United States Court of Appeals
For the First Circuit
No. 18-1881
EASTHAMPTON CONGREGATIONAL CHURCH,
Plaintiff, Appellee,
v.
CHURCH MUTUAL INSURANCE COMPANY,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Katherine A. Robertson, Magistrate Judge]
Before
Lynch, Circuit Judge,
Souter, Associate Justice,*
and Stahl, Circuit Judge.
John Egan, with whom Rubin and Rudman, LLP was on brief, for
appellant.
William P. Rose, with whom Melick & Porter LLP was on brief,
for appellee.
February 22, 2019
* Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
STAHL, Circuit Judge. This appeal requires the
interpretation of words and terms in an insurance policy.
Plaintiff-Appellee Easthampton Congregational Church (the
"Church") had a property insurance policy (the "Policy") with
Defendant-Appellant Church Mutual Insurance Company (the
"Insurance Company"). On April 25, 2016, the ceiling in one
section of the Church collapsed. The Church filed a claim pursuant
to the Policy, which the Insurance Company denied. The Church
then filed suit, seeking a declaratory judgment that the claim was
covered. On cross-motions for summary judgment, the district court
ruled for the Church. Noting that the Policy did not define the
word "decay," the court adopted a dictionary definition of the
word and used that definition to conclude that the Policy provided
coverage. We affirm, albeit for different reasons.
I. Factual Background
A. The Insurance Policy
The Policy was in effect at the time of the collapse and
carries a coverage limit of $5,353,000. The parties agree that
the damaged section of the Church, Fellowship Hall, "is among the
[covered] premises described in the [P]olicy's Declarations Page."
The coverage provisions are governed by two primary
forms. The first is the "Building and Personal Property Coverage
Form," which covers "direct physical loss of or damage to Covered
Property . . . caused by or resulting from any Covered Cause of
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Loss." The second is the "Causes of Loss - Special Form." That
form sets forth various exclusions and limitations in Sections B
and C, respectively.
The Insurance Company argues that two exclusionary
clauses are relevant to this case. First, in Section B-2(d), the
Policy includes a "Wear and Tear Exclusion" which states:
We will not pay for loss or damage caused by
or resulting from any of the following:
. . .
d. (1) Wear and tear;
(2) Rust, or other corrosion, decay,
deterioration, hidden or latent
defect, or any quality in property
that causes it to damage or destroy
itself;[1]
Second, in Section B-3(c), the Policy includes a "Faulty
Construction Exclusion" which excludes coverage for:
loss or damage caused by or resulting from any
of the following [sections] but if an excluded
cause of loss that is listed in [the following
sections] results in a Covered Cause of Loss,
we will pay for the loss or damage caused by
that Covered Cause of Loss.
. . .
c. Faulty, inadequate, or defective:
. . .
1 The Insurance Company did not cite the exclusions for "wear
and tear" and for "any quality in property that causes it to damage
or destroy itself" in its letters to the Church denying coverage,
though it did raise them before the district court.
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(2) Design, specifications,
workmanship, repair, construction,
renovation, remodeling, grading,
compaction;
(3) Materials used in repair,
construction, renovation, or
remodeling; or
(4) Maintenance;
of part or all of any property on or off
the described premises.
In Section B-2(j), the Policy also includes a "Collapse
Exclusion" which excludes coverage for:
Collapse, except as provided below in the
Additional Coverage - Collapse [provision].
But if collapse results in a Covered Cause of
Loss at the described premises, we will pay
for the loss or damage caused by that Covered
Cause of Loss.
The Additional Coverage - Collapse provision, Section D-2, in turn
states:
The term Covered Cause of Loss includes the
Additional Coverage - Collapse as described
and limited in [the sections] below.
1. With respect to buildings:
a. Collapse means an abrupt falling
down or caving in of a building or
any part of a building with the
result that the building or part of
the building cannot be occupied for
its intended purpose;
. . .
2. We will pay for direct physical loss or
damage to Covered Property, caused by
collapse of a [Covered Property] . . . if
the collapse is caused by one or more of
the following:
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. . .
b. Decay that is hidden from view,
unless the presence of such decay is
known to an insured prior to
collapse;
. . .
f. Use of defective material or methods
in construction, remodeling, or
renovation if the collapse occurs
during the course of the
construction, remodeling, or
renovation. However, if the
collapse occurs after construction,
remodeling, or renovation is
complete and is caused in part by a
cause of loss listed in [the
previous sections]; we will pay for
the loss or damage even if use of
defective material or methods, in
construction, remodeling, or
renovation, contributes to the
collapse.
Therefore, although Section B-2(j) excludes coverage for collapses
generally, Section D-2 effectively reinstates coverage under
limited circumstances, including where the collapse was caused in
part by "[d]ecay that is hidden from view." It is noted that the
Policy does not define the word "decay."
B. The Ceiling Collapse
On April 25, 2016, the ceiling in the Fellowship section
of the Church fell to the floor. The Church promptly reported the
incident to the Insurance Company. Eight days later, at the
request of the Insurance Company, forensic engineer Joseph Malo
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inspected the ceiling collapse and detailed his findings in a
written report. The parties accepted the contents of Malo's report
as "agreed material facts."
In that report, Malo wrote that the ceiling "consist[ed]
of three different types of materials installed one over the other
with a total thickness of approximately 3 [and] 3/4 inches." "The
original ceiling [was] constructed with wood lath and plaster
attached to boards" spaced twelve inches apart. The boards
themselves "were attached to the ceiling joists" by "cut nails
with approximately 1 [and] 3/4-inch penetration." Although the
boards were nailed to the joists, the wood lath and plaster were
attached only to the boards. Sometime after the original ceiling
was constructed, two more ceiling layers were installed. The
second layer consisted of drywall affixed to boards, which were
then nailed directly into the plaster. The third layer consisted
of ceiling tiles that were attached directly to the surface of the
drywall. Neither the second nor third layers were attached to the
ceiling joists. In addition, there was approximately ten inches
of insulation blown into the space above the ceiling. Therefore,
the only support for the three layers of ceiling materials and
insulation was the original nails that fastened the first layer of
boards to the ceiling joists.
Malo concluded that "nail withdrawal" by the smooth
nails used to secure the original boards to the joists caused the
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ceiling collapse. He observed that "cyclical volumetric changes
induce[d] by normal temperature and moisture changes in the
building materials" had caused the nails' connection to the joists
to weaken. Eventually, the nails completely pulled out, "leaving
only holes in the bottoms of the ceiling joists." In other words,
the collapse was caused by the "progressive failure of the
fasteners used to attach the layers of ceiling to the ceiling
joists due to the weight of the ceiling."
C. Denial of Coverage
On May 19, 2016, the Insurance Company denied the
Church's claim, relying on Malo's report. As relevant here, the
Insurance Coverage cited the Faulty Construction Exclusion,
stating that "[t]he fasteners used to uphold the ceiling were
inadequate for the size/weight of the ceiling, and the ceiling
system was not adequately fastened to the structure." The Church
asked the Insurance Company to reconsider its decision, arguing
that the collapse was covered under the Additional Coverage -
Collapse provision. However, on July 1, 2016, the Insurance
Company denied the reconsideration request.
On September 26, 2016, the Church, through counsel, sent
the Insurance Company a letter detailing its position that the
loss caused by the ceiling collapse was a covered event under the
Policy. The Church disputed the application of the Faulty
Construction Exclusion, claiming that because the ceiling lasted
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approximately sixty years, its construction was "entirely
effective." In addition, the Church argued that the collapse was
caused by hidden decay and so was covered by the Additional
Coverage - Collapse provision. It noted that Malo's report
concluded that the collapse occurred because of nail withdrawal,
which was a "progressive failure" that "could have taken a period
of years to occur."
The Insurance Company replied by letter through counsel
on October 21, 2016, reiterating its prior position that the
collapse occurred because of "faulty construction."
Specifically, it argued that Malo's report concluded that the
ceiling's construction was flawed because the second and third
layers were not securely fastened to the ceiling joists. The
letter also rejected the Church's allegation that hidden decay
contributed to the collapse.
II. Procedural Background
The Church filed suit in Massachusetts Superior Court in
April 2017 seeking a declaratory judgment that the Policy provided
coverage for the collapse. The Insurance Company timely removed
the case to federal court based on diversity jurisdiction.2 Both
2 The Church is an organization located in Easthampton,
Massachusetts; the Insurance Company is a corporation with its
principal place of business in Merrill, Wisconsin; and the amount
in controversy exceeds $75,000.
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parties consented to have the case heard by a magistrate judge and
filed cross-motions for summary judgment.
On May 10, 2018, the district court granted summary
judgment for the Church. Easthampton Congregational Church v.
Church Mut. Ins. Co., 322 F. Supp. 3d 230 (D. Mass. 2018). The
court concluded that the collapse resulted at least in part from
"hidden decay" such that the Additional Coverage - Collapse
provision applied. Id. at 235-41. After noting that the Policy
failed to define "decay," the court looked to dictionary
definitions of that term and adopted a definition that encompassed
"a gradual deterioration or decline in strength or soundness."
Id. at 236-37. From there, the court held that there was
sufficient evidence (i.e., the Malo report) to show that the
collapse "was 'caused in part' by 'decay'" "hidden from view" --
namely, the gradual nail withdrawal. Id. at 236-38. Accordingly,
it held that the collapse fell within the Additional Coverage -
Collapse provision. Id. Because that provision expressly provided
coverage, the court declined to address the Insurance Company's
arguments that the Wear and Tear and Faulty Construction Exclusions
applied. Id. at 241-42. This timely appeal followed.
III. Analysis
A. Legal Framework
We review the district court's grant of summary judgment
de novo. AJC Int'l, Inc. v. Triple-S Propiedad, 790 F.3d 1, 3
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(1st Cir. 2015). "Cross motions [for summary judgment] simply
require us to determine whether either of the parties deserves
judgment as a matter of law on facts that are not disputed."
Littlefield v. Acadia Ins. Co., 392 F.3d 1, 6 (1st Cir. 2004)
(quotation marks and citation omitted).
"Because this case is brought in diversity jurisdiction,
we must look to state law for the substantive rules of decision."
Sanders v. Phoenix Ins. Co., 843 F.3d 37, 42 (1st Cir. 2016)
(citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)). The
parties agree that Massachusetts law controls the disposition of
this case. See Artuso v. Vertex Pharm., Inc., 637 F.3d 1, 5 (1st
Cir. 2011) ("In determining which state's law applies, a diversity
court is free to honor the parties' reasonable agreement.").
"[T]he construction of an insurance policy is a question
of law . . . ." Lind-Hernández v. Hosp. Episcopal San Lucas
Guayama, 898 F.3d 99, 103 (1st Cir. 2018) (internal quotation marks
and citation omitted). "Under Massachusetts law, we construe an
insurance policy under the general rules of contract
interpretation, beginning with the actual language of the
policies, given its plain and ordinary meaning." AIG Prop. Cas.
Co. v. Cosby, 892 F.3d 25, 27 (1st Cir. 2018) (internal quotation
marks, alterations, and citation omitted).
As a general matter, in Massachusetts, the insured bears
the "initial burden of showing that the case involves a generally
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covered risk under the policy." Stor/Gard, Inc. v. Strathmore
Ins. Co., 717 F.3d 242, 247 (1st Cir. 2013) (citation omitted).
Where, as is here, the parties do not dispute that the incident
was a generally covered risk, the burden shifts such that the
insurer must demonstrate that an exclusion precludes coverage.
Clark Sch. for Creative Learning, Inc. v. Phila. Indem. Ins. Co.,
734 F.3d 51, 55 & n.1 (1st Cir. 2013). "And if the insurer
satisfies that burden, the burden shifts back to the insureds to
show an exception to the exclusion holds sway." Stor/Gard, Inc.,
717 F.3d at 247 (citation omitted).
However, where "a term is 'susceptible of more than one
meaning and reasonably intelligent persons would differ as to which
meaning is the proper one,' the term is ambiguous." U.S. Liab.
Ins. Co. v. Benchmark Constr. Servs., Inc., 797 F.3d 116, 119-20
(1st Cir. 2015) (quoting Citation Ins. Co. v. Gomez, 426 Mass.
379, 381 (1998)). To the extent an ambiguity does exist, it is
strictly construed against the insurer. See Metro. Prop. & Cas.
Ins. Co. v. Morrison, 460 Mass. 352, 362-63 (2011).
It is also a principle of Massachusetts law that "[m]ore
specific contract terms ordinarily control over more general
contract terms." Davis v. Dawson, Inc., 15 F. Supp. 2d 64, 109
(D. Mass. 1998) (citing Lawson v. Fed. Deposit Ins. Corp., 3 F.3d
11, 17 (1st Cir. 1993)). Therefore, if a policy provision is found
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to provide for coverage, then general exclusion clauses are
inapplicable. See id.
B. Definition of "Decay"
The parties agree that we must first determine whether
the hidden decay section of the Additional Coverage - Collapse
provision applies. If the ceiling collapse is covered by that
section, or if the language is ambiguous with respect to coverage,
then the general Faulty Construction and Wear and Tear Exclusions
are inapplicable. The parties further agree that the nail
withdrawal was "hidden," so that the disposition of this case turns
at the outset on the definition and application of the word
"decay."
As we have said, the Policy does not define "decay." In
such circumstances, "courts often look to dictionaries for
assistance in determining ordinary meaning." Fed. Ins. Co. v.
Raytheon Co., 426 F.3d 491, 498-99 (1st Cir. 2005) (citation
omitted). Here, the district court consulted two dictionaries.
Easthampton, 322 F. Supp. 3d at 236. First, it looked to the
Merriam-Webster Dictionary, which defined "decay" (in noun form)
as a "gradual decline in strength, soundness, or prosperity or in
degree of excellence or perfection," "a wasting or wearing away,"
and a "rot . . . specifically[,] aerobic decomposition of proteins
chiefly by bacteria." Decay, Merriam-Webster Dictionary,
available at https://www.merriam-webster.com/dictionary/decay.
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Second, it turned to the Oxford English Dictionary, which defined
"decay" as "[t]he process of falling off from a prosperous or
thriving condition; progressive decline; the condition of one who
has thus fallen off or declined," "falling off (in quantity,
volume, intensity, etc.); dwindling, decrease," and "the
destructive decomposition or wasting of organic tissue; rotting."
Decay, Oxford English Dictionary, available at
http://www.oed.com/view/Entry/48067?rskey=z7ljDr& result=1#eid.
The district court held that "[t]he most reasonable
reading of the word 'decay' as it is used in the Policy is that it
refers to the broader concept of the word." Easthampton, 322 F.
Supp. 3d at 236. That is, a "gradual decline in strength" or
"progressive decline" as opposed to a narrower definition that
entails organic rotting. Id. at 236-37. In support, it noted
that the Policy used the word "rot" in a separate exclusion titled
"'Fungus,' Wet Rot, Dry Rot and Bacteria." Id. at 236.
Therefore, the district court reasoned that the Insurance Company
must have intended "decay" to mean something broader than rot.
Id. at 236-37.
We agree with the district court's decision, although
not its reasoning. As used in the Policy, the word "decay" could
plausibly be read to mean either "progressive decline" or "rot."
Accordingly, its meaning is ambiguous and that ambiguity must be
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resolved in the Church's favor.3 See U.S. Liab. Ins. Co., 797 F.3d
at 119-21; Allmerica Fin. Corp. v. Certain Underwriters at Lloyd's,
London, 449 Mass. 621, 628 (2007). On that basis alone, we affirm
the district court's judgment.
We note that other courts have resolved this issue in
the same way. For example, in Stamm Theatres, Inc. v. Hartford
Cas. Ins. Co., 93 Cal. App. 4th 531, 535 (2001), the ceiling in
the insured's theater "was in a state of 'imminent collapse.'"
Several wooden trusses supporting the ceiling had cracked
"completely through." Id. at 536. The theater produced an expert
who attributed the cracks to, inter alia, "the increased load
created by a partial reroofing." Id. The insurer produced experts
who similarly concluded that the cracks were caused by excessive
pressure on the trusses. Id. at 537. Considering an insurance
policy that, like the Policy in question here, covered losses
attributable to "hidden decay," the California Court of Appeals
rejected the insurer's argument that the definition of "decay"
should be limited to organic rot. Id. at 538-41. In doing so,
the court stated that the insurer's failure to define "decay,"
coupled with the existence of multiple dictionary definitions of
3 Neither party argued that the term was ambiguous at the
district court. However, on appeal, the Church appears to have
raised an ambiguity argument.
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the term, created an ambiguity that must be resolved in favor of
the insured.4 Id. at 543.
The Insurance Company raises a variety of arguments in
response, none of which are availing. First, it suggests that the
cases the district court relied upon were inapposite because the
"'decay' that was the actual subject of each [case] was uniformly,
and more narrowly, associated with a discrete physical impairment
to the material quality of a component of the collapsed property."
However, that argument does nothing to refute the core holding of
the cited cases -- namely, that those "physical impairments" were
covered because they fell within a broader definition of "decay"
that included gradual degradation.
4 It is also a principle that contract terms should be
construed in their plain and ordinary meaning. AIG Prop. Cas.
Co., 892 F.3d at 27. While "decay" has a definition connoting
"rot" in the biological sciences, other courts have found that its
"'ordinary, plain meaning' [] encompasses a 'generalized
definition of decomposition.'" Joy Tabernacle—The New Testament
Church v. State Farm Fire and Cas. Co., 616 F. App'x 802, 809 (6th
Cir. 2015) (unpublished) (quoting Hani & Ramiz, Inc. v. North
Pointe Ins. Co., No. 316453, 2014 WL 523492, at *3 (Mich. Ct. App.
Feb. 4, 2014) (unpublished per curiam opinion)); accord Quality
Time, Inc. v. West Bend Mut. Ins. Co., No. 12-1008-JTM, 2013 WL
474289, at *13 (D. Kan. Feb. 7, 2013) ("Because the term decay
may, consistent with popular understanding, be construed to mean
gradual deterioration or degradation, without organic
decomposition, this is how the court construes the term here.");
Ne. Ctr. Inc. v. St. Paul Fire and Marine Ins. Co., No. 03-246-
TS, 2006 WL 842396, at *5 (N.D. Ind. Mar. 28, 2006) (concluding
that "decay" "is not ordinarily understood to mean only 'rot,'"
but rather connotes "a progressive failure in strength or
soundness" or "wasting and wearing away.").
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Second, the Insurance Company complains that the
district court's chosen definition would encompass all collapses,
because "it is difficult to imagine any collapse, of any structure,
being caused by something other than 'decay.'" But, even if the
Insurance Company did not intend to provide coverage for collapses
like the one in question, that is a self-inflicted problem. The
Insurance Company, which wrote the Policy, could simply have
defined "decay" narrowly or limited the coverage period. Despite
the Insurance Company's protestations, our interpretation of the
Policy would not result in coverage for all collapses. As the
district court correctly noted, "[t]he insured still has to prove
that one of the . . . enumerated causes of loss contributed to the
collapse, and where an insured relies on hidden decay, the insured
still has to show a gradual deterioration or decline in strength
or soundness that was not apparent to the insured." Easthampton,
322 F. Supp. 3d at 241.
Finally, the Insurance Company argues that the district
court's decision "cannot be reconciled with [the First Circuit's]
opinion in Parker v. Worcester Ins. Co., 247 F.3d 1 (1st Cir.
2001)." In that case, the plaintiff homeowner obtained homeowner's
insurance shortly after acquiring her Connecticut home. Parker,
247 F.3d at 2. Soon after moving in, she noticed hairline cracks
in the concrete walls of the basement but disregarded them as
cosmetic. Id. Approximately ten years later, she "noticed that
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the cracks were growing larger," threatening the home's
foundation, and filed a claim for collapse with the defendant
insurer.5 Id. The insurer denied coverage based on an engineering
report which concluded that the cracks were caused by "defective
concrete" and "high lateral earth pressures due to poor drainage."
Id. at 3.
The district court granted summary judgment for the
insurer, finding that the claim was time-barred. Id. at 3-4. This
court reversed, concluding that the Connecticut Supreme Court6
would likely toll the limitations period until "the point of real
or imputed knowledge of such a threat [of loss]." Id. at 5.
However, in dicta, the decision expressed skepticism as to the
merits of the claim, cautioning that the policy excluded coverage
for loss "due to faulty construction of the foundation." Id. at
6. While there was a coverage provision for "hidden decay," the
decision also stated that "'decay' is not a backdoor to coverage
for poor construction materials and workmanship." Id.
Here, because the second and third layers of the ceiling
were never fastened to the joists, the Insurance Company argues
5In Connecticut, a property owner may file a claim for
collapse "as soon as structural integrity is substantially
impaired." Parker, 247 F.3d at 4 (citing Beach v. Middlesex Mut.
Assurance Co., 532 A.2d 1297, 1300-01 (Conn. 1987)).
6In Parker, although the case was filed in Massachusetts,
the parties agreed that Connecticut law controlled. 247 F.3d at
3.
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that the collapse was attributable to defective workmanship and
that the above-quoted dicta from Parker compels reversal. It
argues that to do otherwise would be to "sneak in through the
backdoor of coverage in the guise of 'hidden decay.'" In support,
the Insurance Company claims that "[t]he policy language in the
two [cases] is essentially the same."
Even ignoring the fact that the cited language was dicta,
which is not binding, there are important distinctions between
Parker and this case. In Parker, the insurer limited coverage for
collapses attributable to "defective material or methods" only to
situations where the collapse occurred "during construction." 247
F.3d at 6. By contrast, in this case, the Insurance Company
explicitly granted coverage for collapses occurring after
construction, provided the collapse was caused in part by hidden
decay. Moreover, in Parker, because the concrete that caused the
collapse was defective to begin with, it was doubtful that it
"could be called 'decay,'" so the hidden decay provision was
inapplicable. Id. at 6. Here, even assuming that the ceiling as
put together at the time of collapse was defective, the Malo report
establishes that the cause of the collapse was the progressive
weakening of the smooth nails connecting the first layer of the
ceiling to the joists. Our holding is not inconsistent with
Parker.
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IV. Conclusion
Because ambiguities in the Policy result in coverage for
the collapse, we need not consider the application of the general
exclusions. For the foregoing reasons, the judgment of the
district court is AFFIRMED. Costs are awarded to the Church.
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