          United States Court of Appeals
                      For the First Circuit


No. 10-1702

      LÓPEZ & MEDINA CORP., d/b/a Emmanuel Travel & Tours,

                      Plaintiff, Appellant,

                                v.

    MARSH USA, INC., as agent for certain subscribing and/or
      participating insurance underwriters for Policies No.
AW823101, S1HL-200A, HL3391396-02, PXLA37000032-01, MMO2326AV501
 and AAV01.440 issued to Patriot Air LLC, d/b/a Marsh Aviation;
     PIEDMONT AVIATION SERVICES, INC., d/b/a Pace Airlines,

                           Defendants,


            UNITED STATES AVIATION UNDERWRITERS, INC.,
     as Managers of United States Aircraft Insurance Group &
    Other Underwriters and Co-Insurers, Certain Underwriters
  at the Institute of London, Certain Underwriters at Lloyd's,
  AIG Aviation, Inc., Brockbank Underwriting Syndicate (U.K.),
      Mutual Marine Office, AXA Equity and Law (U.K.), and
                      XYZ Insurance Company,

                       Defendant, Appellee.


          APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF PUERTO RICO

        [Hon. Juan M. Pérez-Giménez, U.S. District Judge]


                              Before

                       Lynch, Chief Judge,
              Torruella and Stahl, Circuit Judges.


     Fernando D. Castro-Maldonado, with whom Fernando D. Castro Law
Offices, was on brief for appellant.
     Christopher A. Duggan, with whom Smith & Duggan LLP, H. Reed
Witherby, Diego A. Ramos, and Fiddler González & Rodríguez, PSC,
were on brief for appellee.




                        January 26, 2012




                               -2-
            TORRUELLA, Circuit Judge.        Plaintiff-appellant López &

Medina Corp. ("L&M") appeals the district court's order denying its

cross-motion for summary judgment.        The cross-motion was denied on

the grounds that the insurance policy pursuant to which L&M sought

coverage,   issued by    defendant-appellee          United   States   Aviation

Underwriters, Inc. ("USAUI"),1 did not cover L&M's losses arising

from an alleged breach of contract.        López & Medina Corp. v. Marsh

USA, Inc. et al., 694 F. Supp. 2d 119 (D.P.R. 2010).            We affirm the

decision of the district court.

            In   addressing   whether     USAUI's     policy   covered    L&M's

contractually    based   claim,   we    tread   on    virgin ground      in   our

circuit.    We have not yet had the opportunity to address whether

the phrase "legally obligated to pay as damages" in a commercial

general liability ("CGL")2 policy, which usually covers only tort

claims, also provides coverage for claims in an underlying action

arising out of and related to a contract between the parties.                  In

resolving this matter of first impression, we join the majority of




1
   The underlying policy was purchased in the aviation insurance
Lloyd's of London market through USAIG and several other
underwriters and co-insurers, to be managed by appellee USAUI. For
simplicity's sake, we will refer to those entities named as
defendants throughout the course of this action as "USAUI" or
"defendant co-insurers."
2
    The acronym "CGL" is a common term used in the insurance
industry to refer to comprehensive general liability.

                                    -3-
those circuit courts of appeals that have ruled on the issue.3         We

thus hold that the policy in this case covers only liability

arising in tort and does not provide coverage for liability arising

from a breach of contract.

                            I.   Background

A.   Factual Background

            On September 1, 2001, USAUI and other defendant co-

insurers issued Airline Insurance Form PA-01, Policy #SIHL1-200A

(the "Policy") to Pace Airlines, Inc. ("Pace").4             Pace was the

"Named Insured" under the Policy, and two Boeing 737-200 aircraft

were listed as the insured subjects.       The Policy covered certain

risks assumed by its insured, Pace, in its contractual arrangements

with   other   companies,   which    generally   consisted    of   charter

programs.

            That same month (September 10, to be precise), Pace

entered into one such charter program contractual arrangement.

Pace signed an Aircraft Charter and Management Agreement ("Charter

Agreement") with Patriot Air, LLC ("Patriot").        Pursuant to this

agreement, Pace, as a direct air carrier, leased to Patriot, an



3
   See Data Specialties, Inc. v. Transcon. Ins. Co., 125 F.3d 909
(5th Cir. 1997); Stanford Ranch, Inc. v. Md. Cas. Co., 89 F.3d 618
(9th Cir. 1996); see also Nationwide Mut. Ins. Co. v. CPB Int'l,
Inc., 562 F.3d 591 (3d Cir. 2009); VBF, Inc. v. Chubb Group of Ins.
Cos., 263 F.3d 1226 (10th Cir. 2001).
4
  Pace's actual business name is the Carlyle Group and/or Piedmont
Aviation Services, Inc., d/b/a Pace Airlines.

                                    -4-
indirect air carrier, certain of its Boeing 737 aircraft for use in

Patriot's charter flight operations.

           Thereafter, on May 15, 2002, Patriot entered into a

Passenger Aircraft Agreement ("Passenger Agreement") with L&M.

Pursuant to this agreement, Patriot, acting as an indirect air

carrier,   agreed   to    provide   L&M   with     aircraft   transportation

(specifically,   the     Boeing   737   aircraft    leased    from   Pace)   to

transport L&M customers to destinations that L&M had booked on the

travelers' behalf.5      In return, L&M agreed to "submit a schedule of

Flights to Patriot . . . forty-five (45) days prior to the month in

which the Flights are to occur."        Additionally, L&M agreed to make


5
    Because our assessment of insurance law in this case also
requires us to traverse certain areas of aviation law, we define at
the outset the following relevant terms for purposes of this
opinion: charter flight, public charter, direct air carrier,
indirect air carrier, and sub-operator.

   1. A charter flight is "a flight operated under the terms of a
charter contract between a direct air carrier and its customer."
14 C.F.R. § 380.2.
   2. A public charter is "a one-way or round-trip charter flight
to be performed by one or more direct air carriers that is arranged
and sponsored by a charter operator." Id.
   3. A direct air carrier (in this case, Pace) is "a certificated
commuter or foreign air carrier . . . that directly engages in the
operation of aircraft under a certificate, authorization, permit or
exemption issued by the Department." Id.
   4. An indirect air carrier (here, Patriot) is "any person who
undertakes to engage indirectly in air transportation operations
and who uses for such transportation the services of a direct air
carrier." Id.
   5. A sub-operator (here, L&M) is a "Public Charter operator that
has contracted for its charter seats from a Public Charter operator
that has contracted from one or more direct air carriers. A sub-
operator is itself an indirect air carrier, not an agent of the
Public Charter operator from which it has obtained its seat." Id.

                                    -5-
advance deposits in Patriot's escrow account "[e]ach Friday during

the term of this Agreement" in "an amount that is equal to the

scheduled flight hours multiplied by $4,950 for the Applicable

Period."      It also agreed "to pay Patriot at least $643,500.00 per

month during the term of this Agreement . . . even if Charterer

cancels flight(s)."           Lastly, before any of the scheduled flights

took place,6 Patriot required L&M to provide a surety bond in the

amount of two hundred thousand dollars to ensure L&M's performance

under the Passenger Agreement; L&M purchased the surety bond from

United Surety and Indemnity Company for fifty thousand dollars.

              With all matters seemingly finalized, Patriot and L&M

prepared for their business venture, titled "Dream Air operated by

Pace Airlines," to take off.          On June 22, 2002, the first chartered

flight left Luis Muñoz Marín International Airport, departing from

San   Juan,    Puerto    Rico    to   the   Dominican     Republic.        Business

seemingly continued to soar into early July, with additional

flights occurring on July 3, 4, 7, 8, 11, 12, and 14 of 2002.

However,   it    was    not    long   before   L&M     and    Patriot's   business

arrangement began to experience turbulence.

              Between June and July 2002, L&M and Patriot exchanged

various communications, in which L&M claimed that Patriot had

unlawfully     refused    to    provide     aircraft    for    already    scheduled


6
  The first scheduled charter flight under the Passenger Agreement
initially was scheduled for June 1, 2002. The first flight did not
actually take place until June 20, 2002.

                                        -6-
flights, and Patriot contended that L&M had unlawfully failed to

fulfill its payment obligations under the Passenger Agreement.               As

of mid-July, L&M and Patriot's Dream Air operation had become a

business venture nightmare.          By July 18, 2002, Patriot had taken

action and terminated the Passenger Agreement.

            Two months later, Patriot filed for voluntary bankruptcy

under Chapter 11 in the United States Bankruptcy Court for the

Northern District of Texas.          L&M filed a proof of claim against

Patriot for the former's incurred costs and suffered damages

resulting   from    the   latter's    alleged   breach     of   the   Passenger

Agreement and failure to provide chartered aircraft to L&M's booked

passengers.    The bankruptcy court subsequently disallowed L&M's

claim   against    Patriot   after    the   Chapter   11   proceedings     were

converted to a Chapter 13 liquidation.                The bankruptcy judge

confirmed a plan of liquidation on May 25, 2004, and all bankruptcy

proceedings were terminated on August 31, 2004.

B.   Procedural History

            On June 3, 2005, L&M filed the complaint in this action

against Patriot and Pace's insurers (specifically, USAIG and its

co-insurers, including USAUI, the manager of the Policy).7                  L&M


7
   L&M was able to sue USAIG and its co-insurers by virtue of
Patriot's contractual agreement with Pace, the latter of which was
insured for its charter operations for and on behalf of Patriot
Air.   Specifically, and as discussed infra, Pace (the direct air
carrier) was insured for conventional aviation risks and physical
damages to the aircraft leased to Patriot (indirect air carrier),
as well as for risks associated with third-party liabilities

                                      -7-
claimed    that   Patriot    not   only    had   breached    their    Passenger

Agreement, but also had terminated the agreement in bad faith as of

July 2002.    L&M noted that Patriot, which it did not name as a

defendant, had filed for bankruptcy in September 2002; however, it

contended that its claim against Patriot was covered by one or more

insurance policies, including the USAUI-managed Policy now at

issue, thus explaining its suit against the co-insuring defendants.

            L&M alleged three causes of action in its complaint:

(1) the named defendants were liable under Puerto Rico's Direct

Action Statute, P.R. Laws Ann. tit. 26, § 2003,8 for risks insured

under the Policy; (2) declaratory judgment, establishing that one

or more of defendants' insurance policies provided coverage for

those risks associated with the breach of the Passenger Agreement,

Charter Agreement, or any other agreements concerning Patriot and

Pace's charter operations; and (3) a determination that the Policy

insured    against   a   breach    of     contract   risk,   and     therefore,

defendant-insurers were directly liable to L&M within the maximum

limit of their combined policies for losses arising from the

alleged    breach,   which   L&M   contended     amounted    to    ten   million

dollars.


arising from Pace's airline operations with a charter program, like
Patriot.
8
   Puerto Rico's Direct Action Statute permits third parties to
bring an action against an insurer (or insurers) for claims covered
under an insurance policy, without having to join the insured to
the dispute.

                                     -8-
          On August 21, 2007, USAUI, on behalf of all defendants,

filed a motion for summary judgment arguing that L&M's claims were

precluded under the doctrines of res judicata and collateral

estoppel; that Puerto Rico's Direct Action Statute did not permit

a claim against an insurer (here, defendants) if the claim no

longer existed against the insured (here, Patriot); and that the

Direct Action Statute did not apply extraterritorially to USAUI's

actions in Puerto Rico.     The court ultimately denied the motion,

rejecting USAUI's arguments that L&M's claims were unavailable

under either preclusion doctrine, or that the Direct Action Statute

was inapplicable to the dispute.

          USAUI subsequently requested that the district court

certify for interlocutory appeal the question of whether coverage

even applied under the Policy to the breach of contract claim that

(USAUI contended) was alleged in L&M's complaint.     Although the

district court granted defendants the opportunity to file a motion

explaining why certification as to this issue was appropriate,

defendants elected instead to file a supplemental memorandum of law

on the issue of coverage.   Specifically, defendants requested that

the district court dismiss the case with prejudice because the

undisputed facts (namely, the plain language of the Policy) showed

that the Policy did not cover L&M's alleged breach of contract

claim, regardless of whether a breach of contract ultimately was or

was not established.


                                 -9-
            L&M    responded   by    filing     a    cross-motion   for       summary

judgment, which USAUI opposed.           In its cross-motion, L&M argued

that the Policy's coverage expressly applied to its underlying

claims for damages arising from Pace and Patriot's failure to

provide air transportation, as contractually required, to its

passengers.       Specifically, L&M distinguished between those risks

which it contended were inapplicable to its claims, including

aviation risks and physical damages to the insured aircraft and

listed in "Part II - Physical Damages" of the Policy, and those

risks to which it asserted coverage applied.                     These allegedly

coverage-applicable risks were listed in "Part I - Liability

Coverage" of the Policy, or the CGL provision. L&M described these

latter   risks     as   "third-party    liabilities       arising      from    Pace's

insured Airline Operations (i.e. non-owner, or aircraft charterer,

third-party liabilities) as said term is defined in the Policy."

L&M asserted that the Policy's clear language both identified and

distinguished third-party liability risks, including contractual

liabilities ("offenses"), from the aviation risks ("occurrences")

for which it claimed coverage did not apply.

            The district court rejected L&M's motion, concluding that

the Policy "clearly and unambiguously does not provide coverage for

a breach of contract claim."           López & Medina, 694 F. Supp. 2d at

122.    In brief, the district court carefully reviewed the Policy's

plain    language,      relevant    insurance       treatises,   and    case     law;


                                       -10-
concluded that, pursuant to Puerto Rico insurance law and contract

law, it could not consider extrinsic sources because the contested

Policy language contained no inherent ambiguity; and found that the

CGL language at issue only applied to "(1) tort claims, (2) for

personal   injuries,   (3)    arising   out   of   Pace's   refusal   of

transportation, (4) for offensive or wrongful reasons, such as

discriminatory animus."9     Id. at 126.

           The district court also rejected L&M's subsequent re-

framing of its argument in its Motion to Alter or Amend Judgment

under Rule 59(e) and 60(b), for Amended and Additional Findings of

Fact under Rule 52(b), and for Judgment as a Matter of Law under

Rule 50(b) on the Issue of Insurance Coverage.     In this motion, L&M

asserted that the Policy covered "concomitant tort damages" arising

from the alleged breach of contract, which L&M claimed were covered

under the Policy.   The district court again noted that neither in

its complaint nor in its cross-motion for summary judgment had L&M

alleged a tort violation, instead basing its claim entirely on

Patriot's failure to fulfill contractually required obligations to

provide air transport. Additionally, the district court noted that



9
   The district court also addressed (and L&M again raises the
issue on appeal) whether the Charter Agreement constituted an
"Approved Contract" under the language of the Policy, providing an
exception to the Policy's exclusion of contractual liability.
López & Medina, 694 F. Supp. 2d at 129-30. Having concluded that
the Policy does not provide coverage for L&M's claim, we need not
reach this issue, and thus do not address the district court's
analysis on this matter.

                                 -11-
L&M's alleged losses were economic in nature and concerned the

related value of completed performance under the agreement, both of

which sounded in contract.        Lastly, the district court clarified

that   the    Policy's   listed    tortious   offense   of   "refusal   or

withholding of transportation" concerned an offense against a

natural person, like a ticketed passenger, and not a corporation,

like Patriot or L&M, further confirming that under no reasonable

interpretation of the Policy's language could coverage be deemed

applicable to L&M's claim.

             L&M now appeals, arguing that the district court erred

when it determined that the scope of the Policy's CGL coverage for

Personal Injury was limited to tort claims.10      Mindful that we face

a matter of first impression for this circuit, we proceed down the

rabbit hole.

                            II.    Discussion

A. Standard of Review

             Summary judgment is properly granted where "the movant

shows that there is no genuine dispute as to any material fact and

the movant is entitled to judgment as a matter of law."           Fed. R.


10
    L&M additionally raises the following arguments on appeal,
namely, that the district court: (1) erred in concluding that the
Charter Agreement was not an "Approved Contract" under the Policy;
(2) improperly failed to consider the Certificate of Insurance as
further evidence of coverage; and (3) erred in rejecting L&M's
expert's opinion regarding how to interpret coverage under the
Policy. Because we agree with USAUI's position that the Policy
does not provide coverage for L&M's claims, as explained infra, we
need not address these issues.

                                   -12-
Civ. P. 56(a).        We review the district court's grant of summary

judgment de novo, Specialty Nat'l Ins. Co. v. OneBeacon Ins. Co.,

486 F.3d 727, 732 (1st Cir. 2007), and the facts in the light most

favorable     to    the   non-moving     party,    drawing   all   reasonable

inferences in its favor, Daniels-Recio v. Hosp. del Maestro, Inc.,

109 F.3d 88, 89 (1st Cir. 1997).              "The presence of cross-motions

for summary judgment neither dilutes nor distorts this standard of

review." Mandel v. Bos. Phoenix, Inc., 456 F.3d 198, 205 (1st Cir.

2006).

            Additionally, because "[t]he construction of an insurance

policy is a question of law, . . . the legal conclusions of the

district court are . . . not binding on the court of appeals."

Nieves v. Intercont'l Life Ins. Co. of P.R., 964 F.2d 60, 63 (1st

Cir. 1992).        Thus, we "may make an independent examination of an

insurance policy."        Id.   We review de novo the question of whether

an insurance contract is ambiguous.             Lloyd's of London v. Pagán-

Sánchez, 539 F.3d 19, 22 (1st Cir. 2008); see also Lexington Ins.

Co. v. Gen. Accident Ins. Co. of Am., 338 F.3d 42, 46 (1st Cir.

2003) ("[A] trial court's interpretation of an insurance contract

is equally subject to de novo review.").

B.   Insurance Policy Construction Under Puerto Rico Law

            Puerto Rico law governs this diversity case.            See Erie

R.R. Co. v. Tompkins, 304 U.S. 64 (1938); see also Daniels-Recio,

109 F.3d at 90.        Pursuant to such law, we must first turn to the


                                       -13-
Insurance Code of Puerto Rico ("Insurance Code") as our guide on

the path to interpreting the underlying insurance contract.                       See

P.R. Laws Ann. tit. 26, §§ 101 et seq.; Nieves, 964 F.2d at 63;

Jiménez v. Triple S. Inc., 154 F. Supp. 2d 236, 238 (D.P.R. 2001).

Article 11.250 of the Insurance Code states that every insurance

contract "shall be construed according to the entirety of its terms

and conditions as set forth in the policy, and as amplified,

extended,     or     modified    by    any    lawful    rider,    endorsement,    or

application attached to and made a part of the policy."                  P.R. Laws

Ann. tit. 26, § 1125.

              Where    the      Insurance       Code    fails     to   provide    an

interpretative approach for a given situation, we also may turn to

the Civil Code as a supplemental source of law.                   Nieves, 964 F.2d

at 63 (citing P.R. Hous. Bank v. Pagán Ins. Underwriters, 11 Offic.

Trans. 3, 8 (1981), 111 P.R. Dec. 1, 6).                   "Article 1233 of the

Puerto Rico Civil Code provides that when the terms of a contract

are   clear    and    leave     no    doubt   as   to   the     intentions   of   the

contracting parties, the literal sense of its stipulations shall be

observed."     Id. (quoting P.R. Laws Ann. tit. 31, § 3471) (internal

quotation marks omitted).             "[A] term is considered 'clear' when it

is sufficiently lucid to be understood to have one particular

meaning, without room for doubt."               Jiménez, 154 F. Supp. 2d at 238

(quoting Hopgood v. Merrill Lynch, Pierce, Fenner & Smith, 839 F.

Supp. 98, 104 (D.P.R. 1993)) (internal quotation marks omitted).


                                         -14-
On the other hand, where a policy's language is unclear, we must

construe the provisions against the insurer. Great Am. Ins. Co. v.

Riso, Inc., 479 F.3d 158, 162 (1st Cir. 2007).   We deem ambiguity

present in a policy if a word or phrase is reasonably susceptible

to more than one construction.    Id. at 163 (stating that "[t]he

ambiguities canon applies only where the policy can reasonably be

read two ways, and the touchstone of coverage is expectation of

protective insurance reasonably generated by the terms of the

policy" (internal quotation marks and citation omitted)).

          We lastly note that insurance contracts generally are

viewed as adhesion contracts under Puerto Rico law, requiring

liberal construction in favor of the insured.     Fajardo Shopping

Ctr., S.E. v. Sun Alliance Ins. Co. of P.R., Inc., 167 F.3d 1, 7

(1st Cir. 1999) (citing Quiñones López v. Manzano Pozas, 96 J.T.S.

95, at 1306, P.R. Offic. Trans. RE-91-567, slip op. at 10, 1996 WL

499244 (P.R. June 25, 1996)). However, we are cognizant that where

a contract's wording is explicit and its language unambiguous, the

parties are bound by its clearly stated terms and conditions, with

no room for further debate.      Nieves, 964 F.2d at 63; see also

Vulcan Tools of P.R. v. Makita U.S.A., Inc., 23 F.3d 564, 567 (1st

Cir. 1994) (where no doubt or ambiguity lies amidst the meaning of

a contract's terms, "the court cannot dwell on the 'alleged' intent

of the parties at the time they entered into the contract."




                               -15-
(quoting Hopgood, 839 F. Supp. at 104) (internal quotation marks

omitted)).

C.   Whether the Policy Extends Coverage to L&M's Claims

             L&M's essential argument on appeal is that the Policy --

in contrast to the district court's finding -- is not limited

solely to tort claims, but instead covers both contract and tort

actions.11        Thus, L&M's claims also must be covered under the

Policy.      Because our analysis centers on the Policy's language,

which serves as the best evidence of the parties' intentions, we

address the relevant terms of the CGL provision. However, we begin

our analysis by examining L&M's claims, for we cannot adequately

consider whether the Policy covers L&M's claims without first

understanding their actual nature.

             1.    L&M's Claims

             A    careful   review   of   L&M's   pleadings,   motions,   and

arguments on appeal establishes that L&M's allegations against

USAUI –- based on L&M's asserted damages for Patriot's alleged

failure to provide chartered air transport via Pace -- sound in


11
   Specifically, L&M's brief contends that "[t]he District Court
erred in limiting the allegations in the Complaint to a single
breach of contract claim, determining that the scope of the
aviation Policy's [CGL] insurance coverage for Personal Injury can
only apply to 'tort' actions."     Although L&M's brief does not
clearly articulate whether its main source of contention is that
(1) its claims are not limited to a contract action but also are
tort-based, or (2) the Policy is not limited solely to tort
actions, L&M's counsel clarified during oral argument that its true
dispute lay with the district court's interpretation of the
Policy's scope as being applicable solely to tort claims.

                                     -16-
contract.      For example, in its complaint, L&M repeatedly alleges

that indirect air carrier Patriot (which leased aircraft from

direct air carrier Pace) breached its written Passenger Agreement

with L&M by (1) failing to provide aircraft for a charter air

travel program, and (2) unilaterally terminating the contract

approximately two months following its execution.            See L&M Compl.

¶¶ 20-29, 32, 34, & 37-38; L&M Compl. Prayers for Relief ¶¶ 1-2.

L&M similarly argues in its cross-motion for summary judgment that

Patriot breached its Passenger Agreement with L&M and therefore

coverage for L&M's resulting losses should extend to L&M under the

Policy.      See L&M Cross-Motion for S.J. at 4, 5, 11, 12, 13 & 14.

Indeed,      L&M   specifically     states   in   its   cross-motion   that

"Plaintiff's allegations are precisely based on Pace's and/or

Patriot's sudden wrongful failure to provide air transportation to

third-party, L&M, as contracted," id. at 4 (emphasis added), and

that   the    Policy   "expressly   contemplates    Pace's   assumption   of

Patriot's contractual liability" in its coverage for "approved

contracts," id. at 7 (emphasis added).

             L&M's arguments on appeal -- generally, that the district

court improperly limited L&M's allegations to a breach of contract

claim, despite defendants' tortious act of refusing or withholding

of transportation -- do little to persuade us otherwise as to the




                                     -17-
contractual nature of its claim.12    Without belaboring the point,

L&M repeatedly asserts in its complaint that Patriot breached its

contractual obligations to L&M, and that such breach and its

resulting losses are covered under the Policy.    L&M Compl. ¶¶ 20-

29, 32, 34, & 37-38; L&M Compl. Prayers for Relief ¶¶ 1-2.    L&M's

alleged losses in the complaint are economic and concern the value



12
    L&M additionally raised the following supporting arguments:
(1) Puerto Rico's Direct Action Statute "makes no expression as to
contractual or extra-contractual distinctions as pre-requisites"
for an action under the statute against the insurer, and thus, the
court's "pre-qualification, and mislabeling" of L&M's direct action
as contract-based was improper; and (2) although the district court
initially acknowledged a "distinction" between the instant action
and L&M's breach of contract action for damages against Patriot in
the Texas Bankruptcy Court, it subsequently failed to appreciate
the underlying (and unstated on appeal) differences between the two
actions. We respond in brief.

   For an injured party to successfully pursue a claim against an
insurer under the Direct Action Statute, there still must be
coverage under the policy for the alleged losses.      See Torres-
Troche v. Municipality of Yauco, 873 F.2d 499, 502 (1st Cir. 1989)
(stating that an insurer "has no liability [under the Direct Action
Statute] unless there is a loss covered by the policy held by the
[insured]").    Because, as discussed infra, we agree with the
district court's conclusion that L&M's claims are not covered under
the Policy, L&M's contention as to the Direct Action Statute's
relevance regardless of the "contractual or extra-contractual"
nature of its claims holds little water.

   Second, it is clear that the initial distinction the district
court drew in its first order, and to which L&M refers, largely
rests upon the fact that the defendant in the bankruptcy action (in
contrast to the current action) was a different entity, with L&M
raising actions against an insured (Patriot) in one instance, and
against an insurer (USAUI) in another.      See López & Medina v.
Marsh, USA, Inc. et al., No. 05-1595, slip op. at 7 (D.P.R. Sept.
22, 2009). Thus, the court's conclusion that the underlying facts
and allegations in each action would be "similar," but certainly
not "identical," stands to reason.

                               -18-
of completed performance under the contested contracts, namely, the

Passenger and Charter Agreements.       Lastly, the complaint's very

caption frames the action as contractual in nature, stating:

"Action for Declaratory Judgment, Direct Action Statute, Breach of

Contract and Monetary Damages."   At no point in the complaint does

L&M ever clearly or expressly assert a tort violation, and it is

not our role to sift through the tea leaves to predict additional

claims that might be imbedded amongst those specifically alleged.

See Schneider v. Local 103 I.B.E.W. Health Plan, 442 F.3d 1, 3 (1st

Cir. 2006) ("Judges are not expected to be mindreaders." (quoting

United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) (internal

quotation marks omitted)).

          There can be no doubt that L&M's allegations here sound

in contract, and L&M fails to establish otherwise in its arguments

on appeal.     Thus, in order for L&M to receive coverage under the

Policy, it must establish that the Policy's coverage extends to

contract-based claims.    To the Policy we go.

          2.    Relevant Policy Terms

          L&M directs us to specific provisions in the Policy which

it alleges support its claim of coverage.    Specifically, there are

two main sources of coverage that L&M contends are relevant to our

interpretation of the Policy.   The first (and uncontested) type of

coverage is that listed under "Part II - Physical Damages," which

extends coverage to Pace for conventional aviation risks and


                                -19-
physical damages to the    insured aircraft.13    The second (and

contested) form of coverage is that provided under "Part I -

Liability Coverage," also referred to by the parties as the "CGL

provision."   L&M directs us to the following CGL language:

          1. COVERAGE
          The INSURER will pay on behalf of the INSURED
          all sums which the INSURED shall become
          legally obligated to pay as damages arising
          out of the Named Insured's Airline Operations
          because of:
          . . .
          B. PERSONAL INJURY arising out of one or more
          of the following offenses committed during the
          policy period;
          . . .
          Group 3.14     - Refusal or withholding of
          transportation or other public accommodation;
          but coverage hereunder shall not apply to
          payments made by the Insured under the
          provisions of its tariffs or contract of
          carriage,   to   persons   holding   confirmed
          reserved space on a flight and who are denied
          boarding on such flights whether such space is
          relinquished voluntarily or involuntarily.15

Furthermore, L&M, throughout its various pleadings and motions, has

relied on the following specific language within the CGL provision

to support its position that L&M suffered damages due to Patriot's

allegedly bad faith failure to provide air transportation to L&M in


13
   L&M concedes that the coverage provided for under "Part II -
Physical Damages" is "inapplicable to plaintiff's claims."
14
   The Policy lists seven "groups" of offenses that fall within the
scope of the CGL provision's "Personal Injury" section, to be
discussed infra.
15
   We will refer interchangeably to this section of the Policy as
the CGL provision, Subpart I.B, or the "Personal Injury" section of
the Policy.

                               -20-
violation of their contractual agreement, and that the Policy

extends coverage to such damages:

          The insurer will pay on behalf of the insured
          all sums which the insured shall become
          legally obligated to pay as damages arising
          out of the Named Insured's Airline Operations
          because of . . . personal injury arising out
          of   .  .   .  refusal   or  withholding   of
          transportation or other public accommodation.

(Emphasis added).

          We address the relevant language of the CGL provision.

                    a.    "Legally Obligated to Pay as Damages"

          The circuit courts of appeals that have ruled on the

interpretation   of      the   phrase,   "legally   obligated   to   pay   as

damages," in a CGL provision have all held that it applies to tort

and not contractual liability.           See Data Specialties, Inc. v.

Transcon. Ins. Co., 125 F.3d 909, 911 (5th Cir. 1997) ("[T]he CGL

policy language 'legally obligated to pay as damages' applies only

to tort-based obligations."); Smith Mailer Mfg. v. Lib. Mut. Ins.

Co., 119 F.3d 7, 1997 WL 407862, at *3 (9th Cir. 1997) (unpublished

table decision) ("California courts have consistently interpreted

[the "legally obligated to pay as damages"] language to cover only

tort liabilities and not those liabilities arising in contract."

(quoting Stanford Ranch, Inc. v. Md. Cas. Co., 89 F.3d 618, 624

(9th Cir. 1996) (internal quotation marks omitted)); see also

Nationwide Mut. Ins. Co. v. CPB Int'l, Inc., 562 F.3d 591, 597-98

(3d Cir. 2009) (addressing the phrase "legally obligated to pay" in


                                    -21-
a CGL policy and noting that "Pennsylvania law does not recognize

the applicability of a general liability policy to breach of

contract . . . claims," and that "[t]he purpose and intent of a

general liability insurance policy is to protect the insured from

essentially accidental injury to the person or property of another

rather than coverage for disputes between parties to a contractual

undertaking" (citations and internal quotation marks omitted));

VBF, Inc. v. Chubb Grp. of Ins. Cos., 263 F.3d 1226, 1231 (10th

Cir. 2001) ("The phrases, 'legally obligated to pay' and 'liability

imposed    by   law'   refer   only   to   tort   claims   and   not   contract

claims.").

            Other state and federal courts similarly echo that a CGL

provision, such as that at issue here, generally applies to tort,

and not contract, claims.        See, e.g., Keystone Filler & Mfg. Co.,

Inc. v. Am. Mining Ins. Co., 179 F. Supp. 2d 432, 439 (M.D. Pa.

2002) ("The purpose and intent of [a general liability] insurance

policy is to protect the insured from liability for essentially

accidental injury to the person or property of another rather than

coverage     for   disputes     between      parties   to    a    contractual

undertaking." (alterations in original) (citations and internal

quotation marks omitted)); Hartford Accident & Indem. Co. v. A.P.

Reale & Sons, Inc., 644 N.Y.S.2d 442, 443 (N.Y. App. Div. 1996)

("[T]he purpose of a [CGL] policy . . . is to provide coverage for

tort liability . . . and not for contractual liability of the


                                      -22-
insured for economic loss . . . ."); Wis. Label Corp. v. Northbrook

Prop. & Cas. Ins. Co., 607 N.W.2d 276, 343 (Wis. 2000) ("A CGL

policy is not a performance bond; it provides coverage for tort

damages but not for economic loss resulting from contractual

liability." (internal quotation marks omitted)); Action Ads, Inc.

v. Great Am. Ins. Co., 685 P.2d 42, 45 (Wyo. 1984) (providing that

liability insurance "encompasses liability which the law imposes on

all insureds for their tortious conduct and not on the liability

which a   particular      insured   may   choose   to   assume   pursuant     to

contract").

           Renowned insurance treatises and commentators also agree

that the purpose of a CGL policy is to indemnify a party against

tort and not contract-based liability.             For instance, Couch on

Insurance, considered one of the leading sources on insurance law,

clearly   states   that    CGL   policies   "are   designed      to   cover   an

insured's tort liability, . . . [and thus] liability based upon

contract is generally excluded from coverage."            7A Lee R. Russ &

Thomas F. Segalla, Couch on Insurance § 103:19 (3d ed. 2009); see

id. § 129:4 ("A [CGL] policy is designed and intended to provide

coverage to the insured for tort liability for physical injury to

the person or property of others.          A [CGL] policy is not intended

to provide coverage for the insured's contractual liability which

merely causes economic losses.").          See also 1 Barry R. Ostrager &

Thomas R. Newman, Handbook on Insurance Coverage Disputes, § 7.01,


                                    -23-
at 469 (15th ed. 2010) ("[T]he purpose of a [CGL] policy . . . is

to provide coverage for tort liability for physical damage to

others and    not   for   contractual   liability   of   the   insured   for

economic loss . . . ." (quoting Hartford Accident, 644 N.Y.S.2d at

443)); Jack P. Gibson et al., Commercial Liability Insurance,

§ V.D.6 (10th reprint 2006) ("While no coverage is intended for

most two-party contractual obligations, the CGL policy is intended

to cover one party's tort liability to another party, and the mere

existence of a parallel contractual obligation between them should

not prejudice this coverage."); 2 Jeffrey W. Stemple, Stemple on

Insurance Contracts § 14.14[A], at 14-226 (3d ed. 2009) (stating

that, generally, a liability insurance policy provides coverage for

tort claims, not contract claims, and noting that the pleading of

a breach of contract claim is "something uncovered").

          Secondly, such trusted insurance resources have also

widely accepted that the phrase, "legally obligated to pay as

damages," refers exclusively "to the liability of the insured

arising from the breach of a duty that exists independent of any

contractual   relationship    between    the   insured   and   the   injured

party."   1 Ostrager & Newman, § 7.01 at 468 (emphasis added); see

also 7A Couch at § 103:14 ("While the phrase 'legal liability'

includes liability assumed by contract, the phrases 'liability

imposed by law,' and 'legally obligated to pay as damages' do

not.").


                                  -24-
           L&M's   proposed   interpretation   of   the   Policy's   CGL

language as applicable to contract claims effectively asks us to

view well-settled insurance law through the looking glass.           It is

generally not our role to contradict established, well-grounded

law.   Here, the well-beaten path does indeed make the right road,

and we refuse to accept L&M's invitation to wander from it.

Indeed, the upshot of extending coverage to a breach of contract

claim in this instance would be to turn this CGL policy into a

performance bond; we are unwilling to do so.

                          III.    Conclusion

           Finding no ambiguity in the Policy's clear language, we

may enforce it according to its express terms, which, as previously

stated, provide no coverage for L&M's contract-based claims.          See

Nieves, 964 F.2d at 63. We need not address L&M's other arguments,

as they invite us to look outside the clearly delineated scope of

the Policy to external documents and the parties' alleged intent

when entering the agreement -- factors that are not relevant where

a policy's language is unambiguous.      See Vulcan Tools of P.R., 23

F.3d at 567.

           For the foregoing reasons, we affirm.

           Affirmed.




                                  -25-
