Stor/Gard, Inc. v. Strathmore Insurance

United States Court of Appeals
For the First Circuit

No. 12-1650

STOR/GARD, INC.; SGI-WALPOLE, LLC,

Plaintiffs, Appellants,

v.

STRATHMORE INSURANCE COMPANY,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Marianne B. Bowler, U.S. Magistrate Judge]

Before

Thompson, Stahl, and Lipez,
Circuit Judges.

Liam J. McCarthy, with whom Scannell & Crowley, LLP was on
brief, for appellants.
Marie Cheung-Truslow, with whom Insurance Recovery Legal
Associates, LLC was on brief, for appellee.

May 31, 2013
 THOMPSON, Circuit Judge.

Overview

This diversity case involves an insurance-coverage

dispute, governed (the parties agree) by Massachusetts substantive

law. On one side is SGI-Walpole, LLC and Stor/Gard, Inc. On the

other is Strathmore Insurance Company. A federal magistrate judge

(presiding by the parties' consent, see 28 U.S.C. § 636(c)) granted

Strathmore summary judgment, and SGI-Walpole and Stor/Gard ask us

to take a second look. Exercising de novo review, we affirm,

though our reasoning differs somewhat from the magistrate judge's.

See, e.g., RTR Techs., Inc. v. Helming, 707 F.3d 84, 92 (1st Cir.

2013) (discussing some of the ins and outs of summary-judgment

review). We will explain our thinking shortly. But first we

summarize the relevant facts in the light most friendly to SGI-

Walpole and Stor/Gard (the summary-judgment losers). See, e.g.,

Soto-Padró v. Pub. Bldgs. Auth., 675 F.3d 1, 2 (1st Cir. 2012).

A Hard Rain Falls

The story begins in Walpole, Massachusetts, in March

2010, after a late-winter nor'easter blew through the area, dumping

about seven inches of rain in three days. To give the reader a

sense of just how bad the storm was, the Bay State's governor ended

up declaring a state of emergency. Anyway, SGI-Walpole owns land

in Walpole with self-storage warehouses on it. Stor/Gard manages

the property, which, importantly, butts up against a retaining wall

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at the base of a steep slope. And, rounding out our brief

description of the parties, Strathmore insured the two companies'

interest in the property. Unfortunately, by the storm's end, a

pile of soil had slid down the hill and into and over the retaining

wall, damaging one of the buildings — to the tune of several

hundred thousand dollars.

The Policy

Stripped to essentials, the policy between the parties —

called, in insurance lingo, an "all risks" policy — covers all

physical loss to the property unless "caused by or resulting from"

an excluded peril.1 Among the many exclusions is one — found in

the exclusions section's first numbered paragraph — barring

coverage "for loss or damage caused directly or indirectly by . . .

earth movement," which includes a "landslide." "Such [earth

movement] loss or damage" is noncompensable "regardless of any

1
As a heads-up, whenever we quote the policy in the text, we
omit any needless capitalization of words. But to give the reader
a better sense of policy's setup, we reproduce the relevant parts
(like this one) in some footnotes that follow, presenting them
pretty much as they appear in that document:

A. Coverage

We will pay for direct physical loss of or damage to
Covered Property at the premises described in the
Declarations caused by or resulting from any Covered
Cause of Loss.

The policy defines "Covered Causes of Loss" a little later as
"Risks of Direct Physical Loss unless the loss is . . . [e]xcluded
in Section B., Exclusions . . . ."

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other cause or event that contributes concurrently or in any

sequence to the loss."2 Known in the insurance world as an

"anticoncurrent cause" clause, what this provision does is deny

coverage whenever covered and excluded perils combine to cause the

loss. See, e.g., Boazova v. Safety Ins. Co., 968 N.E.2d 385, 393-

94 (Mass. 2012).

For clarity's sake, a word or two more about

anticoncurrent-cause clauses might be helpful. Understanding how

all-risk policies work is fairly easy, at least at a certain level.

If a peril is excluded, there is no coverage. See 3 Stephen A.

Cozen, Insuring Real Property § 48.03[1], at 48-19 (2009). If a

peril is not excluded, there is coverage. See id. It gets a bit

more complicated when excluded and covered perils combine to cause

the loss — i.e., when there is concurrent causation. Courts have

adopted a few different approaches for dealing with this very

2
That piece of the policy is set out this way:

B. Exclusions

1. We will not pay for loss or damage caused directly or
indirectly by any of the following. Such loss or damage
is excluded regardless of any other cause or event that
contributes concurrently or in any sequence to the loss.

. . .

b. Earth Movement

. . .

(2) Landslide, including any earth sinking, rising or
shifting related to such event . . . .

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situation. See id. We need not delve into them any further than

to say that Massachusetts courts follow the "efficient proximate

cause" approach: Skipping over nuances not relevant here, coverage

exists if "the predominant cause of the loss is a covered peril,"

Boazova, 968 N.E.2d at 394 n.4, or if a covered cause sets in

motion a "train of events" leading to the loss, Jussim v. Mass. Bay

Ins. Co., 610 N.E.2d 954, 955-56 (Mass. 1993).3 Looking to

contract around the concurrent-cause doctrine, the insurance

industry has come up with anticoncurrent-cause clauses, which, as

we just said, bar coverage for damage caused by an excluded cause,

regardless of whether a covered act also contributed to the damage.

See Boazova, 968 N.E.2d at 394-95; see also 7 Lee R. Russ & Thomas

F. Segalla, Couch on Insurance § 101:57, at 101-78 (2005).

Now back to our policy. Another key exclusion — found in

numbered paragraph 2 of the exclusions section — excludes coverage

"for loss or damage caused by or resulting from" a "collapse,

except as" set forth in the policy's "additional coverage for

collapse" section.4 And another exclusion — found in the

3
The Jussim court held that the efficient-proximate-cause
doctrine is flexible enough to make an event at the beginning of a
"chain" the responsible cause of an event that happens later. 610
N.E.2d at 955-56 (holding that if the proximate cause "is an
insured risk, there will be coverage even though the final form of
the property damage, produced by a series of related events,
appears to take the loss outside of the terms of the policy").
4
This part of the policy is laid out like so:

2. We will not pay for loss or damage caused by or

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exclusions section's numbered paragraph 3 — precludes coverage "for

loss or damage caused by or resulting from . . . weather conditions

. . . if weather conditions contribute[d] in any way with a cause

or event excluded" in numbered paragraph 1 (e.g., landslide) "to

produce the loss or damage."5 A few pages later the "additional

coverage - collapse" proviso appears — a proviso that says that

Strathmore "will pay for direct physical loss or damage" to the

property "caused by collapse of a building or any part of a

building" insured under the policy. But there is a catch. The

collapse must have been "caused by" a listed peril — one of which

is something called "specified causes of loss," which (most

pertinently for our purposes) means "water damage," which in turn

means "accidental discharge or leakage of water . . . as the direct

resulting from any of the following:

. . .

k. Collapse, except as provided below in the Additional
Coverage for Collapse.
5
That paragraph reads in pertinent part:

3. We will not pay for loss or damage caused by or
resulting from any of the following . . . .

a. Weather conditions. But this exclusion only applies
if weather conditions contribute in any way with a cause
or event excluded in Paragraph 1. above to produce the
loss or damage.

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result of the breaking apart or cracking of a plumbing . . . or

other system" on the property.6

6
Here is how that section shows up in the policy:

D. Additional Coverage – Collapse

The term Covered Cause of Loss includes the Additional
Coverage – Collapse as described and limited in D.1.
through D.5. below.

. . .

2. We will pay for direct physical loss or damage to
Covered Property, caused by collapse of a building or any
part of a building that is insured under this Coverage
Form or that contains Covered Property insured under this
Coverage Form, if the collapse is caused by one or more
of the following:

a. The "specified causes of loss" or breakage of
building glass, all only as insured against in this
Coverage Part.

. . .

G. Definitions

. . .

2. "Specified Causes of Loss" means the following:
Fire; lightning; explosion; windstorm or hail; smoke;
aircraft or vehicles; riot or civil commotion; vandalism;
leakage from fire extinguishing equipment; sinkhole
collapse; volcanic action; falling objects; weight of
snow, ice or sleet; water damage;

. . .

c. Water damage means accidental discharge or leakage of
water or steam as the direct result of the breaking apart
or cracking of a plumbing, heating, air conditioning or
other system or appliance (other than a sump system
including its related equipment and parts), that is
located on the described premises and contains water or
steam.

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 The Denied Claim — Lead-Up and Fallout

SGI-Walpole and Stor/Gard filed a claim with Strathmore,

and Strathmore sent AEGIS Engineering, Inc. and GZA

GeoEnvironmental, Inc. to determine what had caused the damage.

AEGIS concluded that rain from the nor'easter had soaked into the

soil, causing a landslide that caused the loss. Acting on an idea

floated by a representative of SGI-Walpole and Stor/Gard, AEGIS

checked whether water leaking from a drain pipe had caused or

contributed to the landslide. AEGIS did detect some water leakage.

But after running some tests, AEGIS flatly said that that leakage

"was not a cause or contributing factor." The pipe-leakage amount

was "negligible" compared to the rain amount, AEGIS noted, and

besides, the "majority" of the leakage "flowed . . . away from the

slope and retaining wall failure area . . . ."

Similarly, GZA's investigation led it to blame the "slope

and retaining wall failure" on "a combination of heavy rain

infiltrating into the slope and the inadequate subsurface drainage

behind the retaining wall." GZA also spotted some water leaking

from the pipe. But, like AEGIS, GZA rejected the idea championed

"by others that the failure was caused by leakage of stormwater

from the subsurface drainage system . . . ." That theory, GZA

emphasized, "is not supported by our analyses," which "indicate[s]

that such leakage represented merely 2 percent of the water [that]

infiltrated the failed area."

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 Armed with reports from both firms, Strathmore denied

coverage, citing (most relevantly here) the landslide, collapse,

and weather exclusions. Unwilling to take this lying down, SGI-

Walpole and Stor/Gard sued Strathmore in federal court, alleging

breach of the insurance contract and violation of the Massachusetts

consumer-protection act, Mass. Gen. Laws ch. 93A. Not missing a

beat, Strathmore counterclaimed, seeking a declaration that the

policy did not cover the claimed loss. Both sides moved for

summary judgment, and ultimately, the magistrate judge denied SGI-

Walpole and Stor/Gard's motion and granted Strathmore's.

The policy excludes damages from landslides, the

magistrate judge noted. And, she said, the AEGIS and GZA reports

characterize the slope movement here as a landslide. Plus SGI-

Walpole and Stor/Gard presented no evidence that the "accident" was

not a "landslide," she added. Then she took on their elaborate

coverage theory, which went something like this: The exclusions

section, they said, has an anticoncurrent-cause clause in numbered

paragraph 1, but, they insisted, the additional-coverage section

does not. And so, in their view, the additional-coverage section

provides coverage even if an excluded peril (think landslide)

contributed to the loss. Quoting a snippet of the GZA report

saying "2 percent of the water which infiltrated the failed area"

came from a leaky pipe, they contended that that leakage

constituted a specified cause of loss per the additional-coverage

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section, which combined with the rain water to trigger the

landslide that caused the collapse. In the end, because the pipe

leakage is a covered concurrent cause and because there is no

anticoncurrent-cause clause in the additional-coverage section,

Strathmore is obligated to pay up despite the landslide exclusion

— or so their argument concluded. The magistrate judge was

unpersuaded. Causes of loss in the additional-coverage section

(like water damage), she stressed, "are still subject to the

exclusions in the exclusion[s] section" (one of which is

landslides). Also, a commonsense reading of the policy, she

believed, shows that the anticoncurrent-cause clause in numbered

paragraph 1 of the exclusions section (excluding all loss caused

"directly or indirectly" by a landslide, "regardless of any other

cause or event that contributes concurrently or in any sequence to

the loss") bars "coverage for any damage caused in whole or in

part" by losses covered in the additional-coverage section. And,

she ruled, because the loss here "was caused at least in part by"

the excluded landslide peril, Strathmore's denial of coverage was

proper as a matter of law, which, she added, doomed SGI-Walpole and

Stor/Gard's chapter 93A claim.

So the magistrate judge entered final judgment against

SGI-Walpole and Stor/Gard. Unhappy with this outcome, SGI-Walpole

and Stor/Gard appeal.

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 Our Take on the Case

A few legal principles (some of which we mentioned

earlier) guide our decision. They fall into two groups. The first

deals with some of the inner workings of the summary-judgment

standard. The second deals with some of the basics of

Massachusetts insurance law.

As always, we give fresh review to the grant of summary

judgment, affirming only if the record — read as required (here, in

the light most agreeable to SGI-Walpole and Stor/Gard) — shows both

the lack of any genuine issue of material fact and the moving

party's entitlement to judgment as a matter of law. See, e.g.,

Candelario Del Moral v. UBS Fin. Servs. Inc. of P.R., 699 F.3d 93,

99 (1st Cir. 2012); Rodríguez v. Municipality of San Juan, 659 F.3d

168, 175 (1st Cir. 2011); see also Fed. R. Civ. P. 56(a). And of

course we are not straitjacketed by the magistrate judge's

reasoning — quite the contrary, we are free to uphold her order on

any basis present in the record. See, e.g., Loubriel v. Fondo del

Seguro del Estado, 694 F.3d 139, 142 (1st Cir. 2012).

Moving on to Massachusetts insurance-coverage decisions,

we see that the insureds (here, SGI-Walpole and Stor/Gard) have the

initial burden of showing that the case involves a generally

covered risk under the policy. See, e.g., Boazova, 968 N.E.2d at

390. Should the insureds accomplish that task, the burden shifts

to the insurer (here, Strathmore) to show an exclusion applies.

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Id. And if the insurer satisfies that burden, the burden shifts

back to the insureds to show an exception to the exclusion holds

sway. Id. Making life a little easier for us, the parties just

argue about whether SGI-Walpole and Stor/Gard shouldered this last

burden. Finally, when it comes to causation, remember the

applicable standard here is efficient proximate cause, using the

predominant-cause or train-of-events tests highlighted above. See

id. at 394 n.4; Jussim, 610 N.E.2d at 955-56.

SGI-Walpole and Stor/Gard's argument to us — a variation

on the one they made below — involves (bear with us) seven steps.

Step one: Landslides and collapses are excluded causes of loss,

and (they concede) their losses here would be excluded by these

provisions but for one thing — the additional-coverage section.

Step two: That section provides coverage for a collapse caused by

"water damage," defined as including water that leaked from a

cracked plumbing (or similar) system. Step three: GZA found that

water had saturated soil on the slope, helping to cause the

landslide that caused the collapse. Step four: 2 percent of that

water came from a leaky pipe, according to GZA. Step five: The

presence of any water from a cracked pipe — "no matter the

percentage," they write — means "water damage" helped cause the

collapse. Step six: The magistrate judge got it wrong in

construing the policy, because the additional-coverage section

cannot be trumped by the landslide, collapse, or weather-condition

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exclusions, given that it has no anticoncurrent-cause language.

Step seven: So the summary-judgment ruling cannot stand. Though

we give SGI-Walpole and Stor/Gard points for creativity, their

theory does not hold together.

"The simplest way to decide a case is often the best," a

distinguished judge once wrote. Chambers v. Bowersox, 157 F.3d

560, 564 n.4 (8th Cir. 1998) (R. Arnold, J.). Thankfully, there is

a simple way here. Let us put aside SGI-Walpole and Stor/Gard's

complaints about the magistrate judge's policy interpretation (step

six of their seven-step argument, for those keeping track). We

need not (and therefore do not) decide those tricky issues (and the

anticoncurrent-cause issue, for example, is nothing if not tricky),

because to get anywhere SGI-Walpole and Stor/Gard must convince us

that the summary-judgment evidence shows that water from the

cracked pipe "caused" the collapse, to paraphrase and quote the key

parts of the additional-coverage section. Recall that it is SGI-

Walpole and Stor/Gard's burden to make that showing. See, e.g.,

Boazova, 968 N.E.2d at 390. And this they have not come close to

doing. We explain.

Properly understood, SGI-Walpole and Stor/Gard's reversal

theory turns on concurrent causation (just like they agreed, at

least implicitly, at oral argument) — i.e., that a covered peril

(water damage, to be precise) combined with one or more excluded

perils (weather conditions, perhaps, in the form of rain, or a

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landslide) to cause the collapse. But even on their own view of

things, Strathmore can be on the hook for their losses only if the

water leak was the efficient proximate cause of the collapse — in

other words, only if the leak was the predominant cause of the

collapse or set in motion the cause or causes of the collapse.7

See, e.g., Boazova, 968 N.E.2d at 394 n.4; Jussim, 610 N.E.2d at

955-56. SGI-Walpole and Stor/Gard argue that a sentence from the

GZA report makes that required showing. Not so.

Yes, GZA found that "2 percent" of all the water that had

"infiltrated the failed area" had come from the leaky pipe. But

pulling no punches, GZA thoroughly rejected the theory (pushed by

someone on SGI-Walpole and Stor/Gard's behalf) that that leakage

had caused the failure — such a theory "is not supported by our

analyses," GZA declared. Elsewhere GZA stressed that "the heavy

rain" and "the inadequate subsurface drainage" had combined to

"cause[]" the slope and retaining-wall failures. Note that GZA did

not say that water from the rain and the cracked pipe had combined

with the poor drainage system to cause the failures. And GZA was

not alone in rejecting the leakage theory. AEGIS did not buy it

7
Despite suggesting before us that they are making a
concurrent-cause argument, SGI-Walpole and Stor/Gard say that
efficient proximate cause has no place in our analysis, though they
cite no authorities (and we know of none) that back up their claim.
For our part, then, we continue to follow, as we are duty-bound to
do, see Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938), the path
blazed by Massachusetts law dealing with concurrent causation,
which requires us to confront efficient proximate cause. See,
e.g., Boazova, 968 N.E.2d at 394 n.4; Jussim, 610 N.E.2d at 955-56.

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either. The leakage, AEGIS wrote, was "negligible," in comparison

with the amount of rain water that had soaked into the soil, which

is a pithy way of saying that the leakage was "so small or

insignificant as not to be worth considering." See Oxford English

Dictionary Online, http://www.oed.com (quick search "negligible")

(last visited May 15, 2013). The leakage, then, "was not a cause

or contributing factor," AEGIS bluntly stated. For what it is

worth, SGI-Walpole and Stor/Gard submitted no expert reports

supporting their hypothesis or contradicting GZA's and AEGIS's

conclusions.

The upshot of this is that SGI-Walpole and Stor/Gard

cannot prevail. After all, it would take a topsy-turvy view of

causation to say that a leak not listed as one of the combined

causes of the collapse (GZA report) and dismissed as too

insignificant to matter (AEGIS report) really was the predominant

cause of the collapse or put in motion events that caused the

collapse. See, e.g., Boazova, 968 N.E.2d at 394 n.4; Jussim, 610

N.E.2d at 955-56. And because Strathmore acted well within its

rights in denying coverage, the magistrate judge properly denied

SGI-Walpole and Stor/Gard's summary-judgment motion and properly

granted summary judgment for Strathmore on all claims. See, e.g.,

Timpson v. Transamerica Ins. Co., 669 N.E.2d 1092, 1098 (Mass. App.

Ct. 1996).

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 Final Words

Our story over, we affirm the judgment below in all

respects. Each side shall bear their own costs on appeal.

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