

December 19, 1994 United States Court of Appeals                            United States Court of Appeals
                    For the First Circuit                                For the First Circuit
                                         
No. 94-1526

             COMMERCIAL UNION INSURANCE COMPANY,
                    Plaintiff, Appellant,

                              v.

             WALBROOK INSURANCE CO., LTD., ET AL.
                    Defendants, Appellees.

No. 94-1561

             COMMERCIAL UNION INSURANCE COMPANY,
                     Plaintiff, Appellee,

                              v.

                NATIONAL CASUALTY CO. ET AL.,
                   Defendants, Appellants.
                                         

        APPEALS FROM THE UNITED STATES DISTRICT COURT

              FOR THE DISTRICT OF MASSACHUSETTS

           [Hon. Rya W. Zobel, U.S. District Judge]                                                              
                                         

                         ERRATA SHEET                                     ERRATA SHEET

   On page 10, line 14, delete "Interest" and insert "Intent".                                                                        

                United States Court of Appeals                            United States Court of Appeals
                    For the First Circuit                                For the First Circuit
                                         
No. 94-1526

             COMMERCIAL UNION INSURANCE COMPANY,
                    Plaintiff, Appellant,

                              v.

             WALBROOK INSURANCE CO., LTD., ET AL.
                    Defendants, Appellees.

No. 94-1561

             COMMERCIAL UNION INSURANCE COMPANY,
                     Plaintiff, Appellee,

                              v.

                NATIONAL CASUALTY CO. ET AL.,
                   Defendants, Appellants.
                                         

        APPEALS FROM THE UNITED STATES DISTRICT COURT

              FOR THE DISTRICT OF MASSACHUSETTS

           [Hon. Rya W. Zobel, U.S. District Judge]                                                              
                                         

                            Before

                     Selya, Circuit Judge,                                                     
               Campbell, Senior Circuit Judge,                                                         
                  and Stahl, Circuit Judge.                                                      
                                         

Richard L. Neumeier with whom Parker,  Coulter, Daley &amp; White  was                                                                         
on brief for Commercial Union Insurance Company.
James B. Dolan with whom Erin  R. Boisvert, Badger, Dolan,  Parker                                                                              
&amp; Cohen, Robert J. Brown,  Mark A. DiTaranto, and Mendes &amp;  Mount were                                                                         
on brief for Walbrook Insurance Co., Ltd., et al.

                                         
                       December 5, 1994
                                         

          STAHL,  Circuit Judge.    For the  second time,  we                      STAHL,  Circuit Judge.                                           

examine issues  arising out  of a dispute  between Commercial

Union Insurance Company ("CU")  and Walbrook Insurance et al.

(collectively, "Weavers") concerning Weavers's  obligation to

indemnify CU under an insurance contract.  On initial appeal,

we reversed the district court's grant of summary judgment in

favor  of   Weavers  and   remanded  the  case   for  further

proceedings consistent with  our opinion.   Commercial  Union                                                                         

Ins.  Co. v. Walbrook  Ins. Co., 7 F.3d  1047 (1st Cir. 1993)                                           

("Commercial  Union  I").   Both  parties  now challenge  the                                  

district court's  entry  of judgment  for  CU and  denial  of

cross-motions to amend  or alter that judgment.   Weavers has

also  moved to  dismiss CU's appeal.   We deny  the motion to

dismiss and affirm the entry of judgment below.         

                              I.                                          I.                                            

           FACTUAL BACKGROUND AND PRIOR PROCEEDINGS                       FACTUAL BACKGROUND AND PRIOR PROCEEDINGS                                                               

          Between   1973  and  1975,   a  CU  loss-prevention

inspector  conducted   several  safety  inspections   of  the

Peterson/Puritan aerosol-packing plant  in Cumberland,  Rhode

Island.   On January  17, 1976,  a gas  line exploded  at the

plant, killing four people and  injuring several others.  Two

years  later,  victims  filed  several  suits  naming  CU  as

defendant ("Peterson  claims").   CU  eventually settled  the

Peterson claims.   CU expended $2,502,874.30  for defense and

in settlement of the claims.  Ultimately, CU obtained primary

                             -2-                                          2

indemnification  in  the amount  of $1,000,000  from American

Employers  Insurance  Company  ("American  Employers"),  CU's

primary corporate insurer for the period July 1, 1976 through

July 1, 1979.1

          At  the   time  of  the  explosion,  the  Travelers

Insurance  Company  had  issued  to CU  a  primary  corporate

liability  policy ("Travelers Policy") effective from January

1,  1976, to  July 1,  1976.   The Travelers  Policy provided

occurrence-based  coverage2 during the  policy period  for up

to  $1  million  of CU  liability.    The  main body  of  the

Travelers Policy specifically excluded  occurrences involving

malpractice by CU's engineers.  This gap was partially filled

by  a separate  Engineers Professional  Liability Endorsement

issued  by  Travelers  ("Travelers EPL  Endorsement").    The

Travelers EPL Endorsement provided claims-based coverage.3  

            As  the  Commercial  Union  I  panel  noted,  the                                                     

Travelers Policy  and the  Travelers EPL Endorsement  left CU

with  a  gap  in its  coverage  with  respect  to occurrences

resulting from  engineer malpractice  for which no  claim was

filed during the policy period.  Consequently, at the time of

                                                    

1.  American Employers is not a party to this case.

2.  Occurrence-based insurance provides  coverage if the  act
giving rise to the  claim occurred during the policy  period,
regardless of when the claim is filed.

3.  Claims-based insurance provides  coverage for claims made
during the policy  period regardless of when the  acts giving
rise to the claims occurred.

                             -3-                                          3

the explosion, CU also  carried an umbrella policy  issued by

Weavers ("Weavers  Umbrella").4   Under the first  section of

the main body of  the Weavers Umbrella, captioned "COVERAGE,"

the policy expressly  covered "all  sums . .  . imposed  upon

[CU] by law . . . or assumed under contract or  agreement . .

. for damages on account of . . . personal injuries, property

damage,  [or] advertising liability . . . arising out of each

occurrence happening anywhere in the world."5

          The next  section of the  main body of  the Weavers

Umbrella,  captioned  "LIMIT  OF  LIABILITY,"  provided  that

Weavers would only  be liable  for the ultimate  net loss  in

excess of either "(a) the limits of the underlying insurances

as  set out  in  the attached  schedule  in respect  of  each

                                                    

4.  "Umbrella" policies differ from standard excess insurance
policies in that they  are designed to fill gaps  in coverage
both   vertically   (by   providing  excess   coverage)   and
horizontally (by  providing  primary coverage).    Commercial                                                                         
Union  I,  7  F.3d at  1053.   In  the  latter  instance, the                    
Umbrella is said  to "drop down" to  provide primary coverage
where the underlying policy provides no coverage at all.  

5.  Under  the  Weavers  policy, the  term  "occurrence"  was
defined as follows:

          The   term  "Occurrence"   wherever  used
          herein  shall  mean  an  accident   or  a
          happening  or  event or  a  continuous or
          repeated  exposure  to  conditions  which
          unexpectedly and  unintentionally results
          in  personal  injury, property  damage or
          advertising  liability during  the policy
          period.      All    such   exposure    to
          substantially the same general conditions
          existing   at   or  emanating   from  one
          premises  location  shall  be deemed  one
          occurrence.

                             -4-                                          4

occurrence  covered  by said  underlying insurances"  or "(b)

$25,000 ultimate net  loss in respect of each  occurrence not

covered by said underlying insurances . . . ."

          To   the  Weavers  Umbrella  was  attached  an  EPL

Endorsement ("Weavers  EPL Endorsement").   The terms  of the

Weavers  EPL Endorsement  provided  that it  was to  "include

Engineers Professional  Liability as more fully  described in

the underlying General Liability Policy/ies" (referencing the

Travelers Policy) and that  such coverage "is subject to  the

same  warranties, terms and conditions . . . as are contained

in the said underlying policy/ies . . . ."  The parties agree

that  because  this  language specifically  incorporates  the

provisions of the Travelers  EPL Endorsement, the Weavers EPL

Endorsement provided claims-based coverage.  

          Subsection  (a)  of  the  Weavers  EPL  Endorsement

captioned  "LIMIT OF LIABILITY,"  provided that Weavers would

only be liable for the ultimate net  loss in excess of "[t]he

limits  of the  underlying  insurances  as  set  out  in  the

attached schedule  in respect  of each occurrence  covered by

said  underlying  insurances."    If the  liability  was  not

covered by another policy, subsection  (b) of the Weavers EPL

Endorsement  ("Liability  Amendment")  provided coverage  for

"the excess  of . .  . $25,000  ultimate nett  [sic] loss  in

respect  of each  occurrence not  covered by  said underlying

insurances but in  respect of engineering  services liability

                             -5-                                          5

$250,000 ultimate  nett [sic] loss [for]  each occurrence not

covered   by  said  underlying   insurances."     In  effect,

subsection (b)  provides for  a deductible when  the Umbrella

"drops  down"  to  provide  coverage not  covered  under  the

underlying policy  ("$250,000  deductible").   An  attachment

captioned  "Schedule  of  Underlying  Insurances"  lists  the

Travelers Policy.  

          Initially,  Travelers undertook the  defense of the

Peterson  claims.  Then, in  1982, CU determined  that it had

not made its claim  for coverage during the  Travelers Policy

period.  Accordingly, CU  released Travelers from any further

obligations in  connection with the explosion.   Weavers then

informed CU that  its Umbrella would  not cover the  Peterson

claims.   In November  1982, CU  brought the  present action,

seeking  a judicial  declaration  as to  whether the  Weavers

Umbrella covered the Peterson claims.  

          Following extensive discovery, both  parties sought

summary  judgment.   CU  argued that  the  main body  of  the

Weavers Umbrella  covered EPL  claims on an  occurrence basis

and  that the  Weavers  EPL  Endorsement provided  additional

coverage  on a claims basis.  Weavers argued that the Weavers

EPL Endorsement  was the  sole  source of  EPL coverage  and,

because the  EPL  Endorsement was  claims-based,  there  was,

accordingly, no coverage under either the Weavers Umbrella or

the  Weavers EPL  Endorsement.   The  district court  largely

                             -6-                                          6

adopted the  latter reading and granted  Weavers's motion for

summary judgment.  

          On appeal,  the Commercial Union  I panel reversed.                                                         

Interpreting  the  various   policy  provisions,  the   panel

concluded that the main body of the Weavers Umbrella provided

occurrence-based EPL  coverage and thus covered  the Peterson

claims.  Commercial Union  I, 7 F.3d at 1049.   Consequently,                                        

the  panel ordered that the  judgment in favor  of Weavers be

vacated and that judgment  be entered for CU, in  proceedings

consistent with the panel's  opinion.  Weavers's petition for

rehearing and rehearing en banc was denied.   

          In  this  appeal, we  are  asked  to review  issues

arising from  the subsequent proceedings before  the district

court.  CU moved  that the district court enter  judgment for

$1,502,874.30  plus interest6  to be  calculated at  12%, the

prejudgment  interest rate  for  contractual  disputes  under

Massachusetts law.  In its response, Weavers  argued that the

$1,502,874.30 was subject to the $250,000 deductible and that

prejudgment  interest should  be determined  by  reference to

federal law.   As to the  prejudgment-interest issue, Weavers

argued  in the  alternative that  if state  law applied,  the

                                                    

6.  In  its  brief  in  Commercial  Union  I,  CU  explained:                                                        
"Commercial Union . .  . does not seek to hold Weavers liable
for  $2,227,874.30  [sic]   ($2,502,874.30  [settlement   and
defense  costs  related  to  the Peterson  claims]  less  the
$250,000 retention).  Commercial  Union seeks to recover only
the  amount it is out of pocket caused by Weavers'[s] breach:
$1,502,874.30 plus interest."

                             -7-                                          7

correct  Massachusetts  statute  set the  rate  at  6%.   The

district court, finding that the Commercial Union I panel had                                                               

"rested  judgment   upon"  the  validity   of  the   $250,000

deductible, applied the deductible, ordered entry of judgment

for CU in  the amount  of $1,252,874.30, found  state law  to

govern  interest, and  ordered that  prejudgment interest  be

calculated  at the rate of  12%.  The  district court entered

judgment for $2,749,326.48.

          Pursuant to  Fed. R. Civ. P. 59, both parties filed

motions seeking to alter or amend the judgment.  The district

court denied both  motions.7  CU appealed, and  Weavers cross

appealed.   CU requested that Weavers post a bond pursuant to

Fed.  R. Civ.  P. 62.   When Weavers refused,  CU obtained an

execution.   CU  then  received payment  from all  defendants

except Walbrook  and Slater,  Walker and has  accepted checks

totaling $2,314,758.61.  CU refused to execute a satisfaction

of  judgment.   Weavers moved  to dismiss  CU's appeal.   The

motion  to  dismiss  was  denied  without  prejudice  pending

reconsideration by this panel.  

                             II.                                         II.                                            

                          DISCUSSION                                      DISCUSSION                                                

                                                    

7.  The  judgment  was amended  by  joint  motion to  correct
technical errors.

                             -8-                                          8

          Where, as  here, the issues on  appeal involve pure

questions  of  law,  our review  is  de  novo.8   See,  e.g.,                                                                        

Villafane-Neriz v. Federal Deposit Ins. Corp., 20 F.3d 35, 39                                                         

(1st  Cir.  1994).    On  appeal,  CU  makes  two   principal

arguments:  (1) that the district court erred in stacking the

$250,000  deductible  on top  of  the  payment received  from

American Employers; and  (2) that Weavers waived its right to

argue for alternate relief  in application of the deductible.

In its cross appeal,  Weavers argues:  (1) that  the district

court  erred  in  applying  state law  to  award  prejudgment

interest; and,  in the  alternative, (2) that,  if state  law

applies, the  district court applied  the incorrect law.   On

its motion to  dismiss CU's appeal,  Weavers argues that,  in

executing the district court's  judgment, CU waived its right

to appeal.   We first  address Weavers's  motion to  dismiss,

then CU's appeal and, finally, Weavers's cross appeal.

A.  Weavers's Motion to Dismiss                                           

          In  its  motion to  dismiss,  Weavers argues  that,

because CU  executed judgment  against all defendants  except

Walbrook  and   Slater,  Walker,   CU  has   "accept[ed]  the

                                                    

8.  We review the district court's  decision to deny a motion
to  alter  or  amend  a   judgment  for  manifest  abuse   of
discretion.    See,  e.g.,  Jorge  Rivera  Surillo  &amp;  Co. v.                                                                      
Falconer Glass Indus., No.  94-1047, slip op. at 5  (1st Cir.                                 
Oct. 12, 1994).   As our discussion below indicates,  we find
that  the  district  court  properly  entered   judgment  and
therefore did not abuse its discretion in denying the motions
under Rule 59.  Accordingly, we hold that the parties' cross-
motions under Fed. R. Civ. P. 59 were properly denied.

                             -9-                                          9

substantial   benefits   of  a   judgment,   voluntarily  and

intentionally, and  with  knowledge of  the facts,"  Fidelcor                                                                         

Mortgage Corp. v. Insurance Co. of  N. Am., 820 F.2d 367, 370                                                      

(11th  Cir. 1987)  (citations omitted), and  therefore waived

its  right  to appeal.   CU  argues  that Fidelcor,  on which                                                              

Weavers principally  relies, should be  distinguished because

in that  case Fidelcor  executed a satisfaction  of judgment,

whereas CU has refused to do so.  

          Our  analysis  must  start  with  United States  v.                                                                     

Hougham, 364 U.S. 311, 312 (1960), in which the Supreme Court                   

held  that "where a judgment  is appealed on  the ground that

the damages awarded are  inadequate, acceptance of payment of

the amount of the  unsatisfactory judgment does not, standing

alone, amount  to an  accord and  satisfaction of  the entire

claim."   Commentary  has  noted that  the dimensions  of the

Court's  holding  are  vague   and  courts  of  appeals  have

subsequently  developed  disparate  "acceptance of  benefits"

doctrines.    See, e.g.,  9 James  W.  Moore et  al., Moore's                                                                         

Federal Practice   203.06 (2d ed. 1994) (hereinafter, Moore's                                                                         

Federal Practice); Benson K.  Friedman, Note, An Intent-Based                                                                         

Approach  to  the  Acceptance  of Benefits  Doctrine  in  the                                                                         

Federal  Courts, 92  Mich.  L. Rev.  742 (1993);  Annotation,                           

Right to  Appeal From Judgment  As Affected By  Acceptance of                                                                         

Benefit Thereunder  -- Federal  Cases, 5 L.Ed.2d  889 (1960).                                                 

This Circuit  has not  explicitly addressed this  issue since

                             -10-                                          10

Hougham.  Notably, in Fidelcor, the Eleventh Circuit does not                                          

discuss Hougham.    Instead, Fidelcor  relies on  pre-Hougham                                                                         

common  law that  strictly applied  the bar  to appeal  after

acceptances  of benefits, subject to only limited exceptions.

We decline to follow this approach.  

          While the use of the phrase "standing alone" by the

Hougham Court does  lead to some  uncertainty, we think  that                   

the  unique  circumstances  presented  here  fit  comfortably

within the rule of that case.  As discussed fully below, CU's

appeal  focuses on  the district  court's application  of the

$250,000 deductible.   Weavers argued for  the application of

the deductible before the district  court and, except for its

challenge to  the rate of prejudgment interest  raised in its

cross appeal, Weavers does not otherwise dispute the entry of

judgment.  Under these circumstances, we do not think that CU

should be  foreclosed  from appealing  the  deductible  issue

simply because  it collected payment on  what was essentially

an undisputed amount.  Indeed, this case bears out the wisdom

of  the relative  flexibility  incorporated  in  the  Hougham                                                                         

rule.9  Accordingly, we deny Weavers's motion to dismiss.  

                                                    

9.  We note that  we would  have reached the  same result  by
applying the post-Hougham test adopted by at least four other                                     
circuits.  Under this  test, a party who accepts  the benefit
of   a  judgment   is   precluded  from   appealing  if   the
circumstances indicate  a mutual intent to  settle all claims
in dispute and thereby terminate the  litigation.  See, e.g.,                                                                        
Gadsden v. Fripp, 330 F.2d 545,  548 (4th Cir. 1964).  As the                            
discussion  below amply  illustrates,  no such  mutual intent
exists in this case.

                             -11-                                          11

B.  Commercial Union's Appeal                                         

          CU challenges the  district court's  interpretation

of Commercial Union  I and  argues that the  language of  the                                  

Weavers Umbrella prohibits  stacking the $250,000  deductible

on  top  of  the  amount received  from  American  Employers.

Characterizing  the deductible  as  "alternative relief,"  CU

further argues that,   because Weavers raised the application

of the deductible only after Commercial Union I, the issue is                                                           

waived.  We address each argument in turn.

          1.  The $250,000 Deductible                                                 

          The  doctrine of the law of the case directs that a

decision of an  appellate court  on an issue  of law,  unless

vacated or set aside, governs the issue during all subsequent

stages of litigation  in the nisi prius  court and thereafter                                                   

on any further appeal.  United States v. Rivera-Martinez, 931                                                                    

F.2d 148 (1st  Cir.), cert.  denied, 112 S.  Ct. 184  (1991).                                               

When a case is appealed and remanded:

          "the  decision  of  the  appellate  court
          establishes the law  of the  case and  it
          must be  followed by  the trial court  on
          remand.   If there is an  appeal from the
          judgment   entered   after  remand,   the
          decision of the first  appeal establishes
          the law of the case to be followed on the
          second."  

Id. (quoting 1B Moore's  Federal Practice   0.404[1] (2d  ed.                                                     

1991)).  When the reviewing court, in its mandate, prescribes

that  a court shall proceed in accordance with the opinion of

the  reviewing court,  it incorporates  its opinion  into its

                             -12-                                          12

mandate.  Jones v. Lewis, 957 F.2d 260, 262 (6th Cir.), cert.                                                                         

denied, 113  S. Ct. 125 (1992).  Cf. Elias v. Ford Motor Co.,                                                                        

734 F.2d 463, 465  (1st Cir. 1984) ("A mandate  is completely

controlling as to all matters before the appellate court  and

disposed  of by  its decree.");  accord  Rivera-Martinez, 931                                                                    

F.2d at  150; Federal  Deposit Ins. Corp.  v. Ramirez-Rivera,                                                                        

869 F.2d 624, 627  (1st Cir. 1989).  The  mandate constitutes

the law  of the case on  such issues of law  as were actually

considered  and decided  by the  appellate court, or  as were

necessarily  inferred from  the  disposition on  appeal.   1B

Moore's Federal Practice   0.404[10] (2d ed. 1993).                                    

          In  Commercial Union  I, the  mandate  directed the                                             

district court to conduct further proceedings "in accordance"

with  the panel's  opinion.   The legal  issue in  Commercial                                                                         

Union I was whether the Weavers Umbrella provided occurrence-                   

based coverage  for the  Peterson claims; resolution  of that

issue required  the panel to interpret  the Weavers contract.

As  noted above, the panel  determined that the  main body of

the Weavers Umbrella provided  coverage and that the Peterson

claims resulted  from an  "occurrence" within the  meaning of

the  policy's definition of that term.  Commercial Union I, 7                                                                      

F.3d at 1051.  Importantly, the panel stated:

          Our  integrated  reading  of the  Weavers
          Umbrella   policy   as    a   whole    is
          corroborated by the specific terms of the
          Liability  Amendment,  which  contemplate
          "engineering services liability"  subject
          to    a     $250,000    deductible,    in

                             -13-                                          13

          circumstances where, as here, the Weavers
          Umbrella "drops down" to  provide primary
          coverage  of  risks  not  covered  by the
          underlying [Travelers] insurance  policy.
          Thus,  the  Liability  Amendment  clearly
          replaces  corresponding  language in  the
          "LIMIT  OF LIABILITY" section of the main
          body of the  Weavers Umbrella.   We  find                                                               
          untenable  an interpretation  which would                                                               
          provide a $250,000 EPL "deductible" for a                                                               
          risk not covered in the first place.                                                           

Id.  at  1053 (emphasis  added).   As  the panel  stated, its               

reading  gave "full effect" to all terms  in the main body of

the Weavers  Umbrella and  the Weavers EPL  Endorsement, thus

satisfying the  obligation to  give reasonable effect  to all

contractual  terms whenever  possible.   Id. at  1052 (citing                                                        

Jimenez v.  Peninsular &amp;  Oriental Steam  Nav. Co.,  974 F.2d                                                              

221, 223 (1st  Cir. 1992);  Feinberg v. Insurance  Co. of  N.                                                                         

Am.,   260  F.2d   523,   527  (1st   Cir.  1958)   (applying               

Massachusetts law)).  

          CU argues, in essence, that the  panel's references

to  the  $250,000  deductible   are  dicta  and  thus  cannot                                                      

constitute law of  the case.  See, e.g.,  Dedham Water Co. v.                                                                      

Cumberland Farms Dairy,  Inc., 972  F.2d 453,  459 (1st  Cir.                                         

1992) ("Dictum contained in  an appellate court's opinion has                          

no preclusive  effect in subsequent proceedings  in the same,

or any other,  case.").  We do not agree  with CU's argument.

To resolve the  legal issue presented in  Commercial Union I,                                                                        

it was essential that the panel, to the extent possible, give

reasonable effect to  all contractual terms.  As the language

                             -14-                                          14

from the opinion quoted above suggests, giving full effect to

the $250,000 deductible was an especially critical element in

resolving the case.   Simply stated, it was the  key piece of

the  puzzle.  The availability  of the deductible  lay at the

heart  of   the  integrated  interpretation  of  the  Weavers

Umbrella  and the  Weavers  EPL Endorsement.   Moreover,  the

panel concluded  that, because  the Travelers Policy  did not

provide  coverage  for  the  Peterson   claims,  the  Weavers

Umbrella   "dropped   down"    to   provide   coverage   and,

consequently,  the $250,000  deductible applied.   Therefore,

the  district court correctly interpreted the law of the case

and we hold that the entry of judgment was in accordance with

Commercial Union I's mandate.                              

          Of  course, the  law of  the case  is a  prudential

doctrine  and  does  not serve  as  an  absolute  bar to  our

reconsideration of  an issue.   Rivera-Martinez, 951  F.2d at                                                           

150-51.  We do not  reconsider a decision, however,  "`unless

the  evidence  on   a  subsequent  trial   was  substantially

different, controlling  authority has  since made a  contrary

decision  of law applicable  to such issues,  or the decision

was clearly erroneous and  would work a manifest injustice.'"

Id. (quoting White  v. Murtha,  377 F.2d 428,  432 (5th  Cir.                                         

1967)).  On this appeal, CU essentially argues that the third

condition obtains;  that is,  the Weavers contract  cannot be

                             -15-                                          15

interpreted to  permit application  of the deductible  to the

American Employers indemnification obligation.

          According to CU, the $250,000 deductible should not

be   stacked  upon  the  American  Employers  indemnification

because Travelers,  and not American Employers,  is listed on

the "Schedule  of Underlying  Insurance" and the  Weavers EPL

Endorsement did  not contain a reference  to "other insurance

not scheduled which may have been collectible by CU" to which

the deductible would apply.   

          Any  confusion  on  the  reader's  part  is  to  be

excused.   After years of pointing to the deductible as prima

facie evidence  of Weavers's liability,10 CU  now argues that

the $250,000 deductible should not apply.  Based on the plain

                                                    

10.  For  example, the  Commercial  Union I  panel summarized                                                       
CU's argument as follows:

          [O]n  CU's  reading,   the  Weavers   EPL
          Endorsement extends claims-based coverage
          "for  those  EPL  claims arising  out  of
          accidents or occurrences that  took place
          prior  to  the  Weavers  Umbrella  period
          where claim was made during the [Weavers]
          policy period itself."   Furthermore,  CU
          reasons,  the  language of  the Liability
          Amendment   (amending   the   "LIMIT   OF
          LIABILITY"   section  so  as   to  add  a
          $250,000  "self-insured  retention"   for
          EPL)  supports its  claim  that the  main
          body of the Weavers Umbrella  covers EPL.
          We   think  the  plain  language  of  the
          insurance  contract as  a whole,  and the
          reasonable  expectations of  the parties,
          are effectuated  under the interpretation
          urged by CU.

Commercial Union I, 7 F.3d at 1052.                              

                             -16-                                          16

language of the Weavers  contract, we cannot agree  with CU's

new argument.  The  Liability Amendment provides coverage for

"each occurrence  not covered by  said underlying  insurances                                                                         

[referencing the attached schedule]"  subject, in the case of

engineering services, to a $250,000 deductible.  Both parties

agree  that  the  "attached  schedule"  refers  only  to  the

Travelers Policy.   The Liability Amendment  must be read  to

provide primary coverage, subject to the deductible, when the

Travelers Policy does not provide coverage.  As CU repeatedly

argued,  that is  exactly what  occurred in  this case:   the

Weavers Umbrella "drops down" to provide coverage not covered

by  the Travelers  Policy, and  thus the  $250,000 deductible

must  apply.  In short, the language of the contract requires

application  of  the  deductible.    That  Weavers  may  have

included additional language in the insurance contract has no

bearing on the outcome.  

          In  Commercial  Union  I,  CU  offered  a  somewhat                                              

different  explanation  of  the  amount  it  is  entitled  to

recover.  Rather  than arguing  that the  deductible did  not

apply  because  of  the contractual  language,  CU  expressly

stated that it only  sought to recover that amount  for which

it  was  "out of  pocket,"  or  $1,502,874.30 plus  interest.

Under CU's view,  because its "out of  pocket" figure already

affords Weavers a $750,000 "savings" (ignoring interest) from

its total potential exposure  (amount of Peterson claims less

                             -17-                                          17

deductible less "out of  pocket" amount), they should  not be

entitled  to  the  benefit   of  an  additional  $250,000  in

"savings".  Critically, however, there was never an agreement

among the  parties that the deductible would  not still apply

to whatever amount CU sought to  recover.  We can discern  no

basis  in  the  contractual  language to  effect  what  would

essentially be a "waiver"  of the deductible.  The  fact that

CU sought judgment for an amount less than it might otherwise

be  owed  cannot  obviate  the  plain  language  of  a  valid

contractual  provision.   Indeed,  given the  course of  this

litigation,  we  find  that  the  invitation  to  ignore  the

$250,000 deductible is, to say the least, ironic.  

          In  sum,  we find  no  error in  the  prior panel's

interpretation   of  the  contractual   provisions  or  their

application   in  this   case.     Accordingly,  as   to  the

deductibility issue, we  hold that entry  of judgment by  the

district court is  unassailably proper.

          2.  Waiver of the Deductibility Issue                                                             

          CU argues that, because Weavers failed to raise the

application  of the  deductible until  after the  mandate had

issued in Commercial Union I, the argument should be rejected                                        

as untimely.   We do not agree.  As  the foregoing discussion

indicates,  there   can  hardly  be  any   dispute  that  the

deductible was  a central focus of this lengthy case.  It was

the  subject of intense review  before the Commercial Union I                                                                         

                             -18-                                          18

panel.   Given the pages of record devoted to the deductible,

it would simply be untenable to find waiver had occurred with

respect to  that issue.   We decline to  do so and  hold that

there was no such waiver.

C.  Weavers's Cross Appeal                                      

          On its cross appeal,  Weavers makes two alternative

arguments:   (1) that in  diversity actions brought under the

federal  Declaratory  Judgment  Act,  the   determination  of

prejudgment  interest is  governed  by federal  law; and  (2)

that,  if state law is  to apply, the  district court applied

the wrong law.  We address each argument in turn.  

          1.    Prejudgment  Interest Under  the  Declaratory                                                                         

          Judgment Act                                  

          In  determining the  rate of  prejudgment interest,

the district court held  that, because jurisdiction was based

on diversity,  Massachusetts  law governed.   Weavers  argues

that federal  law  should govern.   Reduced  to its  essence,

Weavers's  theory  is that  the  "procedural"  nature of  the

Declaratory  Judgment  Act ("DJA"),  28  U.S.C.     2201  and

2202,11  displaces a  "contrary  state  provision" under  the

                                                    

11.  Captioned  "Creation  of  remedy,"  28  U.S.C.      2201
provides in relevant part:

          In  a case  of actual  controversy within
          its jurisdiction, . .  . any court of the
          United  States, upon  the  filing  of  an
          appropriate  pleading,  may  declare  the
          rights  and other legal  relations of any
          interested     party     seeking     such

                             -19-                                          19

rule of  Erie R.R. v.  Tompkins, 304 U.S. 64  (1938), and its                                           

progeny.   Thus, Weavers  argues that if  the district  court

grants "[f]urther  necessary or proper relief"  under the DJA

by awarding prejudgment interest, it should apply the federal

rule  governing  prejudgment  interest  under  which, Weavers

says, prejudgment interest is calculated at the "market" rate

of interest.  We find Weavers's analysis to be flawed.

          Where, as  in this  case, jurisdiction is  based on

diversity,   familiar principles  control.  "[F]ederal courts

sitting  in diversity  jurisdiction  are obligated  to  apply

state  law  unless applicable  federal  procedural rules  are

sufficiently broad  to control a particular  issue before the

court."  Daigle v. Maine Medical Ctr., Inc., 14 F.3d 684, 689                                                       

(1st  Cir. 1994) (citing Walker v. Armco Steel Corp, 446 U.S.                                                               

740, 749  (1980);  Hanna  v.  Plumer, 380  U.S.  460,  470-71                                                

                                                    

          declaration,   whether  or   not  further
          relief is  or could be sought.   Any such
          declaration  shall  have  the  force  and
          effect of a final judgment or decree  and
          shall be reviewable as such.

28 U.S.C.   2201 (1988)

          Captioned  "Further  relief,"  28  U.S.C.      2202
provides:  

          Further necessary or proper  relief based
          on a declaratory  judgment or decree  may
          be granted, after  reasonable notice  and
          hearing, against any adverse  party whose
          rights  have  been  determined   by  such
          judgment.

28 U.S.C.   2202 (1988)

                             -20-                                          20

(1965)); see also Stewart Org., Inc. v. Ricoh Corp., 487 U.S.                                                               

22, 26 (1988) (where  federal procedural statute is involved,

a  court  must determine  if  it  is "sufficiently  broad  to

control the issue").

          The DJA creates a particular remedy where a federal

district court already has  jurisdiction to entertain a suit.

See,  e.g., Nashoba  Communications v.  Town of  Danvers, 893                                                                    

F.2d 435, 437 (1st Cir. 1990).  Issues that would be governed

by state law  in a  coercive action are  equally governed  by

state  law when declaratory relief is sought.  10A Charles A.

Wright et al., Federal Practice and Procedure,   2771 (2d ed.                                                         

1983) (hereinafter,  "Wright, Miller,  &amp; Kane").   Indeed, as

one commentator has noted:

          Since  the  declaratory  remedy   is  not
          intended  to  affect substantive  rights,
          federal   substantive  rights   will,  of
          course, rule the adjudication  of federal
          rights.  Similarly, just as in  any other
          type   of   civil   action    where   the
          substantive issues  are non-federal, Erie                                                               
          R.R. v. Tompkins  requires a careful  and                                      
          loyal  application  of state  substantive
          law . . . .

6A Moore's Federal Practice   57.02[5] (2d ed. 1994).                                       

          Notwithstanding  these  well-established principles

governing  both federal-state  choice of law  and declaratory

judgment actions,  Weavers  argues, as summarized above, that

federal  law   should  govern   prejudgment  interest.     In

circumstances  such   as  this  where  a   federal  court  is

confronted with a  claim that  a state law  conflicts with  a

                             -21-                                          21

federal procedural rule or statute, the  court must first ask

whether the  dispute falls  within the scope  of the  federal

statute.  If a conflict exists,  then the court must then ask

whether  the  statute  is  a  valid  exercise  of  Congress's

authority.   See, e.g.,  Stewart, 487 U.S.  at 26-27.   If no                                            

federal  statute  or  procedural  rule covers  the  point  in

dispute,  a  court must  then  proceed  to evaluate  "whether

application of federal judge-made  law would disserve the so-

called `twin aims of  the Erie rule: discouragement of  forum                                          

shopping and  inequitable administration of the  laws.'"  Id.                                                                         

at 27 n.6  (quoting Hanna, 380 U.S. at 468).   If application                                     

of federal law  would disserve these two  policies, state law

applies.  Id.                         

          We find  that Weavers's  theory fails on  the first

inquiry:   no conflict exists between  the "procedural" DJA12

and state prejudgment  interest law.   Weavers reads the  DJA

broadly:  under  Weavers's  interpretation,  a  federal court

entertaining  a declaratory  judgment action may,  in effect,

                                                    

12.  As  Weavers  points  out, courts  and  commentators have
characterized the DJA as "procedural."  See, e.g., Skelly Oil                                                                         
Co.  v.  Phillips Petroleum  Co.,  339 U.S.  667,  671 (1950)                                            
("`[T]he  operation  of  the  Declaratory  Judgment  Act   is
procedural  only.'  .  .  . Congress  enlarged  the  range of
remedies available  in the federal courts but  did not extend
their jurisdiction." (citation  omitted) (dicta)); Charles A.                                                           
Wright, Law of  Federal Courts    100 (5th  ed. 1994)  ("[The                                          
DJA]  may  be  regarded  as  `procedural'  and  is  expressly
authorized by  Act  of  Congress.").   For  the  purposes  of
addressing   Weavers's   argument   only,   we   adopt   this
characterization.

                             -22-                                          22

apply  a  rule  of  decision13 that  would  fashion  "further

relief"  in a more restrictive  manner than would  apply in a

non-declaratory diversity case.  Thus, according to  Weavers,

a conflict with state law arises.14    

          The plain  language of 28  U.S.C.    2201  and 2202

does  not  support Weavers's  broad  reading.   Section  2201

authorizes  a judicial  declaration "whether  or not  further

relief is  or  could be  sought,"   thus  "indicat[ing]  that

declaratory  relief  is  alternative  or  cumulative and  not

exclusive or extraordinary."   Fed. R.  Civ. P. 57  Committee

Notes.  Section 2202 gives effect to the cumulative nature of

the declaratory  device15 by authorizing a  district court to

                                                    

13.  When   a  district  court   sits  in   federal  question
jurisdiction,  prejudgment interest  has  been determined  by
federal  common law in the absence of a specific provision in
the  underlying  statute.    See,  e.g.,  Robinson  v.  Watts                                                                         
Detective Agency,  Inc., 685 F.2d  729, 741 (1st  Cir. 1982),                                   
cert.  denied, 459  U.S. 1105,  1204  (1983).   Thus, Weavers                         
appears  to argue  that federal  common law  should similarly
apply  in  the  context  of  a   diversity-based  declaratory
judgment  action.   We note,  however, that  in at  least one
federal question  case, we  held  that a  district court  may
properly look to state  law where the underlying federal  law
is silent as  to awarding prejudgment interest.   Colon Velez                                                                         
v. Puerto Rico  Marine Mgmt.,  Inc., 957 F.2d  933, 941  (1st                                               
Cir. 1992).  Hence, we held  that the district court did  not
abuse its  discretion in levying prejudgment  interest at the
12% rate applicable under local law.  Id.                                                     

14.  Notably, notwithstanding  the long  history of  the DJA,
Weavers does not point to a single case adopting its view.

15.  On this  point we also note  that under Fed. R.  Civ. P.
54(c),  a  court,  in   rendering  judgment,  may  grant  the
prevailing party any relief to which that party  is entitled,
even if such relief was not, but could have been, demanded in
the original pleadings.   See 6A  Moore's Federal Practice                                                                         

                             -23-                                          23

grant   additional  relief  consistent  with  the  underlying

declaration even  though the  right to the  relief may  arise

long after  the court  has entered its  declaratory judgment.

See, e.g., Gant v. Grand Lodge, 12 F.3d 998, 1002  (10th Cir.                                          

1993) (citing Wright,  Miller, &amp; Kane    2771), cert. denied,                                                                        

114 S. Ct. 1834  (1994).  The fact that a  declaratory action

was  brought in  lieu of  an action  seeking  coercive relief

"`does not  merge a claim in the judgment or bar it.'"  Gant,                                                                        

12 F.3d at 1002 (quoting Wright, Miller, &amp; Kane   2771).

          Simply stated,  the DJA complements,  but does  not

displace,    relief    available   under    applicable   law.

Accordingly,  we  do  not   share  Weavers's  view  that  the

provision for district courts  to grant "further necessary or

proper relief"  is an  authorization to  formulate a  rule of

decision granting less relief  than would otherwise have been

available had a coercive action been brought instead.16  

          Because  no  conflict  exists  between  a  specific

federal rule or statute and state law, we then must determine

                                                    

57.10 (2d ed. 1994).

16.  We  note here that in  Gant the Tenth Circuit reaffirmed                                            
an earlier holding interpreting section 2202 as authorizing a
district  court  sitting  in  a  diversity-based  declaratory
proceeding   to  grant   additional  relief,   not  otherwise                                               
authorized by state law,  if that relief were "`necessary  or
proper  to  effectuate  relief  based  upon  the  declaratory
judgment rendered in the proceeding.'"  Gant, 12 F.3d at 1003                                                        
(quoting  Security Ins. Co. v. White, 236 F.2d 215, 220 (10th                                                
Cir.  1956)).   We take  no position  on the  Tenth Circuit's
interpretation of the statute.

                             -24-                                          24

whether application of  a federal-judge  made rule  governing

the  calculation of prejudgment  interest would  disserve the

twin aims  of Erie.  Assuming  for the moment that  a federal                              

court  would,  as   Weavers  argues,  calculate   prejudgment

interest  according to  the  "market"  rate,  the  difference

between  the application  and nonapplication  of a  state law

under which  interest  is  calculated at  12%  could  make  a

substantial difference in  terms of the plaintiff's  ultimate

monetary recover.   Moreover, if  the state law  were not  to

apply,  the  incentives  for forum  shopping  are  plain.   A

plaintiff would  likely bring  his action in  state court  to

take  advantage of  the more  favorable  prejudgment interest

law; similarly,  a non-Massachusetts defendant would  seek to

remove the  action to  avoid substantial  additional damages.

Because  the twin  aims of Erie  would not  be served  by the                                           

application of judge-made federal  law, state law must apply.

Stated another  way, prejudgment interest  is substantive law

and, therefore, state law  must be applied in diversity-based

proceedings.    This  conclusion comports  with  our repeated

statements  that  when  jurisdiction  is  diversity-based,  a

district court should  look to  the law which  a state  court

sitting  in  that   jurisdiction  would  apply  in   awarding

prejudgment interest.   See, e.g., Aubin v.  Fudala, 782 F.2d                                                               

287, 289 (1st Cir. 1986); Roy v. Star Chopper, Inc., 584 F.2d                                                               

                             -25-                                          25

1124, 1135 (1st Cir. 1978), cert. denied, 440 U.S 916 (1979).                                                    

          In sum, a district  court sitting in diversity when

it  awards  prejudgment interest  pursuant  to a  declaratory

judgment action must  apply the law of the state in which the

court   sits,   including   that    state's   conflict-of-law

principles.  See Klaxon  v. Stentor Elec. Mfg. Co.,  313 U.S.                                                              

487 (1941).  Here, the  parties agree that Massachusetts  law

governs the  substance of the underlying  transaction.  Under

these circumstances,  Massachusetts law directs  that a court

should apply  Massachusetts  law in  calculating  prejudgment

interest.   See, e.g., Morris v. Watsco, Inc., 385 Mass. 672,                                                         

674-75  (1982).    Thus,  we  hold  that  the  district court

properly calculated prejudgment interest  using Massachusetts

law.

          2.  The Applicable Rate of Interest Under                                                                 

          Massachusetts Law                                       

          Weavers  next argues that even if Massachusetts law

is to govern the award of  prejudgment interest, the district

court  erred in  awarding  prejudgment  interest pursuant  to

Mass.  Gen. L. ch. 231,    6C17 rather  than under Mass. Gen.

                                                    

17.  Captioned,   "Interest  added  to  damages  in  contract
actions,"  Mass. Gen. L. ch.  231,   6C  provides in relevant
part:

          In  all  actions  based   on  contractual
          obligations, upon a  verdict, finding  or
          order for judgment for pecuniary damages,

                             -26-                                          26

L.  ch.  107,    3.18    Weavers  reasons  that, because  the

Massachusetts declaratory  judgment  act, Mass.  Gen. L.  ch.

231A,  does not specify the  rate of interest  to be awarded,

there is  no applicable  "provision  of law  for a  different

rate" and,  thus, chapter 107,  section 3 is  not supplanted.

In essence, Weavers seeks to avoid application of  section 6C

by  recharacterizing this  case  as  a "declaratory  judgment

action."  We decline to do so.19

                                                    

          interest  shall be added  by the clerk of
          the court  to the  amount of  damages, at
          the contract rate,  if established, or at
          the  rate of  twelve per  cent per  annum
          from  the date  of the breach  or demand.
          If the  date of  the breach or  demand is
          not established, interest shall  be added
          by  the  clerk  of  the  court,  at  such
          contractual  rate,  or  at  the  rate  of
          twelve per  cent per annum  from the date
          of the commencement of the action . . . .

Mass. Gen. L. ch. 231,   6C  (Supp. 1993)

18.  In relevant part, Mass. Gen. L. ch. 107,   3 provides:

          If there is no agreement or provision  of
          law for a different rate, the interest of
          money shall be at the rate of six dollars
          on each hundred for a year . . . .

Mass. Gen. L. ch. 107,   3 (1990)

19.  Weavers   makes   two   additional   arguments   against
application  of a  12% interest  rate: (1)  that the  rate is
"unreasonably high";  and (2)  that the statute  violates the
Massachusetts  Constitution  because   of  changed   economic
conditions.   Weavers's first contention is properly directed
to  the Massachusetts  legislature.    Whether  Massachusetts
should  adopt  a lower  rate of  interest  or a  scheme which
refers to the "market" rate of interest is not a matter for a
federal court to decide.   

                             -27-                                          27

          As  explained  in  detail  above,  the  declaratory

device is a remedy by which parties may seek a declaration as

to their substantive rights.  A declaratory judgment is not a

theory  of recovery.   It is  clear that,  in this  case, the

underlying  substantive  theory  is contractual.    The plain

language of chapter 231A, section 6C establishes conclusively

that it is  to govern  the award of  prejudgment interest  in

contractual disputes.  Accordingly, Weavers's  reasoning must

be rejected.   The  district court properly  awarded interest

under chapter 231A, section 6C.

                             III.                                         III.                                             

                          CONCLUSION                                      CONCLUSION                                                

          For the foregoing reasons, the motion to dismiss is

denied and the decision of the district court is 

          Affirmed.  Each party shall bear its own costs.                      Affirmed.  Each party shall bear its own costs.                                                                     

                                                    

          As  for Weavers's  second contention,  we are  at a
loss   to  determine  its   theory  for  unconstitutionality.
Indeed, Weavers does not point to a specific provision of the
state constitution that the prejudgment interest rate is said
to   violate.     Moreover,  Weavers   offers  no   developed
argumentation on this point.  We require far more, especially
when we are asked  to reach a state constitutional  question.
Accordingly, we deem  this argument waived.   See, e.g., Ryan                                                                         
v.  Royal Ins. Co. of Am., 916  F.2d 731, 734 (1st Cir. 1990)                                     
("issues  adverted  to on  appeal  in  a perfunctory  manner,
unaccompanied by some developed argumentation, are deemed  to
have been abandoned").

                             -28-                                          28
