United States Court of Appeals For the First Circuit
No. 22-1938
PRESIDENT AND FELLOWS OF HARVARD COLLEGE,
Plaintiff, Appellant,
v.
ZURICH AMERICAN INSURANCE COMPANY,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Allison D. Burroughs, U.S. District Judge]
Before
Kayatta, Selya, and Howard, Circuit Judges.
Marshall N. Gilinsky, with whom Ethan W. Middlebrooks, Jade W. Sobh, and Anderson Kill, P.C. were on brief, for appellant. Andrew L. Margulis, with whom Ropers Majeski PC was on brief, for appellee.
August 9, 2023 SELYA, Circuit Judge. With $15,000,000 in coverage at
stake, this case requires us to apply Massachusetts law to
determine the effect of a failure to give notice as specified in
an excess insurance policy affording coverage on a "claims made
and reported" basis. Where, as here, a federal court sits in
diversity jurisdiction, tasked with following state law, it is not
free to innovate but, rather, must apply state substantive rules
of decision as those rules have been articulated by the state's
highest tribunal. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-
79 (1938); see also Torres-Ronda v. Nationwide Mut. Ins. Co., 18
F.4th 80, 84 (1st Cir. 2021).
In this instance, the Massachusetts Supreme Judicial
Court (SJC) has spoken directly to the critical issue. See Chas.
T. Main, Inc. v. Fireman's Fund Ins. Co., 551 N.E.2d 28, 29-30
(Mass. 1990); see also Tenovsky v. All. Syndicate, Inc., 677 N.E.2d
1144, 1145-46 (Mass. 1997). What is more, this court — on no fewer
than four occasions — has recognized the Massachusetts rule. See
Gargano v. Liberty Int'l Underwriters, Inc., 572 F.3d 45, 49-51
(1st Cir. 2009); DiLuglio v. New England Ins. Co., 959 F.2d 355,
358 (1st Cir. 1992); Nat'l Union Fire Ins. Co. v. Talcott, 931
F.2d 166, 167-69 (1st Cir. 1991); J.I. Corp. v. Fed. Ins. Co., 920
F.2d 118, 120 (1st Cir. 1990). Staying within the borders of this
well-beaten path, we hold that the failure to give notice according
to the policy's terms and conditions forfeits any right to
- 2 - coverage. Consequently, we affirm the district court's entry of
summary judgment in favor of the insurer.
I
"Because our review follows the entry of summary
judgment, 'we take the facts and the reasonable inferences
therefrom in the light most' favorable to the non-moving part[y]."
Rivera-Aponte v. Gomez Bus Line, Inc., 62 F.4th 1, 3 (1st Cir.
2023) (quoting Pleasantdale Condos., LLC v. Wakefield, 37 F.4th
728, 730 (1st Cir. 2022)).
For a policy term beginning in November of 2014, the
President and Fellows of Harvard College (collectively, Harvard),
purchased a one-year liability insurance policy from the National
Union Fire Insurance Company of Pittsburg, Pennsylvania, a member
company of the American International Group, Inc. (AIG). The
policy covered litigation costs in the event a claim was brought
against Harvard, as well as the payment of liabilities incurred as
the result of a judgment or settlement, up to the amount of
$25,000,000. Because the AIG policy provided "claims-made
coverage," it required prompt notice of any claim filed against
Harvard. Specifically, the policy stated that:
The Insureds shall, as a condition precedent to the obligations of the Insurer under this policy, give written notice to the Insurer of any Claim made against an Insured . . . as soon as practicable . . . . Notwithstanding the foregoing, the Insured shall not be required to give written
- 3 - notice of a Claim until the earliest occurrence of the following: (i) the Claim is or is sought to be certified as a class action; or (ii) total Loss (including Defense Costs) of the Claim is reasonably estimated by the Organization's General Counsel or Risk Manager (or equivalent position) to exceed 50% of the applicable retention amount for such Claim; provided, however, that in all events, all Claims, including Claims described in (i)-(ii) above, must be reported to the Insurer no later than ninety (90) days after the end of the Policy Period or the Discovery Period (if applicable).
In addition to the AIG policy, Harvard purchased a
secondary excess policy from Zurich American Insurance Co.
(Zurich) to insure against an additional $15,000,000 in costs
should a claim exhaust the AIG coverage. In its reporting and
notice conditions, the excess policy provided: "As a condition
precedent to exercising any rights under this policy, the
Policyholder shall give the Underwriter written notice of any claim
or any potential claim under this policy or any Underlying
Insurance in the same manner required by the terms and conditions
of the [AIG] Policy."
Under both policies, then, securing coverage for a claim
required — in all events — the reporting of that claim to the
insurer within ninety days of the end of the policy period. As
both AIG's primary policy and Zurich's excess policy provided
coverage from November 1, 2014, to November 1, 2015, any claim
- 4 - that was made against Harvard during that period had to be reported
no later than January 30, 2016.
On November 17, 2014, an organization known as Students
for Fair Admissions sued Harvard in federal court for violating
Title VI of the Civil Rights Act of 1964. What followed was a
legal odyssey that spanned nearly a decade and culminated in
proceedings before the Supreme Court. See Students for Fair
Admissions, Inc. v. President & Fellows of Harvard Coll. (Harvard
Corp.), 397 F. Supp. 3d 126 (D. Mass. 2019), aff'd sub nom.
Students for Fair Admissions, Inc. v. President & Fellows of
Harvard Coll., 980 F.3d 157 (1st Cir. 2020), rev'd, 143 S. Ct.
2141 (2023).
On November 19, 2014 — in anticipation of the legal costs
to come — Harvard notified AIG of the pending suit, thereby
securing coverage under the primary policy. Harvard neglected,
though, to notify Zurich of the suit until May 23, 2017 — well
outside the excess policy's ninety-day notification window.
Consequently, Zurich denied coverage under the excess policy on
the ground that Harvard had failed to furnish timely notice.
In September of 2021, Harvard invoked diversity
jurisdiction, see 28 U.S.C. § 1332(a), and sued Zurich in the
United States District Court for the District of Massachusetts.
Harvard's complaint sought both declaratory relief and damages for
breach of contract. Zurich disclaimed liability, arguing that
- 5 - Harvard had forfeited any entitlement to coverage. In due course,
Zurich moved for summary judgment. See Fed. R. Civ. P. 56(a).
Asserting that such a motion was premature and that further
discovery was needed, Harvard opposed summary judgment and moved
for leave to undertake, and to compel production of, additional
discovery. See Fed. R. Civ. P. 56(d), 37(a). After considering
the parties' proffers and entertaining oral argument, the district
court granted summary judgment in favor of Zurich and denied
Harvard's discovery-related motions as moot. This timely appeal
ensued.
II
"We review a district court's grant of summary judgment
de novo." Minturn v. Monrad, 64 F.4th 9, 13 (1st Cir. 2023).
Summary judgment is appropriate "if the movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).
Because the claims under consideration are in a federal court by
virtue of diversity jurisdiction, see 28 U.S.C. § 1332, we look to
the relevant state law — here, Massachusetts law — to supply the
substantive rules of decision, see Minturn, 64 F.4th at 14.
In this venue, Harvard fashions two arguments as to why
Zurich was not entitled to summary judgment. First, Harvard
contends that the district court misapplied Massachusetts law when
it determined that strict compliance with the excess policy's
- 6 - notice requirement was a prerequisite to coverage. Then — as a
fallback — Harvard proposes an alternative interpretation of the
notice requirement and contends that issues of material fact remain
as to whether that requirement was satisfied. Both contentions
lack force.
A
Massachusetts courts generally hew to the rule that an
insurance contract is to be enforced according to the plain meaning
of its terms. See Somerset Sav. Bank v. Chi. Title Ins. Co., 649
N.E.2d 1123, 1127 (Mass. 1995). To be sure, there is an exception
when an insured fails strictly to adhere to a notice requirement
in an occurrence-based policy.1 See Johnson Controls, Inc. v.
Bowes, 409 N.E.2d 185, 186-88 (Mass. 1980). In that circumstance,
the insurer is required to prove not only that the notice
requirement was breached, but also that the breach prejudiced its
position. See id. The SJC has explained that this largess is
warranted because the purpose of the notice requirement in an
occurrence-based policy is to afford the insurer an opportunity
promptly to investigate facts pertaining to liability; when that
1 An occurrence-based policy provides coverage for events that occur during the policy period, regardless of when a claim is brought against an insured. See Chas. T. Main, Inc., 551 N.E.2d at 29. By contrast, a claims-made policy — such as the excess policy that is front and center here — covers claims made against the insured during the policy period, regardless of when the event or act that instigated the claim occurred. See id.
- 7 - investigation can still effectively be made, and the insurer is
not in any other way prejudiced, forfeiture of coverage based on
technical non-compliance with the notice requirement results in
unfairness to the insured. See id. at 187-88.
But not all liability insurance policies are on an equal
footing, and the "no harm, no foul" principle does not apply to
failures to give timely written notice under claims-made insurance
policies. In Massachusetts, notice provisions of claims-made
policies — which require that notice of a claim be given by the
end of the policy period or a defined period ending shortly
thereafter — are of the essence of those policies. Those
provisions are intended not merely to facilitate an investigation
into the facts underlying a claim but also — just as importantly
— to promote fairness in rate setting. See Chas. T. Main, 551
N.E.2d at 29-30. As the SJC has explained:
The purpose of a claims-made policy is to minimize the time between the insured event and the payment. For that reason, the insured event is the claim being made against the insured during the policy period and the claim being reported to the insurer within that same period or a slightly extended, and specified, period. If a claim is made against an insured, but the insurer does not know about it until years later, the primary purpose of insuring claims rather than occurrences is frustrated. Accordingly, the requirement that notice of the claim be given in the policy period or shortly thereafter in the claims-made policy is of the essence in determining whether coverage exists. Prejudice for an untimely
- 8 - report in this instance is not an appropriate inquiry.
Id. at 30. Under Massachusetts law, then, an insurer is not
required to show prejudice before denying coverage due to an
insured's failure to comply with the notice requirement of a
claims-made policy. See id.; see also Tenovsky, 677 N.E.2d at
1146.
Where state law controls and the state's highest court
has plainly articulated that law, a federal court must follow suit.
Thus, we have unswervingly applied this clear rule regarding the
failure to give timely notice as it has been spelled out by the
SJC. See Gargano, 572 F.3d at 51 ("To require the insurer of a
'claims made and reported' policy to demonstrate prejudice from
the insured's failure to report a claim within the relevant policy
period 'would defeat the fundamental concept on which claims-made
policies are premised[]' . . . ." (quoting Chas. T. Main, Inc.,
551 N.E.2d at 30)); Nat'l Union Fire Ins. Co., 931 F.2d at 168
("[I]n order for an insurer to be entitled to deny coverage under
a 'claims made' policy, it must only show that the insured did not
report the claim within the same policy year in which he received
notice of it; no showing of prejudice need be made."); J.I. Corp.,
920 F.2d at 120 (similar); see also DiLuglio, 959 F.2d at 358
(explaining Massachusetts rule while discussing Rhode Island law).
In the absence of supervening authority — and we discern none here
- 9 - — we are duty-bound to continue to apply the SJC's clear rule.
See Torres-Ronda, 18 F.4th at 84.
The parties do not dispute that Harvard purchased a
claims-made policy from Zurich. Nor do they dispute that Harvard
failed to provide Zurich with written notice until May of 2017 —
long after the deadline stipulated in the policy had passed.
Consequently, Zurich had every right to deny coverage based on a
lack of timely notice. See Chas. T. Main, 551 N.E.2d at 30.
Harvard resists this conclusion. It argues that if
Zurich had actual notice of the pending lawsuit (a fact that
Harvard asserts might be established through further discovery),
then the rate-setting purpose that animated the excess policy's
notice requirement would have been satisfied and a denial of
coverage for want of timely written notice alone would be contrary
to Massachusetts law. In Harvard's view, the SJC's holding in
Chas. T. Main does not apply to circumstances in which an insurer
has actual notice of a claim and can use that information to set
its rates, notwithstanding the insured's failure to comply with
the policy's notice requirement. But this is little more than
gaslighting. Arguing that the policy's notice requirement should
not be enforced because Zurich may have had actual notice of the
claim is simply another way of arguing that Zurich was not
prejudiced by the lack of timely written notice. To honor such an
argument would impermissibly collapse the critical distinction
- 10 - that the SJC has made between occurrence-based and claims-made
policies.2
Harvard's argument that Chas. T. Main is factually
distinct because the insurer in that case had no actual knowledge
of the claim is equally unpersuasive. Harvard places great
emphasis on the SJC's statement that "[i]f a claim is made against
an insured, but the insurer does not know about it until years
later, the primary purpose of insuring claims rather than
occurrences is frustrated." Id. This statement, though, resides
within a discussion that addresses not the specific facts of that
case but, rather, why the purpose underlying notice provisions in
claims-made policies differs from that underlying the notice
provisions in occurrence-based policies. Premised on that
discussion, the SJC promulgated a general rule that an insurer
need not demonstrate prejudice before denying coverage under a
claims-made policy for the insured's failure to provide timely
notice. See id. at 29-30. Nothing in Chas. T. Main suggests that
the SJC meant to carve out an exception to that general rule for
circumstances in which an insurer had actual notice of a pending
2 We think it more than a coincidence that most of the cases cited by Harvard in support of this argument address notice provisions in occurrence-based policies. See, e.g., Boyle v. Zurich Am. Ins. Co., 36 N.E.3d 1229, 1233, 1236 & n.8 (Mass. 2015); Augat, Inc. v. Liberty Mut. Ins. Co., 571 N.E.2d 357, 358 (Mass. 1991); Darcy v. Hartford Ins. Co., 554 N.E.2d 28, 29-30 (Mass. 1990).
- 11 - claim against an insured. And we would be straying well outside
our assigned lane to read such an exception into Massachusetts
law.
There is one further point. Harvard — which could have
sued in a Massachusetts court and argued for a modification of
that state's substantive law — opted instead to avail itself of a
federal forum. As we have admonished in earlier cases, a plaintiff
"who made a deliberate choice to sue in federal court rather than
in a [Massachusetts] state court[] is not in a position to ask us
to blaze a new trail that the [Massachusetts] courts have not
invited." Jones v. Secord, 684 F.3d 1, 11 (1st Cir. 2012).
With its legal arguments encountering strong headwinds,
Harvard pivots. It contends that to enforce the notice requirement
in Zurich's excess policy would contravene sound public policy.
Opportunistic insurers would be incentivized, Harvard insists, to
draft convoluted notice provisions in the hope of duping customers
into defaulting on their coverage. Whatever the merits of this
contention — and we take no position on it — it is for Massachusetts
courts, not for a federal court, to weigh the policy implications
of Massachusetts law. Cf. Gattineri v. Wynn MA, LLC, 63 F.4th 71,
94 (1st Cir. 2023) (certifying question to SJC when issue before
court involved "important questions of state law and public policy
with significant implications"). In diversity cases, we are
followers: we must apply clear rules of law as those rules have
- 12 - been articulated by the highest court of the relevant state. See
Torres-Ronda, 18 F.4th at 84.
That ends this aspect of the matter.3 At bottom, "[i]t
was [Harvard's] responsibility to understand the type of coverage
[it] purchased . . . , and we are not at liberty to rewrite either
the policy or Massachusetts law to conform to [Harvard's]
expectations." Gargano, 572 F.3d at 51. Accordingly, Harvard's
failure to provide timely written notice under the excess policy
resulted in a forfeiture of coverage.
B
Harvard has one last page in its playbook. It claims
that issues of fact remain as to whether it complied with the
excess policy's notice requirement. In this regard, Harvard says
— for the first time on appeal — that the policy's notice
requirement is ambiguous as to how a claim is to be "reported" to
Zurich and that further discovery might reveal that a newspaper or
3Harvard argues at length that the district court wrongly relied on two out-of-circuit cases for the proposition that an insurer may deny coverage under a claims-made policy for a lack of formal notice, even if the insurer had actual notice of the claim. See President & Fellows of Harvard Coll. v. Zurich Am. Ins. Co., No. 21-11530, 2022 WL 16639238, at *2 (D. Mass. Nov. 2, 2022) (citing Atl. Health Sys., Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 463 F. App'x 162, 167 (3d Cir. 2012); Heritage Bank of Com. v. Zurich Am. Ins. Co., No. 21-10086, 2022 WL 3563784, at *3 (N.D. Cal. Aug. 17, 2022)). Because we find Massachusetts law sufficient to resolve the issue before us, we need not address this argument. See Minturn, 64 F.4th at 14 ("We are not tied to the district court's rationale but, rather, may affirm the judgment on any ground made manifest by the record.").
- 13 - other media outlet "reported" the claim to Zurich by covering the
story for the general public.
This claim of error need not detain us. The sockdolager
is that Harvard failed to raise the claim below. "If any principle
is settled in this circuit, it is that, absent the most
extraordinary circumstances, legal theories not raised squarely in
the lower court cannot be broached for the first time on appeal."
Teamsters Union, Local No. 59 v. Superline Transp. Co., 953 F.2d
17, 21 (1st Cir. 1992).
Trying to wriggle off this particularly sharp hook,
Harvard maintains that this case presents such "extraordinary
circumstances." In support, it cites to our decision in National
Ass'n of Social Workers v. Harwood, 69 F.3d 622 (1st Cir. 1995).
There, we decided, in an exercise of our discretion, to hear an
argument raised by a government actor for the first time on appeal
— an argument that was of great public importance and that
"touch[ed] upon policies as basic as federalism, comity, and
respect for the independence of democratic institutions." Id. at
628. The same cannot be said of this case, which implicates only
garden-variety issues of state contract law, over which we are not
an authoritative tribunal.4 See Erie R.R. Co., 304 U.S. at 79
Although we have previously set forth an array of factors 4
to consider when determining the appropriateness of an exception to the raise-or-waive principle, we find this single factor sufficient, under the circumstances, to convince us that an
- 14 - ("Supervision over either the legislative or the judicial action
of the states is in no case permissible except as to matters by
the constitution specifically authorized or delegated to the
United States."); Commonwealth v. Montanez, 447 N.E.2d 660, 661
(Mass. 1983) ("Though we always treat their decisions with
deference, we are not bound by decisions of Federal courts except
the decisions of the United States Supreme Court on questions of
Federal law."). Thus, we see no sufficient reason for departing
from our customary praxis of refusing to consider arguments that
were not raised below.
III
Although we have found no basis for overturning the
district court's entry of summary judgment, a further issue
remains: whether the district court erred in denying as moot
Harvard's motions to reopen and compel additional discovery. See
Fed. R. Civ. P. 56(d), 37(a). We turn to that issue.
We review the denial of a Rule 56(d) motion for abuse of
discretion. See Hicks v. Johnson, 755 F.3d 738, 743 (1st Cir.
2014). "[T]he district court is entitled to refuse a Rule 56(d)
motion if it concludes that the party opposing summary judgment is
exception is unwarranted in this case. See Harwood, 69 F.3d at 627-29. In reaching this conclusion, however, we in no way disclaim the utility of those other factors as they might apply in other circumstances.
- 15 - unlikely to garner useful evidence from supplemental discovery."
Id.
In the case at hand, Harvard sought supplemental
discovery on the issue of whether Zurich had actual notice of the
underlying claim. But any evidence to that effect would have been
irrelevant to the summary judgment inquiry. See supra Part II.
The dispositive factual issue before the district court was whether
Harvard provided timely written notice to Zurich as required by
the excess policy — an issue to which the summary judgment record
offered a clear answer. Further discovery on the issue of actual
notice would have been entirely beside the point.
We need go no further. We hold, without serious
question, that it was not an abuse of discretion to deny Harvard's
motion to reopen discovery under Rule 56(d). And that denial
renders Harvard's motion to compel under Rule 37(a) futile such
that it can be denied as moot. See United States v. Rydle, 58
F.4th 14, 17 (1st Cir. 2023).
IV
For the reasons elucidated above, the judgment of the
district court is
Affirmed.
- 16 -