Court Opinion

ID: 2678015
Source: CourtListenerOpinion
Date Created: 2014-06-11 19:00:08.123976+00
Date Added: 2024-06-11T13:09:08.433411
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 13-2167

                           KATIE GRAF,

                      Plaintiff, Appellant,

                               v.

              HOSPITALITY MUTUAL INSURANCE COMPANY,

                      Defendant, Appellee.

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

         [Hon. Kenneth P. Neiman, U.S. Magistrate Judge]

                             Before

                       Lynch, Chief Judge,
                    Thompson, Circuit Judge,
                   and Smith,* District Judge.

     Mark J. Albano, with whom Dalsey & Albano was on brief, for
appellant.
     James E. Harvey, Jr., with whom John F. Brosnan and O’Malley
and Harvey, LLP were on brief, for appellee.

                          June 11, 2014

     *
      Of the District of Rhode Island, sitting by designation.
          SMITH, Chief District Judge.    The Appellee, Hospitality

Mutual Insurance Company (“Hospitality”), issued a Liquor Liability

Insurance Policy (the “Policy”) to Torcia & Sons, Inc. (“Torcia”).

Torcia owns and operates the Fat Cat Bar & Grill (the “Fat Cat”),

a Springfield, Massachusetts establishment. The Policy represented

the full extent of Torcia’s applicable liability coverage.

          The Appellant, Katie Graf, secured a judgment in her

favor in Massachusetts state court after she was injured while a

patron on the Fat Cat’s premises. Following a jury trial, Graf was

awarded $500,000 in damages and $111,124.26 in prejudgment interest

against Torcia and a Fat Cat employee.1

          Hospitality disclaimed liability for the prejudgment

interest portion of the award, arguing that the terms of the Policy

limited coverage to $500,000 per person, per incident.        As a

result, Graf sought and was granted a writ of attachment on

Torcia’s liquor license to secure the excess judgment.

          Graf and Torcia sought payment from Hospitality for the

cost of a bond to release the attachment.   To obtain such a bond,

Hospitality would have been required to post approximately $115,000

in cash or other collateral, and pay an annual premium of $2,300.

Again, Hospitality refused on grounds that it was not liable for

the cost of the bond because the $500,000 damages award had

independently triggered the Policy’s coverage limit.

     1
          References to “Torcia” include this employee.

                               -2-
               The parties then entered into a settlement agreement. In

relevant part, the settlement agreement provided that Graf would

discharge the attachment of the liquor license and Torcia would

assign its rights against Hospitality to Graf.                     Pursuant to the

assignment of rights, Graf brought suit against Hospitality in

Massachusetts state court, and the action was then removed to

federal court in the District of Massachusetts.2

               In the ensuing litigation, the magistrate judge agreed

with       Hospitality’s     interpretation     of   the       Policy   and    granted

Hospitality’s Motion to Dismiss, see Graf v. Hospitality Mut. Ins.

Co., 956 F. Supp. 2d 337 (D. Mass. 2013), then denied Graf’s

subsequent      Motion     to   Amend   Judgment     in    a    text    order.      The

magistrate judge found that the $500,000 damages award represented

the full extent of recoverable proceeds under the Policy.                            He

reasoned that to require Hospitality to pay for the cost of the

bond would have expanded Hospitality’s liability in contravention

of the express terms of the Policy.                Graf now appeals.           We have

jurisdiction pursuant to 28 U.S.C. § 1291 and we AFFIRM.

                             I.    Standard of Review

               We   review   the   magistrate    judge’s        decision      to   grant

Hospitality’s Motion to Dismiss de novo.              Alt. Energy, Inc. v. St.

Paul Fire & Marine Ins. Co., 267 F.3d 30, 33 (1st Cir. 2001).                         To

       2
          The parties assented to assignment of the case to a
magistrate judge.

                                        -3-
survive a motion to dismiss, a complaint “must provide fair notice

to the defendants and state a facially plausible legal claim.”

Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011).

“Ordinarily, a court may not consider any documents that are

outside     of     the   complaint,   or     not   expressly    incorporated

therein . . . .”         Alt. Energy, 267 F.3d at 33.        But, there is a

narrow exception for certain documents that the parties agree are

authentic    and    that   are   central    to   the   plaintiff’s   claims.

Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993).

            District courts are afforded considerable discretion in

reviewing motions to amend judgment under Federal Rule of Civil

Procedure 59(e); therefore, we review the denial of Graf’s Motion

to Amend Judgment for manifest abuse of discretion. ACA Fin. Guar.

Corp. v. Advest, Inc., 512 F.3d 46, 55 (1st Cir. 2008).

            With respect to our interpretation of the Policy, the

parties agree that Massachusetts law governs.               We “construe the

words of the policy according to the fair meaning of the language

used, as applied to the subject matter.”               Jacobs v. U.S. Fid. &

Guar. Co., 417 Mass. 75, 76, 627 N.E.2d 463, 464 (1994).             “If there

are two rational interpretations of policy language, the insured is

entitled to the benefit of the one that is more favorable to it.”

Hazen Paper Co. v. U.S. Fid. & Guar. Co., 407 Mass. 689, 700, 555

N.E.2d 576, 583 (1990). But, under Massachusetts law, “ambiguity -

unlike beauty - does not lie wholly in the eye of the beholder.            An

                                      -4-
ambiguity must be real.        A policy provision will not be deemed

ambiguous simply because the parties quibble over its meaning.”

Certain Interested Underwriters at Lloyd’s, London v. Stolberg, 680

F.3d 61, 66 (1st Cir. 2012).                And, “[o]f course, whether a

provision is ambiguous is a question of law that we must answer

ourselves . . . .”      HSBC Realty Credit Corp. (USA) v. O’Neill, 745

F.3d 564, 574 (1st Cir. 2014) (discussing Massachusetts law).

                             II.     The Policy

              The Policy obligates Hospitality to “pay on behalf of the

Insured all sums which the Insured shall become legally obligated

to pay as ‘damages’ because of ‘bodily injury’ to any person,

caused   by    an   ‘occurrence.’”     Policy     ¶   I(A).     Nevertheless,

Hospitality has “no other obligation or liability to pay any other

sums or perform any other acts of (sic) services unless they are

explicitly provided for under SUPPLEMENTARY PAYMENTS.”              Id.

              The definitions of two terms are of central importance.

First, “damages” is defined to mean “all monetary sums which the

INSURED is legally obligated to pay as damages including . . . pre-

judgement interest awarded against an INSURED.”               Id. at ¶ V(C).

With respect to “Supplementary Payments,” the Policy provides that:

              We will pay with respect to any claim or “suit”
              we defend:
                     . . .
              The cost of bonds to release attachments, but
              only for bond amounts within the applicable
              limit of insurance. We do not have to furnish
              these bonds.
                     . . .

                                      -5-
           These payments will not reduce the limits of
           insurance of this Policy.

Id. at ¶ I(C)(2) (emphasis added).

           The limits of insurance are addressed in Sections III and

IV. Section III expressly incorporates by reference a $500,000 per

person and $1,000,000 per occurrence coverage limit.                    Id. at

¶ III(B) (“The Per Person limit stated in the Declarations is the

most we will pay to one or more persons as the result of ‘bodily

injury’ to any one person in any one ‘occurrence.’”).               Section IV

provides   that   “[a]   person   .    .    .   may   sue    [Hospitality]   to

recover . . . on a final judgment against an Insured obtained after

an actual trial; but [Hospitality] will not be liable for ‘damages’

that are not payable under the terms of this Policy that are in

excess of the applicable limit of insurance.”               Id. at ¶ IV(B)(2).

                           III.   Discussion

           We agree with the magistrate judge that the Policy is

susceptible to just one reasonable interpretation.                  The Policy

contains a “Supplementary Payments” provision; Section I(C)(2)

unambiguously obligates Hospitality to pay for the cost of certain

bonds, but only insofar as those bonds are for amounts “within the

applicable limit of insurance.” (emphasis added).              Here, the limit

of insurance was reached by virtue of the $500,000 damages award,

and the Policy did not obligate Hospitality to pay for the cost of

                                      -6-
a bond covering a prejudgment interest award beyond that amount.3

Graf’s arguments to the contrary may be quickly dispatched.

            Graf argues here, as she did before the magistrate judge,

that Section I(C)(2) requires Hospitality to pay for the cost of a

bond to release the liquor license because the amount of that bond,

some $115,000, is itself within the $500,000 Policy limit.           Graf

vigorously pursues this point, but her argument tortures what we

believe to be the plain meaning of the applicable terms.            As we

have noted, Section I(C)(2) provides that Hospitality will pay

“with respect to any claim or ‘suit’ [it] defend[s]: . . . [t]he

cost of bonds to release attachments, but only for bond amounts

within the applicable limit of insurance.” (emphasis added).

            Taken to its conclusion, Graf’s argument would obligate

Hospitality to pay for a bond (or perhaps even multiple bonds) so

long as the amount of the bond was $500,000 or less, irrespective

of whether the coverage limit had already been reached, potentially

increasing Hospitality’s exposure by 100% (or even more, depending

on the applicability of the occurrence limitation).            This, we

believe, makes no sense and cannot be squared with the plain

language of the Policy.        To accept Graf’s proposed reading, we

would have to disregard the second clause in the above-cited

sentence,    which   plainly   limits    the   circumstances   in   which

     3
          To be sure, Hospitality’s obligation to pay “damages”
includes awards of prejudgment interest, Policy ¶ V(C), but only
where those awards are within the Policy limit, id. at ¶ I(C)(2).

                                   -7-
Hospitality must pay for the cost of a bond to situations in which

the bond amount is within the applicable limit of insurance.   See

Jacobs, 417 Mass. at 77, 627 N.E.2d at 464 (“[E]very word and

phrase must be presumed to have been employed with a purpose and

must be given meaning and effect whenever practicable . . . .”)

(citations omitted).

          What is more, Graf’s position is belied by other Policy

provisions.   Section III provides that “[t]he Per Person limit [of

$500,000] . . . is the most we will pay to one or more persons as

the result of ‘bodily injury’ to any one person in any one

‘occurrence.’”   Section IV adds further clarity by providing that

even where a plaintiff obtains a judgment greater than the coverage

limit, Hospitality will not be liable for damages “in excess of the

applicable limit of insurance.”       Even if the meaning of the

Supplementary Payments provision, standing alone, were uncertain

(and it is not), that provision clearly does not provide coverage

here when read in light of the other terms of the Policy.   See USM

Corp. v. Arthur D. Little Sys., Inc., 546 N.E.2d 888, 893 (Mass.

App. Ct. 1989) (“The object of the court is to construe the

contract as a whole, in a reasonable and practical way, consistent

with its language, background, and purpose.”).

          Graf argues next that the magistrate judge erred by

relying on non-binding and factually distinguishable precedent.

See, e.g., St. Paul Fire & Marine Ins. Co. v. Nolen Group, Inc.,

                                -8-
Nos. 02-8601, 03-3192, 03-3651, 2007 U.S. Dist. LEXIS 88025 (E.D.

Pa. Nov. 30, 2007).   We acknowledge, as did the magistrate judge,

that the bond at issue in St. Paul Fire is a supersedeas bond and

not an attachment bond.   But the authority that Graf cites, see,

e.g., Arnett v. Mid-Continent Cas. Co., No. 08-cv-2373-T-27EAJ,

2010 U.S. Dist. LEXIS 71666 (M.D. Fla. July 16, 2010), offers

little help because those cases do not involve awards that exceeded

the available insurance coverage.     Ultimately, we are left with

what we believe to be the plain language of the Policy obligating

Hospitality to pay for the cost of only those bonds whose amounts

are within the applicable limit of insurance.

          Next, Graf quarrels with a factual statement in the

magistrate judge’s Memorandum and Order granting Hospitality’s

Motion to Dismiss.    There, the magistrate judge concluded that

“[t]he Policy is clear that [Hospitality] was not required to pay

the cost of the bond because the bond amount . . . was beyond the

Limits of Insurance, the $500,000 judgment having already been

allocated towards that end.” (emphasis added).   Graf notes that at

the time that Torcia and Graf sought payment for the cost of the

bond to release the attached liquor license, Hospitality had not

yet made payment on the $500,000 damages award (likely because

Torcia had appealed the underlying judgment).      Graf’s argument

misses the mark.   Hospitality’s payment obligation arose upon the

return of the judgment in Graf’s favor against Hospitality’s

                                -9-
insured, Torcia.         That Hospitality did not make payment until a

later date is of no consequence in assessing Hospitality’s total

liability under the Policy.

            Finally, Graf raises a series of arguments about the

nature of attachment bonds, and suggests that their unique function

lends support to her interpretation of the Policy.                  Graf relies

principally on the notion that a court may grant a writ of

attachment “only after . . . a finding by the court that there is

a reasonable likelihood that the plaintiff will recover . . . in an

amount equal to or greater than the amount of the attachment over

and above any liability insurance shown by the defendant to be

available to satisfy the judgment.”          See Mass. R. Civ. P. 4.1(c).

In   essence,     Graf   suggests   that    because    attachment      bonds   are

available    only    where    recoverable     proceeds        exceed   available

liability coverage, the Policy must contemplate an additional

$500,000 amount for the cost of attachment bonds.

            We are not convinced because there are scenarios in which

a plaintiff might obtain an attachment for a bond amount within the

limit of insurance, for which Hospitality would be obligated to

pay.   As an example, a court might grant an order of pretrial

attachment where the nature and extent of the defendant’s insurance

coverage    was    uncertain.       See,    e.g.,     Erkan    v.   New   England

Compounding Pharmacy, Inc., Nos. 12-12052-FDS, 12-12066-FDS, 2012

U.S. Dist. LEXIS 172653, at *7 (D. Mass. Nov. 21, 2012) (granting

                                     -10-
an attachment but noting that “[a]lthough there appears to be

liability insurance, there is no evidence . . . of the amount and

scope of the coverage.”).     In this scenario, so long as the bond

amount was within the limit of insurance, Hospitality would be

liable for its cost.

            We need go no further.       For the reasons set forth, we

agree with the magistrate judge’s interpretation of the Policy and

with his dismissal of Graf’s suit.       We need not separately address

the magistrate judge’s denial of Graf’s Motion to Amend Judgment

because   our   finding   necessarily    precludes   Graf’s   ability   to

demonstrate a manifest abuse of discretion on the part of the

magistrate judge.    See ACA Fin. Guar., 512 F.3d at 55.

                            IV.   Conclusion

            The Policy unambiguously obligates Hospitality to pay the

cost of bonds only for bond amounts that, together with any other

liabilities, fall within the liability cap of $500,000.         For that

reason, the grant of Hospitality’s Motion to Dismiss and denial of

Graf’s Motion to Amend Judgment are AFFIRMED.

Affirmed.

                                  -11-