish. Further, a potential argument
No. 20-1245 51
from Liberty that the exception applies only to third-party
emotional distress claims for an Employment Practices
Wrongful Act was never raised before the bankruptcy
court. The bodily injury exclusion therefore does not re-
lieve Liberty of its duty to defend the athlete lawsuits.
V. Coverage for Investigations and Other Matters
The parties also disagree about whether the policy covers
claims for non-compulsory investigations and information
gathering that did not specifically allege USAG committed a
wrongful act. Two issues comprise this disagreement: (1)
whether the Congressional and USOPC investigations were
“formal investigations” or “formal proceedings” such that
they satisfy the definition of a “claim” under the policy; and
(2) whether the White deposition and investigation matters
were “for a Wrongful Act.”
The bankruptcy court ruled that the investigations were
formal and therefore claims, but it did not speak to the second
issue. We review that court’s decision on summary judgment
de novo.
Under the policy, “‘Claim’ means:
(a) a written demand for monetary or non-mon-
etary relief against an Insured;
(b) the commencement of a civil or criminal ju-
dicial proceeding or arbitration against an In-
sured;
(c) the commencement of a formal criminal, ad-
ministrative or regulatory proceeding or formal
investigation against an Insured, including any
52 No. 20-1245
brought before the Equal Employment Oppor-
tunity Commission or any similar state, local or
territorial governmental agency;
…
“‘Wrongful Act’ means:
(a) any actual or alleged error, misstatement,
misleading statement, act, omission, neglect, or
breach of duty, or Employment Practices
Wrongful Act committed or attempted by the
Insured Persons in their capacities as such or by
the Insured Organization; or
(b) any matter claimed against the Insured Per-
sons solely by reason of their status as Insured
Persons.
Liberty argues that even if congressional investigations
are “formal,” they are not all necessarily “formal investiga-
tions” or “formal proceedings” (as the policy requires)
because they do not involve compulsory actions and involun-
tary requests for information. The Congressional investiga-
tion letter stated that Congress was “seeking” or “inviting”
information from USAG, not requiring it.
Further, to Liberty, the investigations and the White dep-
osition matter were not “for a Wrongful Act,” at least during
the claims period. Liberty cites two unpublished decisions
from other circuits, which say that investigations into merely
whether a wrongful act occurred are not investigations of a
wrongful act, because they lack an affirmative accusation of
No. 20-1245 53
misconduct. 10 Liberty argues the investigations did not allege
any violations by USAG. Rather, they sought information
about Nassar’s underlying conduct, and at most contem-
plated that USAG had done something that might later result
in an allegation.
USAG responds that the investigations were “formal” and
that they concerned a “wrongful act,” as those terms and
phrases are used in the policy. USAG distinguishes Liberty’s
authority that purports to show that “formal” requires com-
pulsory and involuntariness. Subsequent decisions have
noted that in those unpublished decisions the notices at issue
explicitly disclaimed any wrongdoing. E.g., Oceans Healthcare,
LLC v. Ill. Union Ins. Co., 379 F. Supp. 3d 554, 562–63 (E.D. Tex.
2019). And other courts have rejected Liberty’s argument
completely. For example, the First Circuit has held that “al-
lege” is not “in and of itself so clearly restrictive that simply
by virtue of that word” an initiating document must explicitly
accuse someone of wrongdoing. BioChemics, Inc. v. AXIS
Reins. Co., 924 F.3d 633, 643–44 (1st Cir. 2019).
USAG has the better of both these issues. The Congres-
sional and USOPC investigations were “formal proceedings”
or “formal investigations.” The claims made in those proceed-
ings were adversarial, and they raised the specter of miscon-
duct by USAG, resulting in very serious harm to hundreds of
girls and women. “Formal” has been defined as “[o]f, relating
to, or involving establishing procedural rules, customs, and
practices.” GARNER, BLACK’S LAW DICTIONARY (11th ed. 2019).
10MusclePharm Corp. v. Liberty Ins. Underwriters, 712 F. App’x 745, 749–50,
756 (10th Cir. 2017); Emplr’s Fire Ins. Co. v. Promedica Health Sys., 524 F.
App’x 241, 243, 247–250 (6th Cir. 2013).
54 No. 20-1245
“Formal” does not have to mean coercive. It can refer to the
investigation being carried out according to established rules
and procedures, which these investigations were.
As for a “wrongful act,” the USOPC investigation led to a
quasi-judicial action brought by the USOPC before itself and
against USAG. Additionally, the Congressional investigation
accused USAG of misconduct, and the fact that the request for
information was technically voluntary says little considering
that subpoenas were almost certain to follow any refusal to
cooperate. The Congressional letters were coercive, and
USAG effectively had no choice but to cooperate, either vol-
untarily or by force of law. The U.S. Senate letter states, “re-
cent reports and revelations … provide ample evidence that
USAG and MSU were negligent in acting on reports of Nas-
sar’s abuse …” and then lists specific allegations. The U.S.
House letter also strongly suggests that USAG acted wrong-
fully. “[A] lack of action allowed Nassar’s offenses to infect
nearly every level of gymnastics” … “USA Gymnastics … is
at the center of many of these failures” … “[USAG] has a sig-
nificant responsibility to its sport and athletes … Yet, the or-
ganization’s team doctor sexually abused young gymnasts
unfettered for years.”
The Indiana Attorney General’s investigation was also ac-
cusatory. It opened with a letter stating he believed USAG
was
in possession … of documentary material or
may have knowledge of a fact that is relevant to
an investigation … to determine whether (1)
[USAG] has exceeded or abused the authority
conferred on the corporation by law … (2)
whether any corporate officer has violated his or
No. 20-1245 55
her duties under Ind. Code § 23-17-14-2 … or …
Ind. Code § 23-17-13.
The Attorney General’s letter then demanded that USAG pro-
duce its rules and policies, records of background checks, in-
formation how sexual abuse complaints were handled, and
other items.
Even by Liberty’s interpretations, the claims here con-
cerned formal proceedings that investigated wrongful acts.
The same is true for the deposition of the USAG employee,
Amy White, and testimony in one of the lawsuits, which were
both formal proceedings involving the same wrongful acts.
We agree with USAG that insurance coverage exists for these
investigations and proceedings.
VI. EPL Sublimit
In addition to an overall liability limit of $5 million, the
policy here includes a $250,000 sublimit endorsement for
“Third Party EPL.” The parties dispute whether this sublimit
applies. 11 The bankruptcy court found that it did not, and thus
ruled against Liberty, but for a reason that was not argued.
That court concluded that because the policy does not define
“Third Party EPL,” and the term does not have a common
meaning, it is ambiguous and void of legal effect.
We agree with Liberty that “Third Party EPL,” although
not defined in the policy, is a term of art in the insurance
11 USAG suggests that Liberty waived appellate review of this point. But
in Liberty’s objections to the proposed findings and conclusions in the
bankruptcy court, the insurer argued that “EPL” is a term of art with a
clear meaning in the insurance industry, and that the parties’ course of
conduct in prior policies clarified the term’s meaning. So, this argument is
not waived.
56 No. 20-1245
industry. “EPL” stands for “Employment Practices Liability.”
Although Liberty offered the bankruptcy court additional ev-
idence to interpret this endorsement, the bankruptcy court
did not consider it. That decision was incorrect. In Allstate Ins.
Co. v. Dana Corp., 759 N.E.2d 1049 (Ind. 2001), the Indiana Su-
preme Court concluded that “[e]vidence of industry practice
is admissible to construe terms of art or ambiguous agree-
ments.” Id. at 1059 (citing, inter alia, 2 RUSS AND SEGALLA,
COUCH ON INSURANCE § 22.49 (3d ed. 1995)). The bankruptcy
court should have considered the extrinsic evidence offered
as to the use and meaning of “Third Party EPL" in this policy
endorsement.
With this type of insurance term of art, used in a policy in
which the parties have a history of negotiating the terms of
coverage, parol evidence should be allowed and considered,
see Dana, 759 N.E.2d at 1059–60; Cummins, Inc. v. Ace Am. Ins.
Co., No. 1:09-CV-00738-JMS, 2011 WL 130158, at *6 (S.D. Ind.
Jan. 14, 2011) (citing Dana for the same proposition), at least
in a case involving a sophisticated insured that was able to
negotiate the scope of the relevant coverage, notwithstanding
the general principle that ambiguities are construed in favor
of the insured. Everett Cash Mut. Ins. Co., 926 N.E.2d at 1012.
There may be a $250,000 aggregate limit for some or all of the
covered claims, subject to what the actual extrinsic evidence
shows about the parties’ conduct and what the term they
inserted into the policy meant. Because more fact finding is
required to resolve this question, this portion of the case is re-
manded to the district court for that to be accomplished.
VII. Conclusion
None of the activities before the policy period amounted
to a claim under the policy, and the district court did not
No. 20-1245 57
abuse its discretion when it decided not to hear additional
evidence in its review of the bankruptcy court’s proposed
findings and conclusions. So that portion of the January 13,
2020 order is AFFIRMED.
The policy’s wrongful conduct exclusion applies to only
the ten claims for which Nassar was found guilty, and not to
the remaining Nassar-related claims, for which Liberty must
provide insurance coverage. And the policy’s bodily injury
exclusion does not relieve Liberty of its duty to defend the
athlete lawsuits. Further, the policy provides coverage for
expenses and costs related to the various investigations
and other matters. The district court’s ruling for USAG that
the conduct exclusion does not apply to most of the Nassar-
related claims is thus also AFFIRMED, albeit under partially
different reasoning.
Finally, the bankruptcy court should have considered the
extrinsic evidence offered as to the use and meaning of the
“Third Party EPL" $250,000 sublimit in the policy. Accord-
ingly, that portion of its ruling is REVERSED, and this case is
REMANDED to the district court and bankruptcy court for
those proceedings.
58 No. 20-1245
BRENNAN, Circuit Judge, concurring in part and dissenting
in part.
I largely agree with the per curiam opinion’s analysis and
resolution of the issues presented in this complex appeal. I re-
spectfully part ways with my colleagues regarding only one
portion of the opinion—its evaluation of the phrase “based
upon, arising from, or in any way related to” in the wrong-
ful conduct exclusion. Per Curiam Op. § III.D.3–5.
The opinion notes that a wrongful conduct exclusion in a
D&O policy typically precludes coverage for criminal acts.
Nassar’s repeated sexual assaults and sexual abuse indisput-
ably satisfy this requirement. The opinion also correctly
concludes that the clause in the wrongful conduct exclusion
naming to whom it applies—“any Insured”—is not ambigu-
ous. I further agree that a causal connection is not required for
a claim to be “in any way related to” wrongful conduct. Ra-
ther, “related to” includes most logical connections. My lim-
ited disagreement centers on how close that logical connec-
tion must be for claims to be “in any way related to” one
another.
The plain meaning of “in any way related to” includes a
logical connection between a claim and an insured’s wrongful
conduct. But the opinion concludes that the logical connection
between the Nassar-related claims and Nassar’s criminal con-
victions does not render them “in any way related to” each
other. To me, the heavy weight of case law sets that degree of
logical connection and provides that “related to” is not
ambiguous. Because the facts here satisfy that unambiguous
definition, I conclude that the wrongful conduct exclusion ap-
plies to all the Nassar-related conduct.
No. 20-1245 59
“Related to” includes a broad range of connections under
Indiana law. See Gregory v. Home Ins. Co., 876 F.2d 602, 606 (7th
Cir. 1989); RLI Ins. Co. v. Conseco, Inc., 543 F.3d 384, 391 (7th
Cir. 2008). In Gregory, the court held that claims were related
which flowed from an attorney’s alleged errors in analyzing
the tax consequences of buying videotapes and preparing an
opinion letter which said videotapes were not securities. See
876 F.2d at 603–06. The breadth of “related,” as that term was
used in Gregory, has not been confined to that decision’s facts.
Rather, courts have cited Gregory across factual contexts and
interpreted the term “related” within an insurance policy to
be broad but not ambiguous. Gregory has been cited by federal
and state courts more than seventy times. Most of those deci-
sions cite Gregory with approval for the concept that “related”
is defined broadly within an insurance policy to unambigu-
ously include causal and logical relationships. These deci-
sions typically hold that “related” covers the conduct alleged
in the underlying lawsuits in those cases. Although some
cases distinguish Gregory and find a lack of relatedness or am-
biguity, see, e.g., Lexington Ins. Co. v. Lexington Healthcare Grp.,
Inc., 84 A.3d 1167, 1176–77 (Conn. 2014), nearly all the deci-
sions referencing Gregory cite it as standing for the broad in-
terpretation of “related.”
Two state supreme court decisions interpreting the term
“related” support this interpretation from Gregory. In the first,
Bay Cities Paving & Grading, Inc. v. Lawyers’ Mut. Ins. Co., 855
P.2d 1263 (Cal. 1993), the Supreme Court of California inter-
preted a provision of a professional-liability policy that
treated multiple claims as a single claim where the claims
arose out of “a series of related acts, error or omissions.” Id. at
1270. In interpreting that phrase, the court in Bay Cities en-
dorsed Gregory’s conception of “related” as encompassing
60 No. 20-1245
“both logical and causal connections.” See id. at 1274. “Re-
stricting the word to only causal connections improperly lim-
its the word to less than its general meaning. ‘Related’ is a
broad word, but it is not therefore a necessarily ambiguous
word.” Id. The court in Bay Cities then concluded that the term
“series of related acts, errors or omissions” unambiguously
applied to the insured’s two omissions in that case. See id.The Supreme Court of California correctly reasoned that
“related” extends beyond the facts of Gregory and those of Bay
Cities itself. As that court stated, “[m]ultiple or broad mean-
ings do not necessarily create ambiguity.” Id. at 1271. The Bay
Cities court also offered an apt analogy. Assume an insurance
policy excluded coverage for any claim arising from the oper-
ation of a “motor vehicle.” Obviously, a “motor vehicle”
could be either an automobile or a truck, but that does not
mean it must be only one or the other, rather than both. Like-
wise, the fact that “related” can encompass a wide variety of
relationships does not necessarily render the word ambigu-
ous. To the contrary, a word with a broad meaning, or multi-
ple meanings, may be used for that very reason—its
breadth—to achieve a broad purpose. Id.Another state supreme court interpreted a policy’s limita-
tion on liability for loss or damage “[i]nvolving a series of re-
lated acts,” similar to the phrase in Bay Cities. The Minnesota
Supreme Court applied Gregory and Bay Cities, holding that
phrase unambiguously limited the insurer’s liability, in Am.
No. 20-1245 61
Com. Ins. Brokers, Inc. v. Minnesota Mut. Fire & Cas. Co., 551
N.W.2d 224 (Minn. 1996). 1
There, an insured business’s employee committed 155 dis-
tinct acts of embezzlement, using two modus operandi: tak-
ing funds received from customers as insurance premiums
and issuing unauthorized checks. Id. at 229–30. Citing Greg-
ory, the court stated: “[w]e cannot so restrict the plain and
ordinary meaning of the word ‘related’ such that acts of em-
bezzlement which follow each other in time, take place at the
same business, and are committed by the same employee are
not ‘related’ as that word is commonly used.” Id. at 228. In
determining whether wrongful acts are part of a “series of re-
lated acts,” the court further held that factors such as
“whether the acts are connected by time, place, opportunity,
pattern, and, most importantly, method or modus operandi”
should be considered. Id. at 231.
This case law defines, unambiguously, the appropriate
logical connection between claims such that they are “related
to” one another in some manner. Applying that understand-
ing to the facts here demonstrates that there is an unequivo-
cal, non-tenuous logical connection between those criminal
acts for which Nassar was convicted and sentenced and the
rest of Nassar’s sexual assaults and sexual abuse.
1 551 N.W.2d at 228: “As stated in Gregory, the common understanding of
the word “related” covers a very broad range of connections, both logical
and causal. 876 F.2d at 606 … The relationship between [the employee]’s
acts of embezzlement is not so ‘attenuated or unusual’ that American
Commerce could not have expected that the acts would be treated as
somehow being related. See Bay Cities, 855 P.2d at 1275; Gregory, 876 F.2d
at 606. We therefore conclude that the phrase ‘series of related acts’ as used
in the policy in this case is not ambiguous.”
62 No. 20-1245
All the crimes to which Nassar pleaded guilty and for
which he was sentenced were for first degree criminal sexual
conduct in violation of Michigan Combined Law 750.520b. All
the victims in these ten convictions were under 13 years of
age, or between 13 and 15 years of age. The plea agreements
in each county recite the factual bases for each of the ten
crimes; all those facts are the same as in the remainder of his
sexual abuse—digital sexual penetration—and the plea agree-
ments use identical language for each count.
All the claims for Nassar’s assaults of hundreds of female
athletes share identical characteristics with his ten convictions
for criminal sexual abuse. All Nassar’s sexual molestations in-
volved the same perpetrator. All victims were girls or young
women, and all gymnasts. All the victims visited Nassar un-
der the guise of medical treatment, and in all Nassar’s sexual
abuse he exploited his position as a physician. These highly
similarly-situated victims saw Nassar under a purported
“doctor–patient” relationship, which was actually between
perpetrator and victim. All Nassar’s sexual abuse occurred
during his volunteering for the USAG, and all his sexual as-
saults were perpetrated with the same modus operandi, as de-
scribed in detail in an independent investigation report.
As Gregory states, “[a]t some point, of course, a logical
connection may be too tenuous reasonably to be called a rela-
tionship.” 876 F.2d at 606. So, it is not the strength of the rela-
tionship between the claims, but whether that connection is
“too tenuous” to fairly be called a relationship at all. The ques-
tion is how attenuated must the connection be before the
claimed or alleged relationship breaks down and ambiguity
is created. See, e.g., Highwoods Props., Inc. v. Exec. Risk Indem.,
Inc., No. 03-0077-CV-W-NKL, 2004 WL 4986355, at *10 (W.D.
No. 20-1245 63
Mo. May 11, 2004), aff’d, 407 F.3d 917 (8th Cir. 2005) (relying
on Gregory and concluding that a similarly worded exclusion
applied to multiple claims that arose out of a single corporate
takeover where “each maneuver was designed to” achieve the
same outcome, even though all the operative facts and legal
theories of each claim were not the same); Am. Med. Sec., Inc.
v. Exec. Risk Specialty Ins. Co., 393 F. Supp. 2d 693, 707 (E.D.
Wis. 2005) (citing the “too tenuous” language from Gregory
and holding that dozens of claims were “clearly ‘related’ in
any meaningful sense of the word” because they were all
based on the insured’s unified, nationwide business practice
in underwriting insurance policies, even though the plaintiffs,
venues, and dates in each lawsuit were different). Because
there is a logical relationship between the ten criminal counts
to which Nassar pleaded guilty and all his sexual abuse and
molestations, the wrongful conduct exclusion unambigu-
ously bars coverage.
The Bay Cities decision is correct that “related” in an insur-
ance policy—where not specifically defined—includes logical
relationships, as stated in Gregory and RLI Ins. The use of “in
any way related to” in the policy Liberty issued to USAG is
not ambiguous and covers logical relationships, in accordance
with the “broad purpose” alluded to in Bay Cities. Indeed, the
per curiam opinion properly points out that the phrase “based
upon, arising from, or in any way related to” is used five times
in the policy when delineating claim exclusions, plus four
more times in an endorsement to the policy that adds further
exclusions. Every time that phrase introduces an exclusion,
this language broadens the circumstances that fall within it.
So, these sophisticated parties, in negotiating this policy,
agreed upon and included this phrase nine times, in each in-
stance to broaden the scope of an exclusion.
64 No. 20-1245
The Minnesota Supreme Court’s analysis in Am. Com. Ins.
Brokers, Inc. is also persuasive. There is no reason to interpret
a provision excluding coverage for a claim that is “in any way
related to” wrongful acts differently from a provision limiting
coverage for a “series of related acts.” If one wrongful act is
part of a “series of related acts,” as in Am. Com. Ins. Brokers,
Inc., a claim for coverage of a lawsuit alleging the one wrong-
ful act is necessarily “in any way related to” the insured’s
prior wrongful acts that form part of a series of related acts.
As that court correctly concluded, whether a common
“method or modus operandi” was used is a crucial factor in
determining whether wrongful acts are related. 551 N.W.2d
at 231. All the Nassar-related conduct included precisely the
same method and modus operandi—abuse of young, vulner-
able, female gymnasts under the guise of medical treatment—
for the ten crimes acts of which he was convicted as well as
for all his other sexual abuse.
“Related to” under Indiana law, therefore, includes not
just the ten counts in the two Michigan state criminal cases,
but all the claims logically connected to them, which comprise
Nassar’s sexually abusive conduct. Given the tight similari-
ties involved in all this sexual abuse, there is no reasonable
interpretation of the insurance contract under which the Nas-
sar-related claims would not be “in any way related to” the
ten criminal counts for which Nassar was finally adjudicated
guilty. At no point has USAG advanced—or explained the
contours of and analysis supporting—the purportedly rea-
sonable alternative interpretation that is required, under In-
diana law, to give rise to ambiguity.
Nassar’s acts targeted hundreds of victims. But that is not
a distinguishing criterion when interpreting the wrongful
No. 20-1245 65
conduct exclusion. Several courts have determined that the
fact that an insured’s acts impact different victims does not
create an ambiguity regarding whether those acts are logically
connected. Instead, a common perpetrator and a common
modus operandi have unambiguously given rise to related
acts. See, e.g., Kilcher v. Cont’l Cas. Co., 747 F.3d 983, 989–90 (8th
Cir. 2014) (acts done to different victims were unambiguously
“logically … connected,” as defined in the insurance policy,
where each victim shared common characteristics such that
he or she “presented the same opportunity” to the perpetra-
tor). In that case, modus operandi was a key consideration in
determining there was no ambiguity. Id.; see also Cont’l Cas.
Co. v. Wendt, 205 F.3d 1258, 1263–64 (11th Cir. 2000) (acts done
to different victims through a common modus operandi un-
ambiguously constituted “related wrongful acts” because
there was a logical connection between them, despite the fact
that the wrongful acts “resulted in a number of different
harms to different persons”).
This analysis is also supported by the Eleventh Circuit’s
decision in HR Acquisition I Corp. v. Twin City Fire Ins. Co., 547
F.3d 1309 (11th Cir. 2008). The policy at issue in that case had
an exclusion for “prior litigation” that was “based upon, aris-
ing from, or in any way related to” any “demand, suit, or
other proceeding against any Insured which was pending on
or existed prior to the applicable Prior Litigation Date speci-
fied by endorsement to this Policy, or the same or substan-
tially the same facts, circumstances or allegations which are
the subject of or the basis for such demand, suit, or other pro-
ceeding.” Id. at 1312.
The question in HR Acquisition I Corp., under Alabama
law, was whether a false claim qui tam action was “in any way
66 No. 20-1245
related” to a shareholder derivative suit for purposes of the
exclusion. The Eleventh Circuit concluded that the exclusion
was not ambiguous, and that the lawsuits were related. Id. at
1315–16. The court explained that “in any way related to” is
“very broad language” that presents a “low standard,” so it
was not necessary for the same transactions to be alleged in
both lawsuits for those lawsuits to be “in any way related.”
Id. at 1316. That the same defendant was sued in both lawsuits
“for the same type of wrongdoing” was “certainly” enough to
meet the “low standard” of “in any way related.” Id. Because
the exclusion required only that the suits be “in any way re-
lated to” each other, the fact that they involved different
plaintiffs and different theories of recovery did not change the
result. Id.The same is true here, where the wrongful conduct exclu-
sion uses the identical phrase to exclude coverage for claims
“based upon, arising from, or in any way related to” an in-
sured’s wrongful conduct. As in HR Acquisition I Corp., Nas-
sar—the same perpetrator—used the same modus operandi
by using his position of trust as a doctor to abuse vulnerable
athletes. The Nassar-related claims allege those same wrong-
ful acts, and they share both a common perpetrator and a
common modus operandi with the ten acts that all agree were
finally adjudicated.
The per curiam opinion concludes that the cases cited
above present more straightforward facts than the difficult
circumstances of this case; in my colleagues’ view, this case is
unique. It is true that the scope of Nassar’s abuse and victim-
ization is enormous. But as a court we must play the cards—
here, the text of the insurance policy and the precedents that
have interpreted identical or nearly identical language—we
No. 20-1245 67
are dealt. Deep research has revealed the contours of “relat-
edness” in the law, including the logical connection identified
above. Notwithstanding the challenging facts here, we must
discern and apply the available law.
Although the per curiam opinion warns of the unforeseen
consequences of applying the plain language of “in any way
related” to the facts of this case, Per Curiam Op. § III.D.3, I do
not agree that such considerations should drive our analysis.
As an analogy, in matters of statutory interpretation, federal
courts must refuse “to soften the import of Congress’ chosen
words even if we believe the words lead to a harsh outcome.”
Baker Botts L.L.P. v. ASARCO LLC, 576 U.S. 121, 134 (2015) (ci-
tation omitted). Likewise, when construing an insurance con-
tract under state law, we should not interpret its terms to
avoid what is deemed a harsh result—here, for the insured,
but potentially for insurers in a future case. See Per Curiam
Op. § III.D.3. Instead, we must apply the relevant legal prin-
ciples to the specific contractual provision at issue. In this
case, regardless of the outcome that follows, the contractual
provision excluding coverage for claims that are “in any way
related to” the finally adjudicated wrongful conduct of an in-
sured “means what it says.” Wisniewski v. Bennett, 716 N.E.2d
892, 897 (Ind. 1999).
As the per curiam opinion recognizes, the failure to define
a term or phrase in an insurance policy does not necessarily
render that policy language ambiguous. Instead, an ambigu-
ity exists only “where the provision is susceptible to more
than one reasonable interpretation.” Colonial Penn Ins. Co. v.
Guzorek, 690 N.E.2d 664, 667 (Ind. 1997) (citation omitted); ac-
cord Am. Home Assur. Co. v. Allen, 814 N.E.2d 662, 666–67 (Ind.
Ct. App. 2004) (citing Guzorek, 690 N.E.2d at 667). USAG has
68 No. 20-1245
not advanced a reasonable interpretation of the wrongful con-
duct exclusion under which the claims for coverage of the
Nassar related claims would not be “in any way related to”
the ten counts of sexual abuse for which Nassar was finally
adjudicated guilty. The phrase “based upon, arising from, or
in any way related to” thus is not ambiguous.
There is another aspect to this debate. If this claims-made
D&O policy is a mismatch for this type of tremendously dif-
ficult and challenging loss, perhaps it is because USAG is try-
ing, per the idiom, to “put a round peg in a square hole.” A
mismatch between complex factual circumstances and policy
language does not mean that language is ambiguous or must
be viewed from the standpoint of the insured. The factual dis-
tinguishability of this case from the other decisions determin-
ing the scope of “related to” should be a signal that a claim
has been made seeking coverage on a policy that is designed
for circumstances far different than those presented here. Re-
call, Liberty is one of many insurers USAG sued, and the
bankruptcy litigation implicates numerous insurance policies
issued by those companies. That this specific policy, including
its particular wrongful conduct exclusion, does not fit these
facts does not mean that coverage follows.
Court decisions interpreting “related” in insurance poli-
cies, across a wide variety of contexts, support this analysis
and the conclusion that the wrongful conduct exclusion’s lan-
guage is unambiguous and applies to claims “based upon,
arising from or in any way related to” Nassar’s sexual abuse
that was finally adjudicated in his guilty pleas and for which
he was sentenced. So, I CONCUR with the per curiam opinion,
except that I respectfully DISSENT from § III.D.3–5. I would
conclude that the wrongful conduct exclusion in the
No. 20-1245 69
insurance policy applies to all the Nassar-related conduct,
thus requiring judgment to be entered for Liberty.