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.