United States Court of Appeals

For the First Circuit

No. 00-1815

KATHY F. PARKER,

Plaintiff, Appellant,

v.

WORCESTER INSURANCE COMPANY,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nathaniel M. Gorton, U.S. District Judge]

Before

 Torruella, Chief Judge,

Boudin and Lynch, Circuit Judges.

Michael D. Parker for appellant.

Patrick Markey with whom Robinson Donovan Madden & Barry,

P.C. was on brief for appellee.

April 23, 2001

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BOUDIN, Circuit Judge. This is a surprisingly

difficult case involving a limitations defense, fixed by

contract and statute, for suit by the insured (Kathy Parker)

claiming a loss under an insurance contract. The matter was

resolved on summary judgment in favor of the insurer

(Worcester). Thus, in reciting the events, we take the facts as

alleged by or in the light most favorable to the insured as the

party opposing summary judgment. Landrau-Romero v. Banco

Popular de P.R., 212 F.3d 607, 611 (1st Cir. 2000).

In January 1985, Michael and Kathy Parker, husband and

wife, moved into a new house at 41 Manse Hill Road, Somers,

Connecticut, purchased from its builder, LHM Developers, Inc.

Kathy Parker thereafter considered herself a Connecticut

resident. Title in the Manse Hill house was taken in Kathy

Parker's name, and homeowner's insurance was obtained, also in

Kathy Parker's name, from Worcester Insurance Company

("Worcester"), an insurance company headquartered in Worcester,

Massachusetts. Almost immediately, Kathy Parker began to notice

hairline, mostly horizontal cracks in the concrete walls of the

basement, which formed the house's foundation.

The Parkers first disregarded the cracks as cosmetic,

but in March 1996 Kathy Parker noticed that the cracks were

growing larger and that the basement wall seemed to be
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developing a sandy texture, as if it were disintegrating. That

summer, Edward Noonan, owner of the company that serviced the

Parkers' heating system, told Michael that a burner repairman

who worked for Noonan had commented either that the Manse Hill

"house look[ed] like it's about to fall over" or that its

"basement wall [was] amazing." Michael Parker then found that

some of the cracks had grown wide enough that he could insert

his fingers and also that cracking had occurred aboveground in

the brick facade supported by the basement wall.

Michael Parker sought an expert to determine the scope

and nature of the cracking problem, but had no immediate

success. Sometime before late September 1996, the Parkers

advised Worcester of problems with the foundation wall. Kathy

Parker's homeowner's policy required that, in the event of a

loss, the insured give "prompt notice" to the insurer--a

requirement distinct from provisions (discussed below) requiring

that any lawsuit be brought within one year of loss. At this

point it is useful to outline, in bare bones terms, pertinent

substantive provisions in the policy obtained by Kathy Parker.

Section I, providing property insurance for the house,

insured against "direct [physical] loss to [the described]

property" but not, among other losses, those "involving

collapse, other than as provided in Additional Coverage 8," or
1Both Additional Coverage 8 and the exclusions just

mentioned are lengthy and complicated. They are set forth in

pertinent part in an Appendix to this opinion. We have assumed,

because the parties do so, that the terms of the policy

furnished in the joint appendix were in force at all relevant

times.

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those caused by "[f]reezing, thawing, pressure or weight of

water or ice . . . to a . . . [f]oundation." Additional

Coverage 8 provides coverage for "collapse" only where due to

certain specified causes. Another set of exclusions applies to

loss due to faulty design, workmanship, construction, or

construction materials.1

Following the Parkers' report to Worcester in September

1996, Peter Judd, an insurance claims adjuster acting for

Worcester, inspected the house; he then wrote a report on

October 1, 1996, concluding that exterior pressure from clay

flow or ice had caused the Manse Hill house's foundation to

crack, and that the damage to the house was therefore not

covered. In a misaddressed letter dated October 8, 1996, Judd

advised the Parkers that, under the "pressure or weight"

exclusion to the policy, coverage was denied; the Parkers say

they never received the letter but admit learning at some point

that coverage had been denied.

The foundation's condition continued to deteriorate.

In June 1997, the Parkers finally arranged for an engineer to
2Gerard Allard, who was in charge of replacing and repairing

the Parkers' foundation in late 1997, agreed that the original

concrete was defective, but opined that adequate concrete "would

have easily been able to withstand the lateral pressure from the

soil directly against the wall."

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inspect the premises. This expert said that he did not regard

the house as safe, especially during the winter when snow could

add to the weight pressing on the foundation, and he surmised

that "something abnormal had occurred in the process of

preparing and mixing the concrete." In late November 1997, the

Parkers had the house jacked up and much of its foundation

rebuilt. Repairs continued into 1998, the total cost

approximating $102,720 by late 1999.

Before the foundation was replaced, the Parkers sent

Worcester a demand letter dated November 12, 1997. The letter

acknowledged the company's denial of coverage in 1996, but it

claimed that the Manse Hill house was now collapsing, and that

Worcester was liable for the repairs needed to prevent collapse.

Worcester hired CCAllc, an architecture and engineering firm, to

inspect the Parkers' home and had tests performed on samples of

concrete from the original foundation wall. CCAllc concluded

that the cracking of the basement walls was due to defective

concrete and to high lateral earth pressures due to poor

drainage.2 In January 1998, Worcester again denied coverage.
3The magistrate judge dismissed both the contract claim and

the chapter 93A claim, because Kathy Parker had not sought to

distinguish between them. The magistrate judge thought it

arguable that the chapter 93A claim might be subject to a longer

limitations period, see Lees v. Middlesex Ins. Co., 594 A.2d

952, 956-58 (Conn. 1991), but deemed this argument waived, as do

we.

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On February 23, 1998, Kathy Parker filed suit in

Massachusetts state court, alleging breach of contract and

violation of Massachusetts General Laws chapter 93A, which

provides multiple damages for consumer fraud and deception,

Mass. Gen. Laws ch. 93A, §§ 2, 9 (1998). Worcester removed the

case to federal district court on diversity grounds. The

parties consented to jury trial by a magistrate judge, 28 U.S.C.

§ 636(c)(1) (1994 & Supp. II 1996). Ultimately, the magistrate

judge granted summary judgment for the insurer on the ground

that Kathy Parker's suit was barred by the applicable one-year

limitations period, the parties having agreed that Connecticut

law applies.3

The magistrate judge reasoned that the presence of

hairline cracks prior to 1996 was too slight to suggest

appreciable damage, but the larger cracks and other damage

visible by mid-1996 "was sufficient to put a reasonable person

on notice of a substantial problem." Coupled with Noonan's

statement to Michael Parker in 1996, and the Parkers' notice to

the insurer in September of that year, the magistrate judge
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found that "a reasonable person would have been on notice by the

end of 1996 that the Premises had suffered appreciable damage."

Kathy Parker now appeals.

Kathy Parker's main argument on appeal is that, in

ruling that her claims were time-barred, the magistrate judge

misconstrued Connecticut law and improperly resolved genuine

issues of material fact. The insurance contract in question

provides explicitly that "[n]o action can be brought [against

the insurer] unless . . . the action is started within one year

after the date of loss." Although strict, this provision

accords with a Connecticut statute requiring that policies that

provide fire insurance coverage contain a one-year period of

limitations. Conn. Gen. Stat. 38a-307, -308(a) (1999); Bocchino

v. Nationwide Mut. Fire Ins. Co., 716 A.2d 883, 884 (Conn.

1998).

The magistrate judge assumed, and we agree, that the

one-year limitations period is subject to at least one implicit

qualification: that, in the case of a non-obvious injury or

loss, the period begins to run only when a reasonable person

would have learned of the injury or loss. Although there is no

Connecticut case in point, a number of cases in other

jurisdictions adopt some form of discovery rule in similar
4E.g., Honeycomb Sys., Inc. v. Admiral Ins. Co., 567 F.

Supp. 1400, 1405 (D. Me. 1983); Prudential-LMI Commercial Ins.

v. Superior Court, 798 P.2d 1230, 1238 (Cal. 1990) (en banc);

U.S. Fid. & Guar. Co. v. Am. Ins. Co., 345 N.E.2d 267, 272 (Ind.

Ct. App. 1976); O'Reilly v. Allstate Ins. Co., 474 N.W.2d 221,

222-23 (Minn. Ct. App. 1991); Jackson v. State Farm Fire & Cas.

Co., 835 P.2d 786, 789 (Nev. 1992).

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situations.4 Absent more explicit language, no one would expect

an insured to be stripped of coverage where a reasonable person

would not have detected the injury or loss. Alternatively, her

brief summarily asserts that there was no loss until the repairs

themselves were made, beginning in November 1997; but this

theory, which is not seriously developed, would allow the

insured to postpone a claim almost indefinitely simply by

deferring the repair work.

At argument, counsel for the insurer properly conceded

that a discovery rule should apply but suggested that it was

enough that the Parkers knew that some kind of appreciable

damage had occurred by mid-1996. This is a plausible position

and is seemingly the view taken by the magistrate judge.

Specifically, the magistrate judge assumed that under

Connecticut law "the 'date of loss' or 'inception of loss' in

this case would be the date on which there was a sufficient

problem to put a reasonable person on notice of the occurrence

of appreciable damage to the Premises."
5E.g., Lally v. Allstate Ins. Co., 724 F. Supp. 760, 762-63

(S.D. Cal. 1989), aff'd, 930 F.2d 28 (9th Cir. 1991); Elsey v.

Hastings Mut. Ins. Co., 411 N.W.2d 460, 461-62 (Mich. Ct. App.

1987); cf. Burns v. Hartford Hosp., 472 A.2d 1257, 1261 (Conn.

1984).

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Kathy Parker, by contrast, argues (primarily) that the

one year period began to run only when she knew or should have

known of the threatened collapse of the house; and, she argues,

this occurred only after her expert so reported in mid-1997.

Because suit followed within one year (i.e., in February 1998),

she says that she met the one-year requirement. Of course, the

house itself never collapsed, but for prudential reasons

Connecticut allows a claim, where a collapse is covered, as soon

as structural integrity is substantially impaired. Beach v.

Middlesex Mut. Assurance Co., 532 A.2d 1297, 1300-01 (Conn.

1987).

It is difficult to find case law, in Connecticut or

elsewhere, on the legal issue thus posed. There is some general

support for the view, taken by the magistrate judge, that the

time to sue under a policy begins to run when the insured knows

(or should have known) of a significant loss, regardless of

whether the cause or the full extent of the loss is known at the

time.5 This view allows the insurer to investigate at the

earliest reasonable stage and is consistent with the short

limitations period. If this is the legal test, summary judgment
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was manifestly justified for the reasons given by the magistrate

judge.

On the other hand, it is not clear that Kathy Parker

had any claim under the policy unless there was not merely

appreciable damage but a structural flaw (indeed, even a

collapse claim may be barred, as we shall soon see). Although

the policy purports initially to cover any property damage,

several exclusions would appear to bar recovery here for the

cracks--short of collapse--in the foundation or the outside

wall. In this case, the company, through Judd, deemed the claim

barred by the "pressure or weight of water" language and

rejected the 1996 claim made by Kathy Parker. An alternative

possible objection, absent collapse, is the general exclusion

for poor construction materials or workmanship.

Taking Judd at his word, Kathy Parker had reason to

believe that no loss covered by the policy had occurred until

she learned or should have learned that a different level or

kind of damage (i.e., a substantial structural flaw) existed;

and in these circumstances one might treat the one year period,

at least where the claim is contingent on "collapse," as

beginning to run only from the point of real or imputed

knowledge of such a threat. Making our best guess, we are

inclined to think that the Connecticut Supreme Court would
6What "likelihood" of a potentially covered loss is

necessary to trigger running of the limitations period is an

obscured, confusing issue rarely addressed by the courts. It is

not clear that "percentages" alone are determinative; severity

of the threat, the diligence required to uncover the threat and

its extent, and other factors may play a role. See PrudentialLMI, 798 P.2d at 1238.

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probably take this view, given the protective attitude toward

the insured displayed in Beach.

If this is the legal test--and it is our best guess as

to Connecticut law--then summary judgment barring suit under the

one-year limitations period is not proper. Admittedly, on the

proffered facts the point is debatable, even assuming the legal

test most favorable to the insured. While Kathy Parker did not

"know" that the cracks represented a substantial structural flaw

until her expert so reported in mid-1997, conceivably she should

have known by mid-1996 that this was likely the case, given the

widening cracks, Noonan's statement about the repairman's

assessment, and the sandy texture of the wall.6

However, it is not entirely clear what Noonan reported

the repairman had said or just what the sandy surface looked

like and what it would connote to a reasonable person. And even

if the facts were undisputed, a reasonable factfinder could draw

varying conclusions as to whether a reasonable person should

have known from these facts that a substantial structural flaw

was present or at least likely. A judgment on undisputed facts
7E.g., Childers Oil Co. v. Exxon Corp., 960 F.2d 1265, 1272-

73 (4th Cir. 1992); In re Mushroom Transp. Co., 247 B.R. 395,

406 (E.D. Pa. 2000); see also Ashley River Indus., Inc. v. Mobil

Oil Corp., -- F. Supp. 2d --, 2000 WL 33243614, at *10 (D.S.C.

2000).

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that a reasonable person "should have known" something is (like

negligence) a legal conclusion; but it is one of those

conclusions that most courts leave to juries where, as here,

reasonable juries could differ.7

In remanding, we do not suggest that a trial on the

limitations issue will automatically be necessary. The insurer

moved for summary judgment on the basis of the limitations

period alone, seemingly because the facts made it easy to secure

under the "appreciable damage" test urged by Worcester. But the

mystery for anyone reading the policy is how Kathy Parker, given

the report of her own expert, can make out a claim under the

collapse coverage (or otherwise) even if her claim is entirely

timely. Her expert, it will be remembered, said that the flaw

was in the concrete.

The policy contains a set of exclusions any one of

which could be read to exclude a loss due to faulty construction

of the foundation, whether in workmanship or materials. The

policy excludes property loss "caused by" "deterioration,"

"[i]nherent vice [or] latent defect," or "[s]ettling, shrinking,

bulging or expansion, including resultant cracking, of . . .
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foundations." Even more in point, the policy generally excludes

loss "caused by" "[f]aulty, inadequate or defective" "[d]esign

. . . , workmanship . . . , construction," or "[m]aterials used

in . . . construction."

Although this last general exclusion appears on its

face to bar Parker's claim, the Beach case could be read to

bypass the exclusions if the claim falls within Additional

Coverage 8's provision for collapse. See Beach, 532 A.2d at

1300. But coverage for collapse is itself limited to only that

collapse which results from certain specified causes. Although

Kathy Parker's brief refers tersely to "hidden decay," which is

a covered cause, it is open to doubt whether defective concrete

could be called "decay," especially when the term is read in the

context of other specified causes (e.g., "[h]idden insect or

vermin damage").

This doubt is greatly reinforced by the final covered

cause of collapse, which reads as follows: "Use of defective

material or methods in construction . . . if the collapse occurs

during the course of the construction . . . ." This language

directly deals with collapse caused by poor workmanship or

materials, but expressly limits coverage in such cases to

collapse during construction. This arguably makes the clause of

no use to Kathy Parker and, even worse for her position,
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suggests that "decay" is not a backdoor to coverage for poor

construction materials or workmanship.

Thus, we assume that on remand the insurer will move

for summary judgment on grounds that the loss, even if not

barred by the one-year limitations period, is not covered by the

policy. Unless there is a rabbit hidden somewhere in the hat,

it is not apparent to us how Kathy Parker can establish

coverage. Still, the issue has not been briefed and lawyers are

inventive in finding ambiguities to construe against the

insurer. While we think it is fair to point out the apparent

difficulties, this is without prejudice to resolution after full

briefing.

This remand also reawakens Kathy Parker's claim under

93A, applying to it the same limitations period as for the

policy claim; any argument for a longer period has been waived.

However, thus far the 93A claim is not very promising. Chapter

93A requires a level of misconduct over and above a good faith

and reasonable disagreement about policy language. Boston

Symphony Orchestra, Inc. v. Commercial Union Ins. Co., 545

N.E.2d 1156, 1160 (Mass. 1989). As evidenced by the able

decision of the magistrate judge, this is a close and difficult

case on limitations, and the validity of Kathy Parker's claim of

coverage itself remains uncertain. 
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Kathy Parker also challenges the magistrate judge's

partial denial of her motion to strike Worcester's reply brief

in support of summary judgment. Parker's interest in this issue

is presumably blunted by our disposition of the main question.

However, assuming that the issue is still alive, and also that

Parker's challenge is not forfeit for failure to provide an

adequate record, we find that there was no abuse of discretion

in the denial as Parker describes it. FDIC v. Kooyomjian, 220

F.3d 10, 15-16 (1st Cir. 2000). The arguments that Parker

claims should have been stricken directly responded to arguments

in Parker's memorandum opposing summary judgment, and were

therefore appropriate for a reply brief.

The judgment is vacated and the case remanded for

proceedings consistent with this decision.

It is so ordered.
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ADDENDUM

Kathy Parker's Homeowner's Insurance Policy (excerpts)

SECTION I - PROPERTY COVERAGES

. . .

ADDITIONAL COVERAGES

. . .

8. Collapse. We insure for direct physical loss

to covered property involving collapse of a

building or any part of a building caused only

by one or more of the following:

a. Perils Insured Against in

COVERAGE C - PERSONAL PROPERTY.

These perils apply to covered

buildings and personal property

for loss insured by this

additional coverage;

b. Hidden decay;

c. Hidden insect or vermin damage;

d. Weight of contents, equipment, animals or

people;

e. Weight of rain which collects on a roof;

or

f. Use of defective material or methods in

construction, remodeling or renovation if

the collapse occurs during the course of

the construction, remodeling or

renovation.

Loss to an awning, fence, patio, pavement,

swimming pool, underground pipe, flue, drain,

cesspool, septic tank, foundation, retaining

wall, bulkhead, pier, wharf or dock is not

included under items b., c., d., e., and f.
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unless the loss is a direct result of the

collapse of a building.

Collapse does not include settling, cracking,

shrinking, bulging or expansion.

This coverage does not increase the limit of

liability applying to the damaged covered

property.

. . . 

SECTION I - EXCLUSIONS

. . .

2. We do not insure for loss to property described

in Coverages A and B caused by any of the

following. However, any ensuing loss to

property described in Coverages A and B not

excluded or excepted in this policy is covered.

a. Weather conditions. However, this

exclusion only applies if weather

conditions contribute in any way with a

cause or event excluded in paragraph 1.

above to produce the loss;

b. Acts or decisions, including the failure

to act or decide, of any person, group,

organization or governmental body;

c. Faulty, inadequate or defective:

(1) Planning, zoning, development,

surveying, sitting;

(2) Design, specifications, workmanship,

repair, construction, renovation,

remodeling, grading, compaction;

(3) Materials used in repair,

construction, renovation or

remodeling; or
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(4) Maintenance;

of part or all of any property whether on

or off the "residence premises."