United States Court of Appeals

For the First Circuit

No. 03-2473

B&T MASONRY CONSTRUCTION CO., INC.,

Plaintiff, Appellant,

v.

PUBLIC SERVICE MUTUAL INSURANCE CO.,

Defendant, Appellee.

 APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Douglas P. Woodlock, U.S. District Judge]

Before

 Boudin, Chief Judge,

Selya and Howard, Circuit Judges.

Francis A. Shannon, III, with whom Shannon Law Associates,

Inc. was on brief, for appellant.

Nina E. Kallen, with whom Thomas G. Guiney was on brief, for

appellee.

August 30, 2004
1B&T made a similar tender to the insurer when the City later

filed amended complaints and Barletta, in turn, filed amended

third-party complaints. Public Service rejected these tenders as

well. Nothing in the amended pleadings changes the coverage

analysis.

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SELYA, Circuit Judge. In 1998, the City of Everett (the

City) retained Barletta Engineering Corporation (Barletta) to

construct a new elementary school. Barletta, as general

contractor, engaged a myriad of subcontractors to assist in this

venture. Among them was appellant B&T Masonry Construction Co.,

Inc. (B&T). The work consumed the better part of two years.

In the City's view, the completed structure left

something to be desired. It sued Barletta in a state court,

alleging that Barletta's faulty workmanship had allowed water

leakage which, in turn, had caused property damage to the school

building (including mold contamination of ceilings, wells, floors,

and other components). Barletta promptly filed a third-party

complaint against B&T and sundry other subcontractors. In the only

iteration relevant here, the third-party complaint attributed the

damage to B&T's deficient masonry work.

Appellee Public Service Mutual Insurance Co. (Public

Service) had issued two consecutive commercial general liability

(CGL) policies to B&T, which were serially in effect during the

course of B&T's work on the school project. B&T tendered the

defense against Barletta's claim to the insurer. Public Service

refused the tender and disclaimed any coverage obligation.1
2Because the two policies are substantially identical with

respect to the matters at issue, we hereinafter refer, for

simplicity's sake, only to the first policy.

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Stung by this rejection, B&T repaired to the United

States District Court for the District of Massachusetts. Invoking

that court's diversity jurisdiction, see 28 U.S.C. § 1332(a), it

initiated an action seeking a declaration that Public Service had

a duty to defend and indemnify it with respect to Barletta's claim.

In due course, the insurer moved for summary judgment. See Fed. R.

Civ. P. 56. The district court granted this motion, holding that

all the damages described in Barletta's third-party complaint fell

within the compass of the exclusions contained in the CGL

policies.2 B&T Masonry Constr. Co. v. Pub. Serv. Mut. Ins. Co.,

No. 02-10595, slip op. at 10 (D. Mass. Sept. 26, 2003)

(unpublished) (D. Ct. Op.). B&T appeals from this ruling.

We need not tarry. The insuring agreement, section

I(A)(1)(a), provides in pertinent part that Public Service will

"pay those sums that the insured becomes legally obligated to pay

as damages because of . . . 'property damage' to which this

insurance applies." This insuring agreement is, however, subject

to certain so-called "business risk" exclusions. These include

section I(A)(2)(j)(5) (which excludes coverage for property damage

to "[t]hat particular part of real property on which [the insured]

or any contractors or subcontractors working directly or indirectly

on [the insured's] behalf are performing operations" so long as
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"the 'property damage' arises out of those operations"); section

I(A)(2)(j)(6) (which excludes coverage for property damage to

"[t]hat particular part of any property that must be restored,

repaired or replaced because [the insured's work on it] was

incorrectly performed"); section I(A)(2)(l) (which excludes

coverage, with a limitation not relevant here, for "'[p]roperty

damage' to '[the insured's] work' arising out of it or any part of

it"); section I(A)(2)(m) (which excludes coverage for "'[p]roperty

damage' . . . arising out of . . . [a] defect, deficiency,

inadequacy or dangerous condition" in the insured's product or

work); and section I(A)(2)(n) (which excludes coverage for

"[d]amages claimed for any loss, cost or expense incurred by [the

insured] or others for the loss of use, withdrawal, recall,

inspection, repair, replacement, adjustment, removal or disposal of

. . . '[the insured's] work'"). The question presented in this

case is whether Barletta's derivative claim (seeking, in effect,

indemnification or contribution anent the City's claim for damages

to the school building) falls within the purview of some or all of

these exclusions.

Because this is a diversity case, Massachusetts law

controls. United States Liab. Ins. Co. v. Selman, 70 F.3d 684, 688

(1st Cir. 1995). Under the Massachusetts cases, the interpretation

of an insurance policy is normally a question of law for the court.

Ruggerio Ambul. Serv., Inc. v. Nat'l Grange Ins. Co., 724 N.E.2d
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295, 298 (Mass. 2000). Where, as here, the material facts upon

which a coverage question is based are not genuinely in dispute,

the application of the policy to those facts is likewise a question

of law (and, thus, properly resolved on summary judgment). Liberty

Mut. Ins. Co. v. Metro. Life Ins. Co., 260 F.3d 54, 61 (1st Cir.

2001).

Massachusetts courts apply the traditional rules of

contract interpretation to the construction of insurance policies.

Brazas Sporting Arms, Inc. v. Am. Empire Surplus Lines Ins. Co.,

220 F.3d 1, 4 (1st Cir. 2000). The first principle is to afford

the language of the policy its plain meaning. Id. Because the

duty of an insurance carrier to defend the insured is broader than

its duty to indemnify, see id., we focus on that duty.

The duty to defend is, of course, "based on the facts

alleged in the complaint and those facts which are known by the

insurer." Boston Symph. Orch., Inc. v. Comm'l Union Ins. Co., 545

N.E.2d 1156, 1158 (Mass. 1989). For the duty to arise, "the

underlying complaint need only show, through general allegations,

a possibility that the liability claim falls within the insurance

coverage." SCA Servs., Inc. v. Transp. Ins. Co., 646 N.E.2d 394,

397 (Mass. 1995) (citation and internal quotation marks omitted).

The insured bears the initial burden of showing coverage under the

policy's insuring agreements. Highlands Ins. Co. v. Aerovox Inc.,

676 N.E.2d 801, 804 (Mass. 1997). Once the insured has
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accomplished this feat, the burden shifts to the carrier to prove

the applicability of one or more separate and distinct exclusionary

provisions. Id. To the extent (if at all) that any ambiguity

permeates a policy exclusion, it must be construed strictly against

the insurer. Brazas Sporting Arms, 220 F.3d at 4.

Here, B&T satisfied its threshold burden of showing

coverage under an insuring agreement. The question reduces, then,

to whether the business risk exclusions avoid the application of

that coverage. On that question, Public Service had the devoir of

persuasion and relied upon the plain language of the exclusions to

show that they applied. In arguing against that proposition before

us, B&T asserts a nascent theory that departs dramatically from

what it argued in the court below. We explain briefly.

In the lower court, B&T acknowledged that the business

risk exclusions applied to damage to the school building caused by

its workmanship but posited that whether the damage claimed by the

City (and, derivatively, by Barletta) was caused by B&T's

workmanship or that of another subcontractor remained an open

question. This open question, it asseverated, precluded summary

judgment. The district court rejected that asseveration,

concluding (correctly, in our view) that any liability that might

attach to B&T under the third-party complaint necessarily would

stem from its own workmanship and, thus, would be excluded from

coverage. D. Ct. Op. at 10. If another firm were negligent and
3To be sure, B&T's counsel did make a passing mention of the

theory during oral argument in this court. We have no need to

respond to that allusion. The district court correctly determined

that Barletta's complaint sought to hold B&T liable only for damage

to the school building caused by B&T's own work and that any such

damage would be completely excluded from coverage under the policy.

D. Ct. Op. at 10. Where, as here, a trial court accurately

evaluates an argument and convincingly dispatches it, there is no

need for a reviewing court to prepare a palimpsest. See, e.g.,

Vargas-Ruiz v. Golden Arch Dev., Inc., 368 F.3d 1, 2 (1st Cir.

2004); Cruz-Ramos v. P.R. Sun Oil Co., 202 F.3d 381, 383 (1st Cir.

2000); Ayala v. Union de Tronquistas, 74 F.3d 344, 345 (1st Cir.

1996).

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B&T were not, that fact would in no way alter the coverage

equation. Id.

B&T did not renew this specific theory in its appellate

briefs3 but, rather, relied upon a newly contrived theory. On

appeal, it suggests for the first time that the exclusion clauses,

taken in the ensemble, render the insurance policy illusory (and,

accordingly, that the exclusions are unenforceable). We cannot

countenance such a bald-faced switching of horses in mid-stream.

Advancing one theory in the trial court and jettisoning

it in favor of another (previously unarticulated) theory in the

court of appeals is unacceptable. Such a praxis violates a

prudential principle firmly embedded in our jurisprudence: that in

the absence of extraordinary circumstances — and none exist in this

case — "legal theories not raised squarely in the lower court

cannot be broached for the first time on appeal." Teamsters Union

v. Superline Transp. Co., 953 F.2d 17, 21 (1st Cir. 1992). Cases

holding to that effect are legion. See, e.g., Vargas-Ruiz v.
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Golden Arch Dev., Inc., 368 F.3d 1, 3 (1st Cir. 2004); United

States v. Bongiorno, 106 F.3d 1027, 1034 (1st Cir. 1997); United

States v. Dietz, 950 F.2d 50, 55 (1st Cir. 1991); Clauson v. Smith,

823 F.2d 660, 666 (1st Cir. 1987); Johnston v. Holiday Inns, Inc.,

595 F.2d 890, 894 (1st Cir. 1979). B&T's tactics transgress that

prudential principle.

In an attempt to place its neoteric theory beyond the

range of the case law enforcing the raise-or-waive rule in this

sort of situation, B&T makes three arguments. We find all of them

unpersuasive.

First, B&T claims that it actually raised the "illusory

coverage" theory below. The record belies that claim. The

reference in B&T's reply brief is to an exchange that took place

during the summary judgment hearing. In that exchange, its counsel

questioned Public Service's interpretation of the policy by asking

rhetorically, "what did we buy this insurance for?" In posing this

rhetorical question, however, the lawyer was arguing for a

particular interpretation of the policy language. He never

mentioned the possibility that the breadth of the exclusions

rendered the coverage illusory and, thus, that the exclusions were

void as a matter of law.

Even if the rhetorical question was intended to start the

argument down this path — and that is a stretch — the court was not

provided a roadmap. That omission would doom the argument here.
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To preserve a point for appeal, some developed argumentation must

be put forward in the nisi prius court — and a veiled reference to

a legal theory is not enough to satisfy this requirement. See,

e.g., United States v. Slade, 980 F.2d 27, 31 (1st Cir. 1992) ("A

litigant cannot ignore her burden of developed pleading and expect

the district court to ferret out small needles from diffuse

haystacks."); Rivera-Gomez v. Adolfo de Castro, 843 F.2d 631, 635

(1st Cir. 1988) ("Judges are not expected to be mindreaders.

Consequently, a litigant has an obligation to spell out its

arguments squarely and distinctly or else forever hold its peace.")

(citation and internal quotation marks omitted).

B&T next maintains that the raise-or-waive rule should

not apply because it is not advancing a new issue on appeal, but

merely a new argument. In mincing words in this fashion, B&T

attempts to align its new theory with its old one, arguing in the

face of obvious differences that these two theories are "the same"

because both relate to the general issue of whether the exclusions

govern this case.

We have decanted this wine before. In Slade, we

explicitly rejected the notion that "only new facts and not new

arguments about those facts are prohibited from debuting in the

court of appeals," calling that notion "grounded more in hope than

in precedent." 980 F.2d at 31. We held, citing numerous cases,

that "a party is not at liberty to articulate specific arguments
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for the first time on appeal simply because the general issue was

before the district court." Id. That holding is dispositive here.

Finally, B&T suggests that even if it failed to preserve

its late-emerging theory for appeal, we should entertain that

theory because the theory is uniquely important. We have

recognized that an appellate court has the authority, in its

discretion, to consider theories not articulated below. See, e.g.,

United States v. LaGuardia, 902 F.2d 1010, 1013 (1st Cir. 1990).

We also have recognized, however, that exceptions of this kind to

the raise-or-waive rule should be "few and far between," Nat'l

Ass'n of Soc. Workers v. Harwood, 69 F.3d 622, 627 (1st Cir. 1995),

and, accordingly, this power is to be used sparingly. The typical

case involves an issue that is one of paramount importance and

holds the potential for a miscarriage of justice. See id. at 628;

United States v. Krynicki, 689 F.2d 289, 292 (1st Cir. 1982).

B&T implores us to entertain the "illusory coverage"

theory here, predicting that any other course will result in

perpetuating the underwriting of "[t]housands, if not tens of

thousands," of other illusory policies. Appellant's Reply Br. at

3. We reject these importunings. We simply do not see how a

straightforward application of the raise-or-waive rule in this

garden-variety coverage dispute either rises to a level of great

importance or threatens to work a miscarriage of justice.
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We add an eschatocol of sorts. Even though we are not

compelled to speak to the merits, we note in the interest of

completeness that B&T's new theory would not have prevailed even if

it had been properly preserved.

B&T contends that the district court's reading of the

business risk exclusions would eliminate all coverage for

negligence claims, even though that is the very type of coverage

that B&T purchased and that a CGL policy purports to provide.

Appellant's Br. at 16. That contention is sheer sophistry. The

exclusions leave most negligence claims unaffected; they merely bar

coverage as to any damages to the project itself caused by B&T's

faulty workmanship. While these exclusions do limit liability,

they do not completely vitiate the bargained-for coverage (indeed,

they do not come close to achieving so drastic a result). Many

negligence claims are undoubtedly covered. If, for example, a wall

of the school building collapsed due to B&T's negligence and

damaged an adjacent structure (not part of the school complex), or

if a B&T employee carelessly dropped a trowel and struck a passing

vehicle, coverage would attach. Consequently, the grant of

coverage is not illusory. See, e.g., Bagley v. Monticello Ins.

Co., 720 N.E.2d 813, 817 (Mass. 1999) (holding that as long as "the

policy still provides coverage for some acts, it is not illusory

simply because of a potentially wide exclusion"). 
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We need go no further. For the reasons elucidated above,

we hold that the district court did not err in entering summary

judgment in Public Service's favor.

Affirmed.