APAC-Atlantic v. Owners Insurance Company - Insurance Indemnification Dispute

UNPUBLISHED UNITED STATES COURT OF AP PEALS FOR THE FOURTH CIRCUIT No. 24 - 1969 APAC - ATLANTI C, INC., Plaintiff – App ellant, v. OWNERS INSURAN CE COMPANY, Defend ant – Appellee. Appeal from the United States District Co urt for the Western District of North Carolina, at Asheville. Max O. Cogburn, Jr., District Judge. (1:23 - cv - 00167 - MOC - WCM) Argued: October 22, 2025 Decided: February 18, 2026 Before NIEMEYER, KING, and HARRIS, Circuit Judges. Vacated and remanded by un published opi nion. Judge Harris wrote the opinion, in which Judge Niemeyer and Judge King joined. ARGUED: Kelly Margolis Dagger, ELLIS & WINTERS, LLP, Raleigh, No rth Carolina, for Appellant. Jeffrey S. Bolster, BOLSTER ROGERS, PC, Charlotte, North Carolina, for Appellee. ON BRIEF: J. Michael Malone, HENDREN REDWINE & MALONE PLLC, Raleigh, North Carolina, for Appellant. Melissa Mon roe, BOLSTER ROGERS, PC, Charlotte, North Carolina, for App ellee. Unpublished opinions are not binding p recedent in this circuit.

2 PAMELA HARRIS, Circuit Judge: This appeal is about an insurance c ompany’s dut y to in demnify. APAC - Atlantic, Inc., was repaving a North C arolina highway with the assistance of subcontracto r Emery Sealco, Inc., when two motorcycles crashed on the highway. APAC paid a settlement to the victims of the accidents. It th en sued Owners Insurance Company for indemnification under a policy that required Owners to indemnify APAC for liability “arising out of” Emery’s w ork on the hi ghway pr oject. On cross - motions for summary jud gment, the district court held that APAC ’s liability to the accident victims did not “ arise out of ” Emery’s work for APAC, and granted summary judgment to Owners. We disagree. APAC’s liability to the victims is causally connected to Emery’s work, and under North Carolina law, that means APAC’s liability “arises out of” Emery’s work. Accordingly, we vacate the district court’s judgment and remand with in structio ns to enter judgment in APAC’s favor. I. A. In 2018, the North Carolina Department of Tran sportation (NCDOT) hired APAC - Atlantic, Inc., fo r a highway repaving p roject. As part of its wo rk, APAC would “mill” – grind away – the top layer of o ld pavement fro m the highway and then replace that layer with new asphalt. Once APAC put down the new layer of asphalt, the highway w ould be restored to its original height. Bu t in the interim, APAC’s work created uneven pav ement conditions: Lanes still “milled down” were lower than adjacent lanes that already had been

3 restored with new asphalt. That kind of uneven pavement is dangerous, especially for motorcyclists switching between un even lanes. So NCDOT required APAC to install, both before and within its work areas, signs that warned oncoming motorists about uneven pavement. Th r ough a series of agreements, APAC hired Emery Sealco, Inc., as a sub contractor to place uneven pavement signs “near the beginning of the project” and “every half mile” thereafter. J.A. 580. Emery obtained liability insurance from Owners Insuran ce Company for its work on the project and added APAC to that policy as an additional insu red party. Under th e terms of the policy, Owners had a dut y to defend a nd inde mnify APAC for any liability “arising out of” Emery’s work fo r APAC. J.A. 323. Th e scope of that “arising out of” policy language is the issue now on ap peal. B. This case began with two separate moto rcycle accidents on an area of highway that APAC was repaving. While APAC’s work was underway, two motorcyclists lost control of their vehicles while switching between lanes that were temporarily unev en as a result of APAC’s work. The accidents were very serious: All o f the victims sustained sev ere bodily injuries, and one lost his life. The victims sued APAC, alleg ing, among other things, that APAC was negligent because it failed to place unev en pavement signs in advance of the uneven lanes. Emery had placed uneven pavement signs within th e area in which APAC was wo rking. But the crashes occurred at the very start of the work area, and there were no uneven pavem ent signs before that point, as would have been necessary to give the victims advance warning

4 of the lane conditions. Indeed, the victims’ expert witnesses identified the lack of such advance - w arning signs as one of the main cau ses of both crashes. APAC settled the victims’ case. It then asked Owners to indemnif y it by paying f or the settlement. Owners refused, lead ing to this lawsuit. C. APAC sued Owners in North Carolina state court, alleging that Owners breached the insurance policy by failing to indemnify APAC for its settlement. Owners removed the case to federal d istrict court, and eventually, th e parties filed cross - motions for summary j udgment. APAC and Owners agreed on the dispositive issue: Under the terms of the Owners policy, Owners was required to in demnify APAC if and only if APAC’s liability in the victims’ case “arose out of” Emery’s signage work on the highway p roject. Applying North Carolina law, the district cou rt held that APAC’s liability did not “arise out of” Emery’s work for A PAC, and thus gra nted Ow ner s ’s moti on for summary j udgment and denied APAC’s. APAC - Atl., Inc. v. Own er’s Ins. Co., 2024 WL 4271580, at *7 (W.D.N.C. Sep. 23, 2024). The district court took a fault - based approach to the question of wh ether APAC’s liability arose out of Emery’s work. It acknowledged that AP AC and Emery had agreed that Emery would place uneven pavemen t signs throughout the project area, and that Emery had done so. But, the district court found, APAC had not delegated to Emery the responsibility for the specific uneven pavement signs requ ired by NCDOT. See id. at *5 – 6. Instead, the district cou rt determined, the blame rested with APAC and its failure to

5 ensure that the required signs were posted. Id. at *7. It followed, the district cour t reasoned, that APAC’s liability to the victims did not arise out of Emery’s wo rk. Id. (citing Davis v. LTV Steel Co., 716 N.E.2d 76 6 (Ohio Ct. Ap p. 1998) (finding that “arising out of” policy language protects a contractor only fro m liability for the negligence of its subcontractor)). This timely appeal followed. II. We review de novo a district court ’ s disposition of cross - mo tions for summary judgment. Grp. Home on Gi bson Island, LLC v. Gi bson Isl and Corp., 14 4 F.4th 522, 531 (4th Cir. 2025). We examine each motion separately, viewing the facts and inferences in the light most favorable to the no n - moving p arty. Id. If a reasonable jury could return a verdict for the non - movant, then a genu ine factual dispute exists, and summary judgment is improper. Id. But “ if the facts are undisputed, we are free to direct the entry of an order awarding summary judgment to the party whose motion was denied.” Bauer v. Lynch, 812 F.3d 340, 351 (4th Cir. 2016) (citation and internal quotation marks omitted). We likewise review de novo the district court’s in terpretation of the Owners policy, which underlies its summary judgment ru ling. Young v. Equinor US A Onshore Props., Inc., 982 F.3d 201, 205 – 06 (4 th Cir. 2020). That q uestion is governed by North Carolina law, as the district court ex plained and the parties agree. APAC - Atl., 2024 WL 42 71580, at *4.

6 The parties also agree, as they h ave from the start, that to decid e this case we need only answe r one ques tion: Does APAC’s liability in the victims’ case “ar i se out of” Emery’s work, und er the terms of the Ow ners policy? North Carolina courts constru e the phrase “arising out of” broadly where, as here, it is used in an insurance contract to extend coverage. Affinity Living G rp., LLC v. StarS tone Specialty Ins. Co., 959 F.3d 6 34, 641 (4t h Cir. 2020). “Arising out o f,” the Supreme Court o f North Carolina has explained, “are words of much broader significance than ‘caused by.’” State Cap. In s. Co. v. Nationwide Mut. Ins. Co., 350 S.E.2d 66, 69 (N.C. 1986). So long as APAC’s liability to the motorcycle accident victims is “inciden t to” or “ha[s] connection with” E mery’s work in placing uneven pavement signs in th e work area, it “arises ou t of” that work. I d. If APAC can demonstrate “only some causal con nection,” it is entitled to indemnification. A ffinity Living Grp., 959 F.3d a t 641. The undisputed facts in this case satisfy that standard. All agree that APAC’s liability to the accident victims stemmed in part from the improper placement of uneven pavement signs, as established by the reco rd from the victims’ case. And no one disput es that Emery installed uneven pavement signs around the pro ject area for APAC. That work by Emery has a “connection” with APAC’s liability – wh ich, again, turned in part on the placement of those signs. Under North Carolina law, it follows that APAC’s liability “arises out of” Emery ’s work, State Cap. Ins. Co., 350 S. E.2d at 69, and th at APAC is thus entitled to summary judgment, Baue r, 812 F.3d at 351. The district cou rt reached a different conclusion by employing a fault - based analysis drawn from an Ohio Court of Appeals decision. See APAC - Atl., 2024 WL 4271580, at *7

7 (citing Davis, 716 N.E.2d 766). In Davis, the Ohio court construed “arising out of” as protecting a contractor like APAC only from liability stemming from a subcontractor’s negligence, and not from its o wn. 716 N.E.2d at 769. What mattered in Da vis, in sho rt, was who w as at fault. Id. But the Court of Appeals of North Carolina has expressly rejected that interpretation of “arising out of.” Instead, it reads “arising out of” as providing coverage to a contractor “even fo r liability arising from the [contractor’s] o wn independent negligence,” so long as there i s some “causal nexus” between the contractor’s liability and the subcontractor’s work. Pulte Home Corp. v. Am. S. Ins. Co., 647 S.E.2d 614, 619 (N.C. Ct. App. 2007). ∗ It is enough, in other words, that APAC’s liability arises from Emery’s work, even if it does not arise from Emery’s negligence or misconduct. And under that standard, as discussed, APAC is entitled to indemnification under the terms of the Owners policy. III. For the for egoing reasons, we vacate the district court’s grant of summary judgment to Owners and remand with instruction s to enter judgment in APAC’s favor. ∗ Pulte was decided by th e Court of Appeals of North Carolina, not b y North Carolina’s Supreme Court. Bu t both parties identify Pulte as the le ading North Carolina case on the issue before us and treat the decision as authoritative. We ag ree that Pulte provides a reliable “indici[um] of wh at state law is.” See C olo. Bankers Life Ins. Co. v. Acad. Fin. Asset s, LLC, 60 F.4th 148, 154 (4th Cir. 2023) (explaining that decisions of a state’s intermediate app ellate court, unlike those of its highest co urt, are not binding statements of state law but are “the next best indicia”). Our job is to predict how North Carolina’s highest court would ru le on this question, and we have been given no reason to think it would depart from Pulte. See id.

8 VACATED AND REMANDED