
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________          No. 95-1678                               JUSTIN L. WYNER, ET AL.,                                     Appellants,                                          v.                     NORTH AMERICAN SPECIALTY INSURANCE COMPANY,                                      Appellee.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                   [Hon. Reginald C. Lindsay, U.S. District Judge]                                              ___________________                                 ____________________                                        Before                               Torruella, Chief Judge,                                          ___________                            Aldrich, Senior Circuit Judge,                                     ____________________                              and Selya, Circuit Judge.                                         _____________                                _____________________               Eric F. Eisenberg, with whom  Joel Lewin and Hinckley, Allen               _________________             __________     _______________          & Snyder were on brief for appellants.          ________               Edward S. Ronan, with whom Ronan, Riley & Dever, P.C. was on               _______________            __________________________          brief for appellee.                                 ____________________                                    March 21, 1996                                 ____________________                    TORRUELLA, Chief Judge.  Appellants Justin L. Wyner, et                    TORRUELLA, Chief Judge.                               ___________                               __          al.  (collectively, "the  Landlords"),  appeal  a district  court          ___          order affirming the bankruptcy  court's grant of summary judgment          for appellee North American  Specialty Insurance Co. ("NASIC") on          the  Landlords' claims that  the language of  an insurance policy          issued to its tenant Wursthaus, Inc. ("Wursthaus") indicates that          the policy covers  alleged damage by  Wursthaus to real  property          owned by the Landlords.  We affirm.                                    I.  BACKGROUND                                    I.  BACKGROUND                                    ______________                    On  January  29,  1993,  Wursthaus  filed  a  voluntary          Chapter  11  petition  with  the  bankruptcy  court.    Wursthaus          operates a  restaurant in  Cambridge, Massachusetts, in  space it          has  leased from the Landlords ("the leased property").  On March          26,  1993, Wursthaus  filed  an Adversary  Complaint against  the          Landlords  in the  bankruptcy  court, claiming  loss of  business          income  due  to the  Landlords'  construction in  and  around the          leased  property.  The Landlords filed an Answer and Counterclaim          on May 24, 1993, denying the allegations and counterclaiming that          Wursthaus damaged the  leased property.1   On June  3, 1993,  the          Landlords filed a third party complaint against NASIC, Wursthaus'          insurer, seeking a declaratory judgment that Wursthaus' insurance                                        ____________________          1  After NASIC's summary judgment motion, the Landlords submitted          an affidavit, discussed  infra, which claimed damage to  a larger                                   _____          portion of the building than just the leased property.                                         -2-          policy  ("the  policy")  may  be  reached  and  applied  for  the          Landlords' benefit.2                    NASIC  answered  the  third  party  complaint,  and  on          November 16,  1993,  moved  for  summary  judgment   against  the          Landlords on  all  three counts  of  the Landlords'  third  party          complaint  against NASIC.    In opposition  to  this motion,  the          Landlords produced  an affidavit  of Richard H.  Ember ("Ember"),          the trustee  of a trust  that owns  the majority interest  of the          three-story building  ("the building")  that contains  the leased          property.3   In  that  affidavit ("the  Ember Affidavit"),  Ember          stated that Wursthaus improperly  altered and damaged portions of          the  building  that  are  not  owned,  rented,  or   occupied  by          Wursthaus.   In contrast to  the Landlords' third party complaint          against  NASIC,  the  Ember   affidavit  described  the   damaged          "premises"  as including  more  than  just  the  portion  of  the          building leased to  the Wursthaus.   The  bankruptcy court  noted                                        ____________________          2   The policy included both  a property insurance  portion and a          commercial  general  liability  portion  ("CGL  portion").    The          Landlords argued before the bankruptcy court that it should  have          been  able to recover under  either portion.   However, on appeal          the Landlords have failed to argue, beyond a passing reference in          a footnote, that the bankruptcy court erred in its interpretation          of the property insurance portion.  Therefore, the Landlords have          waived their  legal and factual arguments  regarding the property          insurance portion, see Citizens Awareness Network, Inc. v. United                             ___ ________________________________    ______          States  Nuclear Regulatory  Comm'n, 59  F.3d 284,  294 (1st  Cir.          __________________________________          1995) (stating that  "[i]t is  not enough to  mention a  possible          argument in the most skeletal way, leaving the court to . . . put          flesh on its bones"),  and we construe their  appeal as based  on          the bankruptcy court's interpretation of the CGL portion.          3    As  the  bankruptcy  court  noted,  this  property  actually          comprises several older  buildings that over the years  have come          to be treated as a single building with several street addresses.                                         -3-          that  the   Landlords  "sought  to  expand"   the  definition  of          "premises" "to include  the entire building," but  did not decide          whether the Ember  Affidavit properly accomplished the  expansion          sought.4    The  bankruptcy  court  granted  NASIC's  motion  for          summary  judgment on  March 18,  1994.   The bankruptcy  court so          ruled  based on its finding  that the policy  issued to Wursthaus          does not  cover damage by Wursthaus to real property owned by the          Landlords.  On  June 14,  1995, the district  court affirmed  the          bankruptcy court's decision in a one-sentence order.                    In this  appeal, the Landlords claim  that the district          court erred by affirming  the bankruptcy court's summary judgment          for NASIC.    The Landlords  also  seek to  reach  and apply  the          proceeds of the policy.5                                     II.  DISCUSSION                                   II.  DISCUSSION                                   _______________                                A.  Standard of Review                                A.  Standard of Review                                ______________________                    In  reviewing  a  district   court's  affirmance  of  a          bankruptcy court's grant  of summary judgment, we apply  the same          decisional  standards as  the bankruptcy  court and  the district                                        ____________________          4   We  do  not consider  whether  the Ember  Affidavit  properly          amended the  Landlords' complaint,  since the resolution  of this          issue would not affect the outcome under our analysis.          5  On November  14, 1994, after the bankruptcy court  had granted          NASIC summary  judgment on the Landlords'  third party complaint,          the  Landlords and Wursthaus  filed with  the bankruptcy  court a          Joint Motion to Approve Partial Settlement and the Disposition of          Remaining Claims.   In this  motion, the debtor  Wursthaus states          that  it wishes  to dismiss  its complaint  for loss  of business          income against the  Landlords, and the  Landlords stated that  if          they  were   to  prevail  on   appeal,  it  would   pursue  their          counterclaim against  Wursthaus only  to the extent  of available          insurance proceeds.                                         -4-          court before us.  We examine a grant of summary judgment de novo,                                                                   __ ____          with a  view  to whether  there  is a  genuine  issue as  to  any          material  fact  and whether  the moving  party  is entitled  to a          judgment as a matter of  law.  Fed. R. Civ. P.  56(c); Den Norske                                                                 __________          Bank AS v. First Nat'l  Bank of Boston, No. 95-1682, slip  op. at          _______    ___________________________          7, ___  F.3d ___,  ___ (1st  Cir. 1996).   Once the  moving party          (NASIC) makes this showing, the party bearing the ultimate burden          of proof  (the Landlords)  cannot rest on  mere allegations,  but          must proffer sufficient competent  evidence upon which a rational          trier of fact could find in its favor.  Id. at 7.  Whether or not                                                  ___          contractual ambiguity exists is generally a matter of law for the          court.  See Smart  v. Gillette Co. Long-Term Disability  Plan, 70                  ___ _____     _______________________________________          F.3d 173, 178 (1st Cir. 1995).  If such ambiguity  is found, then          an  argument between parties  about the  meaning of  an ambiguous          contract is  typically an  argument about  a  material fact,  and          summary  judgment is  normally unwarranted  unless the  extrinsic          evidence presented about the parties' intended meaning is so one-          sided that  no reasonable  person could  decide to  the contrary.          Den Norske Bank AS, slip op. at 7.  Nonetheless,  we must resolve          __________________          all  genuine  factual   disputes,  and  any   competing  rational          inferences, in  the light most  favorable to  the Landlords,  the          party against  whom  summary  judgment entered.    Id.;  Byrd  v.                                                             ___   ____          Ronayne, 61 F.3d 1026, 1030 (1st Cir. 1995).          _______                           B.  Interpretation of the Policy                           B.  Interpretation of the Policy                           ________________________________                    We agree  with  the bankruptcy  court's finding,  which          neither the  Landlords nor NASIC dispute,  that Massachusetts law                                         -5-          applies.  It  is well established  that under Massachusetts  law,          general   rules   of   contract   construction   apply   to   the          interpretation of an  insurance policy.   Save-mor  Supermarkets,                                                    _______________________          Inc.  v. Skelly Detective Serv., Inc., 268 N.E.2d 666, 669 (Mass.          ____     ____________________________          1971); Edward Rose Co. v. Globe & Rutgers Fire Ins. Co., 160 N.E.                 _______________    _____________________________          306,  308  (Mass.  1928).   On  appeal,  the  Landlords take  two          approaches to argue  that summary  judgment was  improper on  its          claims  against  NASIC.   First, they  argue  that the  scheme of          capitalization  and  the  use  of certain  terms  in  the  policy          indicate  either: (a)  that the  policy covered  damage Wursthaus          caused  to  the Landlords'  building; or  (b)  that, even  if the          policy  did not  clearly  and explicitly  cover such  damage, the          policy contained  contractual ambiguity  germane to the  issue of          whether the  policy  covered damage  caused by  Wursthaus to  the          Landlords' building.   Second,  they argue  that  the policy,  if          found by its terms  to unambiguously exclude coverage,  would not          cover damage  to  the extent  that  an objective  and  reasonable          insured,  reading  the  policy's  language, would  expect  to  be          covered,  and would  therefore  violate public  policy that  such          contracts should not  be misleading and that  coverage should not          be unrealistically limited.   See Kates v. St. Paul Fire & Marine                                        ___ _____    ______________________          Ins.  Co., 509 F. Supp. 477, 491  (D. Mass. 1981).  The Landlords          _________          contend that if we accept any of these arguments, we must reverse          the lower courts' summary judgment.                              1.  The Policy's Language                              1.  The Policy's Language                                         -6-                    The  Landlords argue  that  the lower  courts erred  in          finding  that the policy did  not explicitly cover  damage to the          building,  and concluding  that  the policy  did not  ambiguously          address such  coverage.   In particular, the  Landlords challenge          the bankruptcy court's conclusion that, while the  CGL portion of          the policy does apply  to certain property damage, it  contains a          specific  exclusion for  property damage  to property  "you own,"          including  the Landlords within  the term "you."   The bankruptcy          court  concluded  that since  the term  "you"  is defined  in the          policy  as "any  Named Insured,"  and the  Landlords are  both an          "ADDITIONAL INSURED"6  and  "an insured"  (under  an  endorsement          modifying the CGL portion)  under the CGL portion of  the policy,          the plain  and unambiguous  language of  this exclusion bars  the          Landlords from asserting coverage.                    The  Landlords   contend  that  the   bankruptcy  court          erroneously failed to differentiate between the expressly defined          term "Named  Insured" used in  the policy and  the fact  that the          Landlords   were    included   as   an    "ADDITIONAL   INSURED."          Specifically,  the  Landlords  attempt  to  distinguish  the term          "Named Insured" from the  act of generically adding an  entity to          the  group of  those to  be  covered as  part of  a more  broadly          defined category referred to  in various places in the  policy as          "an insured," "any insured," and  those "insured."  According  to          the  Landlords,  capitalization is  crucial;  "Named  Insured" is                                        ____________________          6    The  pertinent  endorsement contains  the  term  "ADDITIONAL          INSURED" in full capitalization.                                         -7-          capitalized throughout the Policy,  while "insured," "an insured"          and "any  insured" are not similarly  capitalized.  Additionally,          the Landlords  attempt to draw  a distinction  between the  terms          "ADDITIONAL  INSURED,"  which  they  concede  includes them,  and          "Named Insured," which  they deny applies to them.   To this end,          the  Landlords emphasize  the usage  of "you" and  "your," noting          that the Business and Personal Property Coverage Form states that          "[t]hroughout this policy the words 'you' and 'your' refer to the          Named Insured shown in  the Declarations and any other  person or          organization, while the  Common Policy  Declarations page  states          that the  "Named Insured" is  "Wursthaus, Inc. &  Wursthaus, Inc.          DBA Cardullo's Gourmet Shop."7                    In   contrast,  NASIC  argues  that  the  courts  below          properly found  that  because the  policy defined  "you" as  "the          Named  Insured shown  in  the Declarations,"  and an  endorsement          modifies  the  policy  to add  the  Landlords  as an  "ADDITIONAL          INSURED"  under  the  CGL  portion,  the  plain  and  unambiguous          language of the exclusion  for damage to property "you  own, rent          or occupy"  bars the Landlords from asserting  coverage under the          CGL  portion.   Furthermore, NASIC  argues that,  along with  the          contractual  language,   Massachusetts  case  law   supports  its          contention that such  exclusions apply not only to named insureds          (such as Wursthaus), but also to additional insureds (such as the          Landlords).    See  Massachusetts  Turnpike Authority  v.  Perini                         ___  _________________________________      ______                                        ____________________          7  Cardullo's Gourmet  Shop is a small gourmet  store operated by          Wursthaus near its restaurant.                                         -8-          Corp.,  208 N.E.2d  807,  812  (Mass.  1965).   In  Massachusetts          _____                                               _____________          Turnpike Authority, the Supreme Judicial Court noted that          __________________                      [t]he naming of additional  insureds does                      not extend the nature of  the substantive                      coverage originally given  by the  policy                      but  merely gives  to  other persons  the                      same protection afforded to the principal                      insured.          Id., 208 N.E.2d at  813 (citing Sonoco Products Co.  v. Travelers          ___                             ___________________     _________          Indem. Co., 315 F.2d  126, 128 (10th Cir.  1963)).  According  to          __________          NASIC,  with respect to the exclusion for property "you own, rent          or  occupy" originally agreed to by Wursthaus, "the same policy .          . .  covers the added insured,"  the Landlords.  See  Sonoco, 315                                                           ___  ______          F.2d at 128.                    We  agree  with these  cases  that  the exclusions  for          property "you own, rent or occupy"  extend to the Landlords as an          additional insured.  The purpose of provisions to add insureds is          "to extend the policy coverage to others  . . . not to change the          nature of th[e] coverage nor to change declarations nor to remove          exclusions."  Id.   Where,  as here, the  endorsement naming  the                        ___          additional  insured  contains  no language  suggesting  that  the          nature  of  coverage,  declarations or  exclusions  were  thereby          altered,  we  see no  reason  to deviate  from  the "well-settled          [rule] that the policy does not extend any greater coverage to an          additional insured."  Id.                                ___                    However, the fact that the exclusions for property "you          own, rent or  occupy" extend  to the Landlords  as an  additional          insured  does not, in and of itself, dispense with the Landlords'          capitalization  argument.   Although  we  cannot conclude,  after                                         -9-          finding that the policy's exclusions apply to the Landlords, that          the capitalization  scheme indicated  clearly that  the Landlords          could benefit from the scope of  coverage, if we were to find the          contract ambiguous, we would have to reverse the district court's          grant  of summary  judgment  for NASIC.   As  a  result, we  must          determine  whether the capitalization and usage arguments suffice          to show contractual ambiguity under Massachusetts law.                    "The first  approach to the question  of interpretation          must be  to read  this  insurance policy  as one  would read  any          ordinary   contract   --   to   inquire  what   the   simplified,          conversational  language of  the policy  would mean  to a  reader          applying  normal reasoning  or  analysis."   Nelson v.  Cambridge                                                       ______     _________          Mutual Fire Ins. Co.,  572 N.E.2d 594, 673 (Mass. App. Ct. 1991);          ____________________          Commerce  Ins. Co. v.  Koch, 522 N.E.2d 979,  980 (Mass. App. Ct.          __________________     ____          1988).     "[A]n  ambiguity  is  not  created  simply  because  a          controversy    exists   between   parties,   each   favoring   an          interpretation contrary to  the other's."  Jefferson Ins.  Co. of                                                     ______________________          New York v. Holyoke, 503  N.E.2d 474, 476 (Mass. App.  Ct. 1987).          ________    _______          Rather, "[i]t  must be shown that  reasonably intelligent persons          would  differ as  to which  one of  two or  more meanings  is the          proper one."  Id. (citing Ober v. National Cas. Co., 60 N.E.2d 90                        ___         ____    _________________          (1945)).                    Applying  these  standards,  we  conclude   that  under          Massachusetts  law, the  Landlords' arguments  do not  suffice to          show   contractual  ambiguity,   let  alone   outright  coverage,          benefitting the Landlords' claims.   First, we find that,  in the                                         -10-          face  of   the  express  exclusion  pointed  to   by  NASIC,  the          capitalization   in  the   policy  would   not  lead   reasonably          intelligent persons to conclude that the exclusions did not apply          as  stated.   At least  one Massachusetts  court has  rejected an          argument  for  ambiguity  contingent  on the  usage  of  one term          contradicted  by  inclusion of  other,  clearer  provisions.   In          Nelson v. Cambridge  Mutual Fire  Ins. Co., 572  N.E.2d 594,  596          ______    ________________________________          (Mass. App. Ct. 1991),  the court found that the  term "residence          premises"  in  an exclusionary  clause,  despite  the lack  of  a          pertinent definition, did not lead to legal ambiguity.  The court          found that  no trial was merited on the issue of whether a rented          home was covered in addition to a separate owned home, since  the          declarations page included  the address of  the owned home  under          the policyholder's name.   Id.   Furthermore, in  the absence  of                                     ___          directly conflicting word meanings, see Quincy Mut. Fire Ins. Co.                                              ___ _________________________          v. Abernathy, 469 N.E.2d 797, 799 (Mass. 1984) (finding ambiguity             _________          regarding  scope  of  coverage  for reckless  acts  where  policy          covered  "accident[s]"  but   where  exclusion  clause  disclaims          liability for "bodily injury .  . . which is expected . .  . from          the standpoint  of the Insured"), Massachusetts  courts appear to          find ambiguity  in insurance contracts somewhat  sparingly.  See,                                                                       ___          e.g., Ober, 60 N.E.2d  at 91 (finding no ambiguity as  to whether          ____  ____          "theatre"  would encompass a  restaurant or night  club "where no          admission is  charged, but where free  entertainment is furnished          in connection with the  serving of food or  other refreshments");          Jefferson Ins. Co.  of New  York, 503 N.E.2d  at 476  (concluding          ________________________________                                         -11-          there  was no  ambiguity in contract,  since exclusion  of claims          arising from events in  which the injured party was in "the care,          custody or control" of  police department covered situation where          injury  was suicide).  Under these rigorous standards, and in the          face of the clear  language of the exclusions and  the Landlords'          inclusion  as an "Additional Insured," neither the capitalization          pattern  nor  the  usage  distinction between  the  terms  "Named          Insured" and  "Additional Insured"  referred to by  the Landlords          can suffice to create legal ambiguity.                    Additionally, the Landlords point to  the CGL portion's          provision  that "[t]hroughout  this  policy the  words 'you'  and          'your'  refer to the Named Insured shown in the declarations, and          any other person  or organization qualifying  as a Named  Insured          under this  policy"; from this provision,  the Landlords conclude          that they are not covered by the term "you" under this provision.          Thus,  they contend, ambiguity results.   We disagree.   Not only          does  the Landlords' argument hinge on the "Named Insured" versus          "ADDITIONAL  INSURED" distinction that  we have already rejected,          but in fact,  the subsequent  sentence in the  CGL policy  states          that  "[t]he  words 'we,'  'us' and  'our'  refer to  the company          providing this insurance."  Thus, the ordinary and common reading          of  the language in this context would  be to find that "you" and          "your"   were  defined  as  the  Named  Insured  not  to  draw  a          distinction  between  Wursthaus and  the  Landlords,  but between          Wursthaus and NASIC.                             2.  Reasonable Expectations                             2.  Reasonable Expectations                                         -12-                    The Landlords also argue that the policy,  if  found to          unambiguously  exclude coverage,  would not  cover damage  to the          extent  that  an  objective,  reasonable   insured,  reading  the          policy's  language, would expect to be covered.  According to the          Landlords,  such a result would violate public policy.  While the          Supreme Judicial Court has  left open the question of  whether to          take  such  an approach  to  the interpretation  of  an insurance          policy, see Bond Bros.,  Inc. v. Robinson, 471 N.E.2d  1332, 1336                  ___ _________________    ________          (Mass.  1984) (noting that "we have not yet explicitly adopted [a          'reasonable expectations'] approach  to the interpretation of  an          insurance  policy");  Markline Co.  v.  Travelers  Ins. Co.,  424                                ____________      ___________________          N.E.2d 464, 465 (Mass. 1981), even if such an approach definitely          applied,  the Landlords would not  benefit.  The  CGL portion can          reasonably be expected to cover both Wursthaus  and the Landlords          for  claims of  third  parties.    See,  e.g.,  Crane  Service  &                                             ___   ____   _________________          Equipment Corp. v. United States Fidelity & Guar. Co., 496 N.E.2d          _______________    __________________________________          833, 834 (Mass. Ct. App. 1986) (stating that, in  that case, "the          broad  purpose of the  comprehensive general  liability insurance          policy, so  far as it  related to  property, was to  cover .  . .          other people's property").  Of course, the Landlords might regard          themselves  collectively  as  owning  "other  people's  property"          damaged by  Wursthaus, and  therefore entitled to  recovery under          the policy.  However, the exclusions applicable to them, referred          to in  the discussion  of contractual  ambiguity,  render such  a          belief  unreasonable.   See,  e.g.,  Nelson, 572  N.E.2d  at 596.                                  ___   ____   ______          Finally,  we find  that the  Landlords'  citation to  Allstate v.                                                                ________                                         -13-          Quinn  Constr. Co., 713  F. Supp. 35,  40-41 (D. Mass.  1989), is          __________________          inapposite.   In  Allstate, the  court found  an exception  to an                            ________          "owned property" exclusion  in a comprehensive general  liability          policy  "does  not  bar recovery  of  the  costs  of cleaning  up          environmental contamination which presented a demonstrated danger          to  the  property  of  another."    Id.  at  41.    Allstate  was                                              ___             ________          subsequently  vacated on other grounds, see id., 784 F. Supp. 927                                                  ___ ___          (D.  Mass.  1990), and  at any  rate,  would appear  to implicate          concerns of  public policy regarding neighboring  property owners          not alleged to be at stake here.                                   III.  CONCLUSION                                   III.  CONCLUSION                                   ________________                    The   Landlords  have   pointed   to  the   scheme   of          capitalization and the  system by  which terms were  used in  the          insurance  policy that gives rise  to this case.   These drafting          points are  coherent enough that they suggest that the Landlords'          argument is not irrational.   However, in the face  of explicitly          worded endorsements and exclusions, they cannot rise to the level          of  contractual  ambiguity  as  found  by  Massachusetts  courts.          Similarly, the  Landlords' public policy based  arguments are not          convincing.                    For the foregoing reasons, the judgment is affirmed.                                                               ________                                         -14-
