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<pre>                  United States Court of Appeals <br>                      For the First Circuit <br>                       ____________________ <br> <br> <br>No. 98-1649 <br> <br>                  FAJARDO SHOPPING CENTER, S.E., <br>                    A NEW JERSEY PARTNERSHIP, <br>                       Plaintiff, Appellee, <br> <br>                                v. <br> <br>       SUN ALLIANCE INSURANCE COMPANY OF PUERTO RICO, INC., <br>        SUBSIDIARY OF ALLIANCE ASSURANCE COMPANY LIMITED, <br>                      Defendant, Appellant. <br> <br>                       ____________________ <br> <br>           APPEAL FROM THE UNITED STATES DISTRICT COURT <br> <br>                 FOR THE DISTRICT OF PUERTO RICO <br> <br>         [Hon. Salvador E. Casellas, U.S. District Judge] <br> <br>                       ____________________ <br> <br>                              Before <br> <br>                     Torruella, Chief Judge, <br> <br>Hall, Senior Circuit Judge, <br> <br>                    and Lynch, Circuit Judge. <br> <br>                      _____________________ <br> <br>     Luis A. Gonzlez, with whom L.A. Gonzlez Law Offices, P.A.was on brief, for appellant. <br>     Edward M. Borges, with whom David Riv-Power and O'Neill & <br>Borges were on brief, for appellee. <br> <br> <br>                       ____________________ <br> <br>                        February 3, 1999 <br>                       ____________________

          TORRUELLA, Chief Judge.  Plaintiff Fajardo Shopping <br>Center, S.E. ("FSC") filed this action against Defendant Sun <br>Alliance Insurance Company of Puerto Rico, Inc. ("SAIC") to recover <br>insurance policy benefits in connection with damage to commercial <br>leasehold property allegedly sustained during Hurricane Hugo.  <br>After approximately five years of discovery, the district court <br>granted summary judgment in favor of FSC on the issues of liability <br>and damages and ordered SAIC to pay FSC $1,301,856.77.  The <br>district judge also awarded FSC prejudgment interest in the amount <br>of $868,826.60 plus attorneys' fees.  SAIC appeals both the <br>district court's grant of summary judgment and its award of <br>prejudgment interest and attorneys' fees. <br>I.  BACKGROUND <br>          The Fajardo Shopping Center ("Shopping Center" or "FSC") <br>is a three-building structure located in the northeastern <br>municipality of Fajardo, Puerto Rico.  For the past twelve years, <br>it has been owned by an entity known as the Fajardo Partnership, a <br>partnership organized under the laws of the state of New Jersey.  <br>Its principal building, Building I, is an L-shaped structure, units <br>of which are leased to more than a dozen retail merchants, <br>including Pueblo Supermarkets, its main tenant.  The remaining two <br>structures, Buildings II and III, have throughout the relevant time <br>period been rented to a Firestone and a Kentucky Fried Chicken <br>franchise, respectively. <br>          On December 19, 1988, the Fajardo Partnership obtained a <br>special multi-peril insurance policy from SAIC for the period of <br>December 19, 1988 through April 22, 1991.  (See J.A. at 778).  The <br>policy insured the Shopping Center against "all risks of direct <br>physical loss subject to the provisions and stipulations herein and <br>in the policy of which this form is made a part."  (Id. at 785).  <br>The policy also insured against the loss of rents by the Fajardo <br>Partnership caused by a covered risk.  (See id. at 779).  One of <br>the pertinent exclusions included in the policy excepted from <br>coverage losses caused by "faulty design, specifications, <br>workmanship, construction, or materials if a peril excluded by this <br>policy contributed to the loss at any time."  (Id. at 786).  None <br>of the provisions or stipulations made a part of the policy <br>excluded losses caused by a hurricane or windstorm.    <br>     On September 18, 1989, Hurricane Hugo struck the island <br>of Puerto Rico.  At maximum sustained winds of 125 miles per hour, <br>the western part of Hurricane Hugo's eyewall passed directly <br>through the municipalities of Ceiba, Fajardo and Luquillo.  The <br>intense winds did not, however, translate into unusually heavy <br>rainstorms.  San Juan reported only 1.4 inches of rain while <br>Fajardo reported approximately 6.25 inches. <br>     During Hurricane Hugo, the FSC property suffered <br>extensive damages.  Specifically, structural double-tee beams ("DT <br>beams") supporting the roof of the Shopping Center deflected, <br>losing their structural integrity.  As a result of this deflection, <br>portions of the FSC roof collapsed.  Other portions of the roof, <br>although not collapsed, were rendered structurally unsound and <br>posed a risk of collapse.   <br>     Upon plaintiff's request, SAIC advanced FSC $150,000 to <br>cover emergency repairs and to prevent further damage to the <br>Shopping Center property.  Shortly thereafter, FSC engaged an <br>engineering firm, Izquierdo, Rueda & Associates ("IR&A"), to <br>prepare an estimate of damages.  The firm concluded that <br>approximately 75,000 square feet of roof would have to be replaced <br>because of structural damage.  IR&A estimated the total cost of <br>repairs to be $1,496,218.  In early 1991, FSC submitted the firm's <br>report and estimate to SAIC.   <br>     On May 7, 1991, a meeting was held at the SAIC offices to <br>discuss FSC's claim.  SAIC followed up the meeting with a letter to <br>FSC dated July 1, 1991.  In its letter, SAIC requested additional <br>information and permission to carry out inspections of the <br>property.  The letter also stated that, despite its advance of <br>$150,000, SAIC was reserving all of its rights under the policy <br>because it had concluded that most of the damage to the roof was <br>caused by preexisting structural defects in the DT beams, and not <br>by Hurricane Hugo. <br>     In a subsequent letter dated August 19, 1991, SAIC <br>informed FSC of the results of an inspection of the FSC property <br>performed by its engineer, Emiliano Ruiz ("Ruiz").  According to <br>Ruiz, the deflections of the DT beams were not caused by windstorm <br>but rather by the ponding of water due to a faulty and inadequate <br>drainage system.  SAIC further stated that such water ponding, <br>"plus other factors such as inherent or latent defect of the beams <br>. . . construction and design deficiencies, and the fact that the <br>building was not built according to the best engineering practices <br>indicate that the damages claimed . . . are excluded under Part <br>VIII, Items 2 and 4C of the above policy."  (J.A. at 2797).  As a <br>result, SAIC agreed to pay exclusively for: (1) the removal and <br>replacement of built-up roofing and hung ceiling; (2) the removal <br>of debris and clean-up; (3) repair to air conditioning and <br>electrical systems; and, (4) the replacement of store front glass, <br>flashings, paint work, and parking illumination.  SAIC calculated <br>its liability under the policy to be $96,584.46, after subtracting <br>the advanced amount ($150,000), the coinsurance penalty ($127,292), <br>and the deductible ($3,000).  SAIC submitted this amount to FSC as <br>a proposed proof of loss. <br>     Upon examining SAIC's proposal, FSC conducted further <br>investigations to prove that the damages suffered resulted from the <br>hurricane and not from inherent or latent design defects.  FSC's <br>investigation included: (1) a survey of the damage performed by <br>Sousa Surveying Services; (2) an opinion as to the cause of the <br>damage from structural expert Jos M. Izquierdo ("Izquierdo"); (3) <br>an accountant's report prepared by CPA Rafael Prez-Villarini <br>("Prez-Villarini") detailing the amount of rent lost; and (4) a <br>second cost estimate rendered by the late Engineer Jos Carbia.  As <br>a result of this investigation, FSC submitted its own proof of loss <br>to SAIC on October 27, 1992, claiming damages in the amount of <br>$1,944,356.73.  SAIC promptly rejected FSC's proof of loss, <br>reasserted its theory of causation, and resubmitted its previous <br>offer of $96,584.46.  Shortly thereafter, FSC filed the instant <br>action. <br>II.  THE APPOINTMENT OF A SPECIAL MASTER <br>     On July 5, 1995, FSC moved for a jury trial.  SAIC <br>opposed the motion on the ground that the case was "extremely <br>technical in nature and involve[d] construction issues . . . which <br>are beyond the knowledge of the common citizen."  (J.A. at 135-36).  <br>In response, the court scheduled a conference for December 11, <br>1995, to address the issues raised by the parties and to explore <br>settlement possibilities.  After hearing arguments from both <br>parties, the court denied FSC's motion for a jury trial.  In <br>addition, the court determined that "the appointment of a [Special] <br>Master [would] be appropriate in this case."  (Mins. of 12/11/95 <br>Proceedings).  The court granted the parties until January 15, <br>1996 to submit three candidates for appointment as special master. <br>     On March 18, 1996, FSC informed the court that, of all <br>the candidates it contacted, only one -- Engineer Efrahim Murati- <br>Martnez ("Murati") -- was willing to serve as a special master in <br>an adversarial proceeding.  SAIC never objected to FSC's motion <br>proposing Murati's appointment.  Nor did SAIC submit names of <br>candidates for special master.  Therefore, after considering his <br>qualifications, the court appointed Murati to serve as special <br>master.   <br>     Pursuant to Rule 53(c), the court's order of appointment <br>enumerated Murati's rights, powers, and responsibilities as special <br>master.  Specifically, the court's order granted the special master <br>"all the rights, powers, and duties as provided for a master under <br>Rule 53 of the Federal Rules of Civil Procedure."  (J.A. at 158).  <br>On June 5, 1996, Murati accepted his appointment.  The very next <br>day, SAIC submitted -- for the first time -- its proposed candidate <br>for special master.  In its Motion Requesting Appointment of <br>Special Master, SAIC never objected to the court's power to appoint  <br>a master.  Nor did SAIC object to Murati's actual mandate.  Rather, <br>the essence of SAIC's objection was that Murati did not have <br>sufficient formal training in structural problems to act as master <br>in this case.  (See id. at 162).  In its order denying SAIC's <br>motion, the court addressed this issue by stating: "Special Master <br>Murati will remain as Master in this case.  His performance so far <br>belies any claims by defendant as to his suitability for the post."  <br>(Id. at 169). <br>     SAIC now argues on appeal that the district court's <br>appointment of a special master in this case violated Fed. R. Civ. <br>P. 53 and Article III of the United States Constitution.  Because <br>we conclude that SAIC's failure to object to the district court's <br>appointment of a special master amounts to consent, we do not reach <br>the merits of this claim. <br>III.  DISCUSSION <br>     A.  THE SPECIAL MASTER <br>     As this court has recognized, "parties to a civil case <br>may consent to the appointment of a master under any <br>circumstances."  See Stauble v. Warrob, 977 F.2d 690, 694 (1st Cir. <br>1992); see also Peretz v. United States, 501 U.S. 923, 936 (1991) <br>("litigants may waive their personal right to have an Article III <br>judge preside over a civil trial"); Goldstein v. Kelleher, 728 F.2d <br>32, 35 (1st Cir. 1992) ("insofar as Article III protects individual <br>litigants, those protections can be waived").  Even if SAIC did not <br>explicitly consent to the appointment of a special master, failure <br>to make a timely objection amounts to consent. <br>          A party who desires to contest the <br>          propriety of a reference to a master under <br>          Rule 53 should move the trial court for <br>          revocation of the reference.  Inaction in <br>          this regard is tantamount to acquiescence <br>          and the reference cannot be challenged <br>          later on appeal. <br> <br>9A Charles Alan Wright & Arthur R. Miller, Federal Practice and <br>Procedure Civil 2d  2605 (2d ed. 1994); see also Adriana Int'l <br>Corp. v. Thoeren, 913 F.2d 1406, 1410 (9th Cir. 1990) ("[A]n <br>objection to the appointment of a special master must be made at <br>the time of the appointment or within a reasonable time thereafter <br>or the party's objection is waived."); Johnson Controls, Inc. v. <br>Phoenix Controls Systems, Inc., 886 F.2d 1173, 1176 (9th Cir. 1989) <br>(party "waived any objections it had to the appointment of a master <br>by failing to raise the issue, or moving to have the reference <br>revoked"); Charles A. Wright, Inc. v. F.D. Rich Co., 354 F.3d 710, <br>714 (1st Cir. 1966) ("Both parties consented to the court's order <br>of reference to the master and . . . plaintiff cannot now object to <br>the order of reference.").    <br>     Not only did SAIC not make a timely objection, SAIC never <br>made any objection at all to the district court's power to appoint <br>a special master in this case.  Indeed, the district court's <br>decision to appoint a master appears to have at least in part <br>resulted from SAIC's opposition to FSC's Motion for Jury Trial on <br>the ground that the issues involved were "beyond the knowledge of <br>the common citizen."  (J.A. at 135-36).  SAIC even proposed its own <br>candidate to serve as master.  Such conduct does not amount to a <br>timely objection to an order of reference.      <br>     Because SAIC consented to the appointment of a special <br>master and to the district court's order of reference, SAIC cannot <br>now object.  Moreover, SAIC waived any objection it may have had by <br>not presenting it to the district court when the district court <br>first raised the idea of appointing a special master.  We do not <br>hear arguments which were not raised with the district court.  SeeUnited States v. Bongiorno, 106 F.3d 1027, 1034 (1st Cir. 1997) <br>(matters not squarely presented below generally cannot be advanced <br>on appeal); Daigle v. Maine Medical Center, Inc., 14 F.3d 684, 687 <br>(1st Cir. 1994) ("Our law is clear that a party ordinarily may not <br>raise on appeal issues that were not seasonably advanced (and <br>hence, preserved) below."); United States v. Slade, 980 F.2d 27, 30 <br>(1st Cir. 1993) ("It is a bedrock rule that when a party has not  <br>presented an argument to the district court, she may not unveil it <br>in the court of appeals.").  Accordingly, we decline to reach the <br>merits of SAIC's special master claims.  <br>     B.  SUMMARY JUDGMENT <br>          1.  SAIC's Liability <br>     The question presented by this lawsuit is whether the <br>damage suffered by the Shopping Center was caused by the forces of <br>Hurricane Hugo (a covered peril) or by the faulty design and <br>structure of the DT beams and the Shopping Center roof (excluded <br>perils).  Concluding that no genuine issues of material fact <br>existed as to the cause of the damage to the Shopping Center, the <br>district court granted summary judgment on the issue of liability <br>in favor of FSC.  SAIC appeals.  We review the district court's <br>grant of summary judgment de novo, viewing the facts in the light <br>most favorable to the nonmovant, defendant SAIC.  See Dominique v. <br>Weld, 73 F.3d 1156, 1158 (1st Cir. 1996). <br>     Summary judgment is appropriate when "the pleadings, <br>depositions, answers to interrogatories, and admissions on file, <br>together with the affidavits, if any, show that there is no genuine <br>issue as to any material fact and that the moving party is entitled <br>to a judgment as a matter of law."  Fed. R. Civ. P. 56(c).  In this <br>context, an issue is "genuine" if the evidence presented is such <br>that a reasonable jury could resolve the issue in favor of the <br>nonmoving party and a "material" fact is one that might affect the <br>outcome of the suit under governing law.  See Pagano v. Frank, 983 <br>F.2d 343, 347 (1st Cir. 1993). <br>         On issues where the nonmovant bears the burden of proof <br>at trial, he may not defeat a motion for summary judgment by <br>relying upon evidence that is "merely colorable" or "not <br>significantly probative."  Id. (internal quotations and citations <br>omitted).  Instead, the nonmovant must present "definite, competent <br>evidence" to rebut the motion.  Id. (quoting Mesnick v. General <br>Elec. Co., 950 F.2d 816, 822 (1st Cir. 1991)).  Summary judgment <br>will be properly entered against a party who, "after adequate time <br>for discovery . . . fails to make a showing sufficient to establish <br>the existence of an element essential to that party's case, and on <br>which that party will bear the burden of proof at trial."  Celotex <br>Corp. v. Catrett, 477 U.S. 317, 322 (1986). <br>             a.  Applicable Law  <br>         Both parties concede that Puerto Rican law governs the <br>instant insurance contract dispute.  Nevertheless, the Puerto Rico <br>Supreme Court has recently established that since most of the <br>insurance contracts sold in Puerto Rico are modeled after contracts <br>drafted in the United States, both federal and state law principles  <br>are useful and persuasive.  See Quiones Lpez v. Manzano Pozas, 96 <br>J.T.S. 95, at 1307, P.R. Offic. Trans. No. RE-91-567, slip op. at <br>11-12 (P.R. June 25, 1996).  We thus expand our analysis beyond <br>Puerto Rican civil law principles. <br>         Under an all-risk insurance policy, the insured has the <br>burden of establishing a prima facie case for recovery by proving <br>the existence of the all-risk policy and the loss of the covered <br>property.  See Jomark Textiles, Inc. v. Int'l Fire & Marine Ins. <br>Co., 771 F. Supp. 577, 578-79 (S.D.N.Y. 1989) (quotations omitted).  <br>Once the insured has established a prima facie case, the burden <br>shifts to the insurer to prove that the claimed loss is excluded <br>from coverage under the policy.  See id. (quotations omitted).   <br>         In the instant case, SAIC admitted that the applicable <br>exclusion clause was Section VI, Item 9, which excepts from <br>coverage losses caused by "faulty design, specifications, <br>workmanship, construction, or materials if a peril excluded by this <br>policy contributed to the loss at any time."  (J.A. at 786).  Thus, <br>to avoid entry of summary judgment against it, SAIC bears the <br>burden of making "a showing sufficient to establish," Celotex, 477 <br>U.S. at 322, that the damage to the FSC property was caused by <br>"faulty design, specifications, workmanship, and construction" -- <br>damage excluded from coverage under the policy.  See Jomark, 771 F. <br>Supp. at 578-79.  More specifically, in order to avoid liability <br>under the policy, SAIC ultimately must prove that the defective <br>design of the DT beams and the FSC roof -- not Hurricane Hugo -- <br>was the proximate cause of the damage to the Shopping Center.  Seeid.  Moreover, under Puerto Rico law, insurance contracts, by <br>virtue of being considered adhesion contracts, are liberally <br>construed in favor of the insured.  Quiones Lpez,, 96 J.T.S. 95, <br>at 1306, P.R. Offic. Trans. No. RE-91-567, slip op. at 10 (P.R. <br>June 25, 1996) (quotations omitted).  Likewise, exclusion clauses <br>-- not usually favored in an insurance contract -- should be <br>strictly construed against the insurer.  See id.    <br>     To determine whether a particular risk was the proximate <br>cause of the damage suffered, one must examine whether the <br>resulting damage was to be expected within the ordinary course of <br>events.  See Crdenas Maxan v. Rodrguez, 90 J.T.S. 36, at 7559, <br>P.R. Offic. Trans. No. RE-88-223, slip op. at 6 (P.R. Mar. 9, <br>1990); Arroyo Lpez v. Comm. of Puerto Rico, 90 J.T.S. 101, at <br>7937, P.R. Offic. Trans. No. RE-88-379, slip op. at 8 (P.R. <br>June 29, 1990).  In cases where concurrent causes are alleged to <br>have caused the damage, we must determine which cause is the most <br>"efficient" one.  See Valle v. American Int'l Insurance Co., 108 <br>D.P.R. 692, at 697-98, 8 P.R. Offic. Trans. 735, 739 (P.R. 1979); <br>see also Allstate Ins. Co. v. Smith, 929 F.2d 447, 451 (9th Cir. <br>1991) ("In determining whether a loss is within an exception in a <br>policy, where there is a concurrence of different causes, the <br>efficient cause -- the one that sets others in motion -- is the <br>cause to which the loss is to be attributed . . . .") (quoting <br>Sabella v. Wisler, 59 Cal.2d 21, 27 Cal. Rptr. 689, 377 P.2d 889 <br>(Cal. 1963) (internal quotations and citations omitted)). <br>     Applying this analysis to windstorm insurance cases, most  <br>courts have agreed that wind need not be the only cause of a loss <br>for it to be considered the proximate or efficient cause.  In <br>order to recover under windstorm insurance coverage, "it is <br>sufficient to show that wind was the proximate or efficient cause <br>of loss or damage notwithstanding other factors contributed to the <br>loss."  Kemp v. American Universal Ins. Co., 391 F.2d 533, 534-35 <br>(5th Cir. 1968).  For example, in Milan v. Providence Washington <br>Ins. Co., the district court concluded that alleged structural <br>defects in a building were immaterial to the issue of liability <br>under a windstorm insurance policy.  The court reiterated that <br>"[i]n order to recover . . . it is not necessary that windstorm be <br>the sole cause of the damage . . . . If the damage would not have <br>occurred in the absence of a windstorm, the loss is covered by the <br>policy."  227 F. Supp. 251, 253 (E.D. La. 1964).  One court has  <br>even gone so far as to hold that "where a policy expressly insures <br>against direct loss and damage by one element but excludes loss or <br>damage by another element, the coverage extends to the loss even <br>though the excluded element is a contributory cause."  General Am. <br>Transp. Corp. v. Sun Ins. Office, Ltd., 369 F.2d 906, 908 (6th Cir. <br>1966). <br>               b.  The Evidence <br>     FSC maintains that downburst forces accompanying <br>Hurricane Hugo proximately caused the damage to the Shopping <br>Center.  FSC further maintains that the damage could not have been <br>caused by faulty design or structural defects.  FSC's basic <br>argument is: but for the hurricane, no damage would have resulted. <br>     In support of this contention, FSC offers the expert <br>testimony of its structural experts Izquierdo and Khan.  Both <br>Izquierdo and Khan specifically concluded that the Shopping Center <br>was properly constructed.  (See Izquierdo Dep. at 51; J.A. at 2417; <br>Khan 7/17/96 Dep. at 119).  Khan further concluded, after <br>conducting  extensive testing on the DT beams, that the original <br>design of all of the DT beams met the design and deflection <br>criteria required by the Puerto Rico Building Code applicable at <br>the time of construction.  (See J.A. at 2417).  Both experts <br>concluded that faulty design and construction could not have caused <br>the deflections existing after Hurricane Hugo. <br>     In support of its theory that Hurricane Hugo was the <br>proximate cause of the damage to the FSC property, FSC points to <br>the fact that all of the experts -- including SAIC's own expert <br>Emiliano Ruiz -- agree that there was a danger of collapse after <br>Hugo that did not exist prior thereto.  (See Ruiz Dep. at 93; <br>Izquierdo Dep. at 102; Khan 7/17/96 Dep. at 119, 147).  FSC further <br>points to the deposition testimony of meteorologist Edwin Nez who <br>concluded that because conditions favorable for microbursts existed <br>over Fajardo, it is quite possible that a microburst did in fact <br>occur in the FSC area.  (See J.A. at 2846).  Nez also concluded <br>that -- whether characterized by a microburst or flow separation <br>and turbulence -- the "severe conditions, as the hurricane's <br>eyewall passed over the Fajardo Shopping Center, very likely <br>produced the collapse of its roof."  (J.A. at 2851).  As proof that <br>such wind damage is possible, FSC makes reference to the most <br>recent revisions to the ASCE-ANSI Building Code, which confirm that <br>hurricanes have downburst forces capable of causing damage like <br>that suffered by FSC. <br>     In order to rule out the possibility that water ponding <br>due to faulty design caused the damage to the roof, FSC points to <br>the fact that the Shopping Center roof had never undergone such <br>severe deflections in the twenty years prior to Hugo -- even during <br>times of much more intense rainfall.  (See Izquierdo Dep. at 91).  <br>As SAIC points out, Izquierdo conceded that the Shopping Center <br>roof may have been compromised before Hugo, but Izquierdo also <br>testified that every structure designed, is designed to suffer <br>deflections "because no structure whatsoever, or nobody can attain <br>[sic][a structure] without deflection."  (Izquierdo Dep. at 102).  <br>Izquierdo further testified that even if the FSC roof had deflected <br>prior to Hugo, the structure "had been inspected [before Hugo] by <br>the insurers, the structure had been inspected and had been <br>accepted as a good structure."  (Izquierdo Dep. at 104).  Most <br>importantly, the structural analysis of FSC expert Siddiq Khan <br>demonstrated that it was "physically impossible" for water ponding <br>alone to have caused the damage to the FSC roof because the height <br>of water necessary to cause the amount of deflection that occurred <br>was higher than the elevation of the DT beams.  (See J.A. at 2411- <br>12, 2429, Appendix VIII at 2627; Khan 7/16/96 Dep. at 51-52, 75).  <br>In other words, it would be physically impossible to place on the <br>roof the amount of water necessary to cause the deflections that <br>resulted because the water would spill over the sides of the roof <br>before reaching the necessary depth.  (See Khan 7/16/96 Dep. at 51- <br>52, 75-76).  <br>     To rebut this evidence and meet its own burden of proving <br>that faulty design and construction was the proximate cause of the <br>damage to the FSC roof, SAIC points to the "overwhelming evidence" <br>in the record that the FSC building suffered inherent structural <br>defects.  SAIC's "overwhelming evidence" consists of a letter <br>written by Engineer Alfonso Vick ("Vick") in 1974 in which <br>reference is made to a deflection of up to 14 inches in the DT <br>beams due to water ponding.  Unfortunately for SAIC, the Vick <br>letter is inadmissible hearsay, and, as a result, may not be <br>considered on summary judgment.  See Vzquez v. Lpez-Rosario, 134 <br>F.3d 28, 33 (1st Cir. 1998) ("Evidence that is inadmissible at <br>trial, such as inadmissible hearsay, may not be considered on <br>summary judgment.").   <br>     As further evidence of the Shopping Center's preexisting <br>structural defects, SAIC points to Engineer David McCloskey's <br>("McCloskey") 1980 inspection report of the FSC property.  <br>According to McCloskey's visual inspection of the FSC property, <br>there was "excessive ponding" over Pueblo and "some ponding" over <br>Walgreens.  (See Letter from McCloskey to Edward Kildare of <br>4/14/80, at 1).  SAIC maintains that these observations, made by a <br>"totally independent" structural engineer, prove that the FSC <br>property was structurally defective.  However, we agree with the <br>district court that SAIC has grossly mischaracterized McCloskey's <br>conclusions.  In fact, McCloskey's report concludes that "in <br>general the structures are in good condition" and that "[t]he only <br>immediate repair required is the roof of the Pueblo Store <br>Expansion."  (Letter from McCloskey to Edward Kildare of 5/21/80, <br>at 3).  McCloskey further explains that DT beams "typically <br>continue to deflect over the years causing portions of the roofs <br>which were ridges to become valleys, and vice versa.  Therefore, <br>roof drains end up at the high points of the roof which leads to <br>ponding."  (Id. at 1).  To address this "fairly common" phenomenon, <br>McCloskey suggested the installation of additional roof drains to <br>the new low points of the roof.  (See id. at 1).  As SAIC's own <br>evidence demonstrates, FSC constantly monitored this situation by <br>installing additional drains in the roof of the Shopping Center.  <br>More importantly, when asked in his deposition whether the roof was <br>structurally sound as built and designed, Engineer McCloskey <br>answered in the affirmative.  (See McCloskey Dep. at 51).  In sum, <br>McCloskey's report in no way supports SAIC's contention that the <br>Shopping Center had preexisting structural or construction defects. <br>     In addition, SAIC maintains that FSC's own expert, <br>Engineer Izquierdo, admitted that DT beams "have had a considerable <br>amount of quality control problems [in Puerto Rico], which is why <br>they are rarely used anymore in this jurisdiction."  However, SAIC <br>offers no evidence that the particular DT beams used in the <br>Shopping Center roof suffered from quality control problems.  <br>Indeed, as discussed above, SAIC's evidence suggests that FSC <br>closely monitored any deflections of the DT beams by constantly <br>installing additional roof drains.  See supra note 16, at 20. <br>     With respect to the expert testimony of meteorologist <br>Nez, SAIC points out that Nez admitted that he had "no way of <br>knowing if [a microburst] occurred . . . because there is no <br>particular study" and that it was only possible that a microburst <br>occurred in the area.  (Nez Dep. at 80).  SAIC also argues that <br>the very report Nez relied upon in forming his expert opinion -- <br>the NOAA Survey -- "found no evidence from which one could <br>reasonably infer that microbursts occurred in the Fajardo area."  <br>(J.A. at 322).  Again, we agree with the district court that SAIC <br>has seriously mischaracterized Nez's testimony as well as the <br>conclusions of the NOAA Survey.  Nez in fact concluded that "the <br>damages sustained by the Fajardo Shopping Center were the direct <br>result of the intense and turbulent winds produced by Hurricane <br>Hugo on September 18, 1989."  (Id. at 2853).  To reach this <br>conclusion, Nez examined the maximum wind speeds and <br>corresponding mean recurrence interval for Hurricane Hugo at <br>different locations in Puerto Rico, including the nearby Roosevelt <br>Roads Naval Base.  (See id. at 2844).  According to Nez, these <br>winds were "above the magnitude specified in the ANSI A58.1-1982 <br>code."  (Id.).  More importantly, Nez explained in his deposition <br>testimony that despite the lack of availability of a Doppler radar <br>or a debris analysis, it was his expert opinion, based on the NOAA <br>Survey and the damage he observed on site, that downburst forces <br>quite possibly occurred.  (See Nez Dep. at 79-81).  We agree with <br>the district court that Nez reasonably relied on his expert <br>opinion and the NOAA Survey for this conclusion.  We further <br>conclude that SAIC again mischaracterized the findings of the NOAA <br>Survey.  In sharp contrast to SAIC's assertion that this team of <br>highly qualified experts "found no evidence from which one could <br>reasonably infer that microbursts occurred in the Fajardo area", <br>(J.A. at 322), the NOAA Survey concluded that "damage surveys <br>suggested possible microbursts on St. Croix, Culebra and Vieques."  <br>(Id. at 1699).  The Survey also stated that "[r]esidents, including <br>personnel at the Roosevelt Road Naval Station believe that some <br>tornadoes did occur although none could be confirmed."  (Id.).  <br>Despite SAIC's assertions to the contrary, these findings clearly <br>do not preclude the possibility that downbursts occurred in the FSC <br>area. <br>     Finally, we agree with the district court that SAIC's <br>reliance on Engineer Ruiz's future testimony at trial is <br>insufficient to defeat summary judgment as to the issue of <br>proximate causation.  It is an established rule of law that <br>"establishing a genuine issue of material fact requires more than <br>effusive rhetoric and optimistic surmise."  Cadle Company v. Hayes, <br>116 F.3d 957, 960 (1st Cir. 1997).  Neither "unsupported <br>speculation, nor brash conjecture coupled with earnest hope that <br>something concrete will materialize" is sufficient to block summary <br>judgment.  Euromotion, Inc. v. BMW of North America, Inc., 136 F.3d <br>866, 869 (1st Cir. 1998) (quoting J.Geils Band Employee Benefit <br>Plan v. Smith Barney Shearson, Inc., 76 F.3d 1245, 1251 (1st Cir. <br>1991)) (internal quotations and citations omitted).  We conclude <br>that SAIC has failed to present any "genuine" evidence that water <br>ponding due to inherent structural or construction defects <br>proximately caused the damage to the FSC property.  We point out <br>that although there is evidence in the record that DT beams in the <br>FSC roof had deflected prior to Hugo, FSC need not prove that wind <br>was the sole cause of the damage to its property in order to <br>prevail on summary judgment.  See supra, at 27-31.  "In order to <br>recover [under windstorm insurance coverage] it is not necessary <br>that windstorm be the sole cause of the damage . . . . If the <br>damage would not have occurred in the absence of a windstorm, the <br>loss is covered by the policy."  Milan v. Providence Washington <br>Ins. Co., 227 F. Supp. at 253.  Because FSC has presented unrefuted <br>evidence that the damage to its property would not have occurred <br>but for Hurricane Hugo, we affirm the district court's entry of <br>summary judgment on the issue of liability in its favor. <br>          2.  The Coinsurance Penalty <br>     SAIC next argues that the district court erred in <br>granting summary judgment in favor of FSC on the issue of the co- <br>insurance penalty.  The insurance policy contains a coinsurance <br>clause which provides that:  <br>                    [t]he Company shall not be liable for a <br>                    greater proportion of any loss to property <br>                    covered than the limit of liability under this <br>                    policy for such property bears to the amount <br>                    produced by multiplying the actual cash value <br>                    of such property at the time of the loss by <br>                    the coinsurance percentage stated in the <br>                    Declarations. <br>                     <br>          (J.A. at 2769).  SAIC maintains that the FSC property is worth more <br>than the amount declared in the policy.  As a result, SAIC claims <br>that, if liable, it is only obligated to pay that proportion of the <br>damages equal to the proportion of the declared value to the actual <br>value pursuant to the terms of the coinsurance clause.   <br>     Another pertinent endorsement excludes from coverage <br>"[p]roperty which is more specifically covered in whole or in part <br>by this or any other contract of insurance, except for the amount <br>of loss which is in excess of the amount due from such more <br>specific insurance."  (J.A. at 2777).  FSC proffers the lease <br>agreements between FSC and its Building I and Building II tenants, <br>which provide that the tenants would purchase their own insurance <br>to cover all leasehold improvements, to prove that SAIC only <br>insured the structure of the buildings -- not the leasehold <br>improvements.  As a result, FSC argues that the declared value of <br>the property is in fact equal to the actual value of the insured <br>structure and thus the coinsurance clause is inapplicable.   <br>     In further support of this contention, FSC points to the <br>Pretrial Report, submitted by both parties in December 1993, which <br>includes as an undisputed fact the following information: <br>                    Under the terms of the leases, tenants in the <br>                    L-shaped building (Building "1") are <br>                    responsible for the integrity and maintenance <br>                    of their own leasehold improvements and <br>                    insurance therefor.  The policy does not cover <br>                    property not owned by the landlord . . . <br>                    including leasehold improvements made by <br>                    Tenants . . . . Tenants are required to <br>                    maintain their own insurance, and all damage <br>                    to leasehold improvements . . . are for the <br>                    account and responsibility of the respective <br>                    tenants.  The tenants have their own insurance <br>                    policies covering their leasehold <br>                    improvements.  The lease for the Firestone <br>                    Store (Building "2") contains similar <br>                    provisions.  The Kentucky Fried Chicken <br>                    building (Building "3") had a different lease, <br>                    according to which the Landlord provided, paid <br>                    for, and owned what would otherwise have been <br>                    the tenant leasehold improvements (i.e. a <br>                    "turnkey" location), and the Landlord insured <br>                    them.  Since the plaintiff herein owned the <br>                    leasehold improvements, the valuation limits <br>                    under the Policy reflected a higher per-unit <br>                    insurable value for Building "3".   <br>           <br>(J.A. at 64). <br> <br>     Despite this earlier admission, SAIC now contends that <br>Buildings I and II should now be appraised to include the value of <br>the leasehold improvements, thus triggering the coinsurance penalty <br>clause.  We agree with the district court that by agreeing to the  <br>preceding "undisputed facts" in the Pretrial Report, SAIC has <br>waived this argument.  See Correa v. Hospital San Francisco, 69 <br>F.3d 1184, 1195 (1st Cir. 1995).  We further agree that, even <br>absent waiver, SAIC has failed to conclusively rebut the evidence <br>proffered by FSC.  As a result, we conclude that FSC is entitled to  <br>judgment as a matter of law that the coinsurance penalty clause <br>does not apply to reduce SAIC's liability under the terms of the <br>policy. <br>          3.  The Emergency Repairs Setoff Issue <br>     SAIC next appeals the district court's grant of summary <br>judgment in favor of FSC with respect to its right to set off <br>amounts spent by Pueblo Supermarkets for repairs against the <br>$150,000 advanced by SAIC for emergency repairs immediately after <br>the hurricane.  SAIC objects to this ruling on the ground that the <br>Pueblo setoff is essentially a new claim, and that for this claim <br>to proceed, FSC should be required to request leave to file an <br>amended complaint.  Absent such a request, SAIC maintains that the <br>district court "flagrantly deviated from the mandates provided by <br>the Federal Rules of Civil Procedure" by accommodating FSC's <br>attempt at "ambush litigation."  (Appellant's Br. at 45).   <br>     It is undisputed that SAIC advanced FSC the sum of <br>$150,000 for emergency repairs.  After reviewing FSC's receipts, <br>the special master found that FSC used the amount of $104,199.11 to <br>conduct emergency repairs on Building I.  The special master also <br>found that some of this money had been inappropriately used to pay <br>FSC's  accountants.  Accordingly, the special master subtracted <br>this amount ($9,685) from the amount used for repairs.  The master <br>concluded that FSC appropriately spent $94,514.11 of the $150,000 <br>in emergency repairs.  Thus, FSC owed SAIC $50,485.89 plus compound <br>interest of 5% per annum, amounting to a total of $71,083.72. <br>     On May 7, 1997, FSC, for the first time, submitted <br>receipts evidencing additional temporary repairs made by Pueblo.  <br>According to the documentation, Pueblo spent $146,000 on emergency <br>repairs immediately after Hugo.  It is undisputed that FSC <br>reimbursed Pueblo for these expenditures in the form of rent <br>concessions.  FSC argued that since the $146,000 was spent by <br>Pueblo on Fajardo's behalf, it was entitled to offset (or set off) <br>this amount against the $150,000 advance pursuant to Article 1149 <br>of the Puerto Rico Civil Code.  To support this claim, FSC points <br>out that setoff is appropriate in this case because it arises from <br>the same breach of contract claim that is the subject of this <br>litigation.  Further, FSC maintains that SAIC has actually <br>benefitted from Pueblo's expenditures because by undertaking the <br>repairs on its own, Pueblo substantially reduced its claim for <br>business interruption.  Thus, FSC argues, if the setoff is not <br>allowed, SAIC will receive unjust enrichment.  <br>     At the May 7 hearing in chambers, the district judge <br>admonished FSC for the tardiness of its setoff claim.  However, the <br>judge ultimately allowed FSC's setoff claim to proceed.  The <br>grounds for the district judge's ultimate decision to allow the <br>setoff claim are unclear.  FSC never filed a motion for leave to <br>amend the complaint.  Nor was any amendment made.  Nevertheless, <br>FSC submitted the claim in a supplemental motion for summary <br>judgment filed on September 30, 1997. <br>     In ruling on this motion, the district judge specifically <br>found that FSC had established the requisites for compensation as <br>set forth in Article 1150.  We agree with the district court that  <br>FSC has established the requisites for a setoff under Puerto Rico <br>law.  We further conclude that no leave to file an amended <br>complaint was required for FSC to state its setoff claim.  As the <br>district court correctly noted, setoffs have no purpose other than <br>to "[allow] the convenient simplification of relations between <br>mutually indebted parties."  999 F. Supp. at 230-31 (quoting United <br>Structures of Am., Inc. v. G.R.G. Eng'g, S.E., 9 F.3d 996, 1000 <br>(1st Cir. 1993)).  As such, FSC's setoff "claim" is not really a <br>separate claim at all from its original claim for an accounting and <br>determination of the amount of SAIC's liability.  As FSC correctly <br>points out, the accounting for the $150,000 advanced by SAIC was in <br>issue from the inception of the case.  Moreover, although the <br>proffer of Pueblo's receipts was tardy, the district court <br>specifically concluded that SAIC was not prejudiced by the delay.  <br>In sum, we agree with the district court that SAIC presented <br>insufficient evidence to rebut FSC's claim that it was entitled, as <br>a matter of law, to entry of judgment in its favor on the setoff <br>claim. <br>          4.  Business Interruption/Lost Rents <br>     The pertinent policy endorsement states that coverage is <br>extended to insure against "loss of rents caused by the perils <br>insured against damaging or destroying, during the policy period, <br>real or personal property at the premises described in this <br>endorsement."  (J.A. at 2765).  FSC originally claimed business <br>interruption damages in the amount of $77,109.37 based on an expert <br>report rendered by the accounting firm of Vlez, Semprit, Nieves & <br>Co.  However, the special master, in his first Report and <br>Recommendation, concluded that FSC misused $50,485.89 of the <br>$150,000 in emergency repair funds advanced by SAIC.  Specifically, <br>the special master found that the $50,485.89 misused by FSC could <br>have been used to repair Buildings II and III.  The special master <br>thus recommended that the district court not allocate any amounts <br>for business interruption as to these buildings.  As a result, FSC <br>reduced the amount of its business interruption damages claim by <br>$50,485.89 to $26,943.37. <br>     In its opposition to FSC's motion for summary judgment on <br>the issue of lost rent, SAIC maintains that FSC's claims are <br>"grossly exaggerated" and that "it does not take a genius to know <br>that a reduction in volume of sales in the Fajardo area after <br>Hurricane Hugo was expected due to the devastation of the hurricane <br>in the immediate area."  (J.A. at 346).  The weakness in SAIC's <br>argument, however, lies in the fact that it does not offer any <br>evidence to support these conclusory statements.  SAIC's opposition <br>relies on statements like "the evidence will show" and "the <br>evidence will further show."  (Id. at 344, 349)(emphasis added).  <br>Unfortunately for SAIC, at the summary judgment stage, it bears the <br>burden of actually presenting this evidence; it cannot rely on <br>"brash conjecture coupled with earnest hope that something concrete <br>will materialize" and expect to survive a motion for summary <br>judgment.  Euromotion, 136 F.3d at 869 (quoting J.Geils Band, 76 <br>F.3d at 1251) (internal quotations and citations omitted).  We <br>agree with the district court that SAIC failed to meet its burden <br>of proof in order to defeat FSC's motion for summary judgment on <br>the issue of business interruption/lost rent damages.  We thus <br>affirm the district court's award of $26,943.37 in damages to FSC <br>for lost rent and business interruption. <br>          5.  Obstinacy <br>     SAIC's final complaint centers around the district <br>court's award of prejudgment interest in the amount of $868,826.60 <br>plus attorneys' fees, based on its finding that SAIC displayed <br>obstinacy throughout the proceedings below.  FSC requested an award <br>of prejudgment interest and attorneys' fees pursuant to Rules <br>44.1(d) and 44.3(b) of the Puerto Rico Rules of Civil Procedure.  <br>Rule 44.1(d) states: "In the event any party or its lawyer has <br>acted obstinately or frivolously, the court shall, in its judgment, <br>impose on such person the payment of a sum for attorneys' fees <br>which the court decides corresponds to such conduct."  (Emphasis <br>added).  Similarly, Rule 44.3(b) states: " . . . . the court willalso impose on the party that has acted rashly the payment of <br>interest at the rate fixed by the Board . . . ."  (Emphasis added).  <br>     In a diversity case in which the substantive law of <br>Puerto Rico supplies the basis of decision, a federal court must <br>give effect to Rules 44.1(d) and 44.3(b) of the Puerto Rico Rules <br>of Civil Procedure.  See Dopp v. Pritzker, 38 F.3d 1239, 1252 (1st <br>Cir. 1994) (quotations omitted).  Moreover, because these rules <br>speak in imperatives, the imposition of attorneys' fees and <br>prejudgment interest is obligatory once the district court makes a <br>threshold finding that a party has acted with obstinacy.  See id.  <br>We review the district court's threshold determination of obstinacy <br>for abuse of discretion.  See id. at 1253. <br>     To make a threshold determination of obstinacy, a court <br>must "determine a litigant to have been unreasonably adamant or <br>stubbornly litigious, beyond the acceptable demands of the <br>litigation, thereby wasting time and causing the court and the <br>other litigants unnecessary expense and delay."  De Len Lpez v. <br>Corporacin Insular de Seguros, 931 F.2d 116, 126 (1st Cir. 1991).  <br>Puerto Rico courts have previously imposed obstinacy-based <br>attorneys' fees on insurance companies that unreasonably refuse to <br>settle out of court claims.  See, e.g., Morales v. Automatic <br>Vending Service, Inc., 103 D.P.R. 281 (1975).   <br>     In the instant case, the district court found that SAIC <br>was "unreasonably adamant" and "stubbornly litigious" by refusing <br>to settle this claim for over three years, while the property's <br>losses increased and FSC was forced to hire more experts and incur <br>mounting expenses.  See 999 F. Supp. at 233.  The district court <br>further concluded with respect to SAIC's obstinacy that "the record <br>speaks for itself."  Id. at 234.  After examining the record, we <br>conclude that the district court did not abuse its discretion in <br>making the threshold determination of obstinacy and thus affirm its <br>grant of prejudgment interest and attorneys' fees to FSC. <br>     The record reveals that SAIC's only settlement offers <br>have been unreasonable in that they have only covered a fraction of <br>the damages proposed by plaintiff.  See supra, at 6-7, 12.  In <br>addition, after opposing FSC's motion for a jury trial and agreeing <br>to the appointment of a special master, SAIC proceeded to object to <br>every report rendered by the master and refused to cooperate with <br>him throughout the proceedings.  It is important to note that <br>SAIC's substantive objections to the role of the special master, <br>discussed supra, at 17-26, do not provide the basis for our <br>affirmance of the district court's finding of obstinacy.  Rather, <br>we conclude that the district court's finding of obstinacy is <br>adequately supported by: (1) SAIC's original failure to timely <br>submit names of candidates for appointment as special master in <br>accordance with the court's order; (2) its subsequent barrage of <br>unwarranted allegations regarding the ultimate appointee's "lack of <br>objectivity, neutrality and clear bias in favor of the plaintiff" <br>(J.A. at 268); (3) its unsubstantiated allegations that the special <br>master's findings were "nothing more than speculation"  (Id. at <br>273); (4) its uncalled for allegations that "as a matter of fact <br>. . . [Special Master Murati] was not qualified to make most of the <br>recommendations contained in the report" (Id. at 343); and (5) its <br>adamant refusal to participate in the discovery process conducted <br>by the special master.  SAIC's refusal to cooperate forced the <br>special master to revise his report and recommendation three times, <br>further increasing the costs of this litigation.  SAIC's personal <br>attacks on Murati caused him to suspend his duties and file a <br>separate motion in defense of his work.  In sum, all of these <br>actions by SAIC wasted considerable time and caused the court and <br>FSC unnecessary expense and delay.  Based on our review of the <br>record, we thus conclude that the district judge acted within his <br>discretion in awarding prejudgment interest and attorneys' fees to <br>FSC based on a finding of obstinacy. <br>IV.  CONCLUSION <br>     For the reasons detailed in this opinion, we affirm the <br>district court's grant of summary judgment in favor of FSC.  We <br>also affirm the court's grant of prejudgment interest and <br>attorneys' fees.  Costs to be awarded to appellees. <br></pre>

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