2003 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 6-23-2003 

# Gr o s s v . S t P aul F ir e P r e c e de n t i al or N on-P r e c e de n t i al : N on-P r e c e de n t i al D ocke t N o . 02-3177

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Thi s de c i sion i s br ou gh t t o you for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i l l a no va U nive r sit y S choo l of L a

w Di g it al Re posit or y

. It h as be e n a c c e pt e d for inclusion in 2003 D e c i sion s b y a n author i z e d a dmini s tr at or of V i l l a no va U nive r sit y S choo l of L a

w Di g it al Re posit or y

. F or mor e infor m at ion, p le as e c on t a ct Be n j a min . C a rl s on@l a

w . v i l l a no va . e du . Re c omme nde d C it at ion
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w . v i l l a no va . e du/thir dc ir c uit_2003/442NOT PRE CEDENT IAL
UNITED STATES COURT OF APPEALS FO R T HE TH IRD CIR CU IT
No. 02-3177
SHELDO N GRO SS; DEBORAH GROSS; DURABLE GM PRODUCTS, INC. ; F INCORE INDUSTRI ES, INC. ; 9 993 61 ONTARI O, I NC.

Ap pellan ts
v. ST . PA UL FIR E A ND M AR IN E IN SU RA NC E C O.; BRECKLES INSURANCE BROKERS LIMITED
App eal from th e Un ited States District Co urt for the Easte rn D istrict of P enns ylvania (D.C. Civi l Action No. 01-cv-01903) Distri ct Judge: Honorable Berl e M. Schill er
Submitte d Under Third Circ uit LAR 34.1(a)

April 24, 2003 Be for e: S CIR ICA *, Chief Judge , AM BR O a nd G AR TH , Circuit Judges (Opinion fi led: J une 23, 2003)

OPI NION * Judge Scirica began hi s term as Chief Judge on May 4, 2003.2

AM BR O, Circuit

Judge In this appeal w e consider the interpretation of an insurance c ontract. We affirm the District

Court’s conclusion that the terms of the contract between Fincore Industries, Inc. ( “Fincore” ) and St. Paul Fir e and Marine Insur ance Company (“St . Paul” )
unam bigu ously limit F incore ’s right to recov ery to $2.6 million and th at St. Pa ul is ther efo re en titled to su mm ary jud gm ent in its fa vor . 1. Facts and Procedural Hist ory Sheldon Gross i s the Chief Executive Offi cer of Finc ore, a Canadi an corporat ion that provides spe cial ized pai nt services. In May 1997, Gross approached Breckl es Insuranc e Brokers ( “Breckles ”) in s earch of busi ness ins urance for Fi ncore. Bre ckles negotiated a one- year

policy for Fincor e with St. Paul beginni ng June 18, 1997. The business interrup tion coverag e in the policy provided “for loss of g ross profits and extra expense becaus e of the sus pension of y our operations. ” The policy ’s Limit s of Coverage prov ision sta ted tha t “[t]he mo st [St. P aul w ill] pay for lo ss in an y event is th e limit shown in the Coverage Summary.” The Coverage Summary l imit was $2.6 mill ion. The business indemnity period was define d by the polic y as “the l ength of time that : begins with the date of di rect phy sicalloss due to a covered caus e of loss at the covered l ocati on, when the gross pr ofit of [the] bus iness i s reduced; and ends not l ater t han 12 months ther eaf ter.” Fincore r enewed its pol icywith St. Paul in 1999, adding an endor sement that3

increa sed it s busines s profi ts i ndemnityperiod fr om 12 to 24 months. St . Paul required Fincore t o complete a Loss of Profit s Worksheet. Sid Persaud, Fincore’ s Chief Financ ial Officer, completed t

hat worksheet

and provided t

he form to Breckl es. Per saud tes tifi ed at his deposi tion t

hat he t old Breckl es that Fincore wante d $2.6 mil lion i n coverage for each of the t wo years in the bus iness i ndemnityperiod. St. Pauldenies t hat thi s request

was made , o r i f i t wa s, th atit kne w of the r equ es t. The p ol ic y not ed t hat th e “Bu si nes s I nco me – Profit s Indemnity Period is : 24 months” and t he busines s int erruption premium increa sed from $4,700 to $6,632. Fi ncore rene wed the poli cy, under the s ame terms, for June 1999-June 2000. In April 2000, Fincore suffered l osses as a resul t of a fi re at i ts Ontario, Canada plant. Over the next

twenty -four months , Fincore lost over $5.2 mi lli on as a res ult of t he inter rup tion in b usin ess, la rge ly from lost b usin ess c ont racts and lost r enta l mo nies
. Fincore made a cl aim to St . Paul for $5.2 mil lion, as under i ts re ading of the polic y i t was entitled to $2.6 m illion in b usine ss interru ption lo ss cov erage for ea ch of the tw o years in the busi ness inde mnityperiod. St. Paulpaid Fincore only$2.6 mil lion, as it clai med the pol icy cap ped cov erag e at th at am oun t for the e ntire two -year p erio d. Fincore, Gross and other named insureds under the pol icy(herei nafter “plai ntiff

s”) sued St. Paul to recover the $2.6 mil lion i n unpaid cover age to which they ar gued they were entitled. Upon the order of the District Court, plainti ffs and St. Paul filed crossmotions for

summary j udgment. The Dist rict Court granted St. Paul ’s moti on for1 We have juris dicti on under 28 U.S.C. § 1291.
2 “A s indica ted ab ove, th oug h, eve n if I did cons ider the applic ation o f Pe nnsylva nia law, this re sult

would have been the s ame.” See Distric t Cou rt Op . at 8, repr odu ced in Appellant

Fincore’ s brie f at App. Vol. I at 10.
3 

### We note in passing that the Distr ict Court considered Fincore’s choice -of-law argume nt waived. We leave for another day further discussion whether the fail ure to raise a cho ice-of -law issue b efore the D istrict Co urt resu lts in w aiver o f that issu e bef ore this Co urt. Com pare 

### Parkway Baking Co., I

nc. v. Fre ihofer Baking Co. , 255 F.2d 641, 646 (3d Cir. 1958) with Nealy v. Club Med M gmt. Servs. , 63 F.3d 1 66, 180 n .10 (3d C ir. 1995) ( en banc ). 4 summary j udgment and dismi ssed the case. Thi s appeal f ollowed. 1 As w e hav e instru cted o n oth er occ asion s, it is not H oyle for th e D istrict Co urt to ente r an ord er th at gr ants sum ma ry judg me nt an d di sm isses the c om plain t. See , e.g., Cheminor Drugs, Lt d. v. Et hylCorp. , 168 F.3d 119, 121 n.2 (3d Cir . 1999). Therefore, we have reviewed the Dis tri ct Court’ s order a s a grant of summary j udgment rather than
as a gra nt o f a R ule 1 2(b )(6) m otio n. 2. Discussi on Plaintiffs ar gue that

the Dist rict Court made vari ous error s when ruli ng on the
cross- motions for

summary j udgment. The Court concluded that Pennsy lvania choice of law rules requir ed it to applythe la w of Canada to inte rpret the contract. Plaintiffs contend that this was error a nd that Pen nsylvania law sh ould hav e been a pplied. W e are in agreem ent with the p arties and w ith the District Cou rt 2 that bot h Canadian and Pennsyl vania l aw are subst antive ly the same. That being s o, we need not address any
ar gum en t rel atin g t o c hoi ce of la w. 35

Plaintiffs’ main contention, of c ourse, is that the Distri ct Court s hould have interpret ed the contract to mean that Fincore is entitl ed to $2.6 million in busi ness inter rupti on coverage per

year . As plai ntiff

s note, if a provi sion i s ambiguous, that provisi on is i nterpr eted t o “giv[e] effect to the rea sonable expe ctations of the parti es.” Reid Crowther & Partner s Ltd. , [1993] S. C.R. 252 . In addi tion, the contra pr oferent em doctrin e pro vides that an amb iguo us pro vision is to be c onstru ed ag ainst the draftin g par ty – he re th e ins ure r. Id. Plaintiffs ar gue that the Distri ct Court erred in not apply ing these princi ples t o the ins urance cont ract i n this case and, had it done so, i t would have
con clud ed th at F inco re w as e ntitle d to $5.2 millio n fr om St. P aul. These princ iples of contra ct interpret ation apply only if the terms of t he contra ct are ambiguous. The reasonabl e expectat ions of an i nsured ar e immateri al if the poli cy limitations are plain; extrinsic evide nce bec omes m eaningfu l only if the contract terms are
am big uou s. Id. The D istrict Court conclud ed that the relevan t contract provision s were not ambiguous, and there fore that extrinsi c evidence was i rrel evant. We agree. As the Dis tric t Co ur t n ot ed, Fi nco re ’s pol ic y “un ambi guo usly cap s l ost bus in es s i nco me coverage at

$2.6 mil lion. ” The “Limits of Coverage” provi sion of the contra ct st ates t hat the most St . Paul wil l “payfor los s in anyone event i s the l imit shown in the cover age
sum ma ry.” T he C ove rag e Su mm ary ex plici tly cap s bu sine ss in com e pr ofits at $2 .6 millio n fo r the term of th e po licy. As f urther argu men t, plaintiff s poin t out tha t the po licy and th e othe r doc um ents6

theydeem relevant

demonstrate that

Fincore, when renewing it s poli cy, increa sed the indemnity period from a 12-month term to a 24-month term. As defined i n the poli cy, the indemnity peri od is the period during which the insured can accrue compensable lost income. The amendment t o the inde mnityperiod does not alter the c overage l imit set forth i n the Coverage Summary , ei ther expl icitly or impli citl y. That amendment means that, if as a result

of the fi re, Fi ncore suffered damages of $1.2 mi lli on during t he firs t 12 months afte r the fire and $1.4 mi lli on during t he second 12 months af ter t he fire , under the o rigin al ind em nity pe riod Fin cor e w oul d be entit led to reco ver onl y $1.2 millio n. Un der the n ew ind em nity pe riod , Fin cor e w oul d be entit led to reco ver the e ntire $2.6 millio n. T he a me ndm ent d oes not me an, h ow eve r, tha t Fin cor e is e ntitle d to $5.2 mill ion. Absent

an amendment to the Coverage Summary, we cannot avoid t he conclusi on that t

he language of t

he polic y unambiguous ly limi ts Finc ore’s recoveryfor bus ines s inte rrup tion as a resu lt of a ny on e ev ent to $2.6 millio n. Nor are we persuaded by an “examination of ext ernal s igns and obj ecti ve indic ia” to co nclu de th at the lang uag e of the p olicy is am big uou s de spite its ap par ent c larity. Northbrook Ins . Co. v. Kuljian Corp. , 690 F.2 d 36 8, 37 2 n.5 (3d Cir . 198 2). We agree with the Distri ct Court t hat a re asonable i nsured would not expect this cont

ract to com mit to $ 5.2 in lo st busin ess inc om e cov erage . As th e D istrict Co urt per suasiv ely reasoned, the only

partyto whom Fincore even ar gues it indicated anydesir e for4 Breckles was an i ndependent br oker with whom Fincore de alt. Fincore had a mended

its complaint

on November 28, 2001 to add Breckl es as a defendant, t hough it was subs eque ntly dismis sed f or lack of p erson al jurisdic tion. B ut bo th partie s sub sequ ently sti pulate d that Fi ncore would not pur sue it s clai m against St . Paul – aclai m that was based on the t

heory that Bre ckles was St . Paul’ s agent – and i n exchange St. Paul dism issed its cro ss-c laim aga inst B reck les. See Su pp. A pp. a t 36 6. 7 increasing the coverage li mits is Breckles. 4 Further , the worksheet that plainti ffs argue prov ides p roof of the ir desire f or incr eased cove rage s how s only that th ey wish ed to extend the period during which the y coul d accrue l osses, not that theywished to extend the m axim um am oun t reco ver able
.

* * * Because we conclude that the insurance poli cy unambi guouslycaps covera ge for Fincore at $ 2.6 million, we affirm the d ecision of the District Cou rt to grant summ ary judg men t to St. Pa ul.

TO THE C LERK: Please fi le the foregoing Opini on.
By the C ourt,

/s/ Thomas L. Ambro Circuit Judge