Court Opinion

ID: 2963438
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:09:43.450135+00
Date Added: 2024-06-11T11:42:41.024913
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

        No. 94-2232

                                    EDGAR SPURLIN,

                                Plaintiff, Appellant,

                                          v.

                    MERCHANTS INSURANCE COMPANY OF NEW HAMPSHIRE,
                           d/b/a MERCHANTS INSURANCE GROUP,

                                 Defendant, Appellee.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                    [Hon. Michael A. Ponsor, U.S. District Judge]
                                             ___________________

                                 ____________________

                                        Before

                                 Selya, Circuit Judge,
                                        _____________

                            Bownes, Senior Circuit Judge,
                                    ____________________

                              and Boudin, Circuit Judge.
                                          _____________

                                 ____________________

            W. Stanley Cooke for appellant.
            ________________
            Carol A. Griffin with  whom Robert M. Mack and Morrison, Mahoney &
            ________________            ______________     ___________________
        Miller were on brief for appellee.
        ______

                                 ____________________

                                     June 7, 1995
                                 ____________________

                 BOUDIN, Circuit Judge.   On  June 8,  1984, Gilbert  Fox
                         _____________

            left  his car for repairs at Yankee Dodge, a Schenectady, New

            York, car dealership and service shop.  Yankee Dodge gave him

            a  "loaner"  car to  use  until the  repairs  were completed.

            Later  that  day, Fox  was involved  in  an auto  accident in

            Massachusetts while  driving the loaner car.   His passenger,

            Edgar Spurlin, was badly injured.

                 In August 1986, Spurlin filed a tort  action against Fox

            and Yankee Dodge in Massachusetts superior court based on the

            accident.   Fox was  insured by Travelers  Insurance Company,

            and Yankee  Dodge was insured by  Merchants Insurance Company

            of   New  Hampshire   under   a  "garage   policy."     After

            negotiations,  Spurlin dismissed  his  claim  against  Yankee

            Dodge with prejudice.   He also negotiated  a settlement with

            Travelers for  $100,000,  the  limit  of Fox's  policy.    In

            exchange,  Spurlin released  Fox from  any liability  for the

            accident except to the  extent that Fox was covered  by other

            insurance policies.

                 Spurlin's  case against  Fox proceeded  to trial  in the

            state court and  resulted in  a jury verdict  of $615,000  in

            favor  of Spurlin.  The  execution of judgment  issued in the

            amount of $962,487.25,  which represented  the $615,000  jury

            verdict   plus  $436,650  in   interest,  less  the  $100,000

            settlement  from  Travelers.    Spurlin  demanded  payment by

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            Merchants on the  ground that  Fox was an  insured under  the

            Yankee Dodge garage policy.  Merchants disclaimed coverage.

                 On  July  9,  1993,  Spurlin filed  the  instant  action

            against Merchants in  Massachusetts superior court,  alleging

            in the first  count that his injuries  were compensable under

            Merchants'  insurance policy  and  in the  second count  that

            Merchants  had violated Mass. Gen. L. ch. 93A, and Mass. Gen.

            L.  ch. 176D.   Merchants  removed the  case to  the district

            court based  on diversity jurisdiction.  On cross motions for

            summary judgment, the district judge granted summary judgment

            in favor of Merchants.  Spurlin v. Merchants Ins. Co., 866 F.
                                    _______    __________________

            Supp. 57 (D. Mass. 1994).  Spurlin now appeals.

                 The parties agree that under Massachusetts choice of law

            rules,  which bind the federal court in a diversity case, New

            York  law governs the coverage issue.  Under the Yankee Dodge

            garage   policy,  apparently   a  standard   form,  liability

            insurance  is  provided  for  "an  insured"  in  an  accident

            involving a "covered auto."   The loaner car is  admittedly a

            covered auto under the policy, and  "an insured" includes not

            only Yankee Dodge but also "anyone else . . . using with your

            [Yankee Dodge's] permission a covered auto" except:

            (3)  Your customers,  if your business is  shown in ITEM
                 ONE  of  the  declarations as  an  auto dealership.
                 However, if a customer of yours:

                      (a)  Has no other available insurance . .
                           ., he or she  is an insured but only
                           up  to  the compulsory  or financial

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                           responsibility law  limits where the
                           covered auto is principally garaged.

                      (b)  Has  other available insurance . . .
                           less   than    the   compulsory   or
                           financial responsibility  law limits
                           where    the    covered   auto    is
                           principally garaged, he or she is an
                           insured only for the amount by which
                           the    compulsory    or    financial
                           responsibility law limits exceed the
                           limits   of   his   or   her   other
                           insurance.

                 The protection  provided  to Yankee  Dodge's  customers,

            such as Fox, accorded  with New York insurance law  requiring

            carriers to provide at least $10,000 in liability coverage to

            "permissive  users"  of  insured  vehicles.    See  Davis  v.
                                                           ___  _____

            DeFrank, 306 N.Y.S.2d 827, aff'd, 266 N.E.2d 822 (1970).  But
            _______                    _____

            New York law only requires such coverage for permissive users

            to  the extent  that they  are not  otherwise insured,  which

            explains the  "However" proviso  in the Yankee  Dodge policy.

            Fox did have  more than $10,000  in liability coverage  under

            his own policy.

                 The district  court held that Fox, being so insured, was

            excluded  from  "insured" status  by  the  plain language  of

            exception (3), quoted above.  Reviewing the interpretation of

            contract language  de novo, Bird  v. Centennial Ins.  Co., 11
                               _______  ____     ____________________

            F.3d 228  (1st Cir. 1993), we  agree.  If this  were all that

            the  case involved, it would  be sufficient to  affirm on the

            basis of the district court's very able opinion.  But Spurlin

            offers a counter-argument that deserves brief comment.

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                 Spurlin's  theory  is  that  the clause  (3),  with  its

            reference  to  an auto  dealership,  applies  only to  Yankee

            Dodge's supply of new cars;  its repair work, Spurlin argues,

            is a  different phase of Yankee Dodge's  business; the loaner

            car was supplied  to Fox as a repair customer; and clause (3)

            therefore does not  apply to  Fox.  In  other words,  Spurlin

            wishes to read  clause (3)  as if it  excepted from  coverage

            "your  customers to the extent that they are customers of the

            new-car phase of your business."  

                 Unfortunately   for   Spurlin's  argument,   the  clause

            actually excludes "your customers,  if your business is shown

            . .  . as an  auto dealership," as Yankee  Dodge clearly was.

            The  clause  does not  purport  to divide  the  business into

            phases and  limit the exclusion to only one phase.  Nor is it

            apparent  why Yankee  Dodge would  wish to  provide liability

            insurance  to  users  of loaner  cars  in  any  phase of  its

            business--a  step  that  would  ultimately  increase  its own

            premiums--over and above  the contingent minimum  required by

            New York law.  

                 In  support  of his  reading,  Spurlin  cites two  cases

            decided by  intermediate appellate state courts,  one decided

            over a forceful dissent.  See Stanfield v. Hartford  Accident
                                      ___ _________    __________________

            & Indem. Co., 581 So. 2d 340 (La. Ct. App. 1991); Connecticut
            ____________                                      ___________

            Indem. Co. v. Cordasco,  535 A.2d 631 (Pa. Super.  Ct. 1987).
            __________    ________

            Both courts  adopted Spurlin's  reading on similar  facts and

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            almost  identical  policy language.   By  contrast, Merchants

            cites  a  number of  state  high  courts  that have  rejected

            Stanfield's  and  Cordasco's  reasoning.    See,  e.g., Globe
            _________         ________                  ___   ____  _____

            Indem. Co.  v. Jordan, 634 A.2d 1279  (Me. 1993); Schoenecker
            __________     ______                             ___________

            v. Haines, 277 N.W.2d 782 (Wis. 1979).
               ______

                 Spurlin,  and the cases on which he relies, also cite to

            another  provision seemingly  common to  garage policies  and

            present in this case.  This provision  excludes from coverage

            any  covered auto "while rented or leased to others" but also

            provides  that the exclusion does not apply to a covered auto

            "you rent to one of  your customers while his or her  auto is

            left  with you for service or  repair."  On its face, neither

            the exclusion nor the exception to it has anything to do with

            a case like ours since Yankee Dodge did not rent or lease the

            loaner  car to  Fox.   Nor  do  exclusions themselves  create

            coverage.  See 13  J. Appleman, Insurance Law and  Practice  
                       ___                  ___________________________

            7387, at 179 (rev. ed. 1976).

                 The  exclusion does  create  a puzzle:    it leaves  the

            impression that a garage that rented loaner cars to customers

            during repairs, but  was not  part of a  new car  dealership,

            might  be  buying  liability   insurance  for  its  customers

            unlimited by clause (3).  We do not know whether such garages

            exist  or, if they do,  whether such coverage  is intended or

            the result of a glitch.  But the exclusion does not show that

            an  auto dealership is to  be treated as  two businesses; nor

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                                         -6-

            does it alter the critical fact that Yankee Dodge  is an auto

            dealership  and, by the  express terms of  the policy, clause

            (3) "except[s]" from insured status  a permissive user who is

            "a  customer" of  an auto dealer  (apart from  the contingent

            minimum protection not here involved).

                 No state court decisions  from New York or Massachusetts

            have been  cited to us, so we must  make our best guess as to

            what those courts would  say if confronted with the  split in

            authority  on the issue  before us.   In  our view,  the more

            straightforward reading of the policy is  that adopted by the

            district  court, which  is consistent  with its  language and

            with what we would expect the parties to the contract--Yankee

            Dodge  and Merchants--to  have sought to  provide.   Nor does

            this exclusion  conflict with  New York public  policy, since

            Fox did carry his own insurance above the mandatory minimum.

                 Finally, Spurlin notes that before the tort suit against

            Fox was filed, Merchants sent several checks to Spurlin under

            the personal injury protection  provision of the Yankee Dodge

            policy.  But we  are told, without contradiction,  that under

            New York  law,  where  two  or  more  insurers  might  afford

            coverage for an  accident, the first one  contacted must make

            personal  injury  protection   payments.    Afterwards,   the

            insurers determine  which company  is liable and  resolve the

            matter between them by reimbursement.  Although         other

            interpretive arguments are urged by Spurlin under the policy,

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            the  ones we have addressed are his  best.  As for his claims

            under  the  Massachusetts  insurance and  consumer-protection

            statutes previously cited, the district court addressed those

            claims and we have nothing to add to its discussion.

                 Affirmed.
                 _________

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