United States Court of Appeals

For the First Circuit

No. 02-1011

CENTER FOR BLOOD RESEARCH, INC.,

Plaintiff, Appellant,

v.

COREGIS INSURANCE COMPANY,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. George A. O'Toole, Jr., U.S. District Judge]

Before

Torruella and Howard, Circuit Judges, and

Greenberg,* Senior Circuit Judge.

Harvey Nosowits with whom Daryl J. Lapp and Palmer & Dodge

were on brief for appellant.

Perry M. Shorris with whom Jeffrey A. Goldwater, Scott Douglas

Burke and Bollinger, Ruberry & Garvey were on brief for appellee.

September 30, 2002

 

*Of the Third Circuit, sitting by designation.
1See Mass. Gen. Laws ch. 93A (West 1997).

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GREENBERG, Senior Circuit Judge. 

I. BACKGROUND

This matter comes on before this court on an appeal by

the Center for Blood Research, Inc. ("Center") from an order for

summary judgment entered in the district court on November 27,

2001, in favor of Coregis Insurance Company, and from an order

denying the Center's motion for reconsideration entered February 1,

2002. The Center brought this action against Coregis in the

Superior Court of Massachusetts, Suffolk Division, on breach of

contract, breach of the implied covenant of good faith and fair

dealing, and statutory unfair and deceptive practices1 theories

against Coregis because of its refusal to reimburse the Center for

attorney's fees it incurred in responding to an investigative

subpoena issued and served on the Center by the United States

Attorney for the District of Massachusetts. The Center asserted

that Coregis was liable for these fees pursuant to a nonmonetary

claims endorsement in a Nonprofit Organization Liability Insurance

policy that Coregis issued to the Center. Coregis removed the case

to the district court pursuant to 28 U.S.C. § 1441 on the basis of

the parties' diversity of citizenship under 28 U.S.C. § 1332. 

After the removal, the parties moved for summary

judgment. The district court denied the Center's motion but

granted Coregis's by its memorandum and order of November 27, 2001,

and, in a separate order entered on the same day, dismissed the
2It appears that the motion for reconsideration was untimely

and that the district court properly denied it on that ground. 

The Center does not mention this point in its brief but instead

focuses on the merits of the case. In any event, the motion for

reconsideration was unmeritorious and added nothing to its case.

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action and closed the case. The Center then filed a motion for

reconsideration and a notice of appeal from the November 27, 2001

order for summary judgment. The district court by order entered on

February 2, 2002, denied the motion for reconsideration following

which the Center amended its notice of appeal to include an appeal

from that order as well.2

The historical facts are undisputed. Coregis issued the

policy for a one-year period from December 1, 1997, through

December 1, 1998. The policy required Coregis to pay on behalf of

its insureds, subject to the policy limits and a retention

provision, all losses attributable to a claim for a "wrongful act."

The policy indicated that "CLAIM means any demand made upon the

INSURED for monetary damages, whether formal or informal, written

or oral, as a result of a WRONGFUL ACT." The policy included an

endorsement entitled "Coverage for Nonmonetary Claims" which

provided that Coregis "shall have the right and duty to defend,

including the selection of counsel, any Claim against the

INSURED(S) alleging, based upon or arising out of claims, demands

or actions solely for relief or redress in any form other than

monetary damages." The endorsement further provided that the

definition of "CLAIM," quoted above from the basic policy, "is

amended to include any judicial or administrative proceeding in
3 Congress has amended section 248, 18 U.S.C. § 3486, since

October 14, 1998, see Pub. L. No. 105-218, 112 Stat. 2681-72;

Pub. L. No. 105-314, 112 Stat. 2984; Pub. L. No. 106-544, 114

Stat. 2716, but we are using the version in effect on October 14,

1998, in this opinion. We are satisfied that our result would

not be different under the amended versions of the section.

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which any INSURED(S) may be subjected to a binding adjudication of

liability for damages or other relief." 

On or about October 14, 1998, within the period for

coverage under the policy, the United States Attorney for the

District of Massachusetts served a subpoena duces tecum on the

Center directing its "Keeper of Records" to appear before a

specific assistant United States attorney at the United States

Courthouse in Boston and to produce certain records that the

subpoena recited were "necessary in the performance of the

responsibility of the U.S. Department of Justice to investigate

Federal Health care offenses." The authority for this subpoena was

section 248 of the Health Insurance Portability and Accountability

Act of 1996, Pub. L. No. 104-191, 18 U.S.C. § 3486, which

authorizes records to be subpoenaed that may be "relevant to the

investigation" of "a Federal health care offense."3

The Center complied with the subpoena and cooperated with

the United States Attorney in the investigation. The investigation

did not culminate in civil or criminal charges being brought

against the Center, though one of its former employees, in a

criminal prosecution apparently instituted on the basis of

information developed in the investigation, pleaded guilty to

taking kickbacks in what the Center recites was "conduct outside
4We have jurisdiction under 28 U.S.C. § 1291, and we are

exercising plenary review on this appeal. See Suarez v. Pueblo

Int'l, Inc., 229 F.3d 49, 53 (1st Cir. 2000).

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the scope of his employment." The Center, however, does not seek

coverage on behalf of that employee, and we are not concerned

further with that prosecution.

The Center gave Coregis timely notice of the service of

the subpoena and sought a defense, essentially the provision of

attorneys or payment of attorney's fees, in the investigation.

After some initial discussions and activities that we need not

describe, Coregis denied coverage. The Center nevertheless engaged

counsel to represent it in response to the subpoena to protect its

interests and those of its employees in the investigation,

incurring $77,091.70 in expenses. Thus, it brought this action

against Coregis seeking recovery of these expenses, less the amount

of the policy retention, as well as statutory damages and

attorney's fees. The district court found that the Center's claim

did not come within the policy, and accordingly, it found in favor

of Coregis. This appeal followed.4

II. DISCUSSION

The district court in its memorandum set forth the

applicable legal principles, indicating that the Appeals Court of

Massachusetts recently restated succinctly the following guidelines

for interpreting insurance contracts:

The interpretation of an insurance

policy is a 'question of law for the trial
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judge, and then for the reviewing court.'

Cody v. Connecticut Gen. Life Ins. Co., 387

Mass. 142, 146, 439 N.E.2d 234 (1982).

Unambiguous words in an insurance policy

exclusion must be interpreted in their usual

and ordinary sense. Bagley v. Monticello Ins.

Co., 430 Mass. 454, 457, 720 N.E.2d 813

(1999). A term is ambiguous only if it is

susceptible of more than one meaning and

reasonably intelligent persons differ as to

which meaning is the proper one. Lumbermens

Mut. Cas. Co. v. Offices Unlimited, Inc., 419

Mass. 462, 466, 645 N.E.2d 1165 (1995). An

ambiguity is not created simply because a

controversy exists between the parties. Ibid.

'Nor does the mere existence of multiple

dictionary definitions of a word, without

more, suffice to create an ambiguity, for most

words have multiple definitions.' Citation

Ins. Co. v. Gomez, 426 Mass. 379, 381 688

N.E.2d 951 (1988).

County of Barnstable v. Am. Fin. Corp., 744 N.E.2d 1107, 1109

(Mass. App. Ct. 2001). The district court also recognized "that

when policy language is ambiguous, a court should adopt an

interpretation of the ambiguous term favorable to the insured and

in that analysis may consider what an objectively reasonable

insured, reading the relevant policy language, would expect to be

covered," Center for Blood Research, Inc. v. Coregis Ins. Co., No.

01-10708-GAO, slip op. at 8 (D. Mass. Nov. 14, 2001) (quoting Hazen

Paper Co. v. United States Fid. & Guar. Co., 555 N.E.2d 576, 583

(Mass. 1990) (omitting internal quotation marks)). We approach

this case applying the same principles.

Initially, of course, we consider the nature of the claim

for which the Center is seeking coverage. There was no suggestion

in the subpoena that the government was seeking anything other than

information from the Center. Moreover, 18 U.S.C. § 3486 provides
5We do not imply that our result would be different if the

Center claimed to have been a target of the investigation or even

if the investigation led to the government bringing civil or

criminal proceedings against it. The Center does not claim to

have been a target, the government did not bring such charges,

and we simply are ruling on the basis of the circumstances

presented.

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that "the Attorney General or the Attorney General's designee may

issue in writing and cause to be served a subpoena" in "any

investigation relating to any act or activity involving a Federal

health care offense" for "the production of any records . . . which

may be relevant to an authorized law enforcement inquiry, that a

person or legal entity may possess or have care, custody or

control." Thus, there is no suggestion in the statute that the

subpoenaed entity need be a target of the investigation, and in

fact, the Center acknowledges that the investigation did not result

in the government bringing any charges against it. Consequently,

there can be no doubt that we must treat the Center as nothing more

than a custodian of records.5 The question, then, is whether the

Center, when served with a subpoena in its capacity as custodian of

records in an investigation to produce records, reasonably could

have expected to be covered under Coregis's policy for its expenses

in connection with producing the records and the ancillary matters

raised by the investigation.

We do not understand how the Center or any reasonable

insured in its position could have had any such expectation. We

reiterate that the endorsement for nonmonetary claims imposed on

Coregis a duty to defend against "any Claim against the INSURED(S)
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alleging, based upon or arising out of claims, demands or actions

solely for relief or redress in any form other than monetary

damages" and that for purposes of the endorsement "Claim" includes

"any judicial or administrative proceeding in which any INSURED(S)

may be subjected to a binding adjudication of liability for damages

or other relief." Certainly, the Center could not possibly have

been subject to a binding adjudication of liability in the

investigation before the assistant United States attorney in

response to the subpoena as that officer could not make an

adjudication of liability for any relief and indeed could not

adjudicate anything at all. Rather, he merely could gather

information and investigate. We think that an objectively

reasonable insured would have recognized the limitations of the

investigation and of the scope of coverage under the insurance

policy and the nonmonetary claims endorsement, and thus understood

that its expenses for attorneys to represent it in response to the

subpoena and in the investigation would not be covered.

We realize that the United States Attorney might have

developed information leading to the institution of civil or

criminal proceedings as a result of the investigation, and indeed,

this apparently happened. We also recognize that the Center itself

might have been a defendant in such proceedings, though this did

not happen. Nevertheless, there could not have been a binding

adjudication of liability for damages or any other relief against

the Center in the investigation before the assistant United States

attorney as the civil or criminal proceedings would have had to
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have been pursued in a different forum. While the Center argues

that the compelled disclosure of information in itself is relief,

see, e.g., Wolfe v. Mass. Port Auth., 319 N.E.2d 423 (Mass. 1974),

the nonmonetary claims endorsement cannot provide coverage for

expenses incurred in the mere participation in the investigation

before the Attorney General or his designee inasmuch as the

endorsement provides that the potential relief for coverage to be

provided must be the product of a binding adjudication in a

proceeding. As we have indicated, there could not have been a

binding adjudication in the investigation. Inasmuch as any other

reading of the endorsement would distort its plain meaning mere

compliance with the subpoena simply is not relief. In sum, we are

satisfied that the endorsement is not ambiguous, and we will not

rewrite it to create coverage where it does not exist.

We have not overlooked the provision in the subpoena

warning the putative witness that "[f]ailure to comply with the

requirements of this subpoena will render you liable to proceedings

in the district court of the United States to enforce obedience to

the requirements of this subpoena, and to punish default or

disobedience." This provision reflects the statutory authority

granted the Attorney General to invoke the aid of a United States

Court "to compel compliance with the subpoena." 18 U.S.C. §

3486(c). But the enforcement proceeding contemplated by 18 U.S.C.

§ 3486(c) is not a portion of the investigation before the Attorney

General or his designee. Rather, section 3486(c) makes clear that

the enforcement proceeding must be instituted separately from the
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investigation and is held before a judge rather than an assistant

United States attorney. In the circumstances, it is clear that if

the United States Attorney initiated an enforcement proceeding it

would be discrete from the investigation, though it would be in aid

of it. It well may be that if there had been such an enforcement

proceeding the nonmonetary claims endorsement would have provided

coverage for the Center's expenses in it, but we need not determine

that issue as the government did not institute any such proceeding.

Affirmed.