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. e du/thir dc ir c uit_1999/107Filed 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 U nited 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 insuran ce policy is ambiguous. Upon review of the relevant ca se law and the tenets of contract construction, we find th ere are two reasonable interpretations of the policy langua ge. Therefore, pursuant to Delaware law, we conclude th at the provision is ambiguous, and we construe it in favor of the

insured. We remand the case to the District Court f or 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 p olicy is ambiguous. The CGL policy at issue is a standard fo rm policy prepared by the Insurance Service Office ("I SO"). It provides that the insurer will defend and indemnify the insured against claims alleging damages for "person al injury." The personal injury offenses covered under the policy include definition 10(c), which reads as fol lows:

10. "Personal injury" means injury, other th an "bodily injury," arising out of one or more of the f ollowing

offenses: . . .

c. The wrongful eviction from, wrongful entr y into, or invasion of the right of private occupanc y of a room, dwelling or premises that a person

2occupies by or on behalf of its owner, landl ord or

lessor.

App. of Appellant, at A141 (CGL Policy No. GL 590-6 2-18- RA).

The above language gave rise to a declaratory judgm ent action brought on October 21, 1996 by New Castle Co unty, Delaware ("the county") in the District Court for t he 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 polic y" or "the policy").2 When Frank E. Acierno, a developer, file d three lawsuits against the county (collectively, "the Aci erno actions"), the county turned to National to defend and indemnify it against the suits. In general, the Aci erno actions alleged that the county violated Acierno's constitutional rights by re-zoning or refusing to i ssue building permits for his property. More specificall y, the actions were styled as follows: (1) the first suit alleged violations of Acierno's constitutional rights for f ailure to issue a commercial building permit on a parcel of l and owned by Acierno;3 (2) the second alleged that an o rdinance

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1. The District Court based its jurisdiction on div ersity of citizenship.

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

2. The county purchased three CGL policies from Nat ional: Policy No. GL 590-44-26-RA, effective July 1, 1991 to July 1, 199 2; Policy No. GL 590- 62-18-RA, effective July 1, 1992 to July 1, 1993; a nd Policy No. GL 590- 73-01-RA, effective July 1, 1993 to July 1, 1994. A s the District Court noted, these policies do not differ from one anothe r in any significant way. See New Castle County, Delaware v. National Un ion Fire Ins. Co. of Pittsburgh, PA, No. CIV. A. 96-504 LON, 1997 WL 809 207, 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 a gainst the county were filed. Br. of Appellee, at 7. National has not decl ared its coverage position with respect to the other two CGL policies.

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

moved for a preliminary injunction, which the trial court granted on December 30, 1992. On appeal, this circuit held that the dis pute was not ripe for judicial review, vacated the lower judgment, and re manded the case with instructions to dismiss it without prejudice. See A cierno v. Mitchell, 6 F.3d 970, 977-78 (3d Cir. 1993).3passed by the county to re-zone one of his properti es

violated his civil rights;4 and (3) the third, file d after the county's final denial of the building permit, essen tially

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

Because the county believed that the Acierno action s state a claim for "invasion of the right of private occupancy" as defined in definition 10(c) of the CGL policy, i t sought to have National defend and indemnify it in those suit s. National disclaimed coverage under the CGL policy f or the Acierno actions.6 The county then filed the declara tory judgment action underlying this appeal.

National responded to the County's declaratory judg ment action with two counter-arguments. First, National asserted that the offense of "invasion of the right of priva te 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 t he actions do not fall within the coverage of definiti on 10(c) and, consequently, National had no obligation to de fend 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 ("Ac ierno 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. Accordin g to the county, it was required to issue a building permit and the cas e was eventually settled in accordance with the Acierno II stipulati on. Br. of Appellant,

at

14.

6. National has actually only disclaimed coverage u nder the CGL policy for Acierno I and II. Yet, the District Court concl uded in its opinion that, although National has apparently not declared its o fficial coverage position with regard to Acierno III, the issue of N ational's obligation to defend and indemnify the county in Acierno III was nonetheless ripe for adjudication, in part because it is likely that Nat ional would disclaim any obligation to defend or indemnify the county in connection with Acierno III. See New Castle County v. National, 199 7 WL 809207 at *3-4. We have no occasion to disrupt the District Court's finding on this

matter.

4coverage 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, Nati onal 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, hold ing that definition 10(c) unambiguously "contemplates c overage for acts such as evictions, entries and invasions c ommitted by one acting by or on behalf of the property's own er, 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 t o defend or indemnify the county. Having thus held, the cour t explicitly declined to reach the question of whethe r the constitutional violations alleged in the Acierno ac tions "constitute an invasion of the right of private occ upancy." New Castle County v. National, 1997 WL 809207, at * 8.

This appeal ensued. The county asserts that the Dis trict Court erred in finding that definition 10(c) only p rovides coverage for acts committed by or on behalf of an o wner, landlord, or lessor. On appeal, the county argues t hat definition 10(c) is ambiguous and should be constru ed in its favor. The issue presented to this Court on app eal is thus a narrow one. In short, we must determine whet her 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 exam ining the parties' conflicting interpretations, relevant case law, tenets of contract construction, and the policy's l anguage 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 acti ons state a colorable claim for an invasion of the right of p rivate occupancy. Accordingly, the District Court's determ ination that definition 10(c) is unambiguous will be revers ed, and

this case will be remanded to the District Court to

5determine, in light of our holding, whether the vio lations

alleged in the Acierno actions constitute an invasi on 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 diversit y of citizenship, and the District Court properly applie d the substantive law of Delaware. See Erie R.R. v. Tompk ins, 304 U.S. 64, 78 (1938). Since the Delaware Supreme Cour t 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 Ci r. 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 Internationa l Union v. Mack Trucks, Inc., 917 F.2d 107, 111 (3d Cir. 19 90), 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 u pon 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 wefir st

understand Delaware law on this matter. Before an i nsurer 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 Accid ent and Indem. Co., 933 F.2d 1162, 1181 (3d Cir. 1991) ("Ne w Castle v. Hartford I") (applying Delaware law). An insurer's duty to defend is broader than its duty to indemnif y, see Charles E. Brohawn & Bros., Inc. v. Employers Comme rcial 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 Ca s. Co. v. Alexis I. duPont School Dist., 317 A.2d 101, 103 (D el. 1974). "[W]here there exists some doubt as to whether the

6complaint against the insured alleges a risk insure d

against, that doubt should be resolved in favor of the insured." Id. at 105. Most importantly therefore, a n insurer is "required to defend any action which potentially states a claim which is covered under the policy." New Castl e 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 potentia lly state a claim that is covered under definition 10(c), Natio nal is required to defend the county in those actions.

Whether the Acierno actions potentially state a cla im for which National has assumed liability depends upon h ow we interpret definition 10(c). As a basic matter, Dela ware 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 p olicy their "ordinary, usual meaning"). We must also exam ine the disputed language in the context of the entire poli cy. See, e.g., New Castle v. Hartford I, 933 F.2d at 1194 (ascertaining whether a term "is ambiguous in the c ontext of a specific insurance policy"); New Castle County v. Hartford Accident and Indem. Co., 970 F.2d 1267, 12 71 (3d Cir. 1991) ("New Castle v. Hartford III") (construi ng a term "in context with the function of the [insurance] po licy"); see also Porter v. Pathfinder Servs., Inc., 683 A.2d 40 , 42 (Del. 1996) (construing language of an employment contrac t in its context as a whole).

"Absent some ambiguity, Delaware courts will not de stroy or twist policy language under the guise of constru ing it,"

Rhone-Poulenc Basic Chemicals Co. v. American Motor ists Insurance Co., 616 A.2d 1192, 1195 (Del. 1992) (cit ation 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 la nguage is ambiguous, however, under Delaware law this Court m ust apply the doctrine of contra proferentem. See Ogles by v. Penn Mut. Life Ins. Co., 877 F. Supp. 872, 881 (D. Del. 1994) (applying Delaware law). That is, ambiguous

7language 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. D ec. 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. Joh nson, 320 A.2d 345, 347 (Del. 1974). As the Delaware Supr eme Court recently explained,

[T]he insurer . . . is the entity in control of the process of articulating the terms [of an insurance c ontract]. The other party . . . usually has very little to say about those terms except to take them or leave the m or to select from limited options offered by the i nsurer. . . . Therefore, it is incumbent upon the dominant party to

make the terms clear. Convoluted or confusin g 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 p olicy 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 (n oting 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 provision s in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings." Phillips Home Builders, Inc. v. Traveler s Ins. Co., 700 A.2d 127, 129 (Del. 1997) (internal quotation m arks and citation omitted). An insurance policy is not ambiguous, however, "merely because two conflicting

8interpretations may be suggested. Rather, both

interpretations must reflect a reasonable reading o f the contractual language." Aetna Cas. and Sur. Co. v. K enner, 570 A.2d 1172, 1174 (Del. 1990). Thus, we must exam ine, 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 (rejec ting one reading of the policy language at issue because, wh ile possible, it was not reasonable).

C. Definition 10(c) is Ambiguous

Against this backdrop of Delaware law, we turn to t he task before us of determining whether definition 10 (c) is ambiguous. First, we consider the respective argume nts of the parties and the relevant case law. We attempt t o balance the weight of authority on this precise iss ue, but find that additional guidance is needed. Consequent ly, we

turn to the tenets of contract construction. Finall y, we examine the disputed language within the policy as a whole. Using these tools, we conclude that definiti on 10(c) is ambiguous.

National and the county assert different interpreta tions 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 e viction, entry or invasion -- was done "by or on behalf of [ the premises'] owner." The county replies that it is eq ually logical, or at least reasonable, to interpret the p hrase as explaining how the premises in question is occupied . In its view, the language indicates that the "room, dwelli ng or premises" must have been occupied "by or on behalf of its owner, landlord or lessor." This distinction is cri tical because the county's reading does not require that the wrongful act have been instigated by the "owner, la ndlord or lessor" of the premises while National's does. A s the county clearly was not an "owner, landlord or lesso r" of Acierno's property, the latter interpretation is th e only one under which the county can claim coverage.

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

Under National's construction, to qualify for cover age, the invasion offense must be committed "by or on behalf of "

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

this case, National would be obligated to defend th e 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 c ases: (1) United States Fidelity and Guaranty Co. v. Goodwin, 950 F. Supp. 24 (D. Me. 1996); (2) Terramatrix, Inc. v. Un ited States Fire Insurance Co., 939 P.2d 483 (Colo. Ct. App. 1997); and (3) TGA Development, Inc. v. Northern In surance Co. of New York, 62 F.3d 1089 (8th Cir. 1995). Nati onal's citations are instructive, yet ultimately we find t he reasoning in these cases unavailing.

In Goodwin, the court held that language identical to definition 10(c) "unambiguously requires that the w rongful entry be committed by the owner, landlord, or lesso r of the room, dwelling, or premises." 950 F. Supp. at 27. W e 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 o f 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" modifie s "room, dwelling or premises," and not "person." 950 F. Sup p. at 27. Yet, replacing "its" with any of the words the court found "its" to modify does not foreclose either Nat ional or the county's reading of the provision. For example, consider the following: "The wrongful eviction from a room t hat a person occupies by or on behalf of the room's owner

, landlord or lessor." Or, consider this: "The invasi on of the right of private occupancy of a premises that a per son occupies by or on behalf of the premises' owner, la ndlord or lessor." Both examples illustrate the flaw in the G oodwin court's reasoning; that is, neither clarifies wheth er "by or on behalf of " requires the offense to be committed by the owner, landlord, or lessor, or whether it defines t he possessory interest of the claimant. Thus, determin ing what "its" modifies neither strengthens nor undermines e ither of the competing interpretations of definition 10(c) f orwarded by National and the county.

10In 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 pro fessed 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 it s own, without more, we cannot accord significant weight t o its holding.

In TGA Development, the Eighth Circuit commented th at it "doubt[ed] very much that coverage is available under" a personal injury provision identical to definition 1 0(c) because the insured could not "even colorably be characterized as owner, landlord, or lessor." TGA Development, 62 F.3d at 1091 (internal quotation ma rks omitted). National points to this language to bolst er 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, howeve r. Indeed, the TGA court explicitly "pass[ed] over" th e issue presented by this appeal. See id. Instead, the cour t based its conclusion that coverage was not available on t he policy's exclusion of coverage clause prohibiting r ecovery "for personal injury for which the insured has assu med liability in a contract or agreement." See 62 F.3d at 1091. The dicta from TGA Development has "no binding auth ority" 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. Sup p. 995 (N.D. Tex. 1996), for the proposition that definiti on 10(c) is unambiguous. In Patel, the court found that languag e identical to definition 10(c) was unambiguous. The case is

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7. We can, of course, accord dicta as much weight a s we deem appropriate. See, e.g., Girard Trust Co. v. United States, 161 F.2d 159, 162 (3d Cir. 1947) (recognizing that although a fin ding was dicta, it was

"made after a careful consideration of authorities" ).

11different in one fundamental respect, however. The Patel

court based its finding on Decorative Center v. Emp loyers Casualty, 833 S.W.2d 257, 260 (Tex. App. 1992), whi ch 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 beha lf of" language that forms the basis for this appeal. The Patel

court dismissed the difference between the Decorati ve Center language and language identical to definitio n 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 cl ose inspection of the cases, however, we find the autho rity to be unpersuasive or of limited precedential value. As s uch, standing alone, the authority forwarded by National does not resolve whether definition 10(c) is clear or am biguous. With that we turn to the county's interpretation of definition 10(c).

2. The County's Competing Interpretation of Definit ion 10(c)

The county urges this Court to accept an alternativ e reading of definition 10(c) as reasonable. Accordin g 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 in voke coverage for an invasion, the claimant must have th e right to occupy the premises, either as owner, landlord, or lessor, or with the permission of the owner, landlord, or l essor.

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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 11 2532 (Del. Super. Ct. Sept. 27, 1989) as persuasive precedent, becaus e they too are based on the pre-1986 version of definition 10(c).

12In 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 l anguage identical to definition 10(c). Although the Distric t Court found the provision to be ambiguous, the Seventh Ci rcuit read the language beginning "that a person occupies . . ." as unambiguously "refin[ing] the nature of the prer equisite `right' of private occupancy." Id. at 265. In other words, in the view of the Security Management court, the lang uage 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 su b-lessees from coverage." Id.

The Seventh Circuit's commentary on the meaning of the clause again is dicta, however. Its holding is base d on the fact that the litigants claiming an invasion in tha t case "unquestionably lacked any . . . enforceable claim of occupancy," Id. at 265; indeed, the litigants were "testers," or civil rights activists who posed as apartment-hu nters but who did not actually rent a unit. Id. at 265. As we noted earlier, we are not bound by this dicta, although w e may consider it in our analysis if we deem it appropria te. See supra n.7.

The county also cites Blackhawk - Central City Sani tation District v. American Guaranty & Liability Insurance Co., 856 F. Supp. 584 (D. Colo. 1994), for the proposition t hat definition 10(c) is ambiguous. In that case, the co urt was asked to construe language identical to definition 10(c), and the parties' arguments mirror those presented here. Appellee contended that language identical to defin ition 10(c) "requires that the eviction, entry or invasio n be by or on behalf of the owner, landlord or lessor of the p remises." Id. at 590. The appellant, on the other hand, argue d that the provision could "be read to modify, not the par ty who evicts, enters or invades, but rather on whose auth ority the current occupant holds the property." Id. Faced wit h these competing interpretations, the court deemed the pro vision ambiguous and construed the language in favor of th e insured. See id. The Blackhawk court, however, did not

elaborate on how it reached its conclusion and thus provides us with little guidance.

13In sum, the county has presented this Court with

authority to suggest that definition 10(c) is ambig uous. The case law it cites -- Security Management and Blackh awk -- however, is either dicta or void of analysis and th us it does not, by itself, establish that definition 10(c) is ambiguous or that the county's interpretation is reasonable. Hav ing reviewed the relevant case law supporting both side s 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 t ending convincingly to show how the highest court in the s tate

would decide the issue at hand." McKenna v. Ortho P harm. Corp., 622 F.2d 657, 663 (3d Cir. 1980). This inclu des "relevant state precedents, analogous decisions, co nsidered dicta, [and] scholarly works." Id. Having reviewed the relevant precedent, it is difficult to predict how the Delaware Supreme Court would decide the issue befor e us. Importantly, we can discern no appreciable trend am ong the cases. First, the universe of cases that examin es language identical to definition 10(c) is very smal l. 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, an d 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 interpre tation.

When faced with a similar situation in another case , we explained that

[a]lthough the presence of conflicting judic ial 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 the se lines is most likely to be followed in Delaware, we c annot help

14but view such a division as at least suggest ing that the

. . . [contested term] is susceptible of mor e than one

reasonable definition.

New Castle v. Hartford I, 933 F.2d at 1196. In shor t, "that different courts have arrived at conflicting interp retations of the policy is strongly indicative of th[is] policy' s essential ambiguity." Little v. MGIC Indem. Corp., 836 F.2d 7 89, 796 (3d Cir. 1987) (citation omitted). Thus, as a start ing point, we tend to view the case law as indicating that def inition 10(c) is susceptible to more than one reasonable interpretation and, as such, is ambiguous. For grea ter guidance on this issue, we now turn to the traditio nal 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. Har tford I,

933 F.2d at 1193-99. The case before us is somewhat different because it turns on the function of a phr ase -- "by or on behalf of" -- within a larger provision. As a consequence, we will look to the grammatical arrang ement of clauses in definition 10(c) to construe the mean ing of definition 10(c). See Lake County v. Rollins, 130 U .S. 662, 670 (1889) ("To get at the thought or meaning expre ssed in a statute, a contract, or a constitution, the first resort, in all cases, is to the natural significance of the wo rds, in the order of grammatical arrangement in which the frame rs of the instrument have placed them."); see also 17A Am . Jur. 2d Contracts S 369 (1991) (instructing a court to g ive "due force to the grammatical arrangement of clauses" be cause grammatical construction of a contract "is often a reliable signpost" in construing its language).

National argues that definition 10(c) is not ambigu ous. 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 i nsured be the owner, landlord or lessor of the property at issue. The county, on the other hand, maintains that "by o r on behalf of" pertains to its nearer antecedent "perso n," establishing the requirement that the claimant have the right to occupy the premises.

15The grammatical construction of contracts generally

requires that a qualifying or modifying phrase be c onstrued 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) (cit ation 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 m odifies the word directly preceding it). The Ninth Circuit appl ied this rule of contract interpretation in construing the l anguage of

an insurance contract in Interstate Fire and Casual ty Co. v. Archdiocese of Portland in Oregon, 35 F.3d 1325 (9t h Cir. 1994) (applying Florida law). Under the terms of th e policy, the underwriters agreed "to indemnify the Assured f or 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 require d that all damages occur within the policy period in order to be covered. In contrast, the court concluded that "bas ed on the plain meaning of the assuring clause . . . it i s the occurrence, rather than the damages, that must happ en during the policy period." Id. (internal quotation marks omitted). Thus, in this example, "happening during the period of Insurance" modifies "occurrence," the nou n that directly precedes it, and not "damages," which is m ore remote.9

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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 lia bility provision in

the contract stated that "Service Inc. does not ass ume any liability for damages caused by or resulting from directly or ind irectly, wholly or in part, any failure or fault other than negligence or willful misconduct . . . ." Id. at 1536. Noting that the"grammatical c onstruction of

contracts generally requires that a qualifying phrase be cons trued as referring to its nearest antecedent," the court concluded that t he "natural reading" of the phrase was that "wholly or in part" modified "c aused by or resulting from directly or indirectly," id., the language tha t most directly preceded

it.

16When we apply this rule of construction to definiti on

10(c), it is plain that "by or on behalf of" modifi es "that a person occupies," the language that directly preced es it, and not the "wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy" languag e that commences definition 10(c). On this basis, we find the county's interpretation of definition 10(c) to be e ntirely 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 s ection 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 def inition 10(c) is reasonable is not diminished by the fact t hat this interpretation may render portions of the provision surplusage in cases of "wrongful eviction" and"wron gful entry." As noted earlier, under Delaware law, we mu st consider the phrase "by or on behalf of " in the co ntext of definition 10(c) as a whole. See Cheseroni v. Natio nwide

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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 b e used as an aid in interpreting a contract"); 17A Am. Jur. 2d Contract s 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 b etween the terms "that a person occupies" and "by or on behalf of," presum ably to break the natural link between the two phrases. Yet in drafti ng this policy, National could easily have inserted a comma in betw een "occupies" and "by or on behalf of" to function as an "interruptio n 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 d id not intend for "by or on behalf of " to flow uninterrupted from "t hat 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 mi sconstrued. And, "convoluted or confusing terms are the problem of " National, not the county. Emmons v. Hartford Underwriters Ins. Co., 6 97 A.2d 742, 745 (Del. 1997).

17Mut. 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 p ortion of the contract deserves consideration."); New Castle v. Hartford III, 970 F.2d at 1271 ("[A] word or term c annot be considered in isolation; it must be read in the sem antic and functional context of the policy or clause at issue to determine if two competing, reasonable interpretati ons 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 st atus of the claimant. It follows, then, that "wrongful eviction from a room . . . by or on behalf of the owner, landlord o r 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 interpretat ion, however, seems to render the term "wrongful" superf luous. Indeed, an eviction is not "wrongful" unless the ev icted party (the claimant) has a right to possess the pre mises. And this Court takes care not to render other porti ons of a provision or contract superfluous when construing c ontract 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 interpr etation which gives a reasonable, lawful and effective mean ing to all the terms is preferred to an interpretation whi ch 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 rig ht to

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11. The language "a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor" a pplies to all three offenses -- wrongful eviction, wrongful entry, and invasion of the right

of private occupancy. We know this because wrongful ev iction is followed by "from," entry by "into," and invasionby "of." "F rom," "into" and "of " are all prepositions, and as such, have an object. The objects in this

case are the room, dwelling, or premises. Thus, definiti on 10(c) must be read, for example, as "wrongful eviction from a room . . . ," "wrongful entry into a room . . . ," or "invasion of the right of p rivate occupancy of a

room . . . ."

18possess the room does not necessarily render the wo rd

"wrongful" surplusage. Whereas an "invasion of the right of private occupancy" is itself a tortious act, both e victions 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 w ith an abundance of caution; indeed, they routinely use wo rds 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 (con cluding that the Delaware Supreme Court would persist in gi ving a term its plain meaning even though other courts fea red that construction rendered the term surplusage). Therefo re, notwithstanding a potential contextual defect, we a re unwilling to override our conclusion that the count y's interpretation of definition 10(c) is reasonable wh en the contextual defect is itself subject to competing interpretations. Although we would prefer to give e qual effect to all of the language in definition 10(c), we refuse to reject an otherwise reasonable reading to avoid wha t might only be a potential contextual infirmity. In sum, t he contextual complexity of definition 10(c) only rein forces our conclusion that the provision is ambiguous.

We also reject National's argument that its interpr etation of definition 10(c) alone makes sense when viewed i n the context of the entire CGL policy. It argues that th e"entire object of the CGL policies" is "to insure against t he 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 deter mine 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 conte xt of the entire policy does not foreclose the county's inter pretation of definition 10(c). Indeed, the county's position that "by or on behalf of " requires the claimant to have the ri ght to possess the premises is consistent with the purpose of the

19policy as stated by National; the language as const rued by

the county ensures that the only claims covered und er 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 issuin g the CGL policies. . . . Appellee can only sell Appel lant a policy of CGL insurance if there is a readily quant ifiable number of properties which Appellee [sic: Ap pellant] owns, leases or rents. If Appellant's interp retation had been accepted by the parties at the time the subject CGL policies were issued, the premium charge d to Appellant for such coverage would have been astronomical since Appellant could potential ly be held liable for wrongfully entering or invading a n ever- expanding number of `rooms, dwellings, or pr emises' within New Castle County.

Br. of Appellee, at 41. In brief, National claims t hat its interpretation of definition 10(c) is the only reas onable one because otherwise, it would have been impossible fo r National to assess the actuarial risk involved in i ssuing 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 i dentify, 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 polic y mechanism that fixes the number of properties the c ounty 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. S ee App. to Br. of Appellant, at A141 (CGL Policy). National cl aims that without knowing the number of properties owned, lea sed, or rented by the county, it could not assess the co unty's risk for claims of eviction, entry, or invasion. As suming that is true, how does National assess the county's risk for "false

20arrest, detention, or imprisonment" without knowing how

many people the county could falsely arrest? Or "ma licious prosecution," without knowing how many people the c ounty could potentially maliciously prosecute? And again National has not indicated that the policy limits the covera ge of these personal injury offenses to a specific number . It seems to this Court that there are a potentially in finite 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 Castl e v. Hartford I, 933 F.2d at 1190 (noting that "under De laware law, the parties to an insurance contract are bound by the popular, lay meaning of its terms, regardless of th e sophistication of the insured."); see also Continen tal 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 particula r risk only

under certain circumstances when those circumstance s 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 in cludes a clause explicitly excepting that risk in the policy . This was the case in New Castle v. Hartford III, where we st ated that an exclusion clause "embodies an understanding that the insurer will only underwrite a certain, specific ri sk, calculable to a margin of actuarial certainty and r ational from an economic point of view for both parties." I d. at 1272. In contrast, definition 10(c) is not an exclu sion clause and does not "embody" a similar understandin g. National's argument thus expects too much from the average insurance consumer.

Lastly, and most importantly, what National intende d definition 10(c) to mean is very different from wha t the provision's language conveys. At best, National's a ctuarial argument suggests that National has a sound busines s rationale for the interpretation of definition 10(c ) it urges on this Court. The argument does not, however, demonst rate

21that National succeeded in drafting a policy that l imited

coverage for the invasion offense only to cases whe n the county was the owner, landlord, or lessor. Cf. Litt le, 836 F.2d at 796 (acknowledging an insurer's "sound busi ness reasons" for not wanting to be obligated to defend the insured, while rejecting notion that such reasons p rove that the insurer "succeeded in drafting a policy that unambiguously states this intention.").

In sum, both National and the county "offer reasona ble, 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 b oth sides' interpretations. Neither one gives full effe ct 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 o ffer definitive guidance, but leads us to suspect that d efinition 10(c) is ambiguous. This finding is supported by th e rules of contract construction. Also, in holding that def inition 10(c) is ambiguous, we recognize Delaware's strong insistence that insurance companies are accountable for confusing policy language. In this case, National h ad 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 interpretati ons 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 t he

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 genera lly 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 con sistent with an invasion of the right of private occupancy. Nor will we address National's response that the invasion of fense is

limited to landlord-tenant scenarios and situations that involve tangible interference with a possessory int erest in land. Such arguments go to the nature of the invasi on offense itself and are outside of our scope of revi ew. We

22leave it to the District Court to determine whether invasions

are limited to the landlord-tenant context and whet her they are limited to tangible interference with possessor y interest.

The District Court will examine them on remand when it

decides whether the claims made in the Acierno acti ons constitute an "invasion of the right of private occ upancy."

IV. CONCLUSION

For the foregoing reasons, the portion of the Distr ict Court judgment finding that definition 10(c) is unambiguous will be reversed. The case will be vaca ted 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