Opinion ID: 196201
Heading Depth: 2
Heading Rank: 1

Heading: Was Coverage Limited to Metropolitan's Office?

Text: 12 GRE argues that the policy does not apply to liability for claims arising from Metropolitan's activities away from its home office, relying upon language in the policy's Declarations form and two supplemental schedules, and upon the amount of the premium, which the district court found to be too low conceivably to reflect the parties' intent to cover additional risks. 13 As for the policy language, the Common Policy Declarations Form lists certain basic information about the policy, such as the types of coverage purchased, the premium for each coverage part, the coverage period, the name, address and type of business of the insured, the policy number, and so forth. It also contains the operative sentence: In return for the payment of the premium, and subject to all the terms of this policy, we agree with you to provide the insurance as stated in this policy. GRE seizes on the fact that the next line of the form calls for a business description of the insured, which is listed as office, as evidence that only liability arising from Metropolitan's office operations was covered. The flaw in this reasoning is that the question calls for a description of the insured's type of business, not the premises or building to which insurance was to be limited. The fact that Metropolitan operated as an office, rather than a hockey rink, manufacturing plant, or boarding house, was obviously relevant to coverage. But it does not show a clear understanding to restrict coverage to liability arising out of Metropolitan's office only. 14 A somewhat closer question is presented by language that appears in the insurance schedules. The Comprehensive General Liability Coverage Declarations Form directs the reader to refer to [the] common policy premises schedule for a description and location of all premises owned, rented or controlled by the named insured. The Common Policy Premises Schedule, under the heading Premises, lists 434 Massachusetts Avenue, Boston, MA, i.e., the location of Metropolitan's office. Further, on the Comprehensive General Liability Insurance Supplemental Schedule, the Description of Hazards Classification is listed as Buildings or Premises--Office, and the Exposure is listed as 15,000 square feet, roughly the area of Metropolitan's office. GRE argues that this shows that only those risks arising out of Metropolitan's office activities were covered. 15 Based on a recent decision of the Supreme Judicial Court of Massachusetts, however, we cannot agree. In Trustees of Tufts University v. Commercial Union Ins. Co., the insurance carrier argued that the failure to include a certain risk on the schedule of hazards to a comprehensive general liability insurance policy removed any coverage for that risk. The SJC rejected that argument, holding simply that nowhere does the policy unambiguously provide that coverage is limited to the specific hazards listed in the schedule. 415 Mass. at 856, 616 N.E.2d at 76. 16 In the instant case, there is no language in the policy clearly indicating that liability insurance is limited to claims arising from occurrences at the premises listed on the schedules from which we have quoted. 3 This absence is made even more probative when compared to the presence of such language on both the coverage grant description and the declarations form for the property coverage part of the policy. The grant of coverage on the property part states that: We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss (emphasis added). The property declarations form, under the heading Coverages Provided, states that the insurance applies only to the premises shown below, and with respect to those premises, only for the coverages, causes of loss and limits shown. By reference to the common premises schedule, the premises shown below is Metropolitan's office space. The failure to include such language anywhere in the liability coverage part, under Tufts, is fatal to GRE's claim that its comprehensive liability insurance was converted into a premises-only liability policy simply by listing a certain premise on the schedule of hazards. 17 Several other considerations support our conclusion that the liability insurance was not limited to occurrences at Metropolitan's office. First, for an additional premium, Metropolitan purchased a so-called Broad Form Comprehensive Liability endorsement for the 1990-91 policy, which was incorporated into the 1991-92 policy. This endorsement expanded the coverage territory to anywhere in the world with respect to [injuries] arising out of the activities of [the] insured (emphasis added). We find it quite unlikely that parties who intended coverage only for activities at Metropolitan's home office at 434 Massachusetts Avenue in Boston would have bought and sold such an endorsement. Certainly, an objectively reasonable insured, reading [this] policy language, would expect to be covered for liability beyond that arising at its home office. Tufts, 415 Mass. at 849, 616 N.E.2d at 72. 18 Second, as part of its application for insurance, Metropolitan, through its broker, made a specific point of telling GRE that it hired outside inspectors to go to the apartments and determine whether they satisfied the relevant federal standards so as to qualify for the subsidy. Having received this information, GRE sold Metropolitan policies that, as their titles made clear, purported to cover comprehensive general liability. Thus, absent express exclusionary language, it was reasonable for Metropolitan to believe that its coverage included the inspectors' activities. 19 Indeed, as we find infra, there was an endorsement, the professional services exclusion, which may indeed have been added in an attempt to exclude from the grant of coverage any liability arising from the inspectors' activities. Among other things, that endorsement expressly excluded from coverage any claims arising out of the rendering or failure to render any professional services ... including ... inspection ... services. If coverage were given only to Metropolitan's office activities in the first place, there would have been no reason to add this exclusion. 20 The district court also gave weight to the relatively small amount of the premium as evidence that no more than Metropolitan's office activities were covered. While we also find the premium to be relatively low, we do not believe the amount of the premium to be dispositive. First, if GRE wanted to press this argument seriously, it could have submitted expert testimony regarding the premium amount here versus premiums charged for comparable risks. Instead, on this record, there is no factual basis whatsoever upon which to assess whether the premium is low or high for the covered risks. 21 More importantly, we can speculate as to many reasons for the low premium. GRE may have concluded that Metropolitan faced very little liability exposure because it was essentially a disbursing agent for government funds, which, even including the apartment inspections, may not have been seen as an enterprise generating large risks. Or, GRE's calculus of low exposure may have been influenced by a Massachusetts statute, Mass.Gen.L. ch. 231 Sec. 85K, which limits liability of non-profit organizations to a $20,000 per claim cap. Or, it could have calculated the premium erroneously, overlooking the apartment inspection aspect of Metropolitan's operations. Thus, without a fact finding on the circumstances surrounding premium calculation based on competent evidence, our general view is that the amount of the premium will rarely be dispositive in determining the extent of coverage, for such a rule would allow poor estimates of risk, or calculations of risk based upon mathematical error, to supersede the actual coverage to which parties agreed. 22 Neither of the cases relied upon by the district court is to the contrary. In Chesapeake Physicians Prof. Ass. v. The Home Ins. Co., 92 Md.App. 385, 608 A.2d 822 (1992), the court was faced with a question similar to ours--whether a comprehensive general liability insurance policy was in fact limited to cover only certain premises--and determined that it was. But that court's holding was based upon the fact that the policy language itself clearly limited coverage to the premises in question. The key language was the carrier's promise to indemnify and defend all claims arising out of the ownership, maintenance, or use of the insured premises and all operations incidental thereto. Id. at 394, 608 A.2d at 826 (emphasis added). As we have noted, GRE's liability policies have a conspicuous lack of such express language limiting coverage to Metropolitan's office. It is true that the Chesapeake court went on to discuss a number of considerations that buttressed its decision, one of which was the fact, also present in our case, that the premium was calculated based on the square footage of the properties and premises covered. But, as this was in the context of a policy that unambiguously limited coverage to certain premises by its express terms, it has little, if any, relevance to interpreting the meaning of the instant policy --particularly after the SJC decision in Tufts. 23 The second case, Rumford Property and Liability Ins. Co. v. Carbone, 590 A.2d 398 (R.I.1991), is even less persuasive. In Rumford, the insurance company had argued that the relatively low premium and the use of only certain square footage to calculate the premium showed that only certain premises were covered. The trial court rejected that argument, a ruling from which the insurance company did not even appeal. Instead, the only issue on appeal was the insurance company's alleged bad faith in refusing to provide coverage. In the context of resolving that issue, the Supreme Court of Rhode Island stated that the low premium and the square footage calculation created at least an arguable basis for denying coverage. Since the insurance company's contention was not a frivolous one, its conduct of refusing to defend and indemnify, while certainly not exemplary, ... failed to reach the level of bad faith. Id. at 400-01. Thus, neither Rumford nor Chesapeake persuade us that the amount of the premium is highly probative in this case.