United States Court of Appeals
For the First Circuit
No. 02-1011
CENTER FOR BLOOD RESEARCH, INC.,
Plaintiff, Appellant,
v.
COREGIS INSURANCE COMPANY,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Torruella and Howard, Circuit Judges, and
Greenberg,* Senior Circuit Judge.
Harvey Nosowits with whom Daryl J. Lapp and Palmer & Dodge
were on brief for appellant.
Perry M. Shorris with whom Jeffrey A. Goldwater, Scott Douglas
Burke and Bollinger, Ruberry & Garvey were on brief for appellee.
September 30, 2002
*Of the Third Circuit, sitting by designation.
GREENBERG, Senior Circuit Judge.
I. BACKGROUND
This matter comes on before this court on an appeal by
the Center for Blood Research, Inc. ("Center") from an order for
summary judgment entered in the district court on November 27,
2001, in favor of Coregis Insurance Company, and from an order
denying the Center's motion for reconsideration entered February 1,
2002. The Center brought this action against Coregis in the
Superior Court of Massachusetts, Suffolk Division, on breach of
contract, breach of the implied covenant of good faith and fair
dealing, and statutory unfair and deceptive practices1 theories
against Coregis because of its refusal to reimburse the Center for
attorney's fees it incurred in responding to an investigative
subpoena issued and served on the Center by the United States
Attorney for the District of Massachusetts. The Center asserted
that Coregis was liable for these fees pursuant to a nonmonetary
claims endorsement in a Nonprofit Organization Liability Insurance
policy that Coregis issued to the Center. Coregis removed the case
to the district court pursuant to 28 U.S.C. § 1441 on the basis of
the parties' diversity of citizenship under 28 U.S.C. § 1332.
After the removal, the parties moved for summary
judgment. The district court denied the Center's motion but
granted Coregis's by its memorandum and order of November 27, 2001,
and, in a separate order entered on the same day, dismissed the
1
See Mass. Gen. Laws ch. 93A (West 1997).
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action and closed the case. The Center then filed a motion for
reconsideration and a notice of appeal from the November 27, 2001
order for summary judgment. The district court by order entered on
February 2, 2002, denied the motion for reconsideration following
which the Center amended its notice of appeal to include an appeal
from that order as well.2
The historical facts are undisputed. Coregis issued the
policy for a one-year period from December 1, 1997, through
December 1, 1998. The policy required Coregis to pay on behalf of
its insureds, subject to the policy limits and a retention
provision, all losses attributable to a claim for a "wrongful act."
The policy indicated that "CLAIM means any demand made upon the
INSURED for monetary damages, whether formal or informal, written
or oral, as a result of a WRONGFUL ACT." The policy included an
endorsement entitled "Coverage for Nonmonetary Claims" which
provided that Coregis "shall have the right and duty to defend,
including the selection of counsel, any Claim against the
INSURED(S) alleging, based upon or arising out of claims, demands
or actions solely for relief or redress in any form other than
monetary damages." The endorsement further provided that the
definition of "CLAIM," quoted above from the basic policy, "is
amended to include any judicial or administrative proceeding in
2
It appears that the motion for reconsideration was untimely
and that the district court properly denied it on that ground.
The Center does not mention this point in its brief but instead
focuses on the merits of the case. In any event, the motion for
reconsideration was unmeritorious and added nothing to its case.
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which any INSURED(S) may be subjected to a binding adjudication of
liability for damages or other relief."
On or about October 14, 1998, within the period for
coverage under the policy, the United States Attorney for the
District of Massachusetts served a subpoena duces tecum on the
Center directing its "Keeper of Records" to appear before a
specific assistant United States attorney at the United States
Courthouse in Boston and to produce certain records that the
subpoena recited were "necessary in the performance of the
responsibility of the U.S. Department of Justice to investigate
Federal Health care offenses." The authority for this subpoena was
section 248 of the Health Insurance Portability and Accountability
Act of 1996, Pub. L. No. 104-191, 18 U.S.C. § 3486, which
authorizes records to be subpoenaed that may be "relevant to the
investigation" of "a Federal health care offense."3
The Center complied with the subpoena and cooperated with
the United States Attorney in the investigation. The investigation
did not culminate in civil or criminal charges being brought
against the Center, though one of its former employees, in a
criminal prosecution apparently instituted on the basis of
information developed in the investigation, pleaded guilty to
taking kickbacks in what the Center recites was "conduct outside
3
Congress has amended section 248, 18 U.S.C. § 3486, since
October 14, 1998, see Pub. L. No. 105-218, 112 Stat. 2681-72;
Pub. L. No. 105-314, 112 Stat. 2984; Pub. L. No. 106-544, 114
Stat. 2716, but we are using the version in effect on October 14,
1998, in this opinion. We are satisfied that our result would
not be different under the amended versions of the section.
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the scope of his employment." The Center, however, does not seek
coverage on behalf of that employee, and we are not concerned
further with that prosecution.
The Center gave Coregis timely notice of the service of
the subpoena and sought a defense, essentially the provision of
attorneys or payment of attorney's fees, in the investigation.
After some initial discussions and activities that we need not
describe, Coregis denied coverage. The Center nevertheless engaged
counsel to represent it in response to the subpoena to protect its
interests and those of its employees in the investigation,
incurring $77,091.70 in expenses. Thus, it brought this action
against Coregis seeking recovery of these expenses, less the amount
of the policy retention, as well as statutory damages and
attorney's fees. The district court found that the Center's claim
did not come within the policy, and accordingly, it found in favor
of Coregis. This appeal followed.4
II. DISCUSSION
The district court in its memorandum set forth the
applicable legal principles, indicating that the Appeals Court of
Massachusetts recently restated succinctly the following guidelines
for interpreting insurance contracts:
The interpretation of an insurance
policy is a 'question of law for the trial
4
We have jurisdiction under 28 U.S.C. § 1291, and we are
exercising plenary review on this appeal. See Suarez v. Pueblo
Int'l, Inc., 229 F.3d 49, 53 (1st Cir. 2000).
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judge, and then for the reviewing court.'
Cody v. Connecticut Gen. Life Ins. Co., 387
Mass. 142, 146, 439 N.E.2d 234 (1982).
Unambiguous words in an insurance policy
exclusion must be interpreted in their usual
and ordinary sense. Bagley v. Monticello Ins.
Co., 430 Mass. 454, 457, 720 N.E.2d 813
(1999). A term is ambiguous only if it is
susceptible of more than one meaning and
reasonably intelligent persons differ as to
which meaning is the proper one. Lumbermens
Mut. Cas. Co. v. Offices Unlimited, Inc., 419
Mass. 462, 466, 645 N.E.2d 1165 (1995). An
ambiguity is not created simply because a
controversy exists between the parties. Ibid.
'Nor does the mere existence of multiple
dictionary definitions of a word, without
more, suffice to create an ambiguity, for most
words have multiple definitions.' Citation
Ins. Co. v. Gomez, 426 Mass. 379, 381 688
N.E.2d 951 (1988).
County of Barnstable v. Am. Fin. Corp., 744 N.E.2d 1107, 1109
(Mass. App. Ct. 2001). The district court also recognized "that
when policy language is ambiguous, a court should adopt an
interpretation of the ambiguous term favorable to the insured and
in that analysis may consider what an objectively reasonable
insured, reading the relevant policy language, would expect to be
covered," Center for Blood Research, Inc. v. Coregis Ins. Co., No.
01-10708-GAO, slip op. at 8 (D. Mass. Nov. 14, 2001) (quoting Hazen
Paper Co. v. United States Fid. & Guar. Co., 555 N.E.2d 576, 583
(Mass. 1990) (omitting internal quotation marks)). We approach
this case applying the same principles.
Initially, of course, we consider the nature of the claim
for which the Center is seeking coverage. There was no suggestion
in the subpoena that the government was seeking anything other than
information from the Center. Moreover, 18 U.S.C. § 3486 provides
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that "the Attorney General or the Attorney General's designee may
issue in writing and cause to be served a subpoena" in "any
investigation relating to any act or activity involving a Federal
health care offense" for "the production of any records . . . which
may be relevant to an authorized law enforcement inquiry, that a
person or legal entity may possess or have care, custody or
control." Thus, there is no suggestion in the statute that the
subpoenaed entity need be a target of the investigation, and in
fact, the Center acknowledges that the investigation did not result
in the government bringing any charges against it. Consequently,
there can be no doubt that we must treat the Center as nothing more
than a custodian of records.5 The question, then, is whether the
Center, when served with a subpoena in its capacity as custodian of
records in an investigation to produce records, reasonably could
have expected to be covered under Coregis's policy for its expenses
in connection with producing the records and the ancillary matters
raised by the investigation.
We do not understand how the Center or any reasonable
insured in its position could have had any such expectation. We
reiterate that the endorsement for nonmonetary claims imposed on
Coregis a duty to defend against "any Claim against the INSURED(S)
5
We do not imply that our result would be different if the
Center claimed to have been a target of the investigation or even
if the investigation led to the government bringing civil or
criminal proceedings against it. The Center does not claim to
have been a target, the government did not bring such charges,
and we simply are ruling on the basis of the circumstances
presented.
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alleging, based upon or arising out of claims, demands or actions
solely for relief or redress in any form other than monetary
damages" and that for purposes of the endorsement "Claim" includes
"any judicial or administrative proceeding in which any INSURED(S)
may be subjected to a binding adjudication of liability for damages
or other relief." Certainly, the Center could not possibly have
been subject to a binding adjudication of liability in the
investigation before the assistant United States attorney in
response to the subpoena as that officer could not make an
adjudication of liability for any relief and indeed could not
adjudicate anything at all. Rather, he merely could gather
information and investigate. We think that an objectively
reasonable insured would have recognized the limitations of the
investigation and of the scope of coverage under the insurance
policy and the nonmonetary claims endorsement, and thus understood
that its expenses for attorneys to represent it in response to the
subpoena and in the investigation would not be covered.
We realize that the United States Attorney might have
developed information leading to the institution of civil or
criminal proceedings as a result of the investigation, and indeed,
this apparently happened. We also recognize that the Center itself
might have been a defendant in such proceedings, though this did
not happen. Nevertheless, there could not have been a binding
adjudication of liability for damages or any other relief against
the Center in the investigation before the assistant United States
attorney as the civil or criminal proceedings would have had to
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have been pursued in a different forum. While the Center argues
that the compelled disclosure of information in itself is relief,
see, e.g., Wolfe v. Mass. Port Auth., 319 N.E.2d 423 (Mass. 1974),
the nonmonetary claims endorsement cannot provide coverage for
expenses incurred in the mere participation in the investigation
before the Attorney General or his designee inasmuch as the
endorsement provides that the potential relief for coverage to be
provided must be the product of a binding adjudication in a
proceeding. As we have indicated, there could not have been a
binding adjudication in the investigation. Inasmuch as any other
reading of the endorsement would distort its plain meaning mere
compliance with the subpoena simply is not relief. In sum, we are
satisfied that the endorsement is not ambiguous, and we will not
rewrite it to create coverage where it does not exist.
We have not overlooked the provision in the subpoena
warning the putative witness that "[f]ailure to comply with the
requirements of this subpoena will render you liable to proceedings
in the district court of the United States to enforce obedience to
the requirements of this subpoena, and to punish default or
disobedience." This provision reflects the statutory authority
granted the Attorney General to invoke the aid of a United States
Court "to compel compliance with the subpoena." 18 U.S.C. §
3486(c). But the enforcement proceeding contemplated by 18 U.S.C.
§ 3486(c) is not a portion of the investigation before the Attorney
General or his designee. Rather, section 3486(c) makes clear that
the enforcement proceeding must be instituted separately from the
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investigation and is held before a judge rather than an assistant
United States attorney. In the circumstances, it is clear that if
the United States Attorney initiated an enforcement proceeding it
would be discrete from the investigation, though it would be in aid
of it. It well may be that if there had been such an enforcement
proceeding the nonmonetary claims endorsement would have provided
coverage for the Center's expenses in it, but we need not determine
that issue as the government did not institute any such proceeding.
Affirmed.
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