Wyner v. North American

• Court: Court of Appeals for the First Circuit
• Decided: March 21, 1996
• Docket: 95-1678
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT

                                 ____________________



          No. 95-1678



                               JUSTIN L. WYNER, ET AL.,



                                     Appellants,



                                          v.



                     NORTH AMERICAN SPECIALTY INSURANCE COMPANY,



                                      Appellee.



                                 ____________________



                     APPEAL FROM THE UNITED STATES DISTRICT COURT



                          FOR THE DISTRICT OF MASSACHUSETTS



                   [Hon. Reginald C. Lindsay, U.S. District Judge]
                                              ___________________



                                 ____________________



                                        Before



                               Torruella, Chief Judge,
                                          ___________



                            Aldrich, Senior Circuit Judge,
                                     ____________________



                              and Selya, Circuit Judge.
                                         _____________



                                _____________________



               Eric F. Eisenberg, with whom  Joel Lewin and Hinckley, Allen
               _________________             __________     _______________

          & Snyder were on brief for appellants.
          ________

               Edward S. Ronan, with whom Ronan, Riley & Dever, P.C. was on
               _______________            __________________________

          brief for appellee.


____________________



                                    March 21, 1996

                                 ____________________



TORRUELLA, Chief Judge.  Appellants Justin L. Wyner, et
                    TORRUELLA, Chief Judge.
                               ___________                               __



          al.  (collectively, "the  Landlords"),  appeal  a district  court
          ___



          order affirming the bankruptcy  court's grant of summary judgment



          for appellee North American  Specialty Insurance Co. ("NASIC") on



          the  Landlords' claims that  the language of  an insurance policy



          issued to its tenant Wursthaus, Inc. ("Wursthaus") indicates that



          the policy covers  alleged damage by  Wursthaus to real  property



          owned by the Landlords.  We affirm.



                                    I.  BACKGROUND
                                    I.  BACKGROUND
                                    ______________



                    On  January  29,  1993,  Wursthaus  filed  a  voluntary



          Chapter  11  petition  with  the  bankruptcy  court.    Wursthaus



          operates a  restaurant in  Cambridge, Massachusetts, in  space it



          has  leased from the Landlords ("the leased property").  On March



          26,  1993, Wursthaus  filed  an Adversary  Complaint against  the



          Landlords  in the  bankruptcy  court, claiming  loss of  business



          income  due  to the  Landlords'  construction in  and  around the



          leased  property.  The Landlords filed an Answer and Counterclaim



          on May 24, 1993, denying the allegations and counterclaiming that



          Wursthaus damaged the  leased property.1   On June  3, 1993,  the



          Landlords filed a third party complaint against NASIC, Wursthaus'



          insurer, seeking a declaratory judgment that Wursthaus' insurance


____________________



          1  After NASIC's summary judgment motion, the Landlords submitted

          an affidavit, discussed  infra, which claimed damage to  a larger
                                   _____

          portion of the building than just the leased property.



                                         -2-



policy  ("the  policy")  may  be  reached  and  applied  for  the



          Landlords' benefit.2



                    NASIC  answered  the  third  party  complaint,  and  on



          November 16,  1993,  moved  for  summary  judgment   against  the



          Landlords on  all  three counts  of  the Landlords'  third  party



          complaint  against NASIC.    In opposition  to  this motion,  the



          Landlords produced  an affidavit  of Richard H.  Ember ("Ember"),



          the trustee  of a trust  that owns  the majority interest  of the



          three-story building  ("the building")  that contains  the leased



          property.3   In  that  affidavit ("the  Ember Affidavit"),  Ember



          stated that Wursthaus improperly  altered and damaged portions of



          the  building  that  are  not  owned,  rented,  or   occupied  by



          Wursthaus.   In contrast to  the Landlords' third party complaint



          against  NASIC,  the  Ember   affidavit  described  the   damaged



          "premises"  as including  more  than  just  the  portion  of  the



          building leased to  the Wursthaus.   The  bankruptcy court  noted



                              
          ____________________



          2   The policy included both  a property insurance  portion and a

          commercial  general  liability  portion  ("CGL  portion").    The

          Landlords argued before the bankruptcy court that it should  have

          been  able to recover under  either portion.   However, on appeal

          the Landlords have failed to argue, beyond a passing reference in

          a footnote, that the bankruptcy court erred in its interpretation

          of the property insurance portion.  Therefore, the Landlords have

          waived their  legal and factual arguments  regarding the property

          insurance portion, see Citizens Awareness Network, Inc. v. United
                             ___ ________________________________    ______

          States  Nuclear Regulatory  Comm'n, 59  F.3d 284,  294 (1st  Cir.
          __________________________________

          1995) (stating that  "[i]t is  not enough to  mention a  possible

          argument in the most skeletal way, leaving the court to . . . put

          flesh on its bones"),  and we construe their  appeal as based  on

          the bankruptcy court's interpretation of the CGL portion.



          3    As  the  bankruptcy  court  noted,  this  property  actually

          comprises several older  buildings that over the years  have come

          to be treated as a single building with several street addresses.



                                         -3-



that  the   Landlords  "sought  to  expand"   the  definition  of



          "premises" "to include  the entire building," but  did not decide



          whether the Ember  Affidavit properly accomplished the  expansion



          sought.4    The  bankruptcy  court  granted  NASIC's  motion  for



          summary  judgment on  March 18,  1994.   The bankruptcy  court so



          ruled  based on its finding  that the policy  issued to Wursthaus



          does not  cover damage by Wursthaus to real property owned by the



          Landlords.  On  June 14,  1995, the district  court affirmed  the



          bankruptcy court's decision in a one-sentence order.



                    In this  appeal, the Landlords claim  that the district



          court erred by affirming  the bankruptcy court's summary judgment



          for NASIC.    The Landlords  also  seek to  reach  and apply  the



          proceeds of the policy.5  



                                   II.  DISCUSSION
                                   II.  DISCUSSION
                                   _______________



                                A.  Standard of Review
                                A.  Standard of Review
                                ______________________



                    In  reviewing  a  district   court's  affirmance  of  a



          bankruptcy court's grant  of summary judgment, we apply  the same



          decisional  standards as  the bankruptcy  court and  the district



                              
          ____________________



          4   We  do  not consider  whether  the Ember  Affidavit  properly

          amended the  Landlords' complaint,  since the resolution  of this

          issue would not affect the outcome under our analysis.



          5  On November  14, 1994, after the bankruptcy court  had granted

          NASIC summary  judgment on the Landlords'  third party complaint,

          the  Landlords and Wursthaus  filed with  the bankruptcy  court a

          Joint Motion to Approve Partial Settlement and the Disposition of

          Remaining Claims.   In this  motion, the debtor  Wursthaus states

          that  it wishes  to dismiss  its complaint  for loss  of business

          income against the  Landlords, and the  Landlords stated that  if

          they  were   to  prevail  on   appeal,  it  would   pursue  their

          counterclaim against  Wursthaus only  to the extent  of available

          insurance proceeds.



                                         -4-



court before us.  We examine a grant of summary judgment de novo,
                                                                   __ ____



          with a  view  to whether  there  is a  genuine  issue as  to  any



          material  fact  and whether  the moving  party  is entitled  to a



          judgment as a matter of  law.  Fed. R. Civ. P.  56(c); Den Norske
                                                                 __________



          Bank AS v. First Nat'l  Bank of Boston, No. 95-1682, slip  op. at
          _______    ___________________________



          7, ___  F.3d ___,  ___ (1st  Cir. 1996).   Once the  moving party



          (NASIC) makes this showing, the party bearing the ultimate burden



          of proof  (the Landlords)  cannot rest on  mere allegations,  but



          must proffer sufficient competent  evidence upon which a rational



          trier of fact could find in its favor.  Id. at 7.  Whether or not
                                                  ___



          contractual ambiguity exists is generally a matter of law for the



          court.  See Smart  v. Gillette Co. Long-Term Disability  Plan, 70
                  ___ _____     _______________________________________



          F.3d 173, 178 (1st Cir. 1995).  If such ambiguity  is found, then



          an  argument between parties  about the  meaning of  an ambiguous



          contract is  typically an  argument about  a  material fact,  and



          summary  judgment is  normally unwarranted  unless the  extrinsic



          evidence presented about the parties' intended meaning is so one-



          sided that  no reasonable  person could  decide to  the contrary.



          Den Norske Bank AS, slip op. at 7.  Nonetheless,  we must resolve
          __________________



          all  genuine  factual   disputes,  and  any   competing  rational



          inferences, in  the light most  favorable to  the Landlords,  the



          party against  whom  summary  judgment entered.    Id.;  Byrd  v.
                                                             ___   ____



          Ronayne, 61 F.3d 1026, 1030 (1st Cir. 1995).
          _______



                           B.  Interpretation of the Policy
                           B.  Interpretation of the Policy
                           ________________________________



                    We agree  with  the bankruptcy  court's finding,  which



          neither the  Landlords nor NASIC dispute,  that Massachusetts law


-5-



applies.  It  is well established  that under Massachusetts  law,



          general   rules   of   contract   construction   apply   to   the



          interpretation of an  insurance policy.   Save-mor  Supermarkets,
                                                    _______________________



          Inc.  v. Skelly Detective Serv., Inc., 268 N.E.2d 666, 669 (Mass.
          ____     ____________________________



          1971); Edward Rose Co. v. Globe & Rutgers Fire Ins. Co., 160 N.E.
                 _______________    _____________________________



          306,  308  (Mass.  1928).   On  appeal,  the  Landlords take  two



          approaches to argue  that summary  judgment was  improper on  its



          claims  against  NASIC.   First, they  argue  that the  scheme of



          capitalization  and  the  use  of certain  terms  in  the  policy



          indicate  either: (a)  that the  policy covered  damage Wursthaus



          caused  to  the Landlords'  building; or  (b)  that, even  if the



          policy  did not  clearly  and explicitly  cover such  damage, the



          policy contained  contractual ambiguity  germane to the  issue of



          whether the  policy  covered damage  caused by  Wursthaus to  the



          Landlords' building.   Second,  they argue  that  the policy,  if



          found by its terms  to unambiguously exclude coverage,  would not



          cover damage  to  the extent  that  an objective  and  reasonable



          insured,  reading  the  policy's  language, would  expect  to  be



          covered,  and would  therefore  violate public  policy that  such



          contracts should not  be misleading and that  coverage should not



          be unrealistically limited.   See Kates v. St. Paul Fire & Marine
                                        ___ _____    ______________________



          Ins.  Co., 509 F. Supp. 477, 491  (D. Mass. 1981).  The Landlords
          _________



          contend that if we accept any of these arguments, we must reverse



          the lower courts' summary judgment.



                              1.  The Policy's Language
                              1.  The Policy's Language


-6-



The  Landlords argue  that  the lower  courts erred  in



          finding  that the policy did  not explicitly cover  damage to the



          building,  and concluding  that  the policy  did not  ambiguously



          address such  coverage.   In particular, the  Landlords challenge



          the bankruptcy court's conclusion that, while the  CGL portion of



          the policy does apply  to certain property damage, it  contains a



          specific  exclusion for  property damage  to property  "you own,"



          including  the Landlords within  the term "you."   The bankruptcy



          court  concluded  that since  the term  "you"  is defined  in the



          policy  as "any  Named Insured,"  and the  Landlords are  both an



          "ADDITIONAL INSURED"6  and  "an insured"  (under  an  endorsement



          modifying the CGL portion)  under the CGL portion of  the policy,



          the plain  and unambiguous  language of  this exclusion bars  the



          Landlords from asserting coverage.



                    The  Landlords   contend  that  the   bankruptcy  court



          erroneously failed to differentiate between the expressly defined



          term "Named  Insured" used in  the policy and  the fact  that the



          Landlords   were    included   as   an    "ADDITIONAL   INSURED."



          Specifically,  the  Landlords  attempt  to  distinguish  the term



          "Named Insured" from the  act of generically adding an  entity to



          the  group of  those to  be  covered as  part of  a more  broadly



          defined category referred to  in various places in the  policy as



          "an insured," "any insured," and  those "insured."  According  to



          the  Landlords,  capitalization is  crucial;  "Named  Insured" is



                              
          ____________________



          6    The  pertinent  endorsement contains  the  term  "ADDITIONAL

          INSURED" in full capitalization.



                                         -7-



capitalized throughout the Policy,  while "insured," "an insured"



          and "any  insured" are not similarly  capitalized.  Additionally,



          the Landlords  attempt to draw  a distinction  between the  terms



          "ADDITIONAL  INSURED,"  which  they  concede  includes them,  and



          "Named Insured," which  they deny applies to them.   To this end,



          the  Landlords emphasize  the usage  of "you" and  "your," noting



          that the Business and Personal Property Coverage Form states that



          "[t]hroughout this policy the words 'you' and 'your' refer to the



          Named Insured shown in  the Declarations and any other  person or



          organization, while the  Common Policy  Declarations page  states



          that the  "Named Insured" is  "Wursthaus, Inc. &  Wursthaus, Inc.



          DBA Cardullo's Gourmet Shop."7



                    In   contrast,  NASIC  argues  that  the  courts  below



          properly found  that  because the  policy defined  "you" as  "the



          Named  Insured shown  in  the Declarations,"  and an  endorsement



          modifies  the  policy  to add  the  Landlords  as an  "ADDITIONAL



          INSURED"  under  the  CGL  portion,  the  plain  and  unambiguous



          language of the exclusion  for damage to property "you  own, rent



          or occupy"  bars the Landlords from asserting  coverage under the



          CGL  portion.   Furthermore, NASIC  argues that,  along with  the



          contractual  language,   Massachusetts  case  law   supports  its



          contention that such  exclusions apply not only to named insureds



          (such as Wursthaus), but also to additional insureds (such as the



          Landlords).    See  Massachusetts  Turnpike Authority  v.  Perini
                         ___  _________________________________      ______



                              
          ____________________



          7  Cardullo's Gourmet  Shop is a small gourmet  store operated by

          Wursthaus near its restaurant.



                                         -8-



Corp.,  208 N.E.2d  807,  812  (Mass.  1965).   In  Massachusetts
          _____                                               _____________



          Turnpike Authority, the Supreme Judicial Court noted that
          __________________



                      [t]he naming of additional  insureds does

                      not extend the nature of  the substantive

                      coverage originally given  by the  policy

                      but  merely gives  to  other persons  the

                      same protection afforded to the principal

                      insured.



          Id., 208 N.E.2d at  813 (citing Sonoco Products Co.  v. Travelers
          ___                             ___________________     _________



          Indem. Co., 315 F.2d  126, 128 (10th Cir.  1963)).  According  to
          __________



          NASIC,  with respect to the exclusion for property "you own, rent



          or  occupy" originally agreed to by Wursthaus, "the same policy .



          . .  covers the added insured,"  the Landlords.  See  Sonoco, 315
                                                           ___  ______



          F.2d at 128.



                    We  agree  with these  cases  that  the exclusions  for



          property "you own, rent or occupy"  extend to the Landlords as an



          additional insured.  The purpose of provisions to add insureds is



          "to extend the policy coverage to others  . . . not to change the



          nature of th[e] coverage nor to change declarations nor to remove



          exclusions."  Id.   Where,  as here, the  endorsement naming  the
                        ___



          additional  insured  contains  no language  suggesting  that  the



          nature  of  coverage,  declarations or  exclusions  were  thereby



          altered,  we  see no  reason  to deviate  from  the "well-settled



          [rule] that the policy does not extend any greater coverage to an



          additional insured."  Id.
                                ___



                    However, the fact that the exclusions for property "you



          own, rent or  occupy" extend  to the Landlords  as an  additional



          insured  does not, in and of itself, dispense with the Landlords'



          capitalization  argument.   Although  we  cannot conclude,  after



                                         -9-



finding that the policy's exclusions apply to the Landlords, that



          the capitalization  scheme indicated  clearly that  the Landlords



          could benefit from the scope of  coverage, if we were to find the



          contract ambiguous, we would have to reverse the district court's



          grant  of summary  judgment  for NASIC.   As  a  result, we  must



          determine  whether the capitalization and usage arguments suffice



          to show contractual ambiguity under Massachusetts law.



                    "The first  approach to the question  of interpretation



          must be  to read  this  insurance policy  as one  would read  any



          ordinary   contract   --   to   inquire  what   the   simplified,



          conversational  language of  the policy  would mean  to a  reader



          applying  normal reasoning  or  analysis."   Nelson v.  Cambridge
                                                       ______     _________



          Mutual Fire Ins. Co.,  572 N.E.2d 594, 673 (Mass. App. Ct. 1991);
          ____________________



          Commerce  Ins. Co. v.  Koch, 522 N.E.2d 979,  980 (Mass. App. Ct.
          __________________     ____



          1988).     "[A]n  ambiguity  is  not  created  simply  because  a



          controversy    exists   between   parties,   each   favoring   an



          interpretation contrary to  the other's."  Jefferson Ins.  Co. of
                                                     ______________________



          New York v. Holyoke, 503  N.E.2d 474, 476 (Mass. App.  Ct. 1987).
          ________    _______



          Rather, "[i]t  must be shown that  reasonably intelligent persons



          would  differ as  to which  one of  two or  more meanings  is the



          proper one."  Id. (citing Ober v. National Cas. Co., 60 N.E.2d 90
                        ___         ____    _________________



          (1945)).



                    Applying  these  standards,  we  conclude   that  under



          Massachusetts  law, the  Landlords' arguments  do not  suffice to



          show   contractual  ambiguity,   let  alone   outright  coverage,



          benefitting the Landlords' claims.   First, we find that,  in the


-10-



face  of   the  express  exclusion  pointed  to   by  NASIC,  the



          capitalization   in  the   policy  would   not  lead   reasonably



          intelligent persons to conclude that the exclusions did not apply



          as  stated.   At least  one Massachusetts  court has  rejected an



          argument  for  ambiguity  contingent  on the  usage  of  one term



          contradicted  by  inclusion of  other,  clearer  provisions.   In



          Nelson v. Cambridge  Mutual Fire  Ins. Co., 572  N.E.2d 594,  596
          ______    ________________________________



          (Mass. App. Ct. 1991),  the court found that the  term "residence



          premises"  in  an exclusionary  clause,  despite  the lack  of  a



          pertinent definition, did not lead to legal ambiguity.  The court



          found that  no trial was merited on the issue of whether a rented



          home was covered in addition to a separate owned home, since  the



          declarations page included  the address of  the owned home  under



          the policyholder's name.   Id.   Furthermore, in  the absence  of
                                     ___



          directly conflicting word meanings, see Quincy Mut. Fire Ins. Co.
                                              ___ _________________________



          v. Abernathy, 469 N.E.2d 797, 799 (Mass. 1984) (finding ambiguity
             _________



          regarding  scope  of  coverage  for reckless  acts  where  policy



          covered  "accident[s]"  but   where  exclusion  clause  disclaims



          liability for "bodily injury .  . . which is expected . .  . from



          the standpoint  of the Insured"), Massachusetts  courts appear to



          find ambiguity  in insurance contracts somewhat  sparingly.  See,
                                                                       ___



          e.g., Ober, 60 N.E.2d  at 91 (finding no ambiguity as  to whether
          ____  ____



          "theatre"  would encompass a  restaurant or night  club "where no



          admission is  charged, but where free  entertainment is furnished



          in connection with the  serving of food or  other refreshments");



          Jefferson Ins. Co.  of New  York, 503 N.E.2d  at 476  (concluding
          ________________________________


-11-



there  was no  ambiguity in contract,  since exclusion  of claims



          arising from events in  which the injured party was in "the care,



          custody or control" of  police department covered situation where



          injury  was suicide).  Under these rigorous standards, and in the



          face of the clear  language of the exclusions and  the Landlords'



          inclusion  as an "Additional Insured," neither the capitalization



          pattern  nor  the  usage  distinction between  the  terms  "Named



          Insured" and  "Additional Insured"  referred to by  the Landlords



          can suffice to create legal ambiguity.



                    Additionally, the Landlords point to  the CGL portion's



          provision  that "[t]hroughout  this  policy the  words 'you'  and



          'your'  refer to the Named Insured shown in the declarations, and



          any other person  or organization qualifying  as a Named  Insured



          under this  policy"; from this provision,  the Landlords conclude



          that they are not covered by the term "you" under this provision.



          Thus,  they contend, ambiguity results.   We disagree.   Not only



          does  the Landlords' argument hinge on the "Named Insured" versus



          "ADDITIONAL  INSURED" distinction that  we have already rejected,



          but in fact,  the subsequent  sentence in the  CGL policy  states



          that  "[t]he  words 'we,'  'us' and  'our'  refer to  the company



          providing this insurance."  Thus, the ordinary and common reading



          of  the language in this context would  be to find that "you" and



          "your"   were  defined  as  the  Named  Insured  not  to  draw  a



          distinction  between  Wursthaus and  the  Landlords,  but between



          Wursthaus and NASIC.



                             2.  Reasonable Expectations
                             2.  Reasonable Expectations


-12-



The Landlords also argue that the policy,  if  found to



          unambiguously  exclude coverage,  would not  cover damage  to the



          extent  that  an  objective,  reasonable   insured,  reading  the



          policy's  language, would expect to be covered.  According to the



          Landlords,  such a result would violate public policy.  While the



          Supreme Judicial Court has  left open the question of  whether to



          take  such  an approach  to  the interpretation  of  an insurance



          policy, see Bond Bros.,  Inc. v. Robinson, 471 N.E.2d  1332, 1336
                  ___ _________________    ________



          (Mass.  1984) (noting that "we have not yet explicitly adopted [a



          'reasonable expectations'] approach  to the interpretation of  an



          insurance  policy");  Markline Co.  v.  Travelers  Ins. Co.,  424
                                ____________      ___________________



          N.E.2d 464, 465 (Mass. 1981), even if such an approach definitely



          applied,  the Landlords would not  benefit.  The  CGL portion can



          reasonably be expected to cover both Wursthaus  and the Landlords



          for  claims of  third  parties.    See,  e.g.,  Crane  Service  &
                                             ___   ____   _________________



          Equipment Corp. v. United States Fidelity & Guar. Co., 496 N.E.2d
          _______________    __________________________________



          833, 834 (Mass. Ct. App. 1986) (stating that, in  that case, "the



          broad  purpose of the  comprehensive general  liability insurance



          policy, so  far as it  related to  property, was to  cover .  . .



          other people's property").  Of course, the Landlords might regard



          themselves  collectively  as  owning  "other  people's  property"



          damaged by  Wursthaus, and  therefore entitled to  recovery under



          the policy.  However, the exclusions applicable to them, referred



          to in  the discussion  of contractual  ambiguity,  render such  a



          belief  unreasonable.   See,  e.g.,  Nelson, 572  N.E.2d  at 596.
                                  ___   ____   ______



          Finally,  we find  that the  Landlords'  citation to  Allstate v.
                                                                ________


-13-



Quinn  Constr. Co., 713  F. Supp. 35,  40-41 (D. Mass.  1989), is
          __________________



          inapposite.   In  Allstate, the  court found  an exception  to an
                            ________



          "owned property" exclusion  in a comprehensive general  liability



          policy  "does  not  bar recovery  of  the  costs  of cleaning  up



          environmental contamination which presented a demonstrated danger



          to  the  property  of  another."    Id.  at  41.    Allstate  was
                                              ___             ________



          subsequently  vacated on other grounds, see id., 784 F. Supp. 927
                                                  ___ ___



          (D.  Mass.  1990), and  at any  rate,  would appear  to implicate



          concerns of  public policy regarding neighboring  property owners



          not alleged to be at stake here.



                                   III.  CONCLUSION
                                   III.  CONCLUSION
                                   ________________



                    The   Landlords  have   pointed   to  the   scheme   of



          capitalization and the  system by  which terms were  used in  the



          insurance  policy that gives rise  to this case.   These drafting



          points are  coherent enough that they suggest that the Landlords'



          argument is not irrational.   However, in the face  of explicitly



          worded endorsements and exclusions, they cannot rise to the level



          of  contractual  ambiguity  as  found  by  Massachusetts  courts.



          Similarly, the  Landlords' public policy based  arguments are not



          convincing.



                    For the foregoing reasons, the judgment is affirmed.
                                                               ________


-14-