OPINION
RENDELL, Circuit Judge,
This action arises from a protracted insurance dispute between Appellee USA Container Co., Inc. (“USA Container”), a company that supplies industrial containers, logistical services, and warehousing, and its insurer, Appellant Travelers Property Casualty Company of America (“Travelers”). Because we write for the benefit of the parties, who by now are well familiar with the details of this case, we will recount only the essential facts.
In 2006, USA Container contracted with Meelunie B.V./Amsterdam (“Meelunie”), a corn syrup distributor, to arrange for the
transfer of corn syrup from rail cars to drums and then on to Meelunie’s customers overseas. For the corn syrup to be moved from the rail cars to the drums, it had to be heated in accordance with standard operating procedures (“SOPs”) developed by Meelunie’s corn syrup supplier, Archer Daniels Midland. USA Container subcontracted with Passaic River Terminal, LLC (“Passaic River”) to perform all of the work necessary to transfer the corn syrup to the drums for transport. Passaic River failed to follow the SOPs and damaged Meelunie’s com syrup by overheating it. The damage was discovered after the corn syrup was shipped to Meelunie’s customers, who rejected it. Meelunie subsequently sold the com syrup at a reduced rate and ultimately incurred $782,723.77 in damages. Meelunie demanded that USA Container compensate it for its loss and USA Container turned to Travelers, claiming coverage for the loss. Travelers denied USA Container’s claim, asserting that the damage was not covered under the terms of the parties’ Commercial General Liability policy (the “CGL Policy”). USA Container and Meelunie later entered into a settlement agreement (the “Settlement Agreement”). Multiple rounds of litigation between USA Container and Travelers followed, and the District Court issued two orders, first finding that the CGL Policy covered the property damage, and second that Travelers was obligated to pay USA Container for its loss in the amount of $732,000 as set forth in the Settlement Agreement. The District Court also awarded USA Container prejudgment interest and attorney’s fees. Travelers timely appealed the District Court’s orders.
The issues we must now address are: (1) whether USA Container’s loss arising from the damage'to the corn syrup is covered under the terms of the CGL Policy, (2) whether the District Court correctly concluded that USA Container’s loss under the Settlement Agreement was for $732,000 and (3) whether the District Court correctly calculated prejudgment interest and attorney’s fees.
Before we begin our analysis, we note that the Erie doctrine instructs that where, as here, a federal court sits in diversity, state substantive law applies.
Gasperini v. Ctr. of Humanities, Inc.,
518 U.S. 415, 427, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996). Here, New Jersey law applies and, as we have long held under Erie, a federal court is bound to follow state law as announced by the state’s highest court (here, the New Jersey Supreme Court).
Edwards v. HOVENSA, LLC,
497 F.3d 355, 361 (3d Cir. 2007).
I. Insurance Coverage
The District Court granted USA Container’s motion for partial summary judgment on its breach of contract claim against Travelers.
We review a grant of summary' judgment de novo under the same standard as the district court applied.
Cypress Point Condominium Ass’n, Inc. v. Adria Towers, L.L.C.,
226 N.J. 403, 143 A.3d 273, 279-280 (2016). Because there is no genuine issue of material fact
before us, we do not afford deference to the District Court’s legal determinations and instead review its coverage conclusions de novo.
Id.
at 280.
The issue of insurance coverage turns on the terms of the CGL Policy that USA Container procured from Travelers, The parties agree that, as the insured, USA Container has the burden to prove coverage, while the burden to prove the applicability of any exclusion falls on the insurer, Travelers.
A. Occurrence
The CGL Policy provides, in relevant part, that Travelers is required “to pay those sums that [USA Container] becomes legally obligated to pay as damages because of .., ‘property damage’ to which the insurance applies.” A. 75. The insurance applies to “property damage”
if it is caused by an “occurrence,”
id.,
which is defined as “an .accident, including continuous or repeated exposure to substantially the same general harmful conditions.” A. 88. In
Cypress Point,
an opinion the New Jersey Supreme Court issued after the District Court’s partial summary judgment grant, the court defined an “accident” as “encompassing] unintended and unexpected harm caused by negligent conduct.”
143 A.3d at 287. The property damage that occurred here clearly meets the criteria of this test.
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OPINION
RENDELL, Circuit Judge,
This action arises from a protracted insurance dispute between Appellee USA Container Co., Inc. (“USA Container”), a company that supplies industrial containers, logistical services, and warehousing, and its insurer, Appellant Travelers Property Casualty Company of America (“Travelers”). Because we write for the benefit of the parties, who by now are well familiar with the details of this case, we will recount only the essential facts.
In 2006, USA Container contracted with Meelunie B.V./Amsterdam (“Meelunie”), a corn syrup distributor, to arrange for the
transfer of corn syrup from rail cars to drums and then on to Meelunie’s customers overseas. For the corn syrup to be moved from the rail cars to the drums, it had to be heated in accordance with standard operating procedures (“SOPs”) developed by Meelunie’s corn syrup supplier, Archer Daniels Midland. USA Container subcontracted with Passaic River Terminal, LLC (“Passaic River”) to perform all of the work necessary to transfer the corn syrup to the drums for transport. Passaic River failed to follow the SOPs and damaged Meelunie’s com syrup by overheating it. The damage was discovered after the corn syrup was shipped to Meelunie’s customers, who rejected it. Meelunie subsequently sold the com syrup at a reduced rate and ultimately incurred $782,723.77 in damages. Meelunie demanded that USA Container compensate it for its loss and USA Container turned to Travelers, claiming coverage for the loss. Travelers denied USA Container’s claim, asserting that the damage was not covered under the terms of the parties’ Commercial General Liability policy (the “CGL Policy”). USA Container and Meelunie later entered into a settlement agreement (the “Settlement Agreement”). Multiple rounds of litigation between USA Container and Travelers followed, and the District Court issued two orders, first finding that the CGL Policy covered the property damage, and second that Travelers was obligated to pay USA Container for its loss in the amount of $732,000 as set forth in the Settlement Agreement. The District Court also awarded USA Container prejudgment interest and attorney’s fees. Travelers timely appealed the District Court’s orders.
The issues we must now address are: (1) whether USA Container’s loss arising from the damage'to the corn syrup is covered under the terms of the CGL Policy, (2) whether the District Court correctly concluded that USA Container’s loss under the Settlement Agreement was for $732,000 and (3) whether the District Court correctly calculated prejudgment interest and attorney’s fees.
Before we begin our analysis, we note that the Erie doctrine instructs that where, as here, a federal court sits in diversity, state substantive law applies.
Gasperini v. Ctr. of Humanities, Inc.,
518 U.S. 415, 427, 116 S.Ct. 2211, 135 L.Ed.2d 659 (1996). Here, New Jersey law applies and, as we have long held under Erie, a federal court is bound to follow state law as announced by the state’s highest court (here, the New Jersey Supreme Court).
Edwards v. HOVENSA, LLC,
497 F.3d 355, 361 (3d Cir. 2007).
I. Insurance Coverage
The District Court granted USA Container’s motion for partial summary judgment on its breach of contract claim against Travelers.
We review a grant of summary' judgment de novo under the same standard as the district court applied.
Cypress Point Condominium Ass’n, Inc. v. Adria Towers, L.L.C.,
226 N.J. 403, 143 A.3d 273, 279-280 (2016). Because there is no genuine issue of material fact
before us, we do not afford deference to the District Court’s legal determinations and instead review its coverage conclusions de novo.
Id.
at 280.
The issue of insurance coverage turns on the terms of the CGL Policy that USA Container procured from Travelers, The parties agree that, as the insured, USA Container has the burden to prove coverage, while the burden to prove the applicability of any exclusion falls on the insurer, Travelers.
A. Occurrence
The CGL Policy provides, in relevant part, that Travelers is required “to pay those sums that [USA Container] becomes legally obligated to pay as damages because of .., ‘property damage’ to which the insurance applies.” A. 75. The insurance applies to “property damage”
if it is caused by an “occurrence,”
id.,
which is defined as “an .accident, including continuous or repeated exposure to substantially the same general harmful conditions.” A. 88. In
Cypress Point,
an opinion the New Jersey Supreme Court issued after the District Court’s partial summary judgment grant, the court defined an “accident” as “encompassing] unintended and unexpected harm caused by negligent conduct.”
143 A.3d at 287. The property damage that occurred here clearly meets the criteria of this test.
Travelers disregards the broad contours of this “occurrence” test and urges instead that there is a “faulty workmanship” limitation on the CGL Policy’s initial grant of coverage. Travelers reiterates this as the central point throughout its supplemental briefs—that the CGL Policy does not provide coverage to replace or repair defective work—and dismisses the damages here as “economic damages” that it maintains are never covered because they are part of the foreseeable risk inherent in any job. Travelers relies on
Weedo v. Stone-E-Brick, Inc.,
81 N.J. 233, 405 A.2d 788 (1979), for this proposition.
But in
Cypress
Point,
the New Jersey Supreme Court rejected this very argument: “[R]elying on
Weedo,
the insurers assert that damage to an insured’s work caused by a subcontractor’s faulty workmanship is foreseeable to the insured developer because damage to any portion of the completed project is the normal, predictable risk of doing business .... We disagree.” 143 A.3d at 287. The court also cited favorably to
U.S. Fire Insurance Co. v. J.S.U.B., Inc.,
979 So.2d 871 (Fla. 2007), where the Florida Supreme Court rejected an insurer’s argument that faulty workmanship can never be an accident because it results in reasonably foreseeable damages; and “confirmed] that the 1986 revisions to the standard CGL policy ... specifically covered] damage caused by faulty workmanship to other parts of work in progress; and damage to, or caused by, a subcontractor’s work after the insured’s operations are completed.”
Cypress Point,
143 A.3d at 282 (alterations in original) (citation and quotation marks omitted). Relatedly,
Cypress Point
noted that
U.S. Fire
represents a “strong recent trend in the case law [of most federal circuit and state courts] interpreting] the term ‘occurrence’ to encompass unanticipated damage to nondefective property resulting from poor workmanship.”
Id.
at 285 (alterations in original) (citation omitted).
Accordingly, we affirm the District Court’s finding that USA Container’s claim falls within the basic coverage provisions of the CGL Policy.
B. Exclusions
Travelers asserts that even if the occurrence issue were resolved against, it, two exclusions, j(6) and n, apply to this case, and that each would be sufficient to relieve Travelers of its obligation under the CGL Policy to cover USA Container’s loss. These assertions are incorrect.
Exclusion j(6) provides that coverage shall not extend to “[t]hat particular part of any property that must be restored, repaired, or replaced because ‘your work’ was incorrectly performed on it.” A. 78. The District Court correctly noted that Meelunie’s damaged corn syrup was not “restored, repaired, or replaced” as required by Exclusion j(6)’s clear terms. As it did before the District Court, and then again before this Court during oral argument on March 9, 2017, Travelers has failed to identify any evidence to the contrary. Nor can it point to any contractual provision that makes it such that the corn syrup, if damaged, “must be” restored,
repaired, or replaced.
While Travelers urges in its most recent brief that Meelu-nie’s damages “cannot be characterized as anything other than damages associated with the
repair/replacement
of the product rejected due to USA Container’s faulty work,” Appellant’s Supp. Br. 8 (emphasis added), this claim is baseless, and Travelers does not—and cannot—point to anything in the record to support it. Indeed, the record clearly reflects Travelers’ own awareness that Meelunie sold the corn syrup at a reduced rate because of the damage.
See
A. 287.
Travelers’ attempt to impose a business risk exclusion based on Exclusion j(6) fares no better. This exclusion is not about
any
risks inherent in any business; it is about clearly demarcated scenarios that did not occur here. As
Cypress Point
noted, if an insurer identifies a risk that it does not want to insure, “it can clearly amend the policy to exclude coverage.” 143 A.3d at 289. Travelers did not fashion a business risk or “your work” exclusion that would apply to this set of facts when it negotiated the CGL Policy with USA Container, and it may not retroactively do so now.
,
Travelers makes a weak argument as to Exclusion n, which applies to events that did not occur here: precautionary recalls.
See Newark Ins. Co. v. Acupac Packaging, Inc.,
328 N.J.Super. 385, 746 A.2d 47, 56 (App. Div. 2000). It is questionable whether we can even properly consider Exclusion n because Travelers did not invoke it until responding to USA Container’s brief in support of its motion for summary judgment. But potential procedural infirmity aside, it is abundantly clear that this exclusion is irrelevant to this case. The record does not in any way suggest, let alone establish, that Meelunie ever recalled the damaged corn syrup. To the contrary, Travelers’ own investigation showed that Meelunie
sold
the damaged corn syrup at a reduced price.
We therefore affirm the District Court’s finding that neither Exclusion j(6) nor Exclusion n applies to this case. Accordingly, USA Container’s loss is covered under the terms of the CGL Policy.
11. Settlement Agreement
Travelers argues that the District Court erred in interpreting USA Container’s loss under the Settlement Agreement to be $732,000 and awarding that amount to USA Container. Because we agree that the District Court erred in its interpretation, we will vacate its order and remand for entry of judgment for loss of $425,000 to USA Container and for an award of $425,000 to USA Container.
“A settlement agreement between parties to a lawsuit is a contract,”
Nolan v. Lee Ho,
120 N.J. 465, 577 A.2d 143, 146 (1990), and we review a district court’s interpretation de novo,
Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt. Osteopathic Med. & Physical Therapy,
210 N.J. 597,
46 A.3d 1272, 1276 (2012) (interpretation of a contract is a question of law).
The Settlement Agreement obligated USA Container to pay Meelunie $425,000 in two installments, and USA Container paid that amount. The Settlement Agreement also contained the following provision:
In the event that
USA Container receives any monies, proceeds, or compensation from Passaic River, an insurance carrier[,] or any other third party for damages alleged in the Lawsuit ... then USA Container and Meelunie
shall share equally
in any such recovery....
At that such time
that Meelunie has received payment totaling [$732,000] from USA Container, Passaic River, any insurance carrier and/or any other party concerning the claims it has asserted in the Lawsuit, then any and all additional funds recovered by USA Container from any third party shall belong exclusively to USA Container.
A. 528-29 (emphasis added). Thus, USA Container committed to paying Meelunie a maximum additional $307,000
only if
it receives payment from another party at some point in the future. The sharing scenario imagined by the Settlement Agreement—USA Container splits its additional recovery with Meelunie until Meelunie has recouped $732,000—is purely hypothetical. USA Container has not parted with any money under this provision.
In finding the Settlement Agreement to be for $732,000, the District Court focused on New Jersey law’s concern that settlement agreements be “reasonable” and entered into in “good faith.” A. 22. But that focus, which USA Container underscores in its briefs, is off-point as Travelers does not directly urge that these criteria are not satisfied here, but rather, that the Settlement Agreement does not support a loss to USA Container in the amount of $732,000. Travelers argues instead that while $732,000 is a maximum amount that USA Container could recover under the terms of the Settlement Agreement, its loss is limited to $425,000.
The language of the leading New Jersey case on settlement obligations is instructive:
[T]he insurer is liable for the amount ... of the settlement
made
by [the insured]. The only qualifications to this rule are that the amount
paid
in the settlement be reasonable and that the payment be made in good faith.... The measure of the insured’s damages is ... the amount
paid
by the insured in making a reasonable good faith settlement of the negligence action before trial.
Fireman’s Fund Ins. Co. of Hartford v. Sec. Ins. Co.,
72 N.J. 63,367 A.2d 864, 868, 872-73 (1976) (citation omitted) (emphasis added).
Fireman’s
clearly contemplates coverage for money
already
paid—an amount that is not inclusive of money that
might
be paid in the future. Moreover, any amount that might be paid upon recovery from a third party is merely a share of the amount paid by the third party, not an amount that USA Container would part with from its own funds. It is not reflective of its loss.
Thus, the District Court erred in construing the Settlement Agreement so as to support a claim for $732,000. Instead, “the
amount paid by the insured” was $425,000. We therefore vacate the District Court’s order and will remand for entry of judgment for loss of $425,000 to USA Container and for an award of $425,000 to USA Container as per the terms of the Settlement Agreement.
III.Prejudgment Interest and Attorney’s Fees
The District Court awarded prejudgment interest of $51,852.77 to USA Container. It calculated this amount as accruing from the date that Travelers (wrongly) denied coverage to USA Container, rejecting both Travelers’ argument to calculate from the date USA Container made the $425,000 Settlement Agreement payment to Meelunie, and USA Container’s argument to calculate from the date Travelers completed its investigation of USA Container’s insurance claim. The District Court then applied interest rates reported by the New Jersey Cash Management Fund to the sum of $732,000, the amount it determined as the settlement amount.
The standard of review for a district court’s prejudgment interest calculation is “manifest denial of justice.”
Litton Indus., Inc. v. IMO Indus., Inc.,
200 N.J. 372, 982 A.2d 420, 431 (2009). "The same discretion applicable to a court’s determination of the appropriate pre-judgment interest rate applies to the court’s determination of the date upon which pre-judgment interest will begin to accrue.”
Munich Reinsurance Am., Inc. v. Tower Ins. Co. of N.Y.,
Civ. Action No. 09-2598 (FLW), 2012 WL 1018799, at *3 (D.N.J. Mar. 26, 2012).
Because we find that the District Court erred in its calculation of the underlying amount of the Settlement Agreement, despite the highly deferential standard of review, we will vacate and remand the prejudgment interest calculation to be recalculated based on the new figure of $425,000.
IV. Attorney’s Fees
Under New Jersey law, “fee determinations by trial courts will be disturbed only on the rarest occasions, and then only because of a clear abuse of discretion.”
Rendine v. Pantzer,
141 N.J. 292, 661 A.2d 1202, 1217 (1995). The soundness of the District Court’s reasoning for awarding USA Container attorney’s fees in the amount of $256,512.95 is apparent on its face and we will affirm the award.
V. Conclusion
For the foregoing reasons, we will (1) Affirm the District Court’s finding that USA Container’s claim falls within the basic coverage provisions of the CGL Policy and that exclusions j(6) and n do not apply; (2) Vacate the District Court’s ruling that the Settlement Agreement is for $732,000; (3) Vacate the District Court’s calculation of prejudgment interest; (4) Remand for
(a) entry of judgment fot loss of $425,000 to USA Container under the Settlement Agreement and for an award of $425,000 to USA Container, and for (b) recalculation of prejudgment interest; and (5) Affirm the District Court’s award of attorney’s fees.