United States Court of Appeals For the First Circuit
No. 21-1648
GREAT LAKES INSURANCE SE,
Plaintiff, Appellee,
v.
MARTIN ANDERSSON,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Timothy S. Hillman, U.S. District Judge]
Before
Barron, Chief Judge, Howard and Montecalvo, Circuit Judges.
Michelle M. Niemeyer, with whom Michelle M. Niemeyer, P.A., Harvey B. Heafitz, and Davagian Grillo & Semple LLP were on brief, for appellant. Michael I. Goldman, with whom Goldman & Hellman was on brief, for appellee.
April 19, 2023 MONTECALVO, Circuit Judge. This maritime insurance case
from Massachusetts arises on interlocutory appeal pursuant to 28
U.S.C. § 1292(a)(3) from the district court's grant of judgment on
the pleadings in favor of the plaintiff-insurer, Great Lakes
Insurance SE (GLI). The defendant, Martin Andersson, asserted
that GLI engaged in unfair claim settlement practices in violation
of Massachusetts General Laws chapters 176D and 93A. The district
court ruled that Andersson's claim was barred by the choice-of-law
provision of the marine insurance policy he purchased from GLI.
For the reasons that follow, we conclude that the choice-of-law
provision is ambiguous as to what law applies to the statutorily
based claim that is at issue. Consistent with the applicable
principles of interpretation we construe this ambiguity against
the drafter -- GLI -- and conclude that Andersson's Massachusetts
state law claim is not subject to the choice-of-law provision.
Accordingly, we reverse.
I. Background
As this question comes to us on appeal from a motion for
judgment on the pleadings, "[w]e view the facts contained in the
pleadings in the light most favorable to the nonmovant and draw
all reasonable inferences in his favor." Zipperer v. Raytheon
Co., 493 F.3d 50, 53 (1st Cir. 2007). These facts may be
supplemented by reference to "documents 'fairly incorporated' in
the pleadings" and "facts susceptible to judicial notice."
- 2 - Sevelitte v. Guardian Life Ins. Co. of Am., 55 F.4th 71, 76 (1st
Cir. 2022) (citation omitted).
GLI issued an insurance policy to Andersson which
provided hull and machinery coverage for his forty-seven-foot
catamaran sailing vessel, the Melody. The effective dates of the
policy were from December 21, 2018, to December 21, 2019. The
policy included the following choice-of-law provision, (which is
directly at issue in this case):
It is hereby agreed that any dispute arising hereunder shall be adjudicated according to well established, entrenched principles and precedents of substantive United States Federal Admiralty law and practice but where no such well established, entrenched precedent exists, this insuring agreement is subject to the substantive laws of the State of New York.1
1 We are aware that this choice-of-law provision is currently before the Supreme Court in Great Lakes Ins. SE v. Raiders Retreat Realty Co., 47 F.4th 225 (3d Cir. 2022), cert. granted, __ S. Ct. __, 2023 WL 2357327 (U.S. March 6, 2023) (No. 22-500). The Third Circuit held that prior to applying New York law the district court should have considered whether applying New York law would contravene the forum state's "strong public policy," including protecting insureds from "bad faith and unfair trade practices by insurance companies." Raiders Retreat Realty Co., 47 F.4th at 230-33. The Supreme Court granted limited review as to whether "[u]nder federal admiralty law, can a choice of law clause in a maritime contract be rendered unenforceable if enforcement is contrary to the 'strong public policy' of the state whose law is displaced?" Raiders Retreat Realty Co., 47 F.4th 225, cert. granted, __ S. Ct. __, 2023 WL 2357327 (U.S. March 6, 2023) (No. 22-500); Petition for Cert. at i, Raiders Retreat Realty Co., 47 F.4th 225 (3d Cir. 2022), cert. granted, __ S. Ct. __, 2023 WL 2357327 (U.S. March 6, 2023) (No. 22-500), 2022 WL 17361673, at *i. This question is not raised by the instant appeal, and we do not delve into public policy here.
- 3 - On December 16, 2019, the Melody was traveling to the
Port of Boca Chica in the Dominican Republic when it struck a
breakwater and became stranded. The vessel was severely damaged,
and Andersson notified GLI of the incident. GLI began
investigating the incident and put Andersson in touch with a marine
surveyor. The marine surveyor informed Andersson that the vessel
was a "constructive total loss." Thereafter, on December 27, 2019,
GLI reserved the right to deny coverage.
Andersson informed GLI that salvage of the vessel would
cost $50,000, or, alternatively, Andersson could give title of the
vessel and its contents to the salvor in exchange for the salvor's
services. On January 2, 2020, the marine surveyor determined that
the Melody "ha[d] very little residual value and a high salvage
cost," and so GLI did not object to Andersson "transferring title
to the vessel in exchange for salvage." Accordingly, Andersson
and the salvor executed a contract requiring the salvor to remove
the Melody from the breakwater, and title of the Melody was
transferred to the salvor. The salvor agreed that it would retain
the vessel and provide access to it upon request. In a January
16, 2020 letter, Andersson informed GLI that the right of access
to the vessel would expire on February 10, 2020. Andersson also
told GLI that the vessel's global positioning system (GPS) device
was taken by the surveyor on GLI's behalf.
- 4 - On January 28, 2020, Andersson asked GLI for
confirmation that it had received his January 16th letter. GLI
confirmed receipt and indicated that "[w]e have asked our surveyors
for comments." On February 19, 2020, Andersson inquired when the
GPS device would be returned to him, to which GLI responded that
Andersson should contact the surveyor directly. Andersson did so,
and the surveyor informed him that the GPS device was not received
from the salvor. The surveyor told Andersson that "[b]eyond the
meeting you and I had with the salvors on the beach when I was
there, we have had no further involvement with salvors. Once we
reported to [GLI,] our file was closed."
On February 27, 2020, GLI brought a declaratory judgment
action to determine whether there was coverage under the policy.
GLI alleged that coverage was unavailable because Andersson
breached the policy by 1) failing to keep the Melody in seaworthy
condition; and 2) travelling outside the navigational limits that
were permitted under the policy.
Andersson filed an answer and counterclaim alleging,
inter alia, a statutorily based claim for violations of chapter
176D, section 3(9) and chapter 93A, section 9(3A) of the
Massachusetts General Laws, which -- taken together -- prohibit
unfair or deceptive acts or practices in the business of insurance.
Specifically, chapeter 176D, section 3(9) "regulates the insurance
business and identifies 'unfair claim settlement practices.'"
- 5 - Rawan v. Cont'l Cas. Co., 136 N.E.3d 327, 335 (Mass. 2019). "A
violation of . . . c[h.] 176D amounts to an unfair or deceptive
act or practice for purposes of claims made under . . . c[h.] 93A."
Id.
Andersson alleged that GLI violated chapters 176D and 93A
by failing to obtain or inspect the GPS device from the Melody,
resulting in loss of access to the GPS device and an incomplete
investigation into the course taken by the vessel. Andersson
further alleged that GLI "failed to affirm or deny the claim
promptly after the surveyor's report was received on or about
January 2[nd]" and instead "misrepresented the status of its claims
decision . . . so that it could proactively file a declaratory
judgment action[.]"
After answering the counterclaim, GLI moved for judgment
on the pleadings pursuant to Federal Rule of Civil Procedure 12(c).
GLI contended that Andersson's unfair trade and settlement
practices claim under Massachusetts law was barred by the policy's
choice-of-law provision. Specifically, GLI argued that the
policy's choice-of-law provision dictated that any issue not
governed by an entrenched rule of federal admiralty law was
governed by New York law. Thus, GLI pressed, Andersson's
Massachusetts state law claim failed as a matter of law.
Andersson's retort was that the choice-of-law provision limited
the application of New York law to disputes that concern
- 6 - interpretation of the policy itself, but not to claims entirely
separate and distinct from a breach of the policy (hereinafter,
"extracontractual claim(s)"). Thus, Andersson maintained, his
Massachusetts state law claim remained viable because it was an
extracontractual claim that did not concern disputes about the
proper interpretation of the contract.
The district court rejected Andersson's position. It
ruled that pursuant to the choice-of-law provision, New York law
governed and barred Andersson's Massachusetts counterclaim. The
district court reasoned that, in the absence of well-established
admiralty law, New York law applied to all claims, including
extracontractual claims, arising from and related to performance
under the policy. Therefore, because New York law does not provide
for a chapters 176D and 93A claim, the district court dismissed
Andersson's counterclaim. This timely appeal ensued.2
2 Andersson appealed three orders of the district court: 1) an order granting GLI's motion to strike Andersson's jury demand; 2) an order denying Andersson's motion to reconsider the order striking the jury demand; and 3) an order granting GLI's motion for judgment on the pleadings. In response to an order to show cause as to why the challenged orders were not appealable on an interlocutory basis, Andersson notified this court that he would not pursue an appeal of the denial of his motion for reconsideration. Andersson never withdrew his appeal of the order granting GLI's motion to strike his jury demand but failed to brief the issue. As such, this issue is waived for purposes of appeal. See Sonoran Scanners, Inc. v. Perkinelmer, Inc., 585 F.3d 535, 545 n.7 (1st Cir. 2009). Therefore, the only order properly before this court on appeal is the district court's order granting GLI's motion for judgment on the pleadings because it is an appealable interlocutory order
- 7 - II. Analysis
"We review the district court's judgment on the
pleadings de novo." Rezende v. Ocwen Loan Servicing, LLC, 869
F.3d 40, 42 (1st Cir. 2017). The non-moving party's well-pleaded
facts are accepted as true, and all reasonable inferences are drawn
in the non-movant's favor. Id. "Judgment on the pleadings is
proper 'only if the uncontested and properly considered facts
conclusively establish the movant's entitlement to a favorable
judgment.'" Zipperer, 493 F.3d at 53 (quoting Aponte-Torres v.
Univ. of P.R., 445 F.3d 50, 54 (1st Cir. 2006)).
From this posture, we consider whether the choice-of-law
provision in the policy requires the application of New York law
to extracontractual claims arising between the parties outside the
scope of federal admiralty law, thereby barring Andersson's
Massachusetts state law claim. The parties agreed, in the policy
itself, that
any dispute arising hereunder shall be adjudicated according to well established, entrenched principles and precedents of substantive United States Federal Admiralty law and practice but where no such well established, entrenched precedent exists, this insuring agreement is subject to the substantive laws of the State of New York.
pursuant to 28 U.S.C. § 1292(a)(3). That order conclusively determined that GLI is not liable for unfair trade and claim settlement practices under Massachusetts law, and GLI does not dispute the propriety of this appeal. See Doyle v. Huntress, Inc., 419 F.3d 3, 6-7 (1st Cir. 2005).
- 8 - As an initial matter, Andersson does not contest that
the choice-of-law provision is valid and enforceable.3 He also
concedes that entrenched principles of admiralty law would control
an extracontractual claim if such precedent existed.
Thus, Andersson's challenge centers on the proper
interpretation of the choice-of-law provision when faced with an
extracontractual claim that is not governed by entrenched
principles of admiralty law. Andersson maintains that the second,
disjunctive clause of the choice-of-law provision -- which states
that "this insuring agreement is subject to the substantive laws
of the State of New York" -- "narrowed the application of New York
law to the insuring agreement[,]" and not to extracontractual
claims. He thus asserts that his statutory extracontractual claim
does not fall within the ambit of the choice-of-law provision.
A. Andersson's statutorily based counterclaim is extracontractual.
Because Andersson does not dispute that contract-related
claims fall within the scope of the choice-of-law provision, the
3 GLI devotes a substantial portion of its brief to the argument that the choice-of-law provision is enforceable pursuant to a two-part test articulated by the Fifth Circuit in Stoot v. Fluor Drilling Servs., Inc., 851 F.2d 1514 (5th Cir. 1988). Even setting aside the fact that Stoot is not binding on this court, GLI's argument is misplaced in this regard because Stoot presupposes that the parties' choice-of-law provision applies to the claims at issue. Whether Andersson's Massachusetts state law claim falls within the scope of the choice-of-law provision is the question at the very heart of this case.
- 9 - first issue we must resolve is whether Andersson's counterclaim
is, in fact, extracontractual. Andersson alleged that GLI, in
handling his insurance claim, engaged in unfair or deceptive acts
that amounted to unfair claim settlement practices in violation of
chapters 176D and 93A.
The conduct prohibited by chapter 176D, such as
"[f]ailing to adopt and implement reasonable standards for the
prompt investigation of claims" or "[r]efusing to pay claims
without conducting a reasonable investigation based upon all
available information[,]" can be entirely separate and distinct
from the breach of an insurance policy. Mass. Gen. Laws ch. 176D,
§ 3(9)(c), (d). Even if an "insurer eventually pays the claim and
honors the contract, its method of conducting the claims settlement
process, and the payment strategy it adopts, can implicate
liability under c[h.] 176D, and thus under c[h.] 93A." Schwartz
v. Travelers Indem. Co., 740 N.E.2d 1039, 1043 (Mass. App. Ct.
2001).
As pleaded, contract violations are not at the core of
Andersson's chapters 176D and 93A claim. Andersson never alleges
that GLI violated chapter 176D by breaching, or taking actions
forbidden by, the contract. See Ne. Data Sys., Inc. v. McDonnell
Douglas Comput. Sys. Co., 986 F.2d 607, 609 (1st Cir. 1993)
(holding that chapter 93A claims "amount[ed] to embroidered
'breach of contract claims'" where the supporting allegations were
- 10 - based on actions that broke or were forbidden by the contract).
Rather, Andersson's allegations -- taken in the light most
favorable to him -- are not duplicative of a breach of contract
claim based on the policy. Thus, Andersson's claim is
extracontractual.
B. The plain language of the choice-of-law provision is not broad enough to unambiguously encompass an extracontractual claim.
Having established the nature of Andersson's claim, we
must now address the exact scope of the choice-of-law provision.
There is no federal maritime rule governing construction of marine
insurance contracts, see Littlefield v. Acadia Ins. Co., 392 F.3d
1, 6 (1st Cir. 2004), and under New York or Massachusetts law, the
relevant rules of contract interpretation are essentially the
same.4
4 We recognize that courts have taken different approaches to determining the scope of a valid choice-of-law provision. Some courts view the scope of a choice-of-law provision as a matter of contract interpretation subject to the law chosen in the provision. See Bunker Holdings, Ltd. v. Green Pac. A/S, 346 F. App'x 969, 973 (4th Cir. 2009); Odin Shipping Ltd. v. Drive Ocean V MV, 221 F.3d 1348 (9th Cir. 2000) (unpublished table decision). Others determine the scope of the choice-of-law provision pursuant to the laws of the forum state. See Schwan's Sales Enters., Inc. v. SIG Pack, Inc., 476 F.3d 594, 597-98 (8th Cir. 2007); Fin. One Pub. Co. v. Lehman Brothers Special Fin., Inc., 414 F.3d 325, 333 (2d Cir. 2005). This court has not had occasion to undertake this particular analysis beyond noting that "[g]iving effect to [a choice-of-law] provision for the purpose of determining whether it . . . should be given effect obviously would be putting the barge before the tug." DeNicola v. Cunard Line Ltd., 642 F.2d 5, 7 n.2 (1st Cir. 1981). Fortunately, we need not wade into these murky waters any further as there are no differences between applying
- 11 - We begin with the actual language of the policy and
give the words their plain and ordinary meaning. See Jalbert ex
rel. F2 Liquidating Tr. v. Zurich Servs. Corp., 953 F.3d 143, 150
(1st Cir. 2020) (applying Massachusetts law); Ali v. Fed. Ins.
Co., 719 F.3d 83, 90 (2d Cir. 2013) (applying New York law). The
choice-of-law provision first provides that "any dispute arising
hereunder" is subject to entrenched admiralty principles.
Andersson's chapters 176D and 93A claim is a "dispute arising
hereunder," and there is no "well established, entrenched
principles and precedent of substantive United States Federal
Admiralty law" governing unfair trade and claim settlement
practices. Absent admiralty precedent, the choice-of-law
provision does not specifically dictate what law applies to a
"dispute arising hereunder," but instead proceeds to state that
"this insuring agreement is subject to the substantive laws of New
York."
This differential in wording employed by GLI in the
choice-of-law provision -- "any dispute arising hereunder" versus
"this insuring agreement" -- creates ambiguity because it is
subject to more than one reasonable interpretation. See Scottsdale
Ins. Co. v. Torres, 561 F.3d 74, 77 (1st Cir. 2009) (applying
Massachusetts law); Aronstein v. Mass. Mut. Life Ins. Co., 15 F.4th
New York or Massachusetts law to the scope determination, and the parties agree as much.
- 12 - 527, 534 (1st Cir. 2021) (applying New York law). Indeed, two
distinct classes of claims are arguably contemplated in the
choice-of-law provision. The first clause encompasses "any
dispute arising hereunder," which could include contract-related
and extracontractual claims. But, the second clause is limited to
"this insuring agreement," which could be limited to
contract-related claims. Only these contract-related claims are
specifically subjected to New York law. It is entirely unclear
whether extracontractual claims -- even if they may be said to
"arise[] hereunder" -- are also subject to New York law.
Although GLI urges us to ignore the differential
wording, a canon of construction refutes this attempt. "Every
word in an insurance contract must be presumed to have been
employed with a purpose and must be given meaning and effect
whenever practicable." Valley Forge Ins. Co. v. Field, 670 F.3d
93, 99 (1st Cir. 2012) (quoting Bos. Gas Co. v. Century Indem.
Co., 910 N.E.2d 290, 304 (Mass. 2009)); see Nomura Home Equity
Loan, Inc., Series 2006-FM2, by HSBC Bank USA, Nat'l Ass'n v.
Nomura Credit & Cap., Inc., 92 N.E.3d 743, 748 (N.Y. 2017) ("[A]
contract must be construed in a manner which gives effect to each
and every part, so as not to render any provision 'meaningless or
without force or effect.'" (quoting Ronnen v. Ajax Elec. Motor
Corp., 671 N.E.2d 534, 536 (N.Y. 1996))). The term "this insuring
agreement" should be given meaning and effect apart from the term
- 13 - "any dispute arising hereunder." Using both terms makes the scope
of the choice-of-law provision ambiguous.
C. Any ambiguity in the policy must be construed in favor of Andersson.
Because the plain language of the choice-of-law
provision is not broad enough to unambiguously encompass
extracontractual claims, "any ambiguities must be construed in
favor of the insured." Clark Sch. for Creative Learning, Inc. v.
Phila. Indem. Ins. Co., 734 F.3d 51, 55 (1st Cir. 2013) (applying
Massachusetts law); see J.P. Morgan Sec. Inc. v. Vigilant Ins.
Co., 183 N.E.3d 443, 447 (N.Y. 2021). While both Massachusetts
and New York law recognize this rule of construction, "[u]nder New
York law, courts must first examine extrinsic evidence of the
parties' intent before turning to doctrinal presumptions."
Aronstein, 15 F.4th at 534 (applying New York law). However, "if
the extrinsic evidence does not yield a conclusive answer as to
the parties' intent, a court may apply other rules of contract
construction[.]" Parks Real Est. Purchasing Grp. v. St. Paul Fire
& Marine Ins. Co., 472 F.3d 33, 43 (2d Cir. 2006) (cleaned up)
(applying New York law).
Here, extrinsic evidence of the parties' intent will not
aid our analysis of the policy's boilerplate choice-of-law
provision. See Kolbe v. BAC Home Loans Servicing, LP, 738 F.3d
432, 440 (1st Cir. 2013) ("Because uniform contracts are
- 14 - interpreted uniformly across cases whenever it is reasonable to do
so, extrinsic evidence about what a particular party intended or
expected when signing the contract is generally irrelevant.")
Thus, we proceed directly to the rules of contract construction.
See Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691 F.2d
1039, 1048 (2d Cir. 1982) ("There are no adjudicative facts
relating to the parties to the litigation for a jury to find[,]
and the meaning of [the] boilerplate provision[] is, therefore, a
matter of law rather than fact."). When, as here, there are
"competing plausible interpretations of the insurance policy
'doubts as to the intended meaning of the words must be resolved
against the insurance company that employed them.'" Performance
Trans., Inc. v. Gen. Star Indem. Co., 983 F.3d 20, 28 (1st Cir.
2020) (quoting Surabian Realty Co. v. NGM Ins. Co., 971 N.E.2d
268, 271 (Mass. 2012)); see Lend Lease (US) Const. LMB Inc. v.
Zurich Am. Ins. Co., 71 N.E.3d 556, 560 (N.Y. 2017) ("Of course,
where the policy may be reasonably interpreted in two conflicting
manners, its terms are ambiguous, and any ambiguity must be
construed in favor of the insured and against the insurer."
(cleaned up)). Doing so leads to the inescapable conclusion that
only contract-related claims are subject to the substantive laws
of New York. Extracontractual claims do not fall within the scope
of the second clause of the choice-of-law provision.
- 15 - Having already determined that Andersson's chapters 176D
and 93A claim, as pleaded, is extracontractual and forms a cause
of action independent from the insuring agreement, it does not
fall within the scope of the choice-of-law provision.
III. Conclusion
For the reasons stated above, the judgment of the
district court is reversed.
- 16 -