Preferred Mutual Insurance v. Travelers Companies

UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT

No. 97-1553

PREFERRED MUTUAL INSURANCE COMPANY,

Plaintiff, Appellant,

v.

THE TRAVELERS COMPANIES,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Michael A. Ponsor, U.S. District Judge]

[Hon. Nancy Gertner, U.S. District Judge]

Before

Torruella, Chief Judge,

Aldrich, Senior Circuit Judge,

and Lynch, Circuit Judge.

Marie Cheung-Truslow with whom Roger A. Emanuelson and Lecomte,

Emanuelson, Motejunas & Doyle were on brief for appellant.

Michael J. Eisele with whom David C. Boch and Bingham, Dana &

Gould were on brief for appellee.

October 3, 1997

ALDRICH, Senior Circuit Judge. On January 20,

1995, an oil fire broke out in the boiler room of the Kimball

Towers condominium in Springfield, Massachusetts, that caused

extensive damage from smoke, soot and heat. Kimball Towers

Condominium Association (Kimball) was insured by Preferred

Mutual Insurance Company (Preferred) under a Business Owners

Special Property Policy that covered its property broadly,

with a limit of $11,340,000 and an annual premium of $40,484.

With some exceptions, the policy did not cover steam or hot

water boilers and their equipment. Kimball was also insured

by Travelers Company (Travelers) under a Boiler and Machinery

Policy. Boiler provisions complementary with Preferred's

have been noted. Travelers' policy had no dollar limitation;

the annual "Provisional Premium"1 was $875. Preferred paid

this loss,2 in the amount of $357,279, and now sues Travelers

for this amount as the "primary insurer," or, at least, for a

share. A condition precedent is that Travelers would have

been liable for the loss. The district court held that there

was no such coverage, so that neither alternative was

correct, and granted summary judgment to Travelers in an

extensive opinion. See Preferred Mut. Ins. Co. v. Travelers

Cos., 955 F. Supp. 9 (D. Mass. 1997). Without deciding, it

1. The elasticity related to offered extensions not
subscribed to by Kimball, and not here relevant.

2. No point has been made by it of any loss to Kimball's
boiler and accessory equipment.

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assumed that Travelers' policy's general provisions covered

the loss -- an assumption not contested, and that we adopt --

but concluded that it fell within the stated exclusions. On

this basis we affirm.

The Facts

On summary judgment we of course take the facts

most favorably to plaintiff Preferred, but review the court's

legal conclusions de novo. See, e.g., Dominique v. Weld, 73

F.3d 1156, 1158 (1st Cir. 1996); E.E.O.C. v. Steamship Clerks

Union, Local 1066, 48 F.3d 594, 602-03 (1st Cir.), cert.

denied, 116 S. Ct. 65 (1995). Construction of insurance

contracts and application of their terms to established facts

are matters of law, ultimately for us. See Commercial Union

Ins. Co. v. Walbrook Ins. Co., 7 F.3d 1047, 1050 (1st Cir.

1993); Falmouth Nat'l Bank v. Ticor Title Ins. Co., 920 F.2d

1058, 1061 (1st Cir. 1990).

The fire, according to Preferred, occurred in the

following manner. A leaky seal in the fuel pump, that

supplied oil to the burner that heated the boiler, allowed

oil to be propelled, with air, into the burner tube. Here it

caught fire. This fire caused a melt, allowing the burner to

fall, damaging the oil line. This released oil, fed by

gravity from the storage supply, that caught fire and burned

until ultimately extinguished by the fire department.

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The relevant Travelers' policy provisions (quoted

out of order) are these.

A. COVERAGE

We will pay for direct damage to Covered
Property caused by a Covered Cause of Loss.

1. Covered Property

Covered Property, as used in this
Coverage Part, means any property that:

a. You own;

. . . . .

2. Covered Cause of Loss

A Covered Cause of Loss is an "accident"
to an "object."

. . . . .

G. DEFINITIONS

1. "Accident" means a sudden and accidental
breakdown of the "object" or part of the
"object."

. . . . .

5. "Object" means:

a. Unless excluded in the
Declarations, the following
equipment:

(1) Any boiler, including its
piping and accessory equipment.

Interrupting, we read the policy to say that

Travelers will pay (subject to exclusions) for direct damage

to Kimball's property due to the breakdown of the boiler and

its accessory equipment. We consider the burner, the burner

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tube, the mechanical fuel pump, and the electric motor that

operates it, to be accessory equipment. Leaking was a

breakdown, or "accident."

B. EXCLUSIONS

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.

. . . . .

4. Other Exclusions

Loss caused by or resulting from:

a. Fire or combustion explosion that
occurs at the same time as an "accident"
or that ensues from an "accident." With
respect to any electrical equipment
forming a part of an "object," this
exclusion is changed to read:

Fire or explosion outside the
"object" that occurs at the same time as
an "accident" or ensues from an
"accident."

. . . . .

The initial paragraph unambiguously means what it

says. If the fire fell within the provisions of section B4a

it is not covered even though it also met some other

definitions. Cf. Jussim v. Massachusetts Bay Ins. Co., 415

Mass. 24, 27-28, 610 N.E.2d 954, 955-56 (1993) (noting 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

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loss outside the terms of the policy"). Preferred says the

present issue lies in provision 4a's second sentence because

the loss was caused by the breakdown of the fuel pump that

was "electrical equipment" because it was operated by an

electric motor. Although there was some struggling

vocalizing by Preferred's expert, we can not possibly agree.

We do not rely on the much mentioned fact that the pump and

the motor were by different manufacturers, but they were

independent articles, connected only by the power shaft, with

no electricity reaching the pump. Manifestly there must be

some purpose for the alternative clause in provision 4a, and,

equally manifestly, electricity must play a meaningful part.

To characterize the pump as electrical is nonsense.

Turning, therefore, to 4a's first sentence,

concededly the leak in the pump was an accident to an object.

Whether or not the broken supply line also be considered

accessory equipment, the burning of the fuel supply

unquestionably "ensue[d] from an 'accident.'" It was plainly

excluded.

In this posture Preferred complains that this

conclusion "result[s] in coverage to the insured which [i]s

unrealistically limited." Support is offered by an affidavit

of Kimball's "property manager," who had obtained the

policies:

It has been my continued
understanding and expectation that fire

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originating from the boiler or its
accessory equipment would be covered
under Travelers' Boiler and Machinery
Policy.

Thus we have an insurer that had received a premium

of $40,484, claiming it was unreasonable for an insurer who

had received a premium of $875 not to pay it $357,279, in

part, if not in whole. The lion would lie down with the lamb

-- for dinner.

The Boiler and Machinery policy covered accidents

to the boiler and accessory equipment, and, in terms,

excluded "fire . . . that ensues from an 'accident.'" There

was an accident, and fire ensued. Plaintiff, who is in the

business of writing and interpreting insurance contracts,

sues therefor. We give notice that if it wishes to object to

our assessing double costs it do so, with grounds, within ten

days of the date hereof. See Fed. R. App. P. 38; Cronin v.

Town of Amesbury, 81 F.3d 257, 261 (1st Cir. 1996); E.H.

Ashley & Co. v. Wells Fargo Alarm Servs., 907 F.2d 1274, 1280

(1st Cir. 1990).

Affirmed.

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