United States Court of Appeals
For the First Circuit
No. 03-2473
B&T MASONRY CONSTRUCTION CO., INC.,
Plaintiff, Appellant,
v.
PUBLIC SERVICE MUTUAL INSURANCE CO.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Douglas P. Woodlock, U.S. District Judge]
Before
Boudin, Chief Judge,
Selya and Howard, Circuit Judges.
Francis A. Shannon, III, with whom Shannon Law Associates,
Inc. was on brief, for appellant.
Nina E. Kallen, with whom Thomas G. Guiney was on brief, for
appellee.
August 30, 2004
SELYA, Circuit Judge. In 1998, the City of Everett (the
City) retained Barletta Engineering Corporation (Barletta) to
construct a new elementary school. Barletta, as general
contractor, engaged a myriad of subcontractors to assist in this
venture. Among them was appellant B&T Masonry Construction Co.,
Inc. (B&T). The work consumed the better part of two years.
In the City's view, the completed structure left
something to be desired. It sued Barletta in a state court,
alleging that Barletta's faulty workmanship had allowed water
leakage which, in turn, had caused property damage to the school
building (including mold contamination of ceilings, wells, floors,
and other components). Barletta promptly filed a third-party
complaint against B&T and sundry other subcontractors. In the only
iteration relevant here, the third-party complaint attributed the
damage to B&T's deficient masonry work.
Appellee Public Service Mutual Insurance Co. (Public
Service) had issued two consecutive commercial general liability
(CGL) policies to B&T, which were serially in effect during the
course of B&T's work on the school project. B&T tendered the
defense against Barletta's claim to the insurer. Public Service
refused the tender and disclaimed any coverage obligation.1
1
B&T made a similar tender to the insurer when the City later
filed amended complaints and Barletta, in turn, filed amended
third-party complaints. Public Service rejected these tenders as
well. Nothing in the amended pleadings changes the coverage
analysis.
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Stung by this rejection, B&T repaired to the United
States District Court for the District of Massachusetts. Invoking
that court's diversity jurisdiction, see 28 U.S.C. § 1332(a), it
initiated an action seeking a declaration that Public Service had
a duty to defend and indemnify it with respect to Barletta's claim.
In due course, the insurer moved for summary judgment. See Fed. R.
Civ. P. 56. The district court granted this motion, holding that
all the damages described in Barletta's third-party complaint fell
within the compass of the exclusions contained in the CGL
policies.2 B&T Masonry Constr. Co. v. Pub. Serv. Mut. Ins. Co.,
No. 02-10595, slip op. at 10 (D. Mass. Sept. 26, 2003)
(unpublished) (D. Ct. Op.). B&T appeals from this ruling.
We need not tarry. The insuring agreement, section
I(A)(1)(a), provides in pertinent part that Public Service will
"pay those sums that the insured becomes legally obligated to pay
as damages because of . . . 'property damage' to which this
insurance applies." This insuring agreement is, however, subject
to certain so-called "business risk" exclusions. These include
section I(A)(2)(j)(5) (which excludes coverage for property damage
to "[t]hat particular part of real property on which [the insured]
or any contractors or subcontractors working directly or indirectly
on [the insured's] behalf are performing operations" so long as
2
Because the two policies are substantially identical with
respect to the matters at issue, we hereinafter refer, for
simplicity's sake, only to the first policy.
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"the 'property damage' arises out of those operations"); section
I(A)(2)(j)(6) (which excludes coverage for property damage to
"[t]hat particular part of any property that must be restored,
repaired or replaced because [the insured's work on it] was
incorrectly performed"); section I(A)(2)(l) (which excludes
coverage, with a limitation not relevant here, for "'[p]roperty
damage' to '[the insured's] work' arising out of it or any part of
it"); section I(A)(2)(m) (which excludes coverage for "'[p]roperty
damage' . . . arising out of . . . [a] defect, deficiency,
inadequacy or dangerous condition" in the insured's product or
work); and section I(A)(2)(n) (which excludes coverage for
"[d]amages claimed for any loss, cost or expense incurred by [the
insured] or others for the loss of use, withdrawal, recall,
inspection, repair, replacement, adjustment, removal or disposal of
. . . '[the insured's] work'"). The question presented in this
case is whether Barletta's derivative claim (seeking, in effect,
indemnification or contribution anent the City's claim for damages
to the school building) falls within the purview of some or all of
these exclusions.
Because this is a diversity case, Massachusetts law
controls. United States Liab. Ins. Co. v. Selman, 70 F.3d 684, 688
(1st Cir. 1995). Under the Massachusetts cases, the interpretation
of an insurance policy is normally a question of law for the court.
Ruggerio Ambul. Serv., Inc. v. Nat'l Grange Ins. Co., 724 N.E.2d
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295, 298 (Mass. 2000). Where, as here, the material facts upon
which a coverage question is based are not genuinely in dispute,
the application of the policy to those facts is likewise a question
of law (and, thus, properly resolved on summary judgment). Liberty
Mut. Ins. Co. v. Metro. Life Ins. Co., 260 F.3d 54, 61 (1st Cir.
2001).
Massachusetts courts apply the traditional rules of
contract interpretation to the construction of insurance policies.
Brazas Sporting Arms, Inc. v. Am. Empire Surplus Lines Ins. Co.,
220 F.3d 1, 4 (1st Cir. 2000). The first principle is to afford
the language of the policy its plain meaning. Id. Because the
duty of an insurance carrier to defend the insured is broader than
its duty to indemnify, see id., we focus on that duty.
The duty to defend is, of course, "based on the facts
alleged in the complaint and those facts which are known by the
insurer." Boston Symph. Orch., Inc. v. Comm'l Union Ins. Co., 545
N.E.2d 1156, 1158 (Mass. 1989). For the duty to arise, "the
underlying complaint need only show, through general allegations,
a possibility that the liability claim falls within the insurance
coverage." SCA Servs., Inc. v. Transp. Ins. Co., 646 N.E.2d 394,
397 (Mass. 1995) (citation and internal quotation marks omitted).
The insured bears the initial burden of showing coverage under the
policy's insuring agreements. Highlands Ins. Co. v. Aerovox Inc.,
676 N.E.2d 801, 804 (Mass. 1997). Once the insured has
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accomplished this feat, the burden shifts to the carrier to prove
the applicability of one or more separate and distinct exclusionary
provisions. Id. To the extent (if at all) that any ambiguity
permeates a policy exclusion, it must be construed strictly against
the insurer. Brazas Sporting Arms, 220 F.3d at 4.
Here, B&T satisfied its threshold burden of showing
coverage under an insuring agreement. The question reduces, then,
to whether the business risk exclusions avoid the application of
that coverage. On that question, Public Service had the devoir of
persuasion and relied upon the plain language of the exclusions to
show that they applied. In arguing against that proposition before
us, B&T asserts a nascent theory that departs dramatically from
what it argued in the court below. We explain briefly.
In the lower court, B&T acknowledged that the business
risk exclusions applied to damage to the school building caused by
its workmanship but posited that whether the damage claimed by the
City (and, derivatively, by Barletta) was caused by B&T's
workmanship or that of another subcontractor remained an open
question. This open question, it asseverated, precluded summary
judgment. The district court rejected that asseveration,
concluding (correctly, in our view) that any liability that might
attach to B&T under the third-party complaint necessarily would
stem from its own workmanship and, thus, would be excluded from
coverage. D. Ct. Op. at 10. If another firm were negligent and
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B&T were not, that fact would in no way alter the coverage
equation. Id.
B&T did not renew this specific theory in its appellate
briefs3 but, rather, relied upon a newly contrived theory. On
appeal, it suggests for the first time that the exclusion clauses,
taken in the ensemble, render the insurance policy illusory (and,
accordingly, that the exclusions are unenforceable). We cannot
countenance such a bald-faced switching of horses in mid-stream.
Advancing one theory in the trial court and jettisoning
it in favor of another (previously unarticulated) theory in the
court of appeals is unacceptable. Such a praxis violates a
prudential principle firmly embedded in our jurisprudence: that in
the absence of extraordinary circumstances — and none exist in this
case — "legal theories not raised squarely in the lower court
cannot be broached for the first time on appeal." Teamsters Union
v. Superline Transp. Co., 953 F.2d 17, 21 (1st Cir. 1992). Cases
holding to that effect are legion. See, e.g., Vargas-Ruiz v.
3
To be sure, B&T's counsel did make a passing mention of the
theory during oral argument in this court. We have no need to
respond to that allusion. The district court correctly determined
that Barletta's complaint sought to hold B&T liable only for damage
to the school building caused by B&T's own work and that any such
damage would be completely excluded from coverage under the policy.
D. Ct. Op. at 10. Where, as here, a trial court accurately
evaluates an argument and convincingly dispatches it, there is no
need for a reviewing court to prepare a palimpsest. See, e.g.,
Vargas-Ruiz v. Golden Arch Dev., Inc., 368 F.3d 1, 2 (1st Cir.
2004); Cruz-Ramos v. P.R. Sun Oil Co., 202 F.3d 381, 383 (1st Cir.
2000); Ayala v. Union de Tronquistas, 74 F.3d 344, 345 (1st Cir.
1996).
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Golden Arch Dev., Inc., 368 F.3d 1, 3 (1st Cir. 2004); United
States v. Bongiorno, 106 F.3d 1027, 1034 (1st Cir. 1997); United
States v. Dietz, 950 F.2d 50, 55 (1st Cir. 1991); Clauson v. Smith,
823 F.2d 660, 666 (1st Cir. 1987); Johnston v. Holiday Inns, Inc.,
595 F.2d 890, 894 (1st Cir. 1979). B&T's tactics transgress that
prudential principle.
In an attempt to place its neoteric theory beyond the
range of the case law enforcing the raise-or-waive rule in this
sort of situation, B&T makes three arguments. We find all of them
unpersuasive.
First, B&T claims that it actually raised the "illusory
coverage" theory below. The record belies that claim. The
reference in B&T's reply brief is to an exchange that took place
during the summary judgment hearing. In that exchange, its counsel
questioned Public Service's interpretation of the policy by asking
rhetorically, "what did we buy this insurance for?" In posing this
rhetorical question, however, the lawyer was arguing for a
particular interpretation of the policy language. He never
mentioned the possibility that the breadth of the exclusions
rendered the coverage illusory and, thus, that the exclusions were
void as a matter of law.
Even if the rhetorical question was intended to start the
argument down this path — and that is a stretch — the court was not
provided a roadmap. That omission would doom the argument here.
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To preserve a point for appeal, some developed argumentation must
be put forward in the nisi prius court — and a veiled reference to
a legal theory is not enough to satisfy this requirement. See,
e.g., United States v. Slade, 980 F.2d 27, 31 (1st Cir. 1992) ("A
litigant cannot ignore her burden of developed pleading and expect
the district court to ferret out small needles from diffuse
haystacks."); Rivera-Gomez v. Adolfo de Castro, 843 F.2d 631, 635
(1st Cir. 1988) ("Judges are not expected to be mindreaders.
Consequently, a litigant has an obligation to spell out its
arguments squarely and distinctly or else forever hold its peace.")
(citation and internal quotation marks omitted).
B&T next maintains that the raise-or-waive rule should
not apply because it is not advancing a new issue on appeal, but
merely a new argument. In mincing words in this fashion, B&T
attempts to align its new theory with its old one, arguing in the
face of obvious differences that these two theories are "the same"
because both relate to the general issue of whether the exclusions
govern this case.
We have decanted this wine before. In Slade, we
explicitly rejected the notion that "only new facts and not new
arguments about those facts are prohibited from debuting in the
court of appeals," calling that notion "grounded more in hope than
in precedent." 980 F.2d at 31. We held, citing numerous cases,
that "a party is not at liberty to articulate specific arguments
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for the first time on appeal simply because the general issue was
before the district court." Id. That holding is dispositive here.
Finally, B&T suggests that even if it failed to preserve
its late-emerging theory for appeal, we should entertain that
theory because the theory is uniquely important. We have
recognized that an appellate court has the authority, in its
discretion, to consider theories not articulated below. See, e.g.,
United States v. LaGuardia, 902 F.2d 1010, 1013 (1st Cir. 1990).
We also have recognized, however, that exceptions of this kind to
the raise-or-waive rule should be "few and far between," Nat'l
Ass'n of Soc. Workers v. Harwood, 69 F.3d 622, 627 (1st Cir. 1995),
and, accordingly, this power is to be used sparingly. The typical
case involves an issue that is one of paramount importance and
holds the potential for a miscarriage of justice. See id. at 628;
United States v. Krynicki, 689 F.2d 289, 292 (1st Cir. 1982).
B&T implores us to entertain the "illusory coverage"
theory here, predicting that any other course will result in
perpetuating the underwriting of "[t]housands, if not tens of
thousands," of other illusory policies. Appellant's Reply Br. at
3. We reject these importunings. We simply do not see how a
straightforward application of the raise-or-waive rule in this
garden-variety coverage dispute either rises to a level of great
importance or threatens to work a miscarriage of justice.
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We add an eschatocol of sorts. Even though we are not
compelled to speak to the merits, we note in the interest of
completeness that B&T's new theory would not have prevailed even if
it had been properly preserved.
B&T contends that the district court's reading of the
business risk exclusions would eliminate all coverage for
negligence claims, even though that is the very type of coverage
that B&T purchased and that a CGL policy purports to provide.
Appellant's Br. at 16. That contention is sheer sophistry. The
exclusions leave most negligence claims unaffected; they merely bar
coverage as to any damages to the project itself caused by B&T's
faulty workmanship. While these exclusions do limit liability,
they do not completely vitiate the bargained-for coverage (indeed,
they do not come close to achieving so drastic a result). Many
negligence claims are undoubtedly covered. If, for example, a wall
of the school building collapsed due to B&T's negligence and
damaged an adjacent structure (not part of the school complex), or
if a B&T employee carelessly dropped a trowel and struck a passing
vehicle, coverage would attach. Consequently, the grant of
coverage is not illusory. See, e.g., Bagley v. Monticello Ins.
Co., 720 N.E.2d 813, 817 (Mass. 1999) (holding that as long as "the
policy still provides coverage for some acts, it is not illusory
simply because of a potentially wide exclusion").
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We need go no further. For the reasons elucidated above,
we hold that the district court did not err in entering summary
judgment in Public Service's favor.
Affirmed.
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