
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 94-2232                                    EDGAR SPURLIN,                                Plaintiff, Appellant,                                          v.                    MERCHANTS INSURANCE COMPANY OF NEW HAMPSHIRE,                           d/b/a MERCHANTS INSURANCE GROUP,                                 Defendant, Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                    [Hon. Michael A. Ponsor, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                                 Selya, Circuit Judge,                                        _____________                            Bownes, Senior Circuit Judge,                                    ____________________                              and Boudin, Circuit Judge.                                          _____________                                 ____________________            W. Stanley Cooke for appellant.            ________________            Carol A. Griffin with  whom Robert M. Mack and Morrison, Mahoney &            ________________            ______________     ___________________        Miller were on brief for appellee.        ______                                 ____________________                                     June 7, 1995                                 ____________________                 BOUDIN, Circuit Judge.   On  June 8,  1984, Gilbert  Fox                         _____________            left  his car for repairs at Yankee Dodge, a Schenectady, New            York, car dealership and service shop.  Yankee Dodge gave him            a  "loaner"  car to  use  until the  repairs  were completed.            Later  that  day, Fox  was involved  in  an auto  accident in            Massachusetts while  driving the loaner car.   His passenger,            Edgar Spurlin, was badly injured.                 In August 1986, Spurlin filed a tort  action against Fox            and Yankee Dodge in Massachusetts superior court based on the            accident.   Fox was  insured by Travelers  Insurance Company,            and Yankee  Dodge was insured by  Merchants Insurance Company            of   New  Hampshire   under   a  "garage   policy."     After            negotiations,  Spurlin dismissed  his  claim  against  Yankee            Dodge with prejudice.   He also negotiated  a settlement with            Travelers for  $100,000,  the  limit  of Fox's  policy.    In            exchange,  Spurlin released  Fox from  any liability  for the            accident except to the  extent that Fox was covered  by other            insurance policies.                 Spurlin's  case against  Fox proceeded  to trial  in the            state court and  resulted in  a jury verdict  of $615,000  in            favor  of Spurlin.  The  execution of judgment  issued in the            amount of $962,487.25,  which represented  the $615,000  jury            verdict   plus  $436,650  in   interest,  less  the  $100,000            settlement  from  Travelers.    Spurlin  demanded  payment by                                         -2-                                         -2-            Merchants on the  ground that  Fox was an  insured under  the            Yankee Dodge garage policy.  Merchants disclaimed coverage.                 On  July  9,  1993,  Spurlin filed  the  instant  action            against Merchants in  Massachusetts superior court,  alleging            in the first  count that his injuries  were compensable under            Merchants'  insurance policy  and  in the  second count  that            Merchants  had violated Mass. Gen. L. ch. 93A, and Mass. Gen.            L.  ch. 176D.   Merchants  removed the  case to  the district            court based  on diversity jurisdiction.  On cross motions for            summary judgment, the district judge granted summary judgment            in favor of Merchants.  Spurlin v. Merchants Ins. Co., 866 F.                                    _______    __________________            Supp. 57 (D. Mass. 1994).  Spurlin now appeals.                 The parties agree that under Massachusetts choice of law            rules,  which bind the federal court in a diversity case, New            York  law governs the coverage issue.  Under the Yankee Dodge            garage   policy,  apparently   a  standard   form,  liability            insurance  is  provided  for  "an  insured"  in  an  accident            involving a "covered auto."   The loaner car is  admittedly a            covered auto under the policy, and  "an insured" includes not            only Yankee Dodge but also "anyone else . . . using with your            [Yankee Dodge's] permission a covered auto" except:            (3)  Your customers,  if your business is  shown in ITEM                 ONE  of  the  declarations as  an  auto dealership.                 However, if a customer of yours:                      (a)  Has no other available insurance . .                           ., he or she  is an insured but only                           up  to  the compulsory  or financial                                         -3-                                         -3-                           responsibility law  limits where the                           covered auto is principally garaged.                      (b)  Has  other available insurance . . .                           less   than    the   compulsory   or                           financial responsibility  law limits                           where    the    covered   auto    is                           principally garaged, he or she is an                           insured only for the amount by which                           the    compulsory    or    financial                           responsibility law limits exceed the                           limits   of   his   or   her   other                           insurance.                 The protection  provided  to Yankee  Dodge's  customers,            such as Fox, accorded  with New York insurance law  requiring            carriers to provide at least $10,000 in liability coverage to            "permissive  users"  of  insured  vehicles.    See  Davis  v.                                                           ___  _____            DeFrank, 306 N.Y.S.2d 827, aff'd, 266 N.E.2d 822 (1970).  But            _______                    _____            New York law only requires such coverage for permissive users            to  the extent  that they  are not  otherwise insured,  which            explains the  "However" proviso  in the Yankee  Dodge policy.            Fox did have  more than $10,000  in liability coverage  under            his own policy.                 The district  court held that Fox, being so insured, was            excluded  from  "insured" status  by  the  plain language  of            exception (3), quoted above.  Reviewing the interpretation of            contract language  de novo, Bird  v. Centennial Ins.  Co., 11                               _______  ____     ____________________            F.3d 228  (1st Cir. 1993), we  agree.  If this  were all that            the  case involved, it would  be sufficient to  affirm on the            basis of the district court's very able opinion.  But Spurlin            offers a counter-argument that deserves brief comment.                                         -4-                                         -4-                 Spurlin's  theory  is  that  the clause  (3),  with  its            reference  to  an auto  dealership,  applies  only to  Yankee            Dodge's supply of new cars;  its repair work, Spurlin argues,            is a  different phase of Yankee Dodge's  business; the loaner            car was supplied  to Fox as a repair customer; and clause (3)            therefore does not  apply to  Fox.  In  other words,  Spurlin            wishes to read  clause (3)  as if it  excepted from  coverage            "your  customers to the extent that they are customers of the            new-car phase of your business."                   Unfortunately   for   Spurlin's  argument,   the  clause            actually excludes "your customers,  if your business is shown            . .  . as an  auto dealership," as Yankee  Dodge clearly was.            The  clause  does not  purport  to divide  the  business into            phases and  limit the exclusion to only one phase.  Nor is it            apparent  why Yankee  Dodge would  wish to  provide liability            insurance  to  users  of loaner  cars  in  any  phase of  its            business--a  step  that  would  ultimately  increase  its own            premiums--over and above  the contingent minimum  required by            New York law.                   In  support  of his  reading,  Spurlin  cites two  cases            decided by  intermediate appellate state courts,  one decided            over a forceful dissent.  See Stanfield v. Hartford  Accident                                      ___ _________    __________________            & Indem. Co., 581 So. 2d 340 (La. Ct. App. 1991); Connecticut            ____________                                      ___________            Indem. Co. v. Cordasco,  535 A.2d 631 (Pa. Super.  Ct. 1987).            __________    ________            Both courts  adopted Spurlin's  reading on similar  facts and                                         -5-                                         -5-            almost  identical  policy language.   By  contrast, Merchants            cites  a  number of  state  high  courts  that have  rejected            Stanfield's  and  Cordasco's  reasoning.    See,  e.g., Globe            _________         ________                  ___   ____  _____            Indem. Co.  v. Jordan, 634 A.2d 1279  (Me. 1993); Schoenecker            __________     ______                             ___________            v. Haines, 277 N.W.2d 782 (Wis. 1979).               ______                 Spurlin,  and the cases on which he relies, also cite to            another  provision seemingly  common to  garage policies  and            present in this case.  This provision  excludes from coverage            any  covered auto "while rented or leased to others" but also            provides  that the exclusion does not apply to a covered auto            "you rent to one of  your customers while his or her  auto is            left  with you for service or  repair."  On its face, neither            the exclusion nor the exception to it has anything to do with            a case like ours since Yankee Dodge did not rent or lease the            loaner  car to  Fox.   Nor  do  exclusions themselves  create            coverage.  See 13  J. Appleman, Insurance Law and  Practice                         ___                  ___________________________            7387, at 179 (rev. ed. 1976).                 The  exclusion does  create  a puzzle:    it leaves  the            impression that a garage that rented loaner cars to customers            during repairs, but  was not  part of a  new car  dealership,            might  be  buying  liability   insurance  for  its  customers            unlimited by clause (3).  We do not know whether such garages            exist  or, if they do,  whether such coverage  is intended or            the result of a glitch.  But the exclusion does not show that            an  auto dealership is to  be treated as  two businesses; nor                                         -6-                                         -6-            does it alter the critical fact that Yankee Dodge  is an auto            dealership  and, by the  express terms of  the policy, clause            (3) "except[s]" from insured status  a permissive user who is            "a  customer" of  an auto dealer  (apart from  the contingent            minimum protection not here involved).                 No state court decisions  from New York or Massachusetts            have been  cited to us, so we must  make our best guess as to            what those courts would  say if confronted with the  split in            authority  on the issue  before us.   In  our view,  the more            straightforward reading of the policy is  that adopted by the            district  court, which  is consistent  with its  language and            with what we would expect the parties to the contract--Yankee            Dodge  and Merchants--to  have sought to  provide.   Nor does            this exclusion  conflict with  New York public  policy, since            Fox did carry his own insurance above the mandatory minimum.                 Finally, Spurlin notes that before the tort suit against            Fox was filed, Merchants sent several checks to Spurlin under            the personal injury protection  provision of the Yankee Dodge            policy.  But we  are told, without contradiction,  that under            New York  law,  where  two  or  more  insurers  might  afford            coverage for an  accident, the first one  contacted must make            personal  injury  protection   payments.    Afterwards,   the            insurers determine  which company  is liable and  resolve the            matter between them by reimbursement.  Although         other            interpretive arguments are urged by Spurlin under the policy,                                         -7-                                         -7-            the  ones we have addressed are his  best.  As for his claims            under  the  Massachusetts  insurance and  consumer-protection            statutes previously cited, the district court addressed those            claims and we have nothing to add to its discussion.                 Affirmed.                 _________                                         -8-                                         -8-
