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-