Court Opinion

ID: 9554814
Source: CourtListenerOpinion
Date Created: 2023-08-09 21:00:36.261774+00
Date Added: 2024-06-11T15:36:40.689515
License: Public Domain

United States Court of Appeals
                       For the First Circuit

No. 22-1938

              PRESIDENT AND FELLOWS OF HARVARD COLLEGE,

                        Plaintiff, Appellant,

                                 v.

                 ZURICH AMERICAN INSURANCE COMPANY,

                        Defendant, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
               FOR THE DISTRICT OF MASSACHUSETTS

        [Hon. Allison D. Burroughs, U.S. District Judge]

                               Before

                     Kayatta, Selya, and Howard,
                           Circuit Judges.

     Marshall N. Gilinsky, with whom Ethan W. Middlebrooks, Jade
W. Sobh, and Anderson Kill, P.C. were on brief, for appellant.
     Andrew L. Margulis, with whom Ropers Majeski PC was on brief,
for appellee.

                           August 9, 2023
             SELYA, Circuit Judge.             With $15,000,000 in coverage at

stake,     this   case    requires      us    to   apply   Massachusetts   law   to

determine the effect of a failure to give notice as specified in

an excess insurance policy affording coverage on a "claims made

and reported" basis.             Where, as here, a federal court sits in

diversity jurisdiction, tasked with following state law, it is not

free to innovate but, rather, must apply state substantive rules

of decision as those rules have been articulated by the state's

highest tribunal.        See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-

79 (1938); see also Torres-Ronda v. Nationwide Mut. Ins. Co., 18

F.4th 80, 84 (1st Cir. 2021).

             In this instance, the Massachusetts Supreme Judicial

Court (SJC) has spoken directly to the critical issue.                   See Chas.

T. Main, Inc. v. Fireman's Fund Ins. Co., 551 N.E.2d 28, 29-30

(Mass. 1990); see also Tenovsky v. All. Syndicate, Inc., 677 N.E.2d

1144, 1145-46 (Mass. 1997).             What is more, this court — on no fewer

than four occasions — has recognized the Massachusetts rule.                     See

Gargano v. Liberty Int'l Underwriters, Inc., 572 F.3d 45, 49-51

(1st Cir. 2009); DiLuglio v. New England Ins. Co., 959 F.2d 355,

358 (1st Cir. 1992); Nat'l Union Fire Ins. Co. v. Talcott, 931

F.2d 166, 167-69 (1st Cir. 1991); J.I. Corp. v. Fed. Ins. Co., 920

F.2d 118, 120 (1st Cir. 1990).               Staying within the borders of this

well-beaten path, we hold that the failure to give notice according

to   the   policy's      terms    and    conditions    forfeits    any   right   to

                                         - 2 -
coverage.    Consequently, we affirm the district court's entry of

summary judgment in favor of the insurer.

                                         I

            "Because     our    review   follows         the   entry   of   summary

judgment,   'we   take    the    facts       and   the    reasonable    inferences

therefrom in the light most' favorable to the non-moving part[y]."

Rivera-Aponte v. Gomez Bus Line, Inc., 62 F.4th 1, 3 (1st Cir.

2023) (quoting Pleasantdale Condos., LLC v. Wakefield, 37 F.4th

728, 730 (1st Cir. 2022)).

            For a policy term beginning in November of 2014, the

President and Fellows of Harvard College (collectively, Harvard),

purchased a one-year liability insurance policy from the National

Union Fire Insurance Company of Pittsburg, Pennsylvania, a member

company of the American International Group, Inc. (AIG).                        The

policy covered litigation costs in the event a claim was brought

against Harvard, as well as the payment of liabilities incurred as

the result of a judgment or settlement, up to the amount of

$25,000,000.      Because       the   AIG     policy      provided     "claims-made

coverage," it required prompt notice of any claim filed against

Harvard.    Specifically, the policy stated that:

                 The Insureds shall, as a condition
            precedent to the obligations of the Insurer
            under this policy, give written notice to the
            Insurer of any Claim made against an
            Insured . . . as soon as practicable . . . .
                 Notwithstanding   the   foregoing,   the
            Insured shall not be required to give written

                                      - 3 -
            notice of a Claim until the earliest
            occurrence of the following:
                 (i) the Claim is or is sought to be
                 certified as a class action; or
                 (ii) total Loss (including Defense Costs)
                 of the Claim is reasonably estimated by
                 the Organization's General Counsel or
                 Risk Manager (or equivalent position) to
                 exceed 50% of the applicable retention
                 amount for such Claim;
            provided, however, that in all events, all
            Claims, including Claims described in (i)-(ii)
            above, must be reported to the Insurer no
            later than ninety (90) days after the end of
            the Policy Period or the Discovery Period (if
            applicable).

            In addition to the AIG policy, Harvard purchased a

secondary    excess    policy   from     Zurich    American      Insurance   Co.

(Zurich) to insure against an additional $15,000,000 in costs

should a claim exhaust the AIG coverage.              In its reporting and

notice conditions, the excess policy provided:                 "As a condition

precedent    to   exercising    any     rights    under   this    policy,    the

Policyholder shall give the Underwriter written notice of any claim

or   any   potential   claim    under   this     policy   or   any   Underlying

Insurance in the same manner required by the terms and conditions

of the [AIG] Policy."

            Under both policies, then, securing coverage for a claim

required — in all events — the reporting of that claim to the

insurer within ninety days of the end of the policy period.                   As

both AIG's primary policy and Zurich's excess policy provided

coverage from November 1, 2014, to November 1, 2015, any claim

                                      - 4 -
that was made against Harvard during that period had to be reported

no later than January 30, 2016.

           On November 17, 2014, an organization known as Students

for Fair Admissions sued Harvard in federal court for violating

Title VI of the Civil Rights Act of 1964.          What followed was a

legal odyssey that spanned nearly a decade and culminated in

proceedings before the Supreme Court.            See Students for Fair

Admissions, Inc. v. President & Fellows of Harvard Coll. (Harvard

Corp.), 397 F. Supp. 3d 126 (D. Mass. 2019), aff'd sub nom.

Students for Fair Admissions, Inc. v. President & Fellows of

Harvard Coll., 980 F.3d 157 (1st Cir. 2020), rev'd, 143 S. Ct.

2141 (2023).

           On November 19, 2014 — in anticipation of the legal costs

to come — Harvard notified AIG of the pending suit, thereby

securing coverage under the primary policy.          Harvard neglected,

though, to notify Zurich of the suit until May 23, 2017 — well

outside   the   excess   policy's   ninety-day    notification   window.

Consequently, Zurich denied coverage under the excess policy on

the ground that Harvard had failed to furnish timely notice.

           In   September   of   2021,   Harvard     invoked   diversity

jurisdiction, see 28 U.S.C. § 1332(a), and sued Zurich in the

United States District Court for the District of Massachusetts.

Harvard's complaint sought both declaratory relief and damages for

breach of contract.      Zurich disclaimed liability, arguing that

                                 - 5 -
Harvard had forfeited any entitlement to coverage.    In due course,

Zurich moved for summary judgment.      See Fed. R. Civ. P. 56(a).

Asserting that such a motion was premature and that further

discovery was needed, Harvard opposed summary judgment and moved

for leave to undertake, and to compel production of, additional

discovery.    See Fed. R. Civ. P. 56(d), 37(a).    After considering

the parties' proffers and entertaining oral argument, the district

court granted summary judgment in favor of Zurich and denied

Harvard's discovery-related motions as moot.      This timely appeal

ensued.

                                 II

            "We review a district court's grant of summary judgment

de novo."    Minturn v. Monrad, 64 F.4th 9, 13 (1st Cir. 2023).

Summary judgment is appropriate "if the movant shows that there is

no genuine dispute as to any material fact and the movant is

entitled to judgment as a matter of law."    Fed. R. Civ. P. 56(a).

Because the claims under consideration are in a federal court by

virtue of diversity jurisdiction, see 28 U.S.C. § 1332, we look to

the relevant state law — here, Massachusetts law — to supply the

substantive rules of decision, see Minturn, 64 F.4th at 14.

            In this venue, Harvard fashions two arguments as to why

Zurich was not entitled to summary judgment.         First, Harvard

contends that the district court misapplied Massachusetts law when

it determined that strict compliance with the excess policy's

                                - 6 -
notice requirement was a prerequisite to coverage.               Then — as a

fallback — Harvard proposes an alternative interpretation of the

notice requirement and contends that issues of material fact remain

as to whether that requirement was satisfied.             Both contentions

lack force.

                                      A

             Massachusetts courts generally hew to the rule that an

insurance contract is to be enforced according to the plain meaning

of its terms.    See Somerset Sav. Bank v. Chi. Title Ins. Co., 649

N.E.2d 1123, 1127 (Mass. 1995).        To be sure, there is an exception

when an insured fails strictly to adhere to a notice requirement

in an occurrence-based policy.1           See Johnson Controls, Inc. v.

Bowes, 409 N.E.2d 185, 186-88 (Mass. 1980).         In that circumstance,

the   insurer   is   required   to   prove   not   only   that   the   notice

requirement was breached, but also that the breach prejudiced its

position.     See id.   The SJC has explained that this largess is

warranted because the purpose of the notice requirement in an

occurrence-based policy is to afford the insurer an opportunity

promptly to investigate facts pertaining to liability; when that

      1 An
         occurrence-based policy provides coverage for events that
occur during the policy period, regardless of when a claim is
brought against an insured. See Chas. T. Main, Inc., 551 N.E.2d
at 29. By contrast, a claims-made policy — such as the excess
policy that is front and center here — covers claims made against
the insured during the policy period, regardless of when the event
or act that instigated the claim occurred. See id.

                                     - 7 -
investigation can still effectively be made, and the insurer is

not in any other way prejudiced, forfeiture of coverage based on

technical non-compliance with the notice requirement results in

unfairness to the insured.         See id. at 187-88.

            But not all liability insurance policies are on an equal

footing, and the "no harm, no foul" principle does not apply to

failures to give timely written notice under claims-made insurance

policies.     In Massachusetts, notice provisions of claims-made

policies — which require that notice of a claim be given by the

end of the policy period or a defined period ending shortly

thereafter   —   are    of   the   essence   of   those   policies.   Those

provisions are intended not merely to facilitate an investigation

into the facts underlying a claim but also — just as importantly

— to promote fairness in rate setting.             See Chas. T. Main, 551

N.E.2d at 29-30.       As the SJC has explained:

            The purpose of a claims-made policy is to
            minimize the time between the insured event
            and the payment. For that reason, the insured
            event is the claim being made against the
            insured during the policy period and the claim
            being reported to the insurer within that same
            period or a slightly extended, and specified,
            period. If a claim is made against an insured,
            but the insurer does not know about it until
            years later, the primary purpose of insuring
            claims rather than occurrences is frustrated.
            Accordingly, the requirement that notice of
            the claim be given in the policy period or
            shortly thereafter in the claims-made policy
            is of the essence in determining whether
            coverage exists.   Prejudice for an untimely

                                     - 8 -
           report in this instance is not an appropriate
           inquiry.

Id. at 30.     Under Massachusetts law, then, an insurer is not

required to show prejudice before denying coverage due to an

insured's failure to comply with the notice requirement of a

claims-made policy.    See id.; see also Tenovsky, 677 N.E.2d at

1146.

           Where state law controls and the state's highest court

has plainly articulated that law, a federal court must follow suit.

Thus, we have unswervingly applied this clear rule regarding the

failure to give timely notice as it has been spelled out by the

SJC.    See Gargano, 572 F.3d at 51 ("To require the insurer of a

'claims made and reported' policy to demonstrate prejudice from

the insured's failure to report a claim within the relevant policy

period 'would defeat the fundamental concept on which claims-made

policies are premised[]' . . . ." (quoting Chas. T. Main, Inc.,

551 N.E.2d at 30)); Nat'l Union Fire Ins. Co., 931 F.2d at 168

("[I]n order for an insurer to be entitled to deny coverage under

a 'claims made' policy, it must only show that the insured did not

report the claim within the same policy year in which he received

notice of it; no showing of prejudice need be made."); J.I. Corp.,

920 F.2d at 120 (similar); see also DiLuglio, 959 F.2d at 358

(explaining Massachusetts rule while discussing Rhode Island law).

In the absence of supervening authority — and we discern none here

                               - 9 -
— we are duty-bound to continue to apply the SJC's clear rule.

See Torres-Ronda, 18 F.4th at 84.

             The parties do not dispute that Harvard purchased a

claims-made policy from Zurich.        Nor do they dispute that Harvard

failed to provide Zurich with written notice until May of 2017 —

long after the deadline stipulated in the policy had passed.

Consequently, Zurich had every right to deny coverage based on a

lack of timely notice.     See Chas. T. Main, 551 N.E.2d at 30.

             Harvard resists this conclusion.          It argues that if

Zurich had actual notice of the pending lawsuit (a fact that

Harvard asserts might be established through further discovery),

then the rate-setting purpose that animated the excess policy's

notice requirement would have been satisfied and a denial of

coverage for want of timely written notice alone would be contrary

to Massachusetts law.       In Harvard's view, the SJC's holding in

Chas. T. Main does not apply to circumstances in which an insurer

has actual notice of a claim and can use that information to set

its rates, notwithstanding the insured's failure to comply with

the policy's notice requirement.           But this is little more than

gaslighting.    Arguing that the policy's notice requirement should

not be enforced because Zurich may have had actual notice of the

claim   is   simply   another   way   of   arguing   that   Zurich   was   not

prejudiced by the lack of timely written notice.            To honor such an

argument would impermissibly collapse the critical distinction

                                  - 10 -
that the SJC has made between occurrence-based and claims-made

policies.2

             Harvard's     argument    that    Chas.   T.    Main    is    factually

distinct because the insurer in that case had no actual knowledge

of the claim is equally unpersuasive.                    Harvard places great

emphasis on the SJC's statement that "[i]f a claim is made against

an insured, but the insurer does not know about it until years

later,    the   primary     purpose    of     insuring      claims   rather       than

occurrences is frustrated."           Id.   This statement, though, resides

within a discussion that addresses not the specific facts of that

case but, rather, why the purpose underlying notice provisions in

claims-made     policies    differs     from   that    underlying         the    notice

provisions      in   occurrence-based       policies.         Premised      on    that

discussion, the SJC promulgated a general rule that an insurer

need not demonstrate prejudice before denying coverage under a

claims-made policy for the insured's failure to provide timely

notice.   See id. at 29-30.      Nothing in Chas. T. Main suggests that

the SJC meant to carve out an exception to that general rule for

circumstances in which an insurer had actual notice of a pending

     2 We think it more than a coincidence that most of the cases
cited by Harvard in support of this argument address notice
provisions in occurrence-based policies.      See, e.g., Boyle v.
Zurich Am. Ins. Co., 36 N.E.3d 1229, 1233, 1236 & n.8 (Mass. 2015);
Augat, Inc. v. Liberty Mut. Ins. Co., 571 N.E.2d 357, 358 (Mass.
1991); Darcy v. Hartford Ins. Co., 554 N.E.2d 28, 29-30 (Mass.
1990).

                                      - 11 -
claim against an insured.    And we would be straying well outside

our assigned lane to read such an exception into Massachusetts

law.

            There is one further point.    Harvard — which could have

sued in a Massachusetts court and argued for a modification of

that state's substantive law — opted instead to avail itself of a

federal forum. As we have admonished in earlier cases, a plaintiff

"who made a deliberate choice to sue in federal court rather than

in a [Massachusetts] state court[] is not in a position to ask us

to blaze a new trail that the [Massachusetts] courts have not

invited."    Jones v. Secord, 684 F.3d 1, 11 (1st Cir. 2012).

            With its legal arguments encountering strong headwinds,

Harvard pivots. It contends that to enforce the notice requirement

in Zurich's excess policy would contravene sound public policy.

Opportunistic insurers would be incentivized, Harvard insists, to

draft convoluted notice provisions in the hope of duping customers

into defaulting on their coverage.        Whatever the merits of this

contention — and we take no position on it — it is for Massachusetts

courts, not for a federal court, to weigh the policy implications

of Massachusetts law.   Cf. Gattineri v. Wynn MA, LLC, 63 F.4th 71,

94 (1st Cir. 2023) (certifying question to SJC when issue before

court involved "important questions of state law and public policy

with significant implications").        In diversity cases, we are

followers:    we must apply clear rules of law as those rules have

                               - 12 -
been articulated by the highest court of the relevant state.                  See

Torres-Ronda, 18 F.4th at 84.

            That ends this aspect of the matter.3               At bottom, "[i]t

was [Harvard's] responsibility to understand the type of coverage

[it] purchased . . . , and we are not at liberty to rewrite either

the   policy    or   Massachusetts     law    to    conform      to   [Harvard's]

expectations."       Gargano, 572 F.3d at 51.            Accordingly, Harvard's

failure to provide timely written notice under the excess policy

resulted in a forfeiture of coverage.

                                       B

            Harvard has one last page in its playbook.                 It claims

that issues of fact remain as to whether it complied with the

excess policy's notice requirement.           In this regard, Harvard says

—   for   the   first   time   on   appeal    —   that    the   policy's   notice

requirement is ambiguous as to how a claim is to be "reported" to

Zurich and that further discovery might reveal that a newspaper or

      3Harvard argues at length that the district court wrongly
relied on two out-of-circuit cases for the proposition that an
insurer may deny coverage under a claims-made policy for a lack of
formal notice, even if the insurer had actual notice of the claim.
See President & Fellows of Harvard Coll. v. Zurich Am. Ins. Co.,
No. 21-11530, 2022 WL 16639238, at *2 (D. Mass. Nov. 2, 2022)
(citing Atl. Health Sys., Inc. v. Nat'l Union Fire Ins. Co. of
Pittsburgh, 463 F. App'x 162, 167 (3d Cir. 2012); Heritage Bank of
Com. v. Zurich Am. Ins. Co., No. 21-10086, 2022 WL 3563784, at *3
(N.D. Cal. Aug. 17, 2022)).     Because we find Massachusetts law
sufficient to resolve the issue before us, we need not address
this argument. See Minturn, 64 F.4th at 14 ("We are not tied to
the district court's rationale but, rather, may affirm the judgment
on any ground made manifest by the record.").

                                     - 13 -
other media outlet "reported" the claim to Zurich by covering the

story for the general public.

                 This claim of error need not detain us.           The sockdolager

is that Harvard failed to raise the claim below.                 "If any principle

is    settled       in   this    circuit,     it    is   that,   absent   the    most

extraordinary circumstances, legal theories not raised squarely in

the lower court cannot be broached for the first time on appeal."

Teamsters Union, Local No. 59 v. Superline Transp. Co., 953 F.2d

17, 21 (1st Cir. 1992).

                 Trying to wriggle off this particularly sharp hook,

Harvard maintains that this case presents such "extraordinary

circumstances."          In support, it cites to our decision in National

Ass'n of Social Workers v. Harwood, 69 F.3d 622 (1st Cir. 1995).

There, we decided, in an exercise of our discretion, to hear an

argument raised by a government actor for the first time on appeal

—    an       argument   that   was   of   great    public   importance   and    that

"touch[ed] upon policies as basic as federalism, comity, and

respect for the independence of democratic institutions."                       Id. at

628.          The same cannot be said of this case, which implicates only

garden-variety issues of state contract law, over which we are not

an authoritative tribunal.4                See Erie R.R. Co., 304 U.S. at 79

       Although we have previously set forth an array of factors
          4

to consider when determining the appropriateness of an exception
to the raise-or-waive principle, we find this single factor
sufficient, under the circumstances, to convince us that an

                                           - 14 -
("Supervision over either the legislative or the judicial action

of the states is in no case permissible except as to matters by

the   constitution     specifically    authorized     or   delegated         to    the

United States."); Commonwealth v. Montanez, 447 N.E.2d 660, 661

(Mass.   1983)    ("Though     we   always    treat   their       decisions       with

deference, we are not bound by decisions of Federal courts except

the decisions of the United States Supreme Court on questions of

Federal law.").       Thus, we see no sufficient reason for departing

from our customary praxis of refusing to consider arguments that

were not raised below.

                                      III

            Although we have found no basis for overturning the

district    court's    entry   of   summary    judgment,      a    further    issue

remains:     whether the district court erred in denying as moot

Harvard's motions to reopen and compel additional discovery.                       See

Fed. R. Civ. P. 56(d), 37(a).         We turn to that issue.

            We review the denial of a Rule 56(d) motion for abuse of

discretion.      See Hicks v. Johnson, 755 F.3d 738, 743 (1st Cir.

2014).     "[T]he district court is entitled to refuse a Rule 56(d)

motion if it concludes that the party opposing summary judgment is

exception is unwarranted in this case. See Harwood, 69 F.3d at
627-29.   In reaching this conclusion, however, we in no way
disclaim the utility of those other factors as they might apply in
other circumstances.

                                     - 15 -
unlikely to garner useful evidence from supplemental discovery."

Id.

            In   the    case    at    hand,     Harvard   sought   supplemental

discovery on the issue of whether Zurich had actual notice of the

underlying claim.       But any evidence to that effect would have been

irrelevant to the summary judgment inquiry.                See supra Part II.

The dispositive factual issue before the district court was whether

Harvard provided timely written notice to Zurich as required by

the excess policy — an issue to which the summary judgment record

offered a clear answer.         Further discovery on the issue of actual

notice would have been entirely beside the point.

            We   need   go     no    further.     We   hold,   without   serious

question, that it was not an abuse of discretion to deny Harvard's

motion to reopen discovery under Rule 56(d).                   And that denial

renders Harvard's motion to compel under Rule 37(a) futile such

that it can be denied as moot.                See United States v. Rydle, 58

F.4th 14, 17 (1st Cir. 2023).

                                         IV

            For the reasons elucidated above, the judgment of the

district court is

Affirmed.

                                       - 16 -