Court Opinion

ID: 200655
Source: CourtListenerOpinion
Date Created: 2011-02-07 04:57:16+00
Date Added: 2024-06-11T17:27:10.315649
License: Public Domain

Not for Publication in West's Federal Reporter
                  Citation Limited Pursuant to 1st Cir. Loc. R. 32.3

             United States Court of Appeals
                           For the First Circuit

No. 03-1151
                           TIG INSURANCE COMPANY,

                             Plaintiff-Appellee,

                                         v.

                           WEMBLEY USA, INC., AND

                BURRILLVILLE RACING ASSOCIATION, INC.,

                           Defendants-Appellants.

             APPEAL FROM THE UNITED STATES DISTRICT COURT

                    FOR THE DISTRICT OF RHODE ISLAND

             [Hon. Ernest C. Torres, U.S. District Judge]

                                      Before

                            Boudin, Chief Judge,

                           Howard, Circuit Judge,

                        DiClerico,* District Judge.

     Daniel V. McKinnon, with whom McKinnon & Harwood was on brief
for appellants.

     Mark T. Reynolds, with whom Reynolds, DeMarco & Boland, Ltd.
was on brief for appellee.

                              September 19, 2003

     *
         Of the District of New Hampshire, sitting by designation.
           Per Curiam.          TIG Insurance Company brought suit seeking

a declaratory judgment that the policy it issued to Wembley USA,

Inc., with Burrillville Racing Association, Inc., as an additional

insured, did not provide coverage for Burrillville’s new building

which was damaged by fire during construction.              TIG asserted that

a clause in the policy, providing a time limit for coverage of new

buildings during construction, barred coverage. The district court

accepted the magistrate judge’s recommendation and summary judgment

was   granted   in    TIG’s      favor.      The   defendants,    Wembley   and

Burrillville, appeal that decision.           We affirm essentially for the

reasons    given     by   the    magistrate    judge   in   his   report    and

recommendation dated August 13, 2002.

I.    Background

            Burrillville operates Lincoln Park, which is located on

Louisquisset Pike in Lincoln, Rhode Island, and offers greyhound

racing along with other activities.           Wembley is the parent company

of Burrillville. The Louisquisset Pike premises are listed in the

schedule of locations in the declarations section of the TIG

policy.

            Burrillville began construction on a new paddock building

at the Park in December of 2000.             Burrillville did not give TIG

notice that the building was being constructed, although TIG issued

an endorsement in December of 2000 in which the old paddock

                                       -2-
building was deleted from coverage.                 On March 13, 2001, a fire

damaged the new paddock building while it was under construction.

             The applicable policy is titled "K & K Sports, Leisure

and Entertainment, Building and Personal Property Coverage," which

is   part    of    a    larger    package   of    commercial   insurance   Wembley

purchased from TIG.         The policy period was for one year, from July

1, 2000, to July 1, 2001.              The policy covered certain premises

listed      in    the    common    policy     declarations     with   a   limit   of

$155,188,494.00 for buildings under the "Blanket B" coverage.

Wembley paid a premium of $205,075.00 for the commercial property

part of the insurance package.              On December 6, 2000, TIG issued an

endorsement that increased the maximum limit for one loss, lowered

the "Blanket B" and "Blanket BPP" limits, and deleted the "old

paddock building and contents."               As a result of those amendments,

TIG returned $176.00 of the premium paid by Wembley.

                 Section A of the policy states:         "We will pay for direct

physical loss to Covered Property at the premises described in the

Declarations caused by or resulting from any Covered Cause of Loss,

except as otherwise excluded or limited."1                   Section A.1 defines

"Covered Property" to include "[n]ew buildings and structures while

being built, and when completed, on the premises described in the

Declarations." § A.1.a.5.c. Section A.2 which describes "Property

      1
      There is no dispute that fire was a covered cause of loss
within the meaning of the policy.

                                            -3-
Not Covered" does not include new buildings under construction.

Section A.5, "Newly Acquired Property Extension of Coverage,"

allows an insured to extend its coverage to new buildings while

they are being built and also provides that TIG "will cover new

Buildings being built at described premises for 60 days after

construction begins, or when reported to us, or when the policy

ends, whichever occurs first."2

             TIG denied coverage for the fire-damaged building under

section A.5 of the policy.           It is undisputed that the damaged

building     was   located   on     premises   described   in    the   policy

declaration and that a listed limit of insurance is shown on the

declarations page for buildings coverage.          It is also undisputed

that the damaged building had been under construction for more than

sixty days at the time of the fire and that the construction had

not   been   reported   to   TIG.     The   district   court    accepted   the

magistrate judge’s recommendation and granted summary judgment in

favor of TIG based on the sixty-day limit provided in section A.5.

      2
      Section A.5 does not explain the process for extending
coverage to new buildings while they are being built.      At oral
argument, counsel for TIG represented that if, after the insured
notified TIG of a new building being built, TIG approved the
extension of coverage, an additional premium would be assessed to
cover the extension.    Because Wembley and Burrillville did not
notify TIG of the new building being built, the extension process
is not at issue here. It is noteworthy, however, that contrary to
the argument of defendants’ counsel that the premium would not be
reduced when buildings were deleted from coverage, it appears that
TIG refunded part of the premium when the old paddock building was
deleted from coverage in December of 2000.

                                      -4-
II.   Discussion

          Wembley and Burrillville challenge the district court’s

interpretation of the policy language.        The material facts are

undisputed, as they were below. The appeal presents a purely legal

issue as to the meaning of the coverage section of the building

policy, and therefore, the district court decision is subject to de

novo review.   See Lexington Ins. Co. v. Gen. Accident Ins. Co., 338

F.3d 42, 46 (1st Cir. 2003).

          Under Rhode Island law, disputed terms in an insurance

policy are interpreted according to their plain and ordinary

meaning to determine "what the ordinary reader and purchaser would

understand them to mean."    Zarrella v. Minn. Mut. Life Ins. Co.,

824 A.2d 1249, 1259 (R.I. 2003).       In assessing disputed language,

the policy is considered in its entirety.        Am. Commerce Ins. v.

Porto, 811 A.2d 1185, 1192 (R.I. 2002).       The literal language of

the policy governs its meaning unless the disputed terms are

ambiguous, in which case the policy is strictly construed against

the insurer.    Pawtucket Mut. Ins. Co. v. Gay, 786 A.2d 383, 386

(R.I. 2001).

          Wembley   and   Burrillville     contend   that   the   damaged

building meets all of the requirements for coverage under section

A.1.5 because it was a structure "while being built," which was

located at a premises described in the policy declarations, with an

applicable limit of insurance, and was not included in section A.2.

                                 -5-
Based on those provisions, Wembley and Burrillville argue that the

damaged building had "permanent" coverage under the policy and did

not need the "temporary" coverage provided in section A.5.     They

also argue that section A.5 applies to "newly acquired property,"

but not to new buildings under construction.         Alternatively,

Wembley and Burrillville assert that the policy provisions are

ambiguous and should be construed in their favor.

             The interpretation urged by Wembley and Burrillville

ignores the qualifying language in section A that coverage is

provided as described "except as otherwise excluded or limited."3

Taking the building policy coverage section as a whole, it provides

coverage for "structures while being built," section A.1.a.5.c, for

"sixty days after construction begins," section A.5.d.4    As such,

section A.5.d neither takes away what section A.1.a.5.c provides

nor offers an alternative basis for coverage.5   Instead, the plain

meaning of    section A.5.d, taken within the broader context of the

     3
      The defendants also argue that the high coverage limit
coupled with the "blanket" coverage language in the declarations,
would suggest to an ordinary insured that the policy would cover
all buildings built on the listed premises. That interpretation,
however, is directly contrary to the plain language of the policy
and is therefore unreasonable.
     4
      The additional limitations in section A.5.d are not pertinent
to this case and therefore are not included in the analysis.
     5
      Section A.2, "Property Not Covered," does not affect the
interpretation of the disputed provisions because new buildings
under construction are covered property, as provided in section
A.1.a.5.c.

                                 -6-
policy, limits the time that coverage is provided for new buildings

while they are being built to a maximum of sixty days after the

commencement of construction.

           The heading of section A.5, "Newly Acquired Property

Extension of Coverage," does not create confusion as to whether the

time   limit   would      apply       to    new    buildings      under       construction.

Immediately under that heading, the policy states that the coverage

may be extended both to "new buildings while being built on the

described premises" and "[b]uildings you acquire or lease at

locations, other than the described premises, . . . ."                                Section

A.5.d specifically states that "new buildings being built" are

covered within the limits provided.                  It is clear from the language

of   section   A.5    that      it    applies      to     both   new    buildings       under

construction at listed premises and buildings acquired by the

insured at other premises.

             Disputed insurance policy language is ambiguous "only

when it is reasonably and clearly susceptible of more than one

interpretation."         Zarrella, 824 A.2d at 1259 (internal quotation

marks omitted).          The court "will not engage in mental or verbal

gymnastics     to   hurdle       over      the    plain    meaning      of    the    policy’s

language."     Am. Commerce Ins. Co., 811 A.2d at 1193.                             Given the

plain meaning       of    the    time      limitation       in   section       A.5.d.,    the

interpretation       that       the   section       offers       only    an    alternative

                                             -7-
temporary basis for coverage is not reasonable.      Therefore, no

ambiguity exists in the disputed policy language.

III.   Conclusion

            The plain meaning of section A.5.d. limits coverage for

buildings under construction to a maximum of sixty days from the

commencement of construction.     Because the damaged building had

been under construction for more than sixty days at the time of the

fire without notice to TIG, section A.5.d unambiguously precludes

coverage.    Accordingly, the district court’s decision granting

summary judgment in favor of TIG is affirmed.

                                 -8-