Court Opinion

ID: 2720537
Source: CourtListenerOpinion
Date Created: 2014-08-25 19:00:48.582047+00
Date Added: 2024-06-11T13:25:24.622005
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                            No. 13-1033

COLONY INSURANCE COMPANY,

                Plaintiff - Appellant,

           v.

CHARLES A. PETERSON; EVERGREEN COMPOSITE TECHNOLOGY, LLC;
RANDOLPH BANK AND TRUST COMPANY,

                Defendants - Appellees,

           v.

EDWARD L. CLAYTON, JR.; HPB INSURANCE GROUP INCORPORATED,

                Third Party Defendants - Appellees.

Appeal from the United States District Court for the Middle
District of North Carolina, at Greensboro.   William L. Osteen,
Jr., Chief District Judge. (1:10-cv-00581-WO-LPA)

Argued:   May 15, 2014                    Decided:   August 25, 2014

Before KING, WYNN, and FLOYD, Circuit Judges.

Affirmed by unpublished opinion. Judge Wynn wrote the majority
opinion, in which Judge King joined.      Judge Floyd wrote a
dissenting opinion.

ARGUED: Reid C. Adams, Jr., WOMBLE CARLYLE SANDRIDGE & RICE,
LLP, Winston-Salem, North Carolina, for Appellant.    Patrick
Michael Kane, SMITH MOORE LEATHERWOOD LLP, Greensboro, North
Carolina; James W. Bryan, NEXSEN PRUET, PLLC, Greensboro, North
Carolina; Stephen G. Teague, TEAGUE, ROTENSTREICH, STANALAND,
FOX & HOLT, PLLC, Greensboro, North Carolina, for Appellees. ON
BRIEF: James R. Morgan, Jr., Jonathan R. Reich, WOMBLE CARLYLE
SANDRIDGE & RICE, LLP, Winston-Salem, North Carolina, for
Appellant.    M. Jay Devaney, NEXSEN PRUET, PLLC, Greensboro,
North Carolina, for Appellee Randolph Bank and Trust Company.
Manning A. Connors, SMITH MOORE LEATHERWOOD LLP, Greensboro,
North Carolina, for Appellees Evergreen Composite Technology,
LLC   and  Charles   A.  Peterson.     Lyn  K.   Broom,  TEAGUE,
ROTENSTREICH, STANALAND, FOX & HOLT, PLLC, Greensboro, North
Carolina, for Appellees Edward L. Clayton, Jr. and HPB Insurance
Group, Incorporated.

Unpublished opinions are not binding precedent in this circuit.

                                2
WYNN, Circuit Judge:

     Plaintiff Colony Insurance Company (“Colony”) appeals from

a final judgment entered upon a jury verdict awarding $2,369,000

to   Defendants     Charles          A.   Peterson       (“Peterson”),         Evergreen

Composite Technology, LLC (“Evergreen”), and Randolph Bank and

Trust Company (“Randolph Bank”) (collectively “Defendants”) on

their insurance claim.           The jury found that Colony waived its

right     to   rescind    a     commercial        property         policy     issued      to

Defendants and was estopped from denying coverage for loss after

a fire damaged a building covered by the policy.                              On appeal,

Colony contends that the district court erred in denying its

motion for judgment as a matter of law.                    For the reasons below,

we affirm.

                                            I.

     In    reviewing     the    denial      of    a    motion      for    judgment   as   a

matter of law, we must view and recite the evidence in the light

most favorable to the non-movants.                    Ocheltree v. Scollon Prods.,

Inc., 335 F.3d 325, 331 (4th Cir. 2003).

     Effective      March      16,    2010,      Colony,      a    Virginia    insurance

company, issued a commercial property policy insuring a 95,000-

square-foot     vacant      building        located      at       501    Hamilton    Road,

Montezuma,     Georgia    (“the       501    building”).            The    policy    named

Evergreen,      a   Georgia          corporation        headquartered         in     North

                                            3
Carolina, and its owner, Peterson, a North Carolina resident, as

the insured.       The policy also listed Randolph Bank, a community

bank in Randolph County, North Carolina, as a mortgage holder

and loss payee under the policy.                   The policy provided coverage

limits of up to $1 million for the 501 building and $3.5 million

for the business-related personal property on the site.

      Peterson had obtained loans from Randolph Bank to launch

Evergreen, which manufactured composite wood products used in

residential decking, fencing, and railings.                       As collateral for

its   loans,    Randolph     Bank      held    a    deed   of    trust      on    the   501

property    and    perfected      a    security      interest     in    the      equipment

located    there.      By    late      2009,       Evergreen     had    suspended       its

operations and was in default on its loans from Randolph Bank.

      In February 2010, a fire, caused by arson, damaged a nearby

building    also     owned     by       Evergreen       (“the      261      building”).

Thereafter, upon learning that the insurance on both buildings

had lapsed, Randolph Bank engaged third-party defendant Edward

Clayton    (“Clayton”),      an       insurance      agent      with    HPB      Insurance

Group, to assist in obtaining insurance coverage for the 501

building.      The policy issued by Colony insured the 501 building

against, among other things, risk of loss caused by fire.                                To

mitigate    this     risk,     the      policy       contained         an   endorsement

requiring certain fire protective safeguards.

                                           4
       Specifically,       the    fire    protective        safeguards          endorsement

required      Evergreen     and     Peterson         to     maintain       an     automatic

sprinkler system, fire extinguishers, and functioning utilities

at the 501 building.            The fire protective safeguards endorsement

stated that Colony would “not pay for loss or damage caused by

or resulting from fire if, prior to the fire,” the named insured

“[f]ailed to maintain any protective safeguard . . . in complete

working    order”     or   “[k]new       of   any    suspension,          malfunction      or

impairment in any protective safeguard” and failed to notify

Colony.    J.A. 114.

       On the same day that Colony issued the policy, it retained

an   independent      vendor,     Safety      Resources,         to     inspect     the   501

building.       Colony      charged       Defendants        a     $250     non-refundable

inspection     fee,    which      was    separate         from    the     $18,000    policy

premium.      According to the policy, the inspection “relate[d]

only to insurability and the premiums to be charged.”                             J.A. 75.

The inspection provided Colony “the chance to independently look

at the risk that it [was] insuring.”                      J.A. 454.        By paying the

$250   fee,    Defendants        expected         Colony    “to       notify     [them]    if

problems were identified by the inspection” so that they could

remedy them.     J.A. 1376.

       Safety Resources inspected the 501 building on April 13,

2010   and    prepared      a    written      report,       which        noted    that    the

utilities for the 501 building were off and that there was no

                                              5
heat.   This contradicted information provided to Colony during

the insurance application process.                  Specifically, Clayton had

submitted   a    “Specialty    Property       Vacant       Supplement”           form    that

indicated that the power and heat would remain on at the 501

building during vacancy.            Colony received the inspection report

on April 21, 2010, but the underwriter at Colony did not review

the report until June 18, 2010.               Nevertheless, Colony issued a

mortgagee   endorsement       on    April     22,    2010,       and    a    loss       payee

endorsement on May 6, 2010, both with retroactive effect as of

March 16, 2010, and naming Randolph Bank as a mortgagee and loss

payee on the policy.

      On May 18, 2010, a fire damaged the 501 building and its

contents.         Firefighters       discovered           that    the        two     valves

controlling the sprinkler system had been turned off.                              Evidence

at the scene indicated that the valves had likely been “tampered

with and vandalized.”        J.A. 761.

      Colony subsequently denied coverage for the loss and sought

a declaratory judgment regarding its indemnity obligations under

the policy.       Colony argued that material misrepresentations on

the   insurance    application       rendered       the    policy      void      and    that

breach of the fire protective safeguards endorsement precluded

coverage.       Defendants    counterclaimed         for      breach        of   contract.

Evergreen   and    Peterson        also   asserted        a   cross-claim           against

                                          6
Randolph Bank and filed a third-party complaint against Clayton

and HPB Insurance Group.

      All    parties       sought     summary      judgment,    which   the     district

court denied.          Regarding Colony’s claims, the district court

held that genuine issues existed “as to whether the doctrines of

waiver/estoppel        prevent       Colony    from   contesting       coverage   under

the [p]olicy.”         J.A. 355.         Accordingly, the case proceeded to

trial.

      At    trial,     Defendants       introduced      deposition      testimony    by

Roseanne Gauthier, the senior underwriter at Colony responsible

for determining whether the conditions of insurance for the 501

building were met.           In her testimony, Gauthier acknowledged that

she   received       the    inspection       report   from     Safety   Resources    on

April 21, 2010, but that she “just did not get to the inspection

by the time the loss occurred.”                     J.A. 1051.        Gauthier stated

that had she reviewed the inspection report when she received

it,   she    would    have        “immediately”      taken   steps     to   cancel   the

policy.      J.A. 1053.

      Defendants           also     presented       evidence     of     other     Colony

underwriting files in which discrepancies appeared between some

of the representations made on insurance applications and the

conditions revealed by Colony’s inspections.                          Regarding those

files,      Colony    did     not     seek    to    rescind,     and    policyholders

remedied the conditions or paid higher premiums.

                                              7
       At   the    conclusion           of    the     evidence,          Colony     moved    for

judgment as a matter of law.                  The district court took the motion

under advisement and allowed the case to go to the jury.                                     The

jury returned a verdict in favor of Defendants, finding that

although a material misrepresentation appeared on the insurance

application       and   that        a    condition          of     the     fire     protective

safeguards endorsement requiring functioning utilities to remain

on had been breached, Colony had nonetheless waived its right to

rescind     the    policy     and       was   estopped           from    denying     coverage.

Further,     the     jury     determined            that        Randolph     Bank    was     not

responsible for the misrepresentation on the application.                                    The

jury   awarded      Defendants          $2,369,000         on    their     counterclaim      for

coverage under the policy, and the court awarded pre-judgment

interest.

       On December 3, 2012, the district court denied Colony’s

motion for judgment as a matter of law and subsequently entered

final judgment in favor of Defendants.                          This appeal followed.

                                              II.

       Colony argues that the district court erred in denying its

motion for judgment as a matter of law.                           “We review de novo the

grant or denial of a motion for judgment as a matter of law[,]”

Anderson    v.     Russell,    247 F.3d 125,    129    (4th     Cir.    2001),    to

determine whether “a reasonable jury would not have a legally

                                                8
sufficient     evidentiary       basis    to    find   for    the    [non-moving]

party[.]”     Fed. R. Civ. P. 50(a)(1). 1          “If, viewing the facts in

the   light   most    favorable     to    the   non-moving    party,      there   is

sufficient evidence for a reasonable jury to have found in [the

non-moving party’s] favor, we are constrained to affirm the jury

verdict.”     Lack v. Wal-Mart Stores, Inc., 240 F.3d 255, 259 (4th

Cir. 2001).

      We note that North Carolina law governs our analysis of

this diversity case.            See Erie R.R. Co. v. Tompkins, 304 U.S.
64, 78 (1938).       Thus, we first look to see if the Supreme Court

of North Carolina has spoken on this issue; if not, we must

predict how that court would rule on it.                   Twin City Fire Ins.

Co. v. Ben Arnold-Sunbelt Beverage Co. of S.C., 433 F.3d 365,

369   (4th    Cir.   2005). 2      In    forming   that    prediction,      we    may

consider     opinions   from     the    North   Carolina     Court   of    Appeals,

teachings of treatises, and practices of other states.                    Id.

      1
       Colony did not pursue any post-verdict motions under Rule
50(b) or Rule 59.    As a result, Colony may not challenge the
sufficiency of the evidence supporting the jury’s verdict.
Belk, Inc. v. Meyer Corp., 679 F.3d 146, 154-55 (4th Cir. 2012).
      2
       Unlike other states within our circuit, there is no
mechanism for certifying questions to the Supreme Court of North
Carolina.   See SunTrust Bank, N.A. v. Macky, 669 F.3d 177, 182
n.* (4th Cir. 2012).

                                          9
                                             A.

      Colony contends that the district court should have granted

judgment as a matter of law because the jury determined that

Peterson or Evergreen breached the fire protective safeguards

endorsement.         Colony     asserts            that     maintaining     functioning

utilities,     as    required      by        the     fire     protective     safeguards

endorsement, was a condition of coverage immune to waiver, and

that the district court therefore erred in denying judgment as a

matter of law.

      Under North Carolina law, an insurer may waive “a provision

or   condition      in   an   insurance        policy       which    is    for   its    own

benefit.”    Brandon v. Nationwide Mut. Fire Ins. Co., 271 S.E.2d
380, 383 (N.C. 1980).         North Carolina courts have long held that

      the breach of any condition in [an insurance] policy,
      as against an increase of risk or by keeping of
      certain hazardous goods . . . or, indeed, the
      violation of any of the conditions of the policy, may
      be waived by the insurer; and a waiver may be implied
      from the acts and conduct of the insurer after
      knowledge that such conditions have been broken.

Blue Bird Cab Co. v. Am. Fid. & Cas. Co., 15 S.E.2d 295, 301

(N.C. 1941) (alteration in original) (quotation marks omitted).

Similarly,    an    insurer    may      be    estopped       from    denying     coverage

under an insurance policy.               Estoppel arises if the insurer’s

“actions     or     silence     when         [it]         ought     to    have    spoken,

intentionally       or   through     culpable        negligence,         induce[s]     [the

insured] to believe . . . coverage exist[s]” and the insured

                                             10
relies upon such belief to his or her detriment.                             United States

Fid. & Guar. Co. v. Country Club of Johnston Cnty., Inc., 458
S.E.2d 734, 740 (N.C. App. 1995).

       The Supreme Court of North Carolina has not spoken directly

on the precise issue in this matter, but the decisions of that

state’s       second    highest       court,      the   North        Carolina     Court      of

Appeals, provide us with guidance.                    See Twin City Fire Ins. Co.,
433 F.3d    at     369.      In    that   regard,         we    find     Durham    v.   Cox

particularly illuminating.             310 S.E.2d 371 (N.C. App. 1984).

       In Durham, the North Carolina Court of Appeals determined

that material issues of fact existed as to whether the defendant

insurance      company       waived    its   right      to    deny    coverage       under    a

homeowner’s policy for loss following a fire. 310 S.E.2d at

376-77.         The    policy      stated      that     “[t]his       coverage       excludes

structures used in whole or part for business purposes.”                              Id. at

373.    In breach of this provision, the insured plaintiff used

the    building,       a     garage,    in     connection          with     his   furniture

upholstery business, but asserted that such use was known to the

insurer,      resulting       in   waiver.        Id.    at       373-74.     The     insurer

argued that the policy exclusion was a “matter of coverage” that

could not be expanded by waiver or estoppel as a matter of law.

Id. at 374.

       On appeal from summary judgment in favor of the insurer,

the North Carolina Court of Appeals reasoned that waiver and

                                             11
estoppel “properly apply” to the business use exclusion “since

the property itself, an appurtenant structure, and the risk,

loss due to fire, [were] already within the coverage of the

policy.”     Durham, 310 S.E.2d at 376.        Thus, the risk of loss to

the covered property due to fire was an “accepted risk” subject

to    forfeiture,   rather   than   an    “excepted     risk”   immune    from

waiver:

      The distinction between an accepted risk to be
      defeated by conditions set forth in the policy and an
      excepted risk is clear, and it is logical to hold that
      it takes a new contract to cover an excepted risk. By
      way of illustration: A. has a plantation on which
      there are 10 buildings.   All are covered by a policy
      of insurance, but the policy provides that, in case A.
      shall store certain inflammable materials in any of
      the houses, then the insurance on that building shall
      instantly cease. That is an assumed risk, which will
      be void upon a condition subsequent.        B. has a
      plantation upon which there are 10 buildings; 9 of
      them are covered by a policy of insurance.    Building
      No. 10 is excluded from the policy.     It is entirely
      logical to hold that it takes a new contract to
      include insurance on B.’s No. 10, but not on A.’s No.
      10.

Id. (citation omitted); accord United States Fid. & Guar. Co.,
458 S.E.2d at 739.

      Applying   this   distinction      between     accepted   and   excepted

risk, the North Carolina Court of Appeals determined that using

the garage for business purposes did not create an entirely new

risk.     Rather, such use “enhance[d] a risk already assumed by

the   insurer”—namely,    the   risk     of   fire   destroying   a    covered

structure.     Durham, 310 S.E.2d at 376.            Moreover, observed the

                                    12
court, “conditions regarding permissible or prohibited uses to

which the property may be put are clearly inserted in the policy

for the benefit of the insurer and therefore may properly be

waived     by   it    or    its   authorized        agent.”    Id.   at    376-77.

Accordingly, the court held that the insurer could waive the

policy provision excluding coverage for business use.                       Id. at

377.

       Turning to the facts at issue here, the relevant part of

the fire protective safeguards endorsement states:

       A. The following is added to the COMMERCIAL PROPERTY
       CONDITIONS:
                 PROTECTIVE SAFEGUARDS
                 1. As a condition of this insurance, you are
       required   to  maintain   the   protective devices  or
       services listed in the [s]chedule above.

J.A. 113.         The protective safeguards schedule specifies that

“ALL   UTILITIES       MUST   REMAIN   ON     AND    FUNCTIONING.”     J.A.      113.

Further,    the      fire   protective   safeguards      endorsement      adds    the

following language to the exclusions section of the policy:

       We will not pay for loss or damage caused                     by    or
       resulting from fire if, prior to the fire, you:

             1.  Knew of any suspension, malfunction or
       impairment in any protective safeguard listed in the
       [s]chedule above and failed to notify [Colony] of that
       fact;

            2.  Failed to maintain any protective safeguard
       listed in the [s]chedule above in complete working
       order[.]

J.A. 114.

                                         13
      There      is   no    dispute      that      the    policy    issued     by     Colony

expressly insured the 501 building against the risk of loss due

to fire.      As such, the loss that occurred was contemplated by

the parties and encompassed by the policy.                              See Durham, 310
S.E.2d at 376 (broadly viewing the risk of loss to property by

fire as covered, notwithstanding a business use exclusion).                                 By

requiring Defendants to maintain functioning utilities, the fire

protective safeguards endorsement limited Colony’s exposure to

risk it had already “accepted”—namely, risk of loss to the 501

building posed by fire.            Id.

      Consequently,          we    agree      with       the    district      court       that

“applying the doctrines of waiver/estoppel to the conditions at

issue in this case would not expand the [p]olicy to cover risks

not currently contemplated by that agreement–i.e., that fire may

destroy    the    subject        property.”        J.A.      323.       Accordingly,       the

district court did not err by submitting the issues of waiver

and   estoppel        to   the    jury.       And       Colony’s    arguments        to    the

contrary are unavailing.

      Colony also argues that, under United Capitol Ins. Co. v.

Kapiloff,     waiver       did    not    apply     as    a     matter    of   law    because

insufficient time had passed between Colony’s receipt of the

inspection report and the fire.                 Again, we disagree.

      First and foremost, Kapiloff, on which Colony’s argument

heavily     relies,        required      us   to     apply       Maryland,     not    North

                                              14
Carolina, law.         155 F.3d 488 (4th Cir. 1998).                  “No one doubts

that a federal court called upon to adjudicate a state law claim

in the diversity jurisdiction must apply the relevant state law

in determining the substantive rights and duties of the parties

. . . .”        Auer v. Kawasaki Motors Corp., U.S.A., 830 F.2d 535,

537 (4th Cir. 1987) (en banc).              Here, that relevant state law is

North Carolina’s. 3

     Turning,        then,   to   North    Carolina         law,    “[w]aiver    by   an

insurer    of    a    forfeiture        provision      in    an     insurance    policy

requires   (1)       ‘knowledge    on    the    part    of    the    insurer    of    the

pertinent facts,’. . . , and (2)‘conduct thereafter inconsistent

with an intention to enforce the condition’. . . .”                            Mabry v.

Nationwide Mut. Fire Ins. Co., 422 S.E.2d 332, 334 (N.C. App.

1992) (quoting Gouldin v. Inter-Ocean Ins. Co., 102 S.E.2d 846,

849 (N.C. 1958)).         “When the evidence is sufficient to justify,

but not require, a finding of waiver on the part of the insurer,

then the issue of waiver is one to be determined by the jury.”

Id. (citing Gouldin, 102 S.E.2d at 851 (because the evidence of

     3
        The dissenting opinion, too, focuses on Kapiloff.
Undoubtedly, that opinion includes some broad statements and few
citations, as the dissent notes.     Those stylistic choices do
not, however, change the fact that “[t]here is no federal
general common law[,]” Erie, 304 U.S. at 78, and that North
Carolina law governs this dispute.

                                           15
waiver was “susceptible of diverse inferences, it is improper

for     the   presiding        judge     to        give    the      jury    a     peremptory

instruction”); and Brandon, 271 S.E.2d at 385 (noting that “the

evidence in this case is sufficient to permit, but not compel, a

jury to find that defendant, by words or conduct, waived the

requirement of proofs of loss [and] [t]he defendant’s evidence

does not, as a matter of law, compel a contrary conclusion” and

thus    “hold[ing]      that      the   issue       of     waiver    should       have   been

submitted to the jury”)).

       Here, sufficient evidence existed for a reasonable jury to

determine that Colony had “‘knowledge . . . of the pertinent

facts.’”      Mabry, 422 S.E.2d at 334 (quoting Gouldin, 102 S.E.2d

at 849).      The inspection paid for by Defendants and conducted by

Colony’s independent vendor revealed that the utilities were off

at the 501 building, in contravention of the fire protective

safeguards endorsement.               Colony received this information from

Safety Resources on April 21, 2010, approximately four weeks

before    the   May    18,     2010     fire.        And    in   North      Carolina,     “an

insurance company is presumed to be cognizant of data in the

official files of the company[.]”                   Gouldin, 102 S.E.2d at 849.

       Further, sufficient evidence existed for a reasonable jury

to     determine      that     Colony     engaged          in    “‘conduct       thereafter

inconsistent       with      an   intention         to    enforce     the       condition.’”

Mabry, 422 S.E.2d at 334 (quoting Gouldin, 102 S.E.2d at 849).

                                              16
Although Colony knew for weeks that the utilities were off, it

neither informed Defendants of the violation nor took steps to

cancel the policy.            See Faircloth v. Ohio Farmers Ins. Co., 117
S.E.2d 404, 408-09 (N.C. 1960) (“Equitably, if [the insurer] did

not desire to carry the risk longer, because of the [breach of

the   policy     conditions],        it    ought,   in     fair    dealing,     to    have

returned       the   unearned       premium,      and    rescinded       the   insurance

contract, so that plaintiff could have known he no longer was

protected thereby and would have been afforded an opportunity to

obtain    a    new   policy    from       another   agent.”).           Instead,   Colony

confirmed coverage by issuing a mortgagee endorsement on April

22, 2010, and a loss payee endorsement on May 6, 2010, naming

Randolph Bank as a mortgagee and loss payee on the policy. 4

      Moreover,         testimony     by     Colony’s       underwriter,        Roseanne

Gauthier, contradicts Colony’s assertion that the time period

between       receipt    of   the    inspection         report    and    the   fire   was

inadequate to permit a finding of waiver.                         Gauthier testified

      4
       The dissent cites Nelson v. Hartford Underwriters Ins.
Co., 630 S.E.2d 221 (N.C. App. 2006), for the notion that “only
a few weeks” provides an insurer with little time to affirm or
deny coverage.    Id. at 233.    Notably, however, at issue in
Nelson was whether the insurer’s failure to make a coverage
determination   within  nineteen   days  of   receiving  a   re-
investigation report of a previously-denied claim constituted an
unfair and deceptive trade practice. Id. The facts and issues
in play in Nelson have little in common with, and shed little
light on, those before us here.

                                             17
that if she had reviewed the inspection report on April 21,

2010, when she received it, she would have “immediately” taken

steps to cancel the policy.           J.A. 1053.

        North   Carolina’s     highest       court   has   underscored      that

forfeiture      “is   not   imposed   as   a   penalty   for   making   a   false

statement, which the insurer may invoke at his pleasure at any

time, regardless of its own antecedent conduct.                It is based on

the principle that the insurer has been misled to its damage.”

Hicks v. Home Sec. Life Ins. Co., 39 S.E.2d 914, 916 (N.C.

1946).      Crucially, however, an insurer “is not misled when it

knows the facts; and when that knowledge exists or is acquired,

it becomes the right and the duty of the insurer” to act.                     Id.

at 916-17.      And a failure to do so “will operate as a waiver.”

Id. 5

        Based on the proffered evidence and the pertinent North

Carolina law, a reasonable jury could determine that Colony was

not misled because it knew the facts, and that Colony had the

right and the duty to act but failed to do so.                 Accordingly, we

must agree with the district court that we “cannot say that the

        5
       We concern ourselves neither with homogenizing state laws
for fear that insurance companies will otherwise need to
“operate drastically differently across state lines” nor with
“the day-to-day realities of the business.”         Post at 32.
Instead, we stick to our business, which is using North Carolina
substantive law to decide the issues presented by this appeal.

                                        18
27 days between the time Colony received the inspection report

and the fire was insufficient, as a matter of law, for Colony to

take action on the inspection as provided—especially in light of

testimony      that       had     the     inspection      been        reviewed,         immediate

action would have occurred.”                      J.A. 323.           The district court

therefore properly submitted the waiver issue to the jury and

did not err in instructing the jury that it could find waiver.

And “we are constrained to affirm the jury verdict.”                                    Lack, 240
F.3d at 259.

       In sum, we conclude, based on North Carolina law, that the

fire   protective          safeguards          endorsement      set     forth     in     Colony’s

policy    is     a   provision          of     forfeiture       subject     to     waiver      and

estoppel, that the issue was properly submitted to the jury, and

that there existed “sufficient evidence for a reasonable jury to

have     found       in     [Defendants’]             favor,     [such      that]        we    are

constrained to affirm the jury verdict.”                        Lack, 240 F.3d at 259.

                                                 B.

       Next, Colony contends that it is entitled to judgment as a

matter    of   law        because    the       jury    determined       that      there    was   a

material       misrepresentation                on      the     insurance          application

regarding      whether       heat        and    power    would        be   on     at     the   501

building.        Although         Colony        correctly       notes      that    a     material

misrepresentation            on     an       insurance        application         may     forfeit

                                                 19
coverage, see Gore v. Assurance Co. of Am., 704 S.E.2d 6, 12

(N.C. App. 2010), waiver and estoppel may overcome a material

misrepresentation, and such a question is for a jury to resolve.

See, e.g., Cullen v. Valley Forge Life Ins. Co., 589 S.E.2d 423,

428 (N.C. App. 2003).       Accordingly, the district court did not

err in allowing the jury to decide whether Colony had waived its

right     to     rescind    the     policy,     notwithstanding        the

misrepresentation on the application. 6

                                   III.

     We   have   reviewed   and   summarily   reject   all   of   Colony’s

arguments.     The judgment of the district court is therefore

                                                                  AFFIRMED.

     6
       Not least given our resolution of the issues above, we
reject Colony’s arguments as regards Randolph Bank, including
Randolph Bank’s status as an innocent mortgagee.

                                    20
FLOYD, Circuit Judge, dissenting:

        I agree with the majority that prolonged inaction by an

insurer can amount to a waiver of rights under an insurance

policy if the insurer has received notice of a breach of a

requirement and takes no steps to notify the insured of the

breach within a reasonable time.                 However, in this case, and as

a matter of law, Colony could not be said to have waived the

endorsement provision of the insurance policy on account of its

inaction during the twenty-seven days between its receipt of the

inspection    report     on    April 21,        2010,       and   the    burning    of   the

501 building on May 18, 2010.                   Accordingly, I think that the

district court erred by submitting to the jury Issues 4 and 5

regarding    waiver      and    estoppel    in        the    first      instance,   and    I

therefore would reverse the district court’s denial of Colony’s

Rule 50(a) motion and respectfully dissent to the majority’s

contrary conclusion.           I would also remand this case for trial on

the sole issue of whether Randolph Bank had knowledge that the

utilities were off and failed to notify Colony pursuant to the

policy.

                                           I.

     It has long been the law in North Carolina that “[u]pon

being    informed   of    [a    breach],        [an    insurer]         should   within   a

reasonable time . . . notif[y] the insured of its determination

                                           21
to cancel the policy[.]”          Horton v. Home Ins. Co., 29 S.E. 944,

946 (N.C. 1898) (emphasis added); see also Dailey v. Integon

Gen. Ins. Corp., 331 S.E.2d 148, 154–55 (N.C. Ct. App. 1985)

(insurer’s responsiveness assessed for reasonableness).                   It is

also well established that “time . . . may be so short or so

long   that   the   court    will    declare   it    to   be    reasonable    or

unreasonable as a matter of law.”              Claus-Shear Co. v. E. Lee

Hardware House, 53 S.E. 433, 434 (N.C. 1906).                  Although Claus-

Shear Co. was a contractual dispute pertaining to the delivery

of goods, the principle regarding temporal reasonableness as a

matter of law has been applied widely by North Carolina courts.

See, e.g., Harris v. Lamar Co., 563 S.E.2d 642, 2002 WL 1013571,

at *4 (N.C. Ct. App. May 21, 2002) (unpublished table decision)

(opinion by Wynn, J.) (quoting the above text from Claus-Shear

Co. in a property case presenting the question of whether a

billboard should be considered “abandoned”).                   Thus, I see no

reason to limit its import in this case.

       The North Carolina Supreme Court has not spoken regarding

what time period is reasonable for an insurer to receive an

inspection    report   and   to   process   that    report     and   notify   the

insured of any deficient conditions or breaches.                 Therefore, we

must look to secondary indicia to try to predict how the North

Carolina Supreme Court would rule in such a case, including,

inter alia, opinions from the North Carolina Court of Appeals

                                      22
and the practices of other states.                       Twin City Fire Ins. Co. v.

Ben Arnold-Sunbelt Beverage Co. of S.C., 433 F.3d 365, 369 (4th

Cir.    2005).       As    between        these    two    secondary      sources,        North

Carolina’s       “intermediate        appellate      court       decisions       constitute

the    next   best    indicia        of    what    state    law    is,      although     such

decisions may be disregarded if the federal court is convinced

by other persuasive data that the highest court of the state

would   decide     otherwise.”            Liberty    Mut.       Ins.   Co.    v.   Triangle

Indus.,   Inc.,      957 F.2d 1153,    1156       (4th   Cir.   1992)       (citation

omitted) (internal quotation marks omitted).                           For the reasons

that follow, both North Carolina appellate decisions and the

practices of other states, together and separately, yield the

conclusion     that,       as   a    matter   of    law,    Colony       could     not    have

waived the endorsement provision of the insurance policy.

                                A.   North Carolina Law

       As the majority notes, waiver requires “(1) knowledge on

the part of the insurer of the pertinent facts” and “(2) conduct

thereafter       inconsistent         with     an    intention         to    enforce      the

condition which leads the insured to believe that he is still

protected by the policy.”                  Mabry v. Nationwide Mut. Fire Ins.

Co., 422 S.E.2d 332, 334 (N.C. Ct. App. 1992) (citation omitted)

(internal quotation marks omitted).                      As to the first criterion,

the majority claims that Colony had knowledge of the utilities

                                              23
being      off        at   the    501     building     simply       by    virtue       of    Colony’s

receipt of the inspection report on April 21, 2010.                                          See ante

at 17 (citing Gouldin v. Inter-Ocean Ins. Co., 102 S.E.2d 846,

849    (N.C.          1958)      (“[A]n    insurance       company        is    presumed       to    be

cognizant of data in the official files of the company, received

in    formal          dealing      with     the   insured.” 1)).               But    surely,       the

majority does not mean to extract from Gouldin the notion that

an insurer has no time whatsoever after receiving an inspection

report          to    process      that    report      and    run    it    up        the    corporate

flagpole             to    be    reviewed    by      the     appropriate         personnel          and

decision-makers.                  Indeed,     North        Carolina’s          appellate       courts

appear to recognize that some time period is necessary between

receipt of information and action on that information.

       For example, in Nelson v. Hartford Underwriters Insurance

Co.,       an    insurer         received    an   inspection         report          regarding      the

condition            of    the    insured    property        on   July 17,           2002,    but    on

August 5, 2002—nineteen days later and “before [the insurer] had

made its determination of whether the . . . claim was covered by

the policy”—“plaintiffs’ counsel sent [to the insurer] a letter

directing it to have no further contact with plaintiffs[.]”                                         630

       1
       I note that                Colony did not receive the inspection report
from Peterson and                Evergreen (the insured), but rather from an
independent third                 party (Safety Resources).     Nonetheless, I
assume, argudendo,               that this difference is immaterial here.

                                                  24
S.E.2d 221, 233 (N.C. Ct. App. 2006).               Plaintiffs then sued the

insurer     for   failing    to   affirm     or    deny     coverage   “within    a

reasonable time.”      Id.    In holding that the insurer did not act

unreasonably for not having responded to plaintiffs on or before

August 5, the court noted that “[t]he report . . . was provided

to   [the   insurer]   only   a   few   weeks      before    [the   insurer]     was

warned not to have any contact with plaintiffs, providing little

time for [the insurer] to determine whether it should cover a

claim it had previously denied.”             Id.   Although nineteen days is

fewer than twenty-seven days, the court’s use of “only a few

weeks” (emphasis added), and the description of nineteen days as

“little time,” certainly indicates that the insurer would have

been allowed additional time to respond. 2                See also Meadlock v.

Am. Family Life Assurance Co., 729 S.E.2d 127, 2012 WL 2891079,

at *7 (N.C. Ct. App. July 17, 2012) (unpublished table decision)

(in light of a lack of evidence or authority to the contrary,

      2
       The majority attempts to discount Nelson by splitting the
finest of hairs based on the facts, see ante at 18 n.4, but
provides no case-to-case analyses of its own for its cited
cases.   Rather, the majority opinion is long on statements of
law and instances in which waiver was found, see id. at 16, but
devoid of application of that law and the facts of the cited
cases to the facts here.        Absent guidance from the North
Carolina Supreme Court as to what time period is “reasonable”
for an insurer to respond under these circumstances, and absent
a case with more similar facts and arriving at an alternative
outcome, Nelson actually provides an excellent analogy from
which much can be gleaned. Any other characterization of Nelson
is, quite simply, disingenuous.

                                        25
insurer’s delay of four months was not unreasonable); cf. N.C.

Gen. Stat. § 20-279.21(b)(3)(a.) (“Suit may not be instituted

against the insurer in less than 60 days from the posting of the

first notice of the injury or accident to the insurer[.]”).

       As to the second waiver criterion, the majority asserts

that    Colony’s    inaction      during    the    twenty-seven     days   after

receiving the inspection report provides the requisite evidence

of conduct that is “inconsistent with an intention to enforce

the condition,” Mabry, 422 S.E.2d at 334.              But this argument is

built upon the false premise that Colony had “knowledge” of the

condition    in    the   first   instance.        Neither    the   majority    nor

Peterson    and    Evergreen     dispute    the   accuracy    or   execution    of

Colony’s internal review procedure upon receipt of an inspection

report.     Specifically, Colony describes, at pages 18–19 of its

brief, its internal review procedure as follows:

       The initial review [by an assistant underwriter] is
       simply to determine if the inspector has made any
       recommendations, and to direct the underwriter’s
       attention to those recommendations.   It [is] not the
       underwriting assistant’s responsibility to compare the
       inspection results against the conditions of coverage,
       or to confirm that all conditions of coverage had been
       met. . . . [T]he underwriting assistant . . . reviewed
       the ‘recommendations’ portion of the Inspection report
       on April 21, 2010, and then passed them on to the
       underwriter . . . . The ‘Recommendations Section’ of
       the report . . . said nothing about the utilities in
       the 501 building.

(Paragraph break omitted.)

                                       26
       In view of the above-described (and uncontested) practice

at Colony, the majority’s argument that waiver must be found

because       Colony’s   underwriter      testified       that   she    would    have

“immediately” taken steps to cancel the policy had she reviewed

the pertinent part of the inspection report is a red herring.

In essence, the relevant portion of the inspection report had

not    been    reviewed,   and    thus,    Colony     cannot     be    imputed   with

knowledge of the information contained in the “recommendations”

section of the report until the appropriate personnel—Colony’s

underwriter—had reviewed that section.                    Moreover, neither the

majority      nor   Peterson    and   Evergreen      argue   that      the    internal

review procedures at Colony are unreasonable and/or out of the

ordinary for the insurance business, and to hold that knowledge

was imputed on April 21, 2010, simply because Colony’s assistant

underwriter reviewed the inspection report would be to impute

knowledge on any individual at Colony who handled the report.

       In sum, notwithstanding the majority’s statements of pure

law, when North Carolina law—most pertinently Nelson—is applied

to    the   facts   of   this    case,    it   is   unquestionable       that    North

Carolina’s appellate decisions counsel in favor of providing to

insurance      companies   a     grace    period    for    processing        documents

during which waiver cannot be found as a matter of law.

                                          27
                        B.   Practices of Other States

      When looking to the practices of other states, my principal

reason   for     positing     that      Colony     could       not   have    waived   the

endorsement provision is this Court’s ruling in United Capitol

Insurance Co. v. Kapiloff, 155 F.3d 488 (4th Cir. 1998).                               In

Kapiloff, this Court held that an insurer was not considered to

have waived a condition/requirement of building occupancy that

the   insured    failed      to    meet   prior     to     a    fire   destroying     the

subject property, even though the insurer had knowledge of the

insured’s noncompliance via a property inspection and did not

inform the insured about the inspection results.                             Id. at 497.

Specifically, the building inspection took place in January and

the losses occurred in February and March of the same year.                           The

insurer, however, did not deny coverage to the insured until

December    of   that    year.          Id.    at 491.         In    holding   that   the

occupancy    requirement          was   not    waived,     this      Court   stated   the

following:

      [T]he amount of time it took for [the insurer] to
      determine that the [insured’s] properties were not in
      compliance with the policy would not, as a matter of
      law, be long enough in any event to constitute a
      waiver of any right under the policy. . . . In making
      coverage decisions, an insurance company must be
      entitled to a sufficient time to collect the facts,
      evaluate them, and make legal determinations with
      respect to those facts.   These activities require not
      only field work but also an internal evaluation with a
      review by appropriate personnel. The one or two months
      urged by the [the insured] as supporting the finding
      of waiver or estoppel would hardly provide an

                                              28
     insurance company with adequate time to make this kind
     of a decision, particularly when its liability for a
     wrongful decision could expose it to the risk of bad
     faith.

Id. at 497.

     As noted above, the fire at the 501 building occurred just

twenty-seven days after Colony received the inspection report.

That amount of time is shorter than the lower end of the at

least “one or two months” contemplated in Kapiloff, during which

an insurer is permitted to timely process information regarding

the conditions of an insured property.         Nonetheless, Peterson,

Evergreen, and the majority assert that such a grace period does

not apply to Colony merely because Kapiloff is a Maryland case.

In the absence of more on-point case law from North Carolina,

however, Kapiloff provides strong and logical guidance, given

its factual similarity to this case.

     Kapiloff was indeed a case arising out of the District of

Maryland   and   applying   Maryland   law   based    upon   jurisdiction

pursuant to 28 U.S.C. § 1332(a), but the relevant portion of the

opinion is in no way Maryland-specific.              In the entirety of

Part V of the Kapiloff opinion, which discusses the grace period

before waiver occurs, this Court cited to Maryland law in three

different instances.    First, this Court cited A/C Electric Co.

v. Aetna Insurance Co., 247 A.2d 708, 713 (Md. Ct. App. 1968),

and McFarland v. Farm Bureau Mutual Automobile Insurance Co., 93

                                  29
A.2d 551, 554 (Md. 1953), for the proposition that “an insurance

company may waive a condition of its policy by its conduct when

it induces an honest belief that the condition is not required,

when    the    insured       is   duly     misled,       and    when   no      extension        of

coverage results from the waiver.”                       Kapiloff, 155 F.3d at 497.

North    Carolina       follows      a     similar       scheme.         See     Brendle        v.

Shenandoah Life Ins. Co., 332 S.E.2d 515, 518 (N.C. Ct. App.

1985) (“An insurer may be found to have waived a provision or

condition in an insurance policy which is for its own benefit.

Implied       waiver    occurs       when       the    insurer     acts     in       a    manner

inconsistent with an intention to enforce strict compliance of

the contested provision, and the insured is naturally led to

believe       that     the   right        has    been    intentionally           given      up.”

(citations       omitted)).          Second,          this     Court   cited        Prudential

Insurance Co. v. Brookman, 175 A. 838, 840 (Md. Ct. App. 1934),

for the proposition that “waiver or estoppel may occur only when

it does not create new coverage; an extension of coverage may

only be created by a new contract.”                      Kapiloff, 155 F.3d at 497.

Again,    North       Carolina      follows      the     same    rule.         See       Gore   v.

Assurance Co. of Am., 704 S.E.2d 6, 10 (N.C. Ct. App. 2010) (“In

North Carolina, the doctrines of waiver and estoppel are not

available to broaden the coverage of a policy so as to protect

the    insured       against      risks    not       included    therein       or    expressly

                                                30
excluded from coverage.” (citation omitted) (internal quotation

marks omitted)).

      Finally—and most relevant here, as it immediately precedes

the above block quote from Kapiloff—this Court cited Monumental

Life Insurance Co. v. U.S. Fidelity & Guaranty Co., 617 A.2d
1163, 1181 (Md. Ct. Spec. App. 1993), for the proposition that

“an   insurance    company        that   denies       coverage       or   rescinds    the

policy in bad faith risks liability for that action.”                          Kapiloff,
155 F.3d at 497.         Once again, North Carolina adheres to a nearly

identical rule.      See Robinson v. N.C. Farm Bureau Ins. Co., 356
S.E.2d 392, 395 (N.C. Ct. App. 1987) (vacating summary judgment

for the defendant insurer and stating, “An insurance company is

expected     to    deal     fairly       and     in      good        faith     with   its

policyholders. . . . Th[e] evidence is sufficient to establish a

tortious    bad    faith    refusal      to     settle      in   a    timely    manner.”

(paragraph break omitted)); see also Thomas v. Ray, 317 S.E.2d
53,   57   (N.C.   Ct.     App.    1984)      (“We    are    aware     that    insurance

companies have wrongfully denied coverage in some cases in which

bad faith or careless business practices might reasonably be

imputed to them.”).         In sum, nothing about the relevant portion

of our decision in Kapiloff is unique to Maryland law; quite the

opposite, North Carolina has the same guidelines to resolve the

same types of issues, and thus this Court should ipso facto

reach the same result.

                                           31
       Kapiloff, rather than announcing a Maryland-specific rule,

provides a much-needed yardstick for assessing reasonableness in

a factual scenario identical to the one at play here.                         It is

curious, given their rejection of Kapiloff’s at least “one or

two   months”   time    period,    that     Peterson      and   Evergreen   do    not

advocate for any standard of their own regarding what amount of

time would have been reasonable for Colony to respond; on the

contrary, they simply contend that North Carolina does not have

a hard-and-fast sixty-day rule.                Similarly, while not disputing

that reasonableness is the sine qua non of whether Colony waived

the endorsement provision, the majority does not put forth any

amount of time that it believes would be reasonable for Colony

to    process   the    information    and      send    notice   to   Peterson    and

Evergreen, nor does the majority cite any authority for the idea

that twenty-seven days is, as a matter of law, unreasonable and

that an insurer should necessarily process information in a more

timely fashion.

       By casting aside the rule from Kapiloff—and thus ignoring

one of the two criteria that we should consider when trying to

predict how the North Carolina Supreme court would rule in this

case—the    majority     appears     to   think       that   insurance   companies

operate    drastically      differently          across      state   lines,      thus

ignoring the day-to-day realities of the business and the fact

that North Carolina, like Maryland, also holds insurers liable

                                          32
for wrongfully denying coverage or rescinding a policy in bad

faith.     Compare Monumental Life Ins. Co., 617 A.2d at 1181, with

Robinson, 356 S.E.2d    at    395,   and   Thomas, 317 S.E.2d    at   57.

Given that Kapiloff is directly on point and is a published

decision of this Court, and that there is not any North Carolina

authority to the contrary to even suggest that twenty-seven days

is an unreasonable time to respond (but there is authority to

suggest that twenty-seven days is not unreasonable, see Nelson,
630 S.E.2d at 233), I would follow Kapiloff’s guidance and logic

in this case.         Accordingly, I do not think that Colony was

required     to    have   notified     Peterson    and     Evergreen    that     the

utilities were off at the time that the 501 building burned.

                                           C.

     Peterson and Evergreen also contend that Colony should not

be permitted to avail itself to a grace period because, at other

times, Colony acted more quickly—at times on the same day—to

contact     policyholders          after    receiving      inspection      reports.

Specifically, Peterson and Evergreen included in their brief a

table showing that Colony had, at other times, responded in a

more timely fashion following receipt of an inspection report.

Among these examples is an instance from 2009 in which Colony’s

underwriter       reviewed    an     inspection    report     and   took     action

twenty-two    days    after    the    assistant    underwriter      received     the

                                           33
report.      Based on Peterson and Evergreen’s implication that this

time    period      was    reasonable,       Peterson         and     Evergreen          would

apparently draw the reasonableness line somewhere between day

twenty-two and day twenty-seven.                      Perhaps at day twenty-four.

Or   maybe    day   twenty-six,       thus   leaving         Colony      on   the    outside

looking in by just twenty-four hours.

       The problem with this approach is readily evident: if we

were   to    use    a     company’s    own       prior      response      times      as    the

benchmark for what is reasonable, companies might begin dragging

their feet in responding to reports to establish a record of

slower response times, thus creating an environment in which

prolonged     delays      become    the     new       business    norm—and         are    even

encouraged—due to the fear of future litigation.                               This would

have the opposite effect of ensuring that insurance companies

provide timely notice to policyholders of defects or breaches.

                                          II.

       The majority did not reach the issue of whether Randolph

Bank   can    recover      from    Colony    because        it    held    that      Colony’s

purported     waiver      trumps    any   alleged        knowledge       of    a    material

misrepresentation.           But    because       I    do   not     think     that    Colony

waived its rights, as explained above, I would reach the merits

of Colony’s defenses to Randolph Bank’s counterclaims.

                                            34
        There are two possible ways for Randolph Bank to recover

payments/benefits under the policy: as Peterson and Evergreen’s

loss payee or as mortgagee of the 501 building.                             As a loss

payee,    however,    Randolph       Bank     stands   in    the     same    shoes   as

Peterson and Evergreen and its rights are coterminous with those

of Peterson and Evergreen; thus any successful defense by Colony

against Peterson and Evergreen also works as against Randolph

Bank.     See Wells Fargo Equip. & Fin., Inc. v. State Farm Fire &

Cas. Co., 805 F. Supp. 2d 213, 218–19 (E.D. Va. 2011) (citing

Sydincate Ins. Co. v. Bohn, 65 F. 165, 173 (8th Cir. 1894)),

aff’d, 494 F. App’x 394 (4th Cir. 2012).                    Because Colony has a

successful defense against Peterson and Evergreen pursuant to

Kapiloff, Randolph Bank is precluded from recovery under the

loss-payee theory.

        Colony further argues that Randolph Bank cannot recover as

an innocent mortgagee of the 501 building because Randolph Bank

is   responsible      for,    and/or    had     knowledge      of,    Peterson       and

Evergreen’s      noncompliance         with     the    endorsement          provision.

Colony     advances    two    theories.          First,      Colony    claims       that

Clayton—whom     Randolph     Bank     engaged    to    procure      the    policy—was

Randolph    Bank’s    agent.        Colony     reasons      that   because    Clayton

filled    out   the   insurance      application       containing      the    material

misrepresentations regarding the status of the utilities, those

misrepresentations      can    be    imputed     to    Randolph       Bank    and    the

                                         35
policy is void as to Randolph Bank.                     See In re McCrary, 435
S.E.2d 359, 364 (N.C. Ct. App. 1993) (“Under [the relevant state

statute], an insurer may avoid the policy if the insured makes a

representation which is both (1) false and (2) material; the

misrepresentation need not be fraudulent.” (emphasis deleted)).

Although sound in principle, this argument by Colony fails in

light   of   the       jury’s      finding     that    Randolph      Bank    was    not

responsible for the representations made in the application for

insurance.    Insofar as Colony failed to file a Rule 50(b) motion

after   trial,    it      cannot   now   challenge      the    sufficiency     of    the

evidence and the jury’s findings; thus, the agency theory fails.

     Second, Colony argues that Randolph Bank itself had actual

knowledge    of     the    misrepresentations          in    the   application      for

insurance    that      substantially     increased       the    risk    of   loss    but

never informed Colony of that knowledge.                    The jury passed on the

question of whether Randolph had actual knowledge based on its

conclusion    that      Colony     had   waived       and/or   was     estopped     from

rescinding the endorsement provision.                       The policy states, in

relevant part, as follows:

     If we [Colony] deny your [Peterson and Evergreen]
     claim because of your acts or because you have failed
     to comply with the terms of this Coverage Part, the
     mortgageholder [Randolph Bank] will still have the
     right to receive loss payment if the mortgageholder:
     . . . (3) has notified us of any change in ownership,
     occupancy or substantial change in risk known to the
     mortgageholder.

                                          36
Randolph         Bank    and      Colony   have     a    material       factual       dispute

regarding communications between Peterson and representatives of

Randolph Bank as to whether Randolph Bank had knowledge that the

utilities at the 501 building were off. 3                       In particular, Colony

claims      that       Randolph    Bank    was   told,    via       telephone,     that     the

utilities were off at the 501 building; Randolph Bank, on the

other hand, claims that it specifically required that a letter

be sent to it confirming the state of the utilities at the 501

building and that it never received such letter.                               Because the

jury       did    not    reach     this    issue,   and    because          this   issue     is

determinative of whether Colony must pay benefits to Randolph

Bank, I would remand the case for trial on the sole issue of

whether Randolph Bank had knowledge that the utilities were off

and failed to notify Colony pursuant to the policy.

                                             III.

       For       the    reasons     set    forth    above,      I    would    reverse       the

district         court’s    denial    of    Colony’s     Rule       50(a)    motion    as    to

waiver      of    the    endorsement       provision     and    remand       the   case     for

trial as to whether Randolph Bank had knowledge that utilities

       3
        Randolph Bank does not appear to contend that the
utilities being off constitutes a “substantial change in risk”
for purposes of the policy, but argues only that it did not have
any such knowledge.

                                              37
at the 501 building were off.        Therefore, I very respectfully

dissent.

                                38