USCA1 Opinion
June 14, 1994
[NOT FOR PUBLICATION]
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 93-1791
SYLVIA BRACERO MARTINEZ, ET AL.,
Plaintiffs, Appellees,
v.
PUERTO RICAN CARS, INC., ET AL.,
Defendants, Appellees.
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UNITED STATES FIDELITY & GUARANTEE CO.,
Defendant, Appellant.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Gilberto Gierbolini, U.S. District Judge]
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Before
Selya, Cyr and Boudin,
Circuit Judges.
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Richard A. Sherman, Rosemary B. Wilder, Law Offices of Richard A.
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Sherman, P.A., Armando Lasa and Lasa, Escalera & Reichard on brief for
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appellant.
Dario Rivera-Carrasquillo, Cordero, Miranda & Pinto, Ramon L.
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Walker-Merino, Reichard, Calaf & Walker, Marcos Valls-Sanchez and
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Cobian & Valls on joint brief for appellees.
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BOUDIN, Circuit Judge. This case involves a dispute
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about insurance coverage arising out of a motor vehicle
accident in Puerto Rico. The appellant United States
Fidelity & Guaranty Company ("USF&G") is an insurance carrier
which, along with other carriers, was held liable for a
portion of the judgment in favor of the victims. USF&G
contends that its policy did not cover the accident at all
and, alternatively, disagrees with the apportionment of
liability among insurers. On both issues--liability and
apportionment--we conclude that the district court reached
the right result on the unusual record before it and affirm.
I.
In August 1987, George Fieldman, a resident of New
Jersey, went on vacation to Puerto Rico with his family,
including his stepdaughter, Theresa Blacketor. Fieldman
rented a car from Puerto Rican Cars, Inc., and allowed
Blacketor to drive it as well. On August 30, 1987, Blacketor
was driving the car with Fieldman in the passenger seat when
she collided with a car driven by Luis Cordova Munoz
("Cordova"). Cordova and two of his passengers were
seriously injured. Another passenger was killed.
In August 1988, Cordova, the injured passengers and
representatives of the deceased passenger ("the plaintiffs")
filed lawsuits against Blacketor, Fieldman, Puerto Rican
Cars, and three insurance companies. The insurers were
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Farmers' Insurance Exchange ("Farmers"), Blacketor's insurer;
CNA Casualty of Puerto Rico ("CNA"), which insured Puerto
Rican Cars and had also issued a policy to Fieldman when he
rented the car; and USF&G, which had issued a policy to
Weiner, Ostrager, Fieldman, and Zucker, the New Jersey law
firm in which Fieldman is a partner.
After the cases were consolidated, Fieldman filed a
claim against USF&G, contending that he was covered under the
law firm's automobile insurance policy. USF&G denied
coverage, asserting that the policy listed the law firm as
the named insured and did not cover Fieldman when he was
vacationing in Puerto Rico, was utilizing a rented car, and
was not engaged in partnership business. The meaning of the
USF&G policy, as written and as allegedly implemented, is the
main subject of this appeal.
On April 9, 1990, Fieldman moved for summary judgment
against USF&G. He was joined by Blacketor, who argued that
she too was covered by the USF&G policy because she was
driving Fieldman's rented car with his permission. Fieldman
included with his motion a statement of uncontested material
facts, asserting that USF&G had regularly paid claims under
the policy for family members of individual partners in
accidents unrelated to partnership business. USF&G did not
contest this portion of the statement, but opposed summary
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judgment on the ground that the insurance policy did not
cover the non-business accident in this case.
The magistrate judge to whom the case was referred
issued his report on June 13, 1990, recommending that summary
judgment be entered in favor of Fieldman. He concluded that
the USF&G policy was ambiguous and, applying Puerto Rico law,
he construed the policy in favor of Fieldman. Alternatively,
the magistrate judge said that because of USF&G's prior
payment of claims for partners' family members, USF&G was
estopped from arguing that coverage was limited to
partnership-related activities. The district judge adopted
the report on July 5, 1990.
Both USF&G and Blacketor filed motions for
reconsideration under Fed. R. Civ. P. 59(e). USF&G again
argued that the policy did not cover the accident, while
Blacketor asked for a ruling that she, like Fieldman, was
covered by the USF&G policy. Both requests were denied on
February 4, 1991, and the district court entered judgment in
favor of Fieldman on February 20, 1991. On May 31, 1991,
USF&G filed a motion to modify the judgment under Fed. R.
Civ. P. 60(b)(6), relying upon new evidence to explain
USF&G's past practice. The magistrate judge recommended a
denial of this motion on December 10, 1991, and the district
judge concurred on April 1, 1992.
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In the meantime, the parties reached a global settlement
as to most issues. It provided that (1) the plaintiffs would
receive a total of $750,000 to be divided among themselves,
and (2) the insurance carriers together would contribute that
sum and then litigate among themselves to apportion shares.
On April 18, 1991, the district judge approved the
settlement. The court ordered Farmers and CNA to contribute
$300,000 each, and USF&G to contribute $150,000. These
payments were provisional. The court reserved final decision
on how the $750,000 liability should be shared among the
insurers.
Finally, on June 17, 1993, the district judge ruled that
each insurer should bear a share of the settlement allocated
in proportion to its own policy's upper liability limit.
This placed the greatest burden on CNA, which had issued two
policies, each with a $300,000 limit. USF&G, however, also
bore a greater burden than its initial contribution because
its policy carried a limit of $500,000; based on the upper
limits of the policies, USF&G's policy represented 5/14ths of
the total coverage; and its share of the total settlement was
5/14th of $750,000 or $267,857.14. The court's final tally
was as follows:
Carrier Policy Limit Insured Liability Share
_______ ____________ _______ _______________
USF&G $500,000 Fieldman $267,857.14
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CNA $300,000 Fieldman $160,714.29
CNA $300,000 PR Cars $160,714.29
Farmers $300,000 Blacketor $160,714.29
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$1,400,000 $749,999.91
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The court ordered USF&G to reimburse Fieldman for legal
expenses. In addition, the court ruled that Blacketor was
also covered under the partnership policy and ordered USF&G
to reimburse Farmers for expenses incurred by Farmers in
defending Blacketor. A final judgment was entered the same
day. This appeal by USF&G followed.1
II.
In this court, USF&G's main argument is that its policy
did not cover either Fieldman or Blacketor for the accident
in question. In substance it contends that the policy
clearly excluded coverage, that any past practice suggesting
coverage for non-business accidents was adequately explained,
and that no estoppel has been made out against USF&G. In
this quite unusual case, we think that USF&G has left the
record in such a posture that liability could properly be
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1Following the appeal, it appears that CNA advised the
district court that its Puerto Rican Cars policy limit was
$500,000, rather than the $300,000 assumed by the district
court. A motion to adopt amended figures has been filed
without opposition but has not yet been granted. The
substitution of the asserted new figures--CNA ($375,000),
USF&G ($234,375) and Farmers ($140,625)--would not affect the
issues presented on this appeal.
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imposed upon it and that its efforts to correct the situation
came too late.
We start, as is proper in contract cases, with the
policy language. The USF&G insurance contract was entitled
"Business Auto Policy," and Fieldman's law firm was listed in
item 1 as the "named insured," the firm's business address
being given as the named insured's address. The policy
stated that "you are an insured for any covered auto," and
that "`you' and `your' mean the person or organization shown
as the named insured . . . ." For liability coverage,
defined in detail elsewhere in the policy, USF&G promised
that it "will pay all sums the insured legally must pay"--up
to the policy limit--on accidents involving covered
automobiles.
Which automobiles were "covered" was the subject of item
2 of the policy, entitled "Schedule of Coverages and Covered
Autos." The definition of covered auto depended on the type
of insurance coverage. For liability coverage, "covered
autos" were said to include "ANY AUTO." Putting items 1 and
2 together with the basic definition of liability coverage,
the policy by its terms insured the law firm of Weiner,
Ostrager, Fieldman and Zucker against liability for accidents
involving any automobile. Nothing else in the lengthy policy
casts much light on the issue before us.
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If the language of the policy were taken in isolation,
we would agree with USF&G that the policy would not cover
liability incurred by a partner in the course of
transportation unrelated to the partnership's business. The
reason is that the policy insures the partnership against
liability due to automobile accidents. In the normal case
the partnership would be liable for automobile accidents
growing out of the conduct of its law firm business, but no
one suggests that Fieldman's Puerto Rico vacation trip falls
into that category or that the partnership bears any
liability in this case. See Burnsed v. Florida Farm Bureau
___ _______ ____________________
Cas. Ins. Co., 549 So. 2d 793 (Fla. App. 5th Dist. 1989).
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But Fieldman and Blacketor have a second string to their
bow. They argue that whatever the bare language of the
policy, its actual implementation by USF&G was broader; that
USF&G in fact regularly had extended coverage in the past to
any family member driving a partner's car with his permission
regardless of whether partnership business was being
conducted at the time of the accident. This allegation
underpins two doctrinally separate arguments. One argument
is that the policy, properly interpreted in light of actual
performance, has this wider meaning; and the other is that
USF&G is estopped to claim otherwise.
To show past practice Fieldman's summary judgment filing
asserts that when the USF&G policy was issued, Fieldman was
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given to understand that it covered all the automobiles of
the partners; that these included three of his own cars, two
of which were used by his wife and himself but never on
partnership business; that insurance coverage certificates
were furnished for these cars as required by New Jersey law;
and that USF&G paid claims without question on accidents,
unrelated to partnership business, where his wife was the
driver.
Remarkably, when USF&G filed its opposition, it did not
trouble to address these contentions directly. Rather, it
asserted that the policy did not cover non-business
accidents, adding cryptically:
"In this particular case, the law firm
did not hire the vehicle, nor did one of
the partners hire the vehicle for the law
firm. However, the autos described in
the schedule of covered autos are assured
under the insurance policy
notwithstanding the purpose of the use
given to them."
The first question that arises in considering Fieldman
and Blacketor's "past practice" argument is whether the USF&G
policy so clearly excluded coverage that no extrinsic
evidence is admissible to construe it. Extrinsic evidence
comes in different types and weight, and ambiguities vary
both in kind and degree. In truth, the law on questions of
ambiguity and extrinsic evidence is clouded in confusion:
courts often do not agree with one another and what they
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assert as doctrine cannot always be squared with what they do
in practice. 3 A. Corbin, Contracts 542A (1960).
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The precedents in the jurisdictions concerned2 leave
us doubtful whether in the first instance New Jersey or
Puerto Rico courts would admit evidence as to how the policy
was actually implemented in order to vary the meaning of this
seemingly clear policy (estoppel is another matter). The
"practical construction" of contract language, as evidenced
by the parties' actions, is often said to deserve "great
weight," A. Farnsworth, Contracts 7.13 at 535 (1990). But
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while the New Jersey and Puerto Rico courts often consider
past practice, courts in both jurisdictions have said that
insurance policies should be construed according to their
language unless they are found to be ambiguous.3
In all events, we need not definitively resolve the
extrinsic-evidence issue because in this case we face a
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2We say "jurisdictions" because this appeal has been
briefed on the premise that Puerto Rico law governs the
interpretation of the USF&G agreement. This assumption is at
least doubtful: the policy was made in New Jersey to provide
automobile insurance for a New Jersey law firm. There is no
indication that Puerto Rico has any connection with either
the insurer or the law firm that would lead its courts to
apply Puerto Rico law to the policy.
3Compare Flint Frozen Foods, Inc. v. Firemen's Ins. Co.,
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86 A.2d 673, 674 (N.J. 1952) (terms of policy govern) and
Velez-Gomez v. SMA Life Assur. Co., 8 F.3d 873 (1st Cir.
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1993) (same under Puerto Rico law) with Kearny PBA Local No.
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21 v. Town of Kearny, 405 A.2d 393, 400 (N.J. 1979)
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("polestar" is intent of parties descended by any means
including "the parties' conduct"), and Merle v. West Bend
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Co., 97 P.R.R. 392, 399 (P.R. 1969) (same).
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singular circumstance: USF&G has admitted that the policy
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does not mean what its language seems to say. After
reconsideration had been denied by the district court,
someone at USF&G apparently woke up and realized that the
record did not reflect an adequate explanation of USF&G's
past payment of non-business claims under the policy. On May
31, 1991, USF&G filed a motion for relief from judgment under
Fed. R. Civ. P. 60(b)(6). This motion for the first time
spelled out a possible explanation by USF&G to Fieldman's
claim relating to USF&G's past practice. The motion prefaced
this answer by saying blandly that previously "the evidence
supporting USF&G's position could not be obtained for reasons
beyond [USF&G's] control. Finally, it was obtained."
The evidence, USF&G's motion asserted, showed that prior
claims paid under the policy, to cover accidents by Fieldman
family members unrelated to the partnership's business, were
paid because the policy covered certain listed automobiles,
additional premiums were paid for this coverage, and "[o]nly
in these circumstances did USF&G paid (sic) claims not
related to the business." Attached were several pages from
the policy and some documents relating to family member
claims previously submitted to USF&G pertaining to specific
cars.4
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4The pages from the policy show that certain cars were
listed as owned by "the insured" but the policy does not
explain that these are actually owned not by the insured (the
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The USF&G motion, read generously, may be taken to claim
that the insurance policy provided two different categories
of liability coverage: first, it covered "any" automobile
(owned or rented or borrowed) being used in connection with
partnership business; and second, based on an additional
premium, the policy covered listed automobiles (apparently
owned by individual partners) for all accidents, whether
driven by a partner or family member and whether or not the
use had any connection with the partnership's business.
Based on the information we have today--it still may not be
complete--one might guess that the insurer "pancaked" a
second layer of coverage on the underlying business policy
but did not spell out this coverage in precise language.
Thus the policy covered some non-business automobile
liability but did not clearly define the limits of that
coverage.
However one might construe the policy language judged in
a vacuum, we think that it would be patently unjust in this
unusual case to conclude that the policy language limits
liability to business-related accidents where, as here, the
insurer has admitted that the policy does cover non-business
accidents in some circumstances. If we limit our
consideration of actual practice to the statements of
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law firm) but by individual partners. Nor does the policy
provide explicitly that these cars are covered for non-
business use.
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Fieldman in his summary judgment motion--statements not
unexpectedly very favorable to his interpretation--then past
practice resolves the matter in his favor.5 The question
remains whether the Rule 60(b) motion should have been
granted, entitling USF&G to the benefit of its description of
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actual performance and therefore to a trial to resolve the
factual conflict.
The Rule 60(b) motion was vigorously opposed, Fieldman
claiming that it was untimely and denying by affidavit that
any additional premiums had been paid. The motion was
referred to the magistrate judge who on December 10, 1991,
recommended that it be denied: he said that USF&G had had
the duty to controvert Fieldman's contentions at the time it
answered his summary judgment motion; that USF&G had
possessed then the documents now belatedly offered; and that
nothing in the Rule 60(b) motion disproved USF&G's payment of
claims unrelated to the partnership business. On review, the
district court summarily upheld the magistrate judge.
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5We ignore the possibility that what Fieldman might have
been entitled to is a jury trial and not a summary judgment
in his favor. When and whether the district court should
take a contract issue to be a matter for the judge rather
than the jury where the contract is ambiguous but the
illuminating extrinsic evidence is undisputed and presents
issues of some difficulty. USF&G has not sought reversal on
the ground that the issue of policy interpretation on
undisputed facts was for the jury rather than the judge, and
we will not pursue this possibility further.
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The USF&G argument and supporting documents offered in
the Rule 60(b) motion might, if timely offered, have required
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the district court to deny Fieldman's summary judgment
motion. One could argue that the policy language does not
directly spell out USF&G's theory of coverage and that at the
very least an affidavit should have been supplied to show
that an extra premium was paid and that the only non-business
claims ever paid were for listed automobiles. On the other
hand, a cautious district judge would likely have declined to
grant summary judgment for Fieldman once USF&G had coherently
explained its payment of past non-business claims.
But the explanation by USF&G, and the limited support
for it, came too late. The time for USF&G to submit its
opposition was in April 1990, not in May 1991, long after the
summary judgment motion had been granted. Nothing in this
record even begins to show due diligence by USF&G, or to
explain why it did not offer its rationale and documents at
the proper time. Teamsters v. Superline Transp. Co., 953
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F.2d 17 (1st Cir. 1992).6 The notion that after several
years of litigation the district court should start over to
consider this new submission is without basis. Thus, we need
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6The motion, although filed under Rule 60(b)(6), appears
more properly based on "excusable neglect" under Rule
60(b)(1), although the neglect here has not been excused. In
any event the motion certainly does not demonstrate the
"extraordinary circumstances" required for a motion under
Rule 60(b)(6). See Gonzalez v. Walgreens Co., 918 F.2d 303,
___ ________ ____________
305 (1st Cir. 1990).
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not reach the estoppel claim asserted by Fieldman, a claim
whose reliance requirement might prove to be a considerable
obstacle for Fieldman (given his own purchase of insurance
from CNA when renting the car in question).
Blacketor, as well as Fieldman, is entitled to coverage
under the USF&G policy for legal expenses. In light of the
construction of the policy achieved by Fieldman, Blacketor is
covered under the "omnibus clause" of the insurance policy.
That clause, with irrelevant exceptions, extends coverage to
"[a]ny one . . . using with your permission a covered auto
you own, hire or borrow". USF&G has not denied that
Blacketor was driving the auto with Fieldman's permission.
Whether some division of the expenses between USF&G and
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Farmers should have been ordered has not been argued on this
appeal.
This outcome may appear at first blush to be a harsh one
for USF&G, for it could well have deserved to prevail on the
literal language of the policy, had it not admitted that the
policy goes beyond business use. At the same time, if given
the full benefit of its Rule 60(b) assertions, it might at
least be entitled to a remand for a trial on the factual
issues posed by the conflict between the Fieldman affidavit
and the Rule 60(b) motion. See generally U.S. Fire Ins. Co.
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v. Producciones Padosa, Inc., 835 F.2d 950, 953 (1st Cir.
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1987). It has managed instead to achieve the worst of both
worlds.
Few tears should be shed for USF&G. Its original
assertions could easily have led a court to believe that the
policy was limited to business use although USF&G now admits
that the policy was not so limited. Its quite different
description of the situation occurred only after it had lost
before both the magistrate judge and the district court, and
even then the explanation is poorly supported. There is no
reason why other parties should be forced in these
circumstances to face the expense of further litigation to
determine whether USF&G's belated explanation is correct.
III.
USF&G contends that even if it is liable under its
policy, the insurance coverage should not be apportioned
according to the upper coverage limits of each policy.
Instead, it argues inter alia that each insurer should pay
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equally up to the policy limits of that insurer's policy,
with the higher-limit insurer making up the balance. On this
issue, we follow the parties in treating Puerto Rico law as
determinative.7
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7This issue, unlike the question of USF&G's policy
coverage, involves a rule to apportion liability where
several different contracts (including two made in Puerto
Rico) conflict as applied to an accident occurring in Puerto
Rico. Since all parties agree that Puerto Rico law controls,
we forego an independent choice of law analysis. See, e.g.,
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Commercial Union Ins. v. Walbrook Ins. Co., 7 F.3d 1047, 1048
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Each of the policies, we are told, contains an "other
insurance" clause which provides that for this accident the
insurer's liability will only be in excess in amounts due
under other policies.8 See generally Hennes Erecting Co. v.
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National Underwriters Fire Ins. Co., 813 F.2d 1074, 1077
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(10th Cir. 1987). This "after you, Alfonse," tactic has not
impressed the courts, which often nullify "other insurance"
clauses when they conflict. See R. Keeton & A. Widiss,
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Insurance Law 3.11(a)(3), at 258-59 (1988). The district
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court properly refused to take these clauses literally, and
the parties do not directly dispute this refusal.
The question, then, is how a court in Puerto Rico would
apportion liability among carriers where liability is less
than the total amount of coverage provided by those policies.
The other insurance carriers rely upon the rule, followed in
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n.1 (1st Cir. 1993).
8The "other insurance" clause of the USF&G policy, the
only policy furnished to us on appeal, states:
1. For any covered auto you own this policy
auto you
provides primary insurance. For any
covered auto you don't own, the insurance
auto you
provided by this policy is excess over
any other collectible insurance . . . .
2. When two or more policies cover on the
same basis, either excess or primary, we
we
will pay only our share. Our share is
our Our
the proportion that the limit of our
our
policy bears to the total of the limits
of all the policies covering on the same
basis.
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a majority of jurisdictions, that liability should be
prorated according to the upper limits of the policies. See,
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e.g., St. Paul Mercury Ins. Co. v. Underwriters at Lloyds of
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London, 365 F.2d 659 (10th Cir. 1966); R. Keeton & A. Widiss,
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supra, 3.11(a)(3). USF&G offers several theories aimed at
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reducing its share. The district court followed the majority
rule.
Interestingly, the USF&G policy (quoted above) itself
provides that the majority rule, apportioning liability based
on the upper limit of each policy, should be applied where
two or more policies cover the accident on the same basis,
either excess or primary. If (as represented to us) each of
the policies at issue here treats its coverage as excess,
then arguably USF&G has contracted for the very apportionment
rule applied by the district court in this case. Cf. Aviles
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v. Burgos, 783 F.2d 270, 282 (1st Cir. 1986) (where the
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policies adopt the same apportionment rule it governs
automatically).
The parties have not cited to us any caselaw from Puerto
Rico courts that directly governs the apportionment issue.
The majority rule has been questioned, see Reliance Ins. Co.
___ _________________
v. St Paul Surplus Lines Ins. Co., 753 F.2d 1288 (4th Cir.
________________________________
1985) (adopting the so-called equal shares rule); and a
leading treatise has said that the majority rule is "open to
question in a number of contexts." Keeton & Widess, supra,
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3(11)(e). In truth, we have little basis for saying
confidently how Puerto Rico would resolve the issue.
In the present case, we are not disposed to look beyond
the majority rule invoked by the district court. It is still
the governing rule in most jurisdictions, and none of the
alternatives proposed appears to be without some
shortcomings. The majority rule is also the rule stipulated
by the USF&G policy for cases where each of the conflicting
policies purports to disclaim primary coverage. Absent
guidance from the Puerto Rico courts or a more persuasive
case for reexamining that rule, we think that Puerto Rico
should be assumed to follow the majority rule.
Affirmed.
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