1999 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

4-22-1999

New Castle County v. Natl Union Fire Ins

Precedential or Non-Precedential:

Docket 98-7091

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Recommended Citation

"New Castle County v. Natl Union Fire Ins" (1999). 1999 Decisions. Paper 107.

http://digitalcommons.law.villanova.edu/thirdcircuit_1999/107
Filed April 23, 1999 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 98-7091 

NEW CASTLE COUNTY, DELAWARE, 

 Appellant 

v. 

NATIONAL UNION FIRE INSURANCE 

COMPANY OF PITTSBURGH, PA 

ON APPEAL FROM THE 

UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF DELAWARE 

(D.C. Civil No. 96-504-LON) 

District Judge: Honorable J.J. Longobardi 

Argued December 7, 1998 

BEFORE: STAPLETON and NYGAARD, Circuit Judges, 

and GOLDBERG, Judge* 

(Filed April 23, 1999) 

 Peter J. Walsh, Jr., Esq. (Argued) 

 Peter L. Tracey, Esq. 

 Potter Anderson & Corroon LLP 

 Hercules Plaza 

 1313 N. Market Street 

 P.O. Box 951 

 Wilmington, DE 19899 

 Attorneys for Appellant 

_________________________________________________________________ 

*The Honorable Richard W. Goldberg, Judge for the United States Court 

of International Trade, sitting by designation. 
 James F. Bailey Jr., Esq. 

 Christopher J. Sipe, Esq. (Argued) 

 Bailey & Wetzel, P.A. 

 716 N. Tatnall Street 

 P.O. Box 2034 

 Wilmington, DE 19899 

 Attorneys for Appellee 

OPINION OF THE COURT 

GOLDBERG, Judge: 

I. INTRODUCTION 

This case reviews whether a provision in an insurance 

policy is ambiguous. Upon review of the relevant case law 

and the tenets of contract construction, we find there are 

two reasonable interpretations of the policy language. 

Therefore, pursuant to Delaware law, we conclude that the 

provision is ambiguous, and we construe it in favor of the 

insured. We remand the case to the District Court for 

further findings in accordance with this decision. 

II. BACKGROUND 

This case addresses whether particular language 

contained in a "personal injury" provision of a 

comprehensive general liability ("CGL") insurance policy is 

ambiguous. The CGL policy at issue is a standard form 

policy prepared by the Insurance Service Office ("ISO"). It 

provides that the insurer will defend and indemnify the 

insured against claims alleging damages for "personal 

injury." The personal injury offenses covered under the 

policy include definition 10(c), which reads as follows: 

 10. "Personal injury" means injury, other than "bodily 

 injury," arising out of one or more of the following 

 offenses: . . . 

 c. The wrongful eviction from, wrongful entry into, 

 or invasion of the right of private occupancy of a 

 room, dwelling or premises that a person 

 2 
 occupies by or on behalf of its owner, landlord or 

 lessor. 

App. of Appellant, at A141 (CGL Policy No. GL 590-62-18- 

RA). 

The above language gave rise to a declaratory judgment 

action brought on October 21, 1996 by New Castle County, 

Delaware ("the county") in the District Court for the District 

of Delaware against National Union Fire Insurance 

Company of Pittsburgh, Pennsylvania ("National").1 Between 

1991 and 1994, the county purchased a series of CGL

policies from National (collectively "the CGL policy" or "the 

policy").2 When Frank E. Acierno, a developer, filed three 

lawsuits against the county (collectively, "the Acierno 

actions"), the county turned to National to defend and 

indemnify it against the suits. In general, the Acierno 

actions alleged that the county violated Acierno's 

constitutional rights by re-zoning or refusing to issue 

building permits for his property. More specifically, the 

actions were styled as follows: (1) the first suit alleged 

violations of Acierno's constitutional rights for failure to 

issue a commercial building permit on a parcel of land 

owned by Acierno;3 (2) the second alleged that an ordinance 

_________________________________________________________________ 

1. The District Court based its jurisdiction on diversity of citizenship. 

See 

28 U.S.C. S 1332 (1994). 

2. The county purchased three CGL policies from National: Policy No. GL 

590-44-26-RA, effective July 1, 1991 to July 1, 1992; Policy No. GL 590- 

62-18-RA, effective July 1, 1992 to July 1, 1993; and Policy No. GL 590- 

73-01-RA, effective July 1, 1993 to July 1, 1994. As the District Court 

noted, these policies do not differ from one another in any significant 

way. See New Castle County, Delaware v. National Union Fire Ins. Co. of 

Pittsburgh, PA, No. CIV. A. 96-504 LON, 1997 WL 809207, at *1 n.1 (D. 

Del. Dec. 30, 1997) ("New Castle County v. National"). National has 

disclaimed coverage under Policy No. 590-44-26-RA, the one it considers 

to have been in effect when the first two actions against the county were 

filed. Br. of Appellee, at 7. National has not declared its coverage 

position 

with respect to the other two CGL policies. 

3. Acierno v. Mitchell, No. Civ. A. 92-384-SLR ("Acierno I"). Acierno 

moved 

for a preliminary injunction, which the trial court granted on December 

30, 1992. On appeal, this circuit held that the dispute was not ripe for 

judicial review, vacated the lower judgment, and remanded the case with 

instructions to dismiss it without prejudice. See Acierno v. Mitchell, 6 

F.3d 970, 977-78 (3d Cir. 1993). 
 3 
passed by the county to re-zone one of his properties 

violated his civil rights;4 and (3) the third, filed after the 

county's final denial of the building permit, essentially 

restated the same facts and violations as the first suit.5 

Because the county believed that the Acierno actions 

state a claim for "invasion of the right of private occupancy" 

as defined in definition 10(c) of the CGL policy, it sought to 

have National defend and indemnify it in those suits. 

National disclaimed coverage under the CGL policy for the 

Acierno actions.6 The county then filed the declaratory 

judgment action underlying this appeal. 

National responded to the County's declaratory judgment 

action with two counter-arguments. First, National asserted 

that the offense of "invasion of the right of private 

occupancy," as contemplated by definition 10(c), is limited 

to tangible interference with a possessory interest in 

property. Since the Acierno actions did not allege 

interference with a possessory interest, but rather with the 

use and enjoyment of land, National asserted that the 

actions do not fall within the coverage of definition 10(c) 

and, consequently, National had no obligation to defend or 

indemnify the county. Second, National argued that based 

on the "by or on behalf of" language in definition 10(c), 

_________________________________________________________________ 

4. Acierno v. Cloutier, No. Civ. A. 92-385-SLR ("Acierno II"). This case 

was 

disposed of by a joint stipulation approved by the District Court on 

October 24, 1997. Br. of Appellant, at 12. 

5. Acierno v. New Castle County, No. Civ. A. 93-579-SLR ("Acierno III"). 

This case was tried in the Spring of 1997. According to the county, it 

was required to issue a building permit and the case was eventually 

settled in accordance with the Acierno II stipulation. Br. of Appellant, 

at 

14. 

6. National has actually only disclaimed coverage under the CGL policy 

for Acierno I and II. Yet, the District Court concluded in its opinion 

that, 

although National has apparently not declared its official coverage 

position with regard to Acierno III, the issue of National's obligation to 

defend and indemnify the county in Acierno III was nonetheless ripe for 

adjudication, in part because it is likely that National would disclaim 

any obligation to defend or indemnify the county in connection with 

Acierno III. See New Castle County v. National, 1997 WL 809207 at *3-4. 

We have no occasion to disrupt the District Court'sfinding on this 

matter. 

 4 
coverage is available only when the insured commits an 

"invasion" as the owner, landlord, or lessor of the property 

at issue. Since the county does not claim to be the owner, 

landlord, or lessor of any Acierno properties, National 

maintained that it had no obligation to defend the county 

in those suits. 

On December 30, 1997, the District Court issued an 

opinion granting summary judgment to National, holding 

that definition 10(c) unambiguously "contemplates coverage 

for acts such as evictions, entries and invasions committed 

by one acting by or on behalf of the property's owner, 

landlord or lessor." New Castle County v. National, 1997 WL 

809207, at *7. According to the District Court, the county 

cannot be considered the owner, landlord, or lessor of the 

property and therefore National had no obligation to defend 

or indemnify the county. Having thus held, the court 

explicitly declined to reach the question of whether the 

constitutional violations alleged in the Acierno actions 

"constitute an invasion of the right of private occupancy." 

New Castle County v. National, 1997 WL 809207, at *8. 

This appeal ensued. The county asserts that the District 

Court erred in finding that definition 10(c) only provides 

coverage for acts committed by or on behalf of an owner, 

landlord, or lessor. On appeal, the county argues that 

definition 10(c) is ambiguous and should be construed in 

its favor. The issue presented to this Court on appeal is 

thus a narrow one. In short, we must determine whether 

definition 10(c) is ambiguous. 

Because the issue addressed in this opinion is one of first 

impression under Delaware law, we must predict how the 

Delaware Supreme Court would resolve it. After examining 

the parties' conflicting interpretations, relevant case law, 

tenets of contract construction, and the policy's language 

and purpose as a whole, we conclude that definition 10(c) 

is ambiguous and must be construed in favor of the county. 

Like the District Court we, too, will not reach the question 

of whether the allegations made in the Acierno actions state 

a colorable claim for an invasion of the right of private 

occupancy. Accordingly, the District Court's determination 

that definition 10(c) is unambiguous will be reversed, and 

this case will be remanded to the District Court to

 5 
determine, in light of our holding, whether the violations 

alleged in the Acierno actions constitute an invasion of the 

right of private occupancy. 

III. DISCUSSION 

A. Scope and Standard of Review 

We assert jurisdiction over this appeal under 28 U.S.C. 

S 1291. Jurisdiction below was premised on diversity of 

citizenship, and the District Court properly applied the 

substantive law of Delaware. See Erie R.R. v. Tompkins, 304 

U.S. 64, 78 (1938). Since the Delaware Supreme Court has 

yet to address the issue presented by this appeal, we must 

predict how that court would decide it. See Epstein Family 

Partnership v. Kmart Corp., 13 F.3d 762, 766 (3d Cir. 1994). 

The issue before this Court, simply put, is whether

definition 10(c) is ambiguous. Whether an insurance policy 

is ambiguous is a question of law, see International Union 

v. Mack Trucks, Inc., 917 F.2d 107, 111 (3d Cir. 1990), and 

we have plenary review over the issue. See Pacific Indem. 

Co. v. Linn, 766 F.2d 754, 760 (3d Cir. 1985)). And, as a 

general rule, we will consider only issues passed upon by 

the court below. See, e.g., Selected Risks Ins. Co. v. Bruno, 

718 F.2d 67, 69 (3d Cir. 1983). 

B. Delaware Law on Interpreting Insurance Policies 

As we must predict how the Delaware Supreme Court 

would decide this issue, it is necessary that wefirst 

understand Delaware law on this matter. Before an insurer 

is obligated to defend or indemnify a policyholder, the 

insured must demonstrate that coverage is available under 

the policy. See New Castle County v. Hartford Accident and 

Indem. Co., 933 F.2d 1162, 1181 (3d Cir. 1991) ("New 

Castle v. Hartford I") (applying Delaware law). An insurer's 

duty to defend is broader than its duty to indemnify, see 

Charles E. Brohawn & Bros., Inc. v. Employers Commercial 

Union Insurance Co., 409 A.2d 1055, 1058 (Del. 1979), but 

"is limited to suits which assert claims for which it has 

assumed liability under the policy." Continental Cas. Co. v. 

Alexis I. duPont School Dist., 317 A.2d 101, 103 (Del. 1974). 

"[W]here there exists some doubt as to whether the 

 6 
complaint against the insured alleges a risk insured 

against, that doubt should be resolved in favor of the 

insured." Id. at 105. Most importantly therefore, an insurer 

is "required to defend any action which potentially states a 

claim which is covered under the policy." New Castle 

County v. Hartford Accident and Indem. Co., 673 F. Supp. 

1359, 1367 (D. Del. 1987) ("New Castle v. Hartford II"). 

Thus, in this case, if the Acierno actions potentially state a 

claim that is covered under definition 10(c), National is 

required to defend the county in those actions. 

Whether the Acierno actions potentially state a claim for 

which National has assumed liability depends upon how we 

interpret definition 10(c). As a basic matter, Delaware law 

requires us to interpret insurance contracts "in a common 

sense manner." SI Management L.P. v. Wininger, 707 A.2d 

37, 42 (Del. 1998); see also New Castle v. Hartford I, 933 

F.2d at 1189 (according the terms of an insurance policy 

their "ordinary, usual meaning"). We must also examine the 

disputed language in the context of the entire policy. See, 

e.g., New Castle v. Hartford I, 933 F.2d at 1194 

(ascertaining whether a term "is ambiguous in the context 

of a specific insurance policy"); New Castle County v. 

Hartford Accident and Indem. Co., 970 F.2d 1267, 1271 (3d 

Cir. 1991) ("New Castle v. Hartford III") (construing a term 

"in context with the function of the [insurance] policy"); see 

also Porter v. Pathfinder Servs., Inc., 683 A.2d 40, 42 (Del. 

1996) (construing language of an employment contract in 

its context as a whole). 

"Absent some ambiguity, Delaware courts will not destroy 

or twist policy language under the guise of construing it," 

Rhone-Poulenc Basic Chemicals Co. v. American Motorists 

Insurance Co., 616 A.2d 1192, 1195 (Del. 1992) (citation 

omitted), because "creating an ambiguity where none exists 

could, in effect, create a new contract with rights, liabilities 

and duties to which the parties ha[ve] not assented." 

Hallowell v. State Farm Mut. Auto. Ins. Co., 443 A.2d 925, 

926 (Del. 1982) (citations omitted). When policy language is 

ambiguous, however, under Delaware law this Court must 

apply the doctrine of contra proferentem. See Oglesby v. 

Penn Mut. Life Ins. Co., 877 F. Supp. 872, 881 (D. Del. 

1994) (applying Delaware law). That is, ambiguous 

 7 
language must be construed against the drafter and in 

conformance with the reasonable expectations of the

insured. See Swfte Int'l, Ltd. v. Selective Ins. Co. of Am., No. 

Civ. A. 94-44-SLR, 1994 WL 827812, at *5 (D. Del. Dec. 30, 

1994); see also Steigler v. Ins. Co. of N. Am., 384 A.2d 398, 

400 (Del. 1978). 

The premise underlying the principle of contra 

proferentem is that an insurance contract is one of

adhesion. See State Farm Mut. Auto. Ins. Co. v. Johnson, 

320 A.2d 345, 347 (Del. 1974). As the Delaware Supreme 

Court recently explained, 

 [T]he insurer . . . is the entity in control of the process 

 of articulating the terms [of an insurance contract]. The 

 other party . . . usually has very little to say about 

 those terms except to take them or leave them or to 

 select from limited options offered by the insurer. . . . 

 Therefore, it is incumbent upon the dominant party to 

 make the terms clear. Convoluted or confusing terms 

 are the problem of the insurer . . . -- not the insured 

 . . . . 

Penn Mut. Life Ins. Co. v. Oglesby, 695 A.2d 1146, 1149-50 

(Del. 1997). As noted earlier, due to the insurer's dominant 

position, when an ambiguity is found in insurance policy 

language, we must construe the language against the

insurer as a matter of Delaware law. And therefore, unlike 

with other types of contracts, we need not inquire into the 

parties' actual intent. See New Castle v. Hartford I, 933 

F.2d at 1182 n. 43; Oglesby, 877 F. Supp. at 881 (noting 

that "Delaware courts . . . consistently constru[e]

ambiguities in favor of the insured as a matter of law."). 

Because ambiguous language is construed against the

insurer as a matter of law, we take special note of Delaware 

law for determining whether language is ambiguous."The 

settled test for ambiguity is whether the provisions in 

controversy are reasonably or fairly susceptible of different 

interpretations or may have two or more different 

meanings." Phillips Home Builders, Inc. v. Travelers Ins. Co., 

700 A.2d 127, 129 (Del. 1997) (internal quotation marks 

and citation omitted). An insurance policy is not 

ambiguous, however, "merely because two conflicting

 8 
interpretations may be suggested. Rather, both 

interpretations must reflect a reasonable reading of the 

contractual language." Aetna Cas. and Sur. Co. v. Kenner, 

570 A.2d 1172, 1174 (Del. 1990). Thus, we must examine, 

not only whether the county's reading of definition 10(c) is 

possible, but also whether it is reasonable. See id.; see also 

New Castle v. Hartford III, 970 F.2d at 1271 (rejecting one 

reading of the policy language at issue because, while 

possible, it was not reasonable). 

C. Definition 10(c) is Ambiguous 

Against this backdrop of Delaware law, we turn to the 

task before us of determining whether definition 10(c) is 

ambiguous. First, we consider the respective arguments of 

the parties and the relevant case law. We attempt to 

balance the weight of authority on this precise issue, but 

find that additional guidance is needed. Consequently, we 

turn to the tenets of contract construction. Finally, we 

examine the disputed language within the policy as a 

whole. Using these tools, we conclude that definition 10(c) 

is ambiguous. 

National and the county assert different interpretations of 

the phrase "by or on behalf of its owner, landlord or lessor." 

National argues, and the District Court held, that the 

phrase can only mean that the wrongful act -- the eviction, 

entry or invasion -- was done "by or on behalf of [the 

premises'] owner." The county replies that it is equally 

logical, or at least reasonable, to interpret the phrase as 

explaining how the premises in question is occupied. In its 

view, the language indicates that the "room, dwelling or 

premises" must have been occupied "by or on behalf of its 

owner, landlord or lessor." This distinction is critical 

because the county's reading does not require that the 

wrongful act have been instigated by the "owner, landlord 

or lessor" of the premises while National's does. As the 

county clearly was not an "owner, landlord or lessor" of 

Acierno's property, the latter interpretation is the only one 

under which the county can claim coverage. 

1. National's Interpretation of Definition 10(c) 

Under National's construction, to qualify for coverage, the 

invasion offense must be committed "by or on behalf of " 

 9 
the owner, the landlord, or lessor. Applied to the facts in 

this case, National would be obligated to defend the county 

against claims of invasion only if the county were the 

owner, landlord, or lessor of the property at issue in the 

Acierno actions. 

In support of this position, National cites three cases: (1) 

United States Fidelity and Guaranty Co. v. Goodwin, 950 F. 

Supp. 24 (D. Me. 1996); (2) Terramatrix, Inc. v. United 

States Fire Insurance Co., 939 P.2d 483 (Colo. Ct. App. 

1997); and (3) TGA Development, Inc. v. Northern Insurance 

Co. of New York, 62 F.3d 1089 (8th Cir. 1995). National's 

citations are instructive, yet ultimately we find the 

reasoning in these cases unavailing. 

In Goodwin, the court held that language identical to 

definition 10(c) "unambiguously requires that the wrongful 

entry be committed by the owner, landlord, or lessor of the 

room, dwelling, or premises." 950 F. Supp. at 27. We fail to 

understand the logic underlying Goodwin, however. 

Reviewing the same phrase, i.e., 

 [t]he wrongful eviction from, wrongful entry into, or 

 invasion of the right of private occupancy of a room, 

 dwelling or premises that a person occupies by or on 

 behalf of its owner, landlord or lessor, 

the Goodwin court found that the word "its" modifies "room, 

dwelling or premises," and not "person." 950 F. Supp. at 

27. Yet, replacing "its" with any of the words the court 

found "its" to modify does not foreclose either National or 

the county's reading of the provision. For example, consider 

the following: "The wrongful eviction from a room that a 

person occupies by or on behalf of the room's owner, 

landlord or lessor." Or, consider this: "The invasion of the 

right of private occupancy of a premises that a person 

occupies by or on behalf of the premises' owner, landlord or 

lessor." Both examples illustrate the flaw in the Goodwin 

court's reasoning; that is, neither clarifies whether "by or 

on behalf of " requires the offense to be committed by the 

owner, landlord, or lessor, or whether it defines the 

possessory interest of the claimant. Thus, determining what 

"its" modifies neither strengthens nor undermines either of 

the competing interpretations of definition 10(c) forwarded 

by National and the county. 

 10 
In Terramatrix, the Colorado Court of Appeals also found 

language identical to definition 10(c) "unambiguous and 

applicable only to entries, evictions and invasions

committed by or on behalf of the owner, landlord or lessor." 

939 P.2d at 489. Although the Terramatrix court professed 

to be "persuaded by the reasoning of other courts," it cited 

only Goodwin in support of its conclusion that the provision 

was unambiguous. Id. As we explained above, the 

reasoning in Goodwin is flawed at best. Because the

Terramatrix court does not offer any analysis of its own, 

without more, we cannot accord significant weight to its 

holding. 

In TGA Development, the Eighth Circuit commented that 

it "doubt[ed] very much that coverage is available under" a 

personal injury provision identical to definition 10(c) 

because the insured could not "even colorably be 

characterized as owner, landlord, or lessor." TGA 

Development, 62 F.3d at 1091 (internal quotation marks 

omitted). National points to this language to bolster its 

claim that the insured must be the owner, landlord, or 

lessor to qualify for coverage under definition 10(c). The 

Eighth Circuit's commentary is purely dicta, however. 

Indeed, the TGA court explicitly "pass[ed] over" the issue 

presented by this appeal. See id. Instead, the court based 

its conclusion that coverage was not available on the 

policy's exclusion of coverage clause prohibiting recovery 

"for personal injury for which the insured has assumed 

liability in a contract or agreement." See 62 F.3d at 1091. 

The dicta from TGA Development has "no binding authority" 

on this Court. Gruber v. Price Waterhouse, 911 F.2d 960, 

967 (3d Cir. 1990).7 

In addition to the above cases, the District Court also 

cited Patel v. Northfield Insurance Co., 940 F. Supp. 995 

(N.D. Tex. 1996), for the proposition that definition 10(c) is 

unambiguous. In Patel, the court found that language 

identical to definition 10(c) was unambiguous. The case is 

_________________________________________________________________ 

7. We can, of course, accord dicta as much weight as we deem 

appropriate. See, e.g., Girard Trust Co. v. United States, 161 F.2d 159, 

162 (3d Cir. 1947) (recognizing that although a finding was dicta, it was 

"made after a careful consideration of authorities"). 

 11 
different in one fundamental respect, however. The Patel 

court based its finding on Decorative Center v. Employers 

Casualty, 833 S.W.2d 257, 260 (Tex. App. 1992), which 

examines language different from definition 10(c). In 

Decorative Center, the personal injury offense was "other 

invasion of the right of private occupancy." Id. at 1001. 

Importantly, it does not include the "by or on behalf of" 

language that forms the basis for this appeal. The Patel 

court dismissed the difference between the Decorative 

Center language and language identical to definition 10(c) 

as having "no practical effect." Id. at 1001 n.10. We, 

however, find that language critical to this case. Indeed, the 

sole focus of this appeal is definition 10(c)'s "by or on behalf 

of" language.8 

In sum, National has offered some authority that 

suggests definition 10(c) is not ambiguous. Upon close 

inspection of the cases, however, we find the authority to be 

unpersuasive or of limited precedential value. As such, 

standing alone, the authority forwarded by National does 

not resolve whether definition 10(c) is clear or ambiguous. 

With that we turn to the county's interpretation of

definition 10(c). 

2. The County's Competing Interpretation of Definition 

10(c) 

The county urges this Court to accept an alternative 

reading of definition 10(c) as reasonable. According to the 

county, the phrase "by or on behalf of" defines the

possessory interest of the person aggrieved in 10(c). Under 

this interpretation, in order for the insured to invoke 

coverage for an invasion, the claimant must have the right 

to occupy the premises, either as owner, landlord, or lessor, 

or with the permission of the owner, landlord, or lessor. 

_________________________________________________________________ 

8. The ISO added the "by or on behalf of" language to definition 10(c) in 

1986. Thus, in addition to Patel, we reject Liberty Mutual Insurance Co. 

v. East Central Oklahoma Electric Cooperative, 97 F.3d 383 (10th Cir. 

1996), Martin v. Brunzelle, 699 F. Supp. 167 (N.D. Ill. 1988), and Harbor 

Insurance Co. v. Anderson Leasing, Inc., 1989 WL 112532 (Del. Super. 

Ct. Sept. 27, 1989) as persuasive precedent, because they too are based 

on the pre-1986 version of definition 10(c). 

 12 
In support of its interpretation, the county cites United 

States v. Security Management Co., 96 F.3d 260 (7th Cir. 

1996). In that case, the Seventh Circuit examined language 

identical to definition 10(c). Although the District Court 

found the provision to be ambiguous, the Seventh Circuit 

read the language beginning "that a person occupies . . ." 

as unambiguously "refin[ing] the nature of the prerequisite 

`right' of private occupancy." Id. at 265. In other words, in 

the view of the Security Management court, the language at 

issue "limit[s] coverage to those instances where `a person 

occupies by or on behalf of its owner, landlord or lessor' " 

and functions to "exclude[ ] at least unapproved sub-lessees 

from coverage." Id. 

The Seventh Circuit's commentary on the meaning of the 

clause again is dicta, however. Its holding is based on the 

fact that the litigants claiming an invasion in that case 

"unquestionably lacked any . . . enforceable claim of 

occupancy," Id. at 265; indeed, the litigants were "testers," 

or civil rights activists who posed as apartment-hunters but 

who did not actually rent a unit. Id. at 265. As we noted 

earlier, we are not bound by this dicta, although we may 

consider it in our analysis if we deem it appropriate. See 

supra n.7. 

The county also cites Blackhawk - Central City Sanitation 

District v. American Guaranty & Liability Insurance Co., 856 

F. Supp. 584 (D. Colo. 1994), for the proposition that 

definition 10(c) is ambiguous. In that case, the court was 

asked to construe language identical to definition 10(c), and 

the parties' arguments mirror those presented here.

Appellee contended that language identical to definition 

10(c) "requires that the eviction, entry or invasion be by or 

on behalf of the owner, landlord or lessor of the premises." 

Id. at 590. The appellant, on the other hand, argued that 

the provision could "be read to modify, not the party who 

evicts, enters or invades, but rather on whose authority the 

current occupant holds the property." Id. Faced with these 

competing interpretations, the court deemed the provision 

ambiguous and construed the language in favor of the 

insured. See id. The Blackhawk court, however, did not 

elaborate on how it reached its conclusion and thus

provides us with little guidance. 

 13 
In sum, the county has presented this Court with 

authority to suggest that definition 10(c) is ambiguous. The 

case law it cites -- Security Management and Blackhawk -- 

however, is either dicta or void of analysis and thus it does 

not, by itself, establish that definition 10(c) is ambiguous or 

that the county's interpretation is reasonable. Having 

reviewed the relevant case law supporting both sides of the 

issue, we consider the weight of the authority. 

3. The Weight of the Authority 

To predict how the Delaware Supreme Court would 

decide this case, we must consider "reliable data tending 

convincingly to show how the highest court in the state 

would decide the issue at hand." McKenna v. Ortho Pharm. 

Corp., 622 F.2d 657, 663 (3d Cir. 1980). This includes 

"relevant state precedents, analogous decisions, considered 

dicta, [and] scholarly works." Id. Having reviewed the 

relevant precedent, it is difficult to predict how the 

Delaware Supreme Court would decide the issue before us. 

Importantly, we can discern no appreciable trend among 

the cases. First, the universe of cases that examines 

language identical to definition 10(c) is very small. While 

our job is not simply to count the number of cases on both 

sides, even if we did so, the line of cases on each side 

would be roughly equal. Moreover, one Circuit Court of 

Appeal has weighed in on each side of the issue, and each 

time only in dicta. Still other cases offered only bare-boned 

analyses. And finally, with particular relevance to our task, 

not one of the cases cited is from a Delaware state court or 

a federal court construing Delaware law. 

The most we can glean from the conflicting case law on 

this issue is that, as a starting point, definition 10(c) may 

reasonably be susceptible to more than one interpretation. 

When faced with a similar situation in another case, we 

explained that 

 [a]lthough the presence of conflicting judicial decisions 

 does not automatically mandate a finding of ambiguity, 

 we think it has some relevance. . . . We are confronted 

 here with two lines of contrasting cases . . . While it is 

 our responsibility to ascertain which of these lines is 

 most likely to be followed in Delaware, we cannot help 

 14 
 but view such a division as at least suggesting that the 

 . . . [contested term] is susceptible of more than one 

 reasonable definition. 

New Castle v. Hartford I, 933 F.2d at 1196. In short, "that 

different courts have arrived at conflicting interpretations of 

the policy is strongly indicative of th[is] policy's essential 

ambiguity." Little v. MGIC Indem. Corp., 836 F.2d 789, 796 

(3d Cir. 1987) (citation omitted). Thus, as a starting point, 

we tend to view the case law as indicating that definition 

10(c) is susceptible to more than one reasonable 

interpretation and, as such, is ambiguous. For greater 

guidance on this issue, we now turn to the traditional rules 

of contract interpretation. 

4. Rules of Contract Interpretation 

Insurance policy disputes often turn on the meaning of a 

single term or phrase. See, e.g., New Castle v. Hartford I, 

933 F.2d at 1193-99. The case before us is somewhat

different because it turns on the function of a phrase -- "by 

or on behalf of" -- within a larger provision. As a

consequence, we will look to the grammatical arrangement 

of clauses in definition 10(c) to construe the meaning of 

definition 10(c). See Lake County v. Rollins, 130 U.S. 662, 

670 (1889) ("To get at the thought or meaning expressed in 

a statute, a contract, or a constitution, the first resort, in 

all cases, is to the natural significance of the words, in the 

order of grammatical arrangement in which the framers of 

the instrument have placed them."); see also 17A Am. Jur. 

2d Contracts S 369 (1991) (instructing a court to give "due 

force to the grammatical arrangement of clauses" because 

grammatical construction of a contract "is often a reliable 

signpost" in construing its language). 

National argues that definition 10(c) is not ambiguous. 

The heart of its argument is that the phrase "by or on 

behalf of its owner, landlord or lessor" modifies "wrongful 

eviction from, wrongful entry into, or invasion of the right 

of private occupancy," and thus requires that the insured 

be the owner, landlord or lessor of the property at issue. 

The county, on the other hand, maintains that "by or on 

behalf of" pertains to its nearer antecedent "person," 

establishing the requirement that the claimant have the 

right to occupy the premises. 

 15 
The grammatical construction of contracts generally

requires that a qualifying or modifying phrase be construed 

as referring to its nearest antecedent. See Bakery and 

Confectionery Union and Indus. Int'l Pension Fund v. Ralph's 

Grocery Co., 118 F.3d 1018, 1026 (4th Cir. 1997) 

(construing a collective bargaining agreement) (citation 

omitted); see also Aks v. Southgate Trust Co., 1994 WL 

171537 (D. Kansas Mar. 31, 1994), at *9 (concluding that 

the "[r]ules of grammar and contract interpretation as well 

as simple logic dictate" that a particular clause modifies the 

word directly preceding it). The Ninth Circuit applied this 

rule of contract interpretation in construing the language of 

an insurance contract in Interstate Fire and Casualty Co. v. 

Archdiocese of Portland in Oregon, 35 F.3d 1325 (9th Cir. 

1994) (applying Florida law). Under the terms of the policy, 

the underwriters agreed "to indemnify the Assured for all 

sums which the Assured shall be obligated to pay by reason 

of the liability imposed upon the Assured by law . .. for 

damages . . . on account of personal injuries . . . arising out 

of any occurrence happening during the period of 

Insurance." Id. at 1329 (ellipses in original). The insurance 

underwriter argued that the assuring clause required that 

all damages occur within the policy period in order to be 

covered. In contrast, the court concluded that "based on 

the plain meaning of the assuring clause . . . it is the 

occurrence, rather than the damages, that must happen 

during the policy period." Id. (internal quotation marks 

omitted). Thus, in this example, "happening during the 

period of Insurance" modifies "occurrence," the noun that 

directly precedes it, and not "damages," which is more 

remote.9 

_________________________________________________________________ 

9. Similarly, the Eleventh Circuit, in Gibbs v. Air Canada, applied the 

same rule of contract construction to a contract in which a company 

called Aircraft Services agreed to provide various ramp services to Air 

Canada. 810 F.2d 1529, 1531 (11th Cir. 1987). A liability provision in 

the contract stated that "Service Inc. does not assume any liability for 

damages caused by or resulting from directly or indirectly, wholly or in 

part, any failure or fault other than negligence or willful misconduct 

. . . ." Id. at 1536. Noting that the"grammatical construction of 

contracts 

generally requires that a qualifying phrase be construed as referring to 

its nearest antecedent," the court concluded that the "natural reading" of 

the phrase was that "wholly or in part" modified "caused by or resulting 

from directly or indirectly," id., the language that most directly 

preceded 

it. 

 16 
When we apply this rule of construction to definition 

10(c), it is plain that "by or on behalf of" modifies "that a 

person occupies," the language that directly precedes it, 

and not the "wrongful eviction from, wrongful entry into, or 

invasion of the right of private occupancy" language that 

commences definition 10(c). On this basis, we find the 

county's interpretation of definition 10(c) to be entirely 

reasonable. Because definition 10(c) is subject to more than 

one reasonable interpretation, it is ambiguous, and must 

be construed in favor of the county.10 See supra section 

III.B. (noting that ambiguous language is construed against 

the insurer as a matter of Delaware law). 

Our finding that the county's interpretation of definition 

10(c) is reasonable is not diminished by the fact that this 

interpretation may render portions of the provision

surplusage in cases of "wrongful eviction" and"wrongful 

entry." As noted earlier, under Delaware law, we must 

consider the phrase "by or on behalf of " in the context of 

definition 10(c) as a whole. See Cheseroni v. Nationwide 

_________________________________________________________________ 

10. We hoped that an examination of the punctuation used in definition 

10(c) might clarify any ambiguity therein. See, e.g., Plymouth Mut. Life 

Ins. Co. v. Illinois Mid-Continent Life Ins. Co. of Chicago, IL, 378 F.2d 

389, 

391 (3d Cir. 1967) (stating that "punctuation may be used as an aid in 

interpreting a contract"); 17A Am. Jur. 2d Contracts S 370 (1991) (stating 

that "where words do not have a plain meaning, the rules of punctuation 

may be of some assistance"). We were disappointed. At oral argument, 

counsel for National represented to this Court that, in construing 

definition 10(c), one is supposed to "breathe" in between the terms "that 

a person occupies" and "by or on behalf of," presumably to break the 

natural link between the two phrases. Yet in drafting this policy, 

National could easily have inserted a comma in between "occupies" and 

"by or on behalf of" to function as an "interruption in continuity of 

thought or sentence structure." The Chicago Manual of Style (John 

Grossman ed., University of Chicago Press, 14th ed. 1993). That is, a 

comma would have alerted the reader that National did not intend for 

"by or on behalf of " to flow uninterrupted from "that a person occupies." 

National chose instead, however, to assume that the reader would 

"breathe" in between "by" and "occupies." In making this choice, National 

also assumed the risk that the language might be misconstrued. And, 

"convoluted or confusing terms are the problem of " National, not the 

county. Emmons v. Hartford Underwriters Ins. Co., 697 A.2d 742, 745 

(Del. 1997). 

 17 
Mut. Ins. Co., 402 A.2d 1215, 1217 (Del. 1979) ("[A] single 

clause or paragraph of a contract cannot be read in

isolation, but must be read in context, and every portion of 

the contract deserves consideration."); New Castle v. 

Hartford III, 970 F.2d at 1271 ("[A] word or term cannot be 

considered in isolation; it must be read in the semantic and 

functional context of the policy or clause at issue to 

determine if two competing, reasonable interpretations 

exist."). We have said that "by or on behalf of" is

ambiguous because it can reasonably be interpreted to 

require the insured to commit the offense as owner,

landlord, or lessor, or to define the possessory status of the 

claimant. It follows, then, that "wrongful eviction from a 

room . . . by or on behalf of the owner, landlord or lessor" 

can mean either that the owner, landlord, or lessor must 

commit the eviction, or that the claimant must have the 

right to possess the room.11 The latter interpretation, 

however, seems to render the term "wrongful" superfluous. 

Indeed, an eviction is not "wrongful" unless the evicted 

party (the claimant) has a right to possess the premises. 

And this Court takes care not to render other portions of a 

provision or contract superfluous when construing contract 

language. See, e.g., Contrans, Inc. v. Ryder Truck Rental, 

Inc., 836 F.2d 163, 169 (3d Cir. 1987) (applying 

Pennsylvania law); see also Restatement (Second) of

Contracts S 203(a) (1979) (stating that "an interpretation 

which gives a reasonable, lawful and effective meaning to 

all the terms is preferred to an interpretation which leaves 

a part unreasonable, unlawful, or of no effect"). 

In this vein, we note that interpreting the phrase "by or 

on behalf of" to require a claimant to have the right to 

_________________________________________________________________ 

11. The language "a room, dwelling or premises that a person occupies 

by or on behalf of its owner, landlord or lessor" applies to all three 

offenses -- wrongful eviction, wrongful entry, and invasion of the right 

of 

private occupancy. We know this because wrongful eviction is followed 

by "from," entry by "into," and invasionby "of." "From," "into" and "of " 

are all prepositions, and as such, have an object. The objects in this 

case 

are the room, dwelling, or premises. Thus, definition 10(c) must be read, 

for example, as "wrongful eviction from a room . . . ," "wrongful entry 

into a room . . . ," or "invasion of the right of private occupancy of a 

room . . . ." 

 18 
possess the room does not necessarily render the word 

"wrongful" surplusage. Whereas an "invasion of the right of 

private occupancy" is itself a tortious act, both evictions 

and entries can be executed rightfully. For example, a 

landlord may rightfully evict a tenant who has not paid 

rent. Thus, the word "wrongful" complements the "by or on 

behalf of" language by ensuring that coverage under

definition 10(c) is limited to situations in which the insured 

has committed a wrongful, tortious act. As we have noted 

in the past, insurance policies are often written with an 

abundance of caution; indeed, they routinely use words or 

groups of words that are fairly synonymous with one

another, particularly to underline a salient point. See New 

Castle v. Hartford I, 933 F.2d at 1194 & n. 56 (concluding 

that the Delaware Supreme Court would persist in giving a 

term its plain meaning even though other courts feared that 

construction rendered the term surplusage). Therefore, 

notwithstanding a potential contextual defect, we are 

unwilling to override our conclusion that the county's 

interpretation of definition 10(c) is reasonable when the 

contextual defect is itself subject to competing 

interpretations. Although we would prefer to give equal 

effect to all of the language in definition 10(c), we refuse to 

reject an otherwise reasonable reading to avoid what might 

only be a potential contextual infirmity. In sum, the 

contextual complexity of definition 10(c) only reinforces our 

conclusion that the provision is ambiguous. 

We also reject National's argument that its interpretation 

of definition 10(c) alone makes sense when viewed in the 

context of the entire CGL policy. It argues that the"entire 

object of the CGL policies" is "to insure against the tortious 

conduct of the insured." Br. of Appellee, at 28. We recognize 

that the Delaware Supreme Court has considered the 

"purpose of liability policies in general" to determine the 

scope of coverage. E.I. Du Pont De Nemours & Co. v. Allstate 

Ins. Co., 686 A.2d 152, 157 (Del. 1996) (construing a CGL 

insurance policy). Contrary to National's argument,

however, viewing "by or on behalf of " in the context of the 

entire policy does not foreclose the county's interpretation 

of definition 10(c). Indeed, the county's position that "by or 

on behalf of " requires the claimant to have the right to 

possess the premises is consistent with the purpose of the 

 19 
policy as stated by National; the language as construed by 

the county ensures that the only claims covered under the 

policy are for tortious conduct. 

Furthermore, we reject National's claim that under the 

county's interpretation 

 there would have been no conceivable way for Appellee 

 to rate the actuarial risk involve in issuing the CGL 

 policies. . . . Appellee can only sell Appellant a policy 

 of CGL insurance if there is a readily quantifiable 

 number of properties which Appellee [sic: Appellant] 

 owns, leases or rents. If Appellant's interpretation had 

 been accepted by the parties at the time the subject 

 CGL policies were issued, the premium charged to 

 Appellant for such coverage would have been 

 astronomical since Appellant could potentially be held 

 liable for wrongfully entering or invading an ever- 

 expanding number of `rooms, dwellings, or premises' 

 within New Castle County. 

Br. of Appellee, at 41. In brief, National claims that its 

interpretation of definition 10(c) is the only reasonable one 

because otherwise, it would have been impossible for 

National to assess the actuarial risk involved in issuing a 

policy to the county. National's argument fails for several 

reasons. First, National claims that it would only issue a 

policy to the county if National could quantify the number 

of properties the county owned, leased, or rented. Yet, this 

Court could not find, and indeed National did not identify, 

any provision in the policy that limited the county's ability 

to buy, lease, or rent new properties while covered by the 

policy. Thus, there does not appear to be any policy 

mechanism that fixes the number of properties the county 

owns, leases, or rents within the limits supposedly

established by the amount of the premium. 

Second, the invasion offense is just one of several

personal injury offenses listed in definition 10. See App. to 

Br. of Appellant, at A141 (CGL Policy). National claims that 

without knowing the number of properties owned, leased, 

or rented by the county, it could not assess the county's 

risk for claims of eviction, entry, or invasion. Assuming that 

is true, how does National assess the county's risk for "false 

 20 
arrest, detention, or imprisonment" without knowing how 

many people the county could falsely arrest? Or "malicious 

prosecution," without knowing how many people the county 

could potentially maliciously prosecute? And again National 

has not indicated that the policy limits the coverage of 

these personal injury offenses to a specific number. It 

seems to this Court that there are a potentially infinite 

number of people the county could libel or slander through 

an infinite number of written and oral statements, and yet 

National was able to calculate a premium to insure the 

county in connection with those offenses. 

Third, we must be sure to read the policy language from 

the average consumer's point of view. See New Castle v. 

Hartford I, 933 F.2d at 1190 (noting that "under Delaware 

law, the parties to an insurance contract are bound by the 

popular, lay meaning of its terms, regardless of the 

sophistication of the insured."); see also Continental Ins. Co. 

v. Burr, 706 A.2d 499, 501 (Del. 1998) (construing 

ambiguous language to satisfy the average consumer's 

expectations). The average consumer can be expected to 

appreciate that the insurer will insure a particular risk only 

under certain circumstances when those circumstances are 

explicitly spelled out in the contract. For example, it is clear 

that the insurer deems a particular event too risky for it to 

insure the policyholder against when the insurer includes a 

clause explicitly excepting that risk in the policy. This was 

the case in New Castle v. Hartford III, where we stated that 

an exclusion clause "embodies an understanding that the 

insurer will only underwrite a certain, specific risk, 

calculable to a margin of actuarial certainty and rational 

from an economic point of view for both parties." Id. at 

1272. In contrast, definition 10(c) is not an exclusion 

clause and does not "embody" a similar understanding. 

National's argument thus expects too much from the 

average insurance consumer. 

Lastly, and most importantly, what National intended 

definition 10(c) to mean is very different from what the 

provision's language conveys. At best, National's actuarial 

argument suggests that National has a sound business 

rationale for the interpretation of definition 10(c) it urges on 

this Court. The argument does not, however, demonstrate 

 21 
that National succeeded in drafting a policy that limited 

coverage for the invasion offense only to cases when the 

county was the owner, landlord, or lessor. Cf. Little, 836 

F.2d at 796 (acknowledging an insurer's "sound business 

reasons" for not wanting to be obligated to defend the 

insured, while rejecting notion that such reasons prove that 

the insurer "succeeded in drafting a policy that 

unambiguously states this intention."). 

In sum, both National and the county "offer reasonable, 

though problematic, interpretations" of definition 10(c). 

Phillips Home Builders, Inc. v. Travelers Ins. Co., 700 A.2d 

127, 129, 130 (Del. 1997) ("We find problems with both 

sides' interpretations. Neither one gives full effect to all of 

the contract language and both could be applied in ways 

that a reasonable person probably would not have 

intended."). And, the case law before us fails to offer 

definitive guidance, but leads us to suspect that definition 

10(c) is ambiguous. This finding is supported by the rules 

of contract construction. Also, in holding that definition 

10(c) is ambiguous, we recognize Delaware's strong 

insistence that insurance companies are accountable for 

confusing policy language. In this case, National had the 

"opportunity and responsibility to state the terms of its 

coverage . . . in clear and understandable language." Id. at 

130. Thus, because using the tools of contract 

interpretation leads to two reasonable interpretations of the 

"by or on behalf of" language in definition 10(c), we hold 

that it is ambiguous. 

Finally, because the District Court did not reach the 

issue of whether the Acierno actions stated a claim for an 

invasion, we decline to reach that issue on appeal. See 

Selected Risks, 718 F.2d at 69 (stating that generally this 

Court will not consider an issue not passed upon by the 

court below). Thus, we will not address the county's 

argument that the nature of Acierno's claims is consistent 

with an invasion of the right of private occupancy. Nor will 

we address National's response that the invasion offense is 

limited to landlord-tenant scenarios and situations that 

involve tangible interference with a possessory interest in 

land. Such arguments go to the nature of the invasion 

offense itself and are outside of our scope of review. We 

 22 
leave it to the District Court to determine whether invasions 

are limited to the landlord-tenant context and whether they 

are limited to tangible interference with possessory interest. 

The District Court will examine them on remand when it 

decides whether the claims made in the Acierno actions 

constitute an "invasion of the right of private occupancy." 

IV. CONCLUSION 

For the foregoing reasons, the portion of the District 

Court judgment finding that definition 10(c) is 

unambiguous will be reversed. The case will be vacated and 

remanded to the District Court to determine whether the 

Acierno actions constitute an invasion of the right of private 

occupancy. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 23