Court Opinion

ID: 4370545
Source: CourtListenerOpinion
Date Created: 2019-02-23 02:00:34.391057+00
Date Added: 2024-06-11T11:58:58.360114
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 18-1881

               EASTHAMPTON CONGREGATIONAL CHURCH,

                      Plaintiff, Appellee,

                               v.

                CHURCH MUTUAL INSURANCE COMPANY,

                      Defendant, Appellant.

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

         [Hon. Katherine A. Robertson, Magistrate Judge]

                             Before

                      Lynch, Circuit Judge,
                   Souter, Associate Justice,*
                    and Stahl, Circuit Judge.

     John Egan, with whom Rubin and Rudman, LLP was on brief, for
appellant.
     William P. Rose, with whom Melick & Porter LLP was on brief,
for appellee.

                        February 22, 2019

     * Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
            STAHL,     Circuit   Judge.         This    appeal   requires     the

interpretation    of    words    and    terms    in    an   insurance     policy.

Plaintiff-Appellee       Easthampton       Congregational        Church     (the

"Church") had a property insurance policy (the "Policy") with

Defendant-Appellant       Church       Mutual    Insurance       Company     (the

"Insurance Company").        On April 25, 2016, the ceiling in one

section of the Church collapsed. The Church filed a claim pursuant

to the Policy, which the Insurance Company denied.                  The Church

then filed suit, seeking a declaratory judgment that the claim was

covered. On cross-motions for summary judgment, the district court

ruled for the Church.       Noting that the Policy did not define the

word "decay," the court adopted a dictionary definition of the

word and used that definition to conclude that the Policy provided

coverage.    We affirm, albeit for different reasons.

            I.   Factual Background

                 A.     The Insurance Policy

            The Policy was in effect at the time of the collapse and

carries a coverage limit of $5,353,000.                The parties agree that

the damaged section of the Church, Fellowship Hall, "is among the

[covered] premises described in the [P]olicy's Declarations Page."

            The coverage provisions are governed by two primary

forms.   The first is the "Building and Personal Property Coverage

Form," which covers "direct physical loss of or damage to Covered

Property . . . caused by or resulting from any Covered Cause of

                                       - 2 -
Loss."    The second is the "Causes of Loss - Special Form."             That

form sets forth various exclusions and limitations in Sections B

and C, respectively.

           The    Insurance   Company       argues   that   two   exclusionary

clauses are relevant to this case.           First, in Section B-2(d), the

Policy includes a "Wear and Tear Exclusion" which states:

           We will not pay for loss or damage caused by
           or resulting from any of the following:

           . . .

           d.      (1)   Wear and tear;
                   (2)   Rust, or other corrosion, decay,
                         deterioration, hidden or latent
                         defect, or any quality in property
                         that causes it to damage or destroy
                         itself;[1]

Second,   in     Section   B-3(c),    the     Policy   includes    a   "Faulty

Construction Exclusion" which excludes coverage for:

           loss or damage caused by or resulting from any
           of the following [sections] but if an excluded
           cause of loss that is listed in [the following
           sections] results in a Covered Cause of Loss,
           we will pay for the loss or damage caused by
           that Covered Cause of Loss.

           . . .

           c.      Faulty, inadequate, or defective:

           . . .

     1 The Insurance Company did not cite the exclusions for "wear
and tear" and for "any quality in property that causes it to damage
or destroy itself" in its letters to the Church denying coverage,
though it did raise them before the district court.

                                     - 3 -
                  (2)   Design,               specifications,
                        workmanship, repair, construction,
                        renovation, remodeling, grading,
                        compaction;
                  (3)   Materials     used      in    repair,
                        construction,      renovation,     or
                        remodeling; or
                  (4)   Maintenance;

                  of part or all of any property on or off
                  the described premises.

          In Section B-2(j), the Policy also includes a "Collapse

Exclusion" which excludes coverage for:

          Collapse, except as provided below in the
          Additional Coverage - Collapse [provision].
          But if collapse results in a Covered Cause of
          Loss at the described premises, we will pay
          for the loss or damage caused by that Covered
          Cause of Loss.

The Additional Coverage - Collapse provision, Section D-2, in turn

states:

          The term Covered Cause of Loss includes the
          Additional Coverage - Collapse as described
          and limited in [the sections] below.

          1.   With respect to buildings:

                  a.    Collapse means an abrupt falling
                        down or caving in of a building or
                        any part of a building with the
                        result that the building or part of
                        the building cannot be occupied for
                        its intended purpose;

          . . .

          2.      We will pay for direct physical loss     or
                  damage to Covered Property, caused       by
                  collapse of a [Covered Property] . . .   if
                  the collapse is caused by one or more    of
                  the following:

                                  - 4 -
             . . .

                     b.   Decay that is hidden from view,
                          unless the presence of such decay is
                          known to an insured prior to
                          collapse;

             . . .

                     f.   Use of defective material or methods
                          in construction, remodeling, or
                          renovation if the collapse occurs
                          during    the     course    of   the
                          construction,      remodeling,    or
                          renovation.    However,     if   the
                          collapse occurs after construction,
                          remodeling,    or    renovation   is
                          complete and is caused in part by a
                          cause of loss listed in [the
                          previous sections]; we will pay for
                          the loss or damage even if use of
                          defective material or methods, in
                          construction,      remodeling,    or
                          renovation,   contributes    to  the
                          collapse.

Therefore, although Section B-2(j) excludes coverage for collapses

generally,    Section     D-2   effectively   reinstates   coverage   under

limited circumstances, including where the collapse was caused in

part by "[d]ecay that is hidden from view."         It is noted that the

Policy does not define the word "decay."

                     B.   The Ceiling Collapse

             On April 25, 2016, the ceiling in the Fellowship section

of the Church fell to the floor.       The Church promptly reported the

incident to the Insurance Company.            Eight days later, at the

request of the Insurance Company, forensic engineer Joseph Malo

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inspected the ceiling collapse and detailed his findings in a

written report. The parties accepted the contents of Malo's report

as "agreed material facts."

           In that report, Malo wrote that the ceiling "consist[ed]

of three different types of materials installed one over the other

with a total thickness of approximately 3 [and] 3/4 inches."   "The

original ceiling [was] constructed with wood lath and plaster

attached to boards" spaced twelve inches apart.         The boards

themselves "were attached to the ceiling joists" by "cut nails

with approximately 1 [and] 3/4-inch penetration."     Although the

boards were nailed to the joists, the wood lath and plaster were

attached only to the boards.    Sometime after the original ceiling

was constructed, two more ceiling layers were installed.       The

second layer consisted of drywall affixed to boards, which were

then nailed directly into the plaster.    The third layer consisted

of ceiling tiles that were attached directly to the surface of the

drywall.   Neither the second nor third layers were attached to the

ceiling joists.   In addition, there was approximately ten inches

of insulation blown into the space above the ceiling.   Therefore,

the only support for the three layers of ceiling materials and

insulation was the original nails that fastened the first layer of

boards to the ceiling joists.

           Malo concluded that "nail withdrawal" by the smooth

nails used to secure the original boards to the joists caused the

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ceiling collapse.        He observed that "cyclical volumetric changes

induce[d]    by    normal      temperature     and   moisture    changes     in   the

building materials" had caused the nails' connection to the joists

to weaken.     Eventually, the nails completely pulled out, "leaving

only holes in the bottoms of the ceiling joists."                In other words,

the   collapse     was   caused     by   the     "progressive    failure     of   the

fasteners used to attach the layers of ceiling to the ceiling

joists due to the weight of the ceiling."

                    C.    Denial of Coverage

             On    May   19,    2016,    the   Insurance   Company     denied     the

Church's claim, relying on Malo's report.                As relevant here, the

Insurance     Coverage      cited   the    Faulty     Construction     Exclusion,

stating that "[t]he fasteners used to uphold the ceiling were

inadequate for the size/weight of the ceiling, and the ceiling

system was not adequately fastened to the structure."                  The Church

asked the Insurance Company to reconsider its decision, arguing

that the collapse was covered under the Additional Coverage -

Collapse provision.            However, on July 1, 2016, the Insurance

Company denied the reconsideration request.

             On September 26, 2016, the Church, through counsel, sent

the Insurance Company a letter detailing its position that the

loss caused by the ceiling collapse was a covered event under the

Policy.      The    Church     disputed    the     application    of   the   Faulty

Construction Exclusion, claiming that because the ceiling lasted

                                         - 7 -
approximately    sixty   years,    its    construction   was   "entirely

effective."    In addition, the Church argued that the collapse was

caused by hidden decay and so was covered by the Additional

Coverage - Collapse provision.            It noted that Malo's report

concluded that the collapse occurred because of nail withdrawal,

which was a "progressive failure" that "could have taken a period

of years to occur."

           The Insurance Company replied by letter through counsel

on October 21, 2016, reiterating its prior position that the

collapse      occurred   because         of   "faulty    construction."

Specifically, it argued that Malo's report concluded that the

ceiling's construction was flawed because the second and third

layers were not securely fastened to the ceiling joists.            The

letter also rejected the Church's allegation that hidden decay

contributed to the collapse.

           II.   Procedural Background

           The Church filed suit in Massachusetts Superior Court in

April 2017 seeking a declaratory judgment that the Policy provided

coverage for the collapse.     The Insurance Company timely removed

the case to federal court based on diversity jurisdiction.2         Both

     2 The Church is an organization located in Easthampton,
Massachusetts; the Insurance Company is a corporation with its
principal place of business in Merrill, Wisconsin; and the amount
in controversy exceeds $75,000.

                                  - 8 -
parties consented to have the case heard by a magistrate judge and

filed cross-motions for summary judgment.

            On May 10, 2018, the district court granted summary

judgment for the Church.            Easthampton Congregational Church v.

Church Mut. Ins. Co., 322 F. Supp. 3d 230 (D. Mass. 2018).                           The

court concluded that the collapse resulted at least in part from

"hidden    decay"    such    that   the   Additional      Coverage       -    Collapse

provision applied.         Id. at 235-41.        After noting that the Policy

failed     to    define    "decay,"   the       court    looked    to     dictionary

definitions of that term and adopted a definition that encompassed

"a gradual deterioration or decline in strength or soundness."

Id.   at   236-37.        From   there,   the    court    held    that       there   was

sufficient evidence (i.e., the Malo report) to show that the

collapse "was 'caused in part' by 'decay'" "hidden from view" --

namely, the gradual nail withdrawal.             Id. at 236-38.         Accordingly,

it held that the collapse fell within the Additional Coverage -

Collapse provision. Id. Because that provision expressly provided

coverage, the court declined to address the Insurance Company's

arguments that the Wear and Tear and Faulty Construction Exclusions

applied.    Id. at 241-42.        This timely appeal followed.

            III. Analysis

                    A.     Legal Framework

            We review the district court's grant of summary judgment

de novo.        AJC Int'l, Inc. v. Triple-S Propiedad, 790 F.3d 1, 3

                                      - 9 -
(1st Cir. 2015).       "Cross motions [for summary judgment] simply

require us to determine whether either of the parties deserves

judgment as a matter of law on facts that are not disputed."

Littlefield v. Acadia Ins. Co., 392 F.3d 1, 6 (1st Cir. 2004)

(quotation marks and citation omitted).

             "Because this case is brought in diversity jurisdiction,

we must look to state law for the substantive rules of decision."

Sanders v. Phoenix Ins. Co., 843 F.3d 37, 42 (1st Cir. 2016)

(citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)).           The

parties agree that Massachusetts law controls the disposition of

this case.     See Artuso v. Vertex Pharm., Inc., 637 F.3d 1, 5 (1st

Cir. 2011) ("In determining which state's law applies, a diversity

court is free to honor the parties' reasonable agreement.").

             "[T]he construction of an insurance policy is a question

of law . . . ."        Lind-Hernández v. Hosp. Episcopal San Lucas

Guayama, 898 F.3d 99, 103 (1st Cir. 2018) (internal quotation marks

and citation omitted).     "Under Massachusetts law, we construe an

insurance     policy    under   the    general   rules    of     contract

interpretation,     beginning   with   the   actual   language   of   the

policies, given its plain and ordinary meaning."         AIG Prop. Cas.

Co. v. Cosby, 892 F.3d 25, 27 (1st Cir. 2018) (internal quotation

marks, alterations, and citation omitted).

             As a general matter, in Massachusetts, the insured bears

the "initial burden of showing that the case involves a generally

                                 - 10 -
covered risk under the policy."       Stor/Gard, Inc. v. Strathmore

Ins. Co., 717 F.3d 242, 247 (1st Cir. 2013) (citation omitted).

Where, as is here, the parties do not dispute that the incident

was a generally covered risk, the burden shifts such that the

insurer must demonstrate that an exclusion precludes coverage.

Clark Sch. for Creative Learning, Inc. v. Phila. Indem. Ins. Co.,

734 F.3d 51, 55 & n.1 (1st Cir. 2013).           "And if the insurer

satisfies that burden, the burden shifts back to the insureds to

show an exception to the exclusion holds sway."        Stor/Gard, Inc.,
717 F.3d at 247 (citation omitted).

           However, where "a term is 'susceptible of more than one

meaning and reasonably intelligent persons would differ as to which

meaning is the proper one,' the term is ambiguous."           U.S. Liab.

Ins. Co. v. Benchmark Constr. Servs., Inc., 797 F.3d 116, 119-20

(1st Cir. 2015) (quoting Citation Ins. Co. v. Gomez, 426 Mass.
379, 381 (1998)).      To the extent an ambiguity does exist, it is

strictly construed against the insurer.       See Metro. Prop. & Cas.

Ins. Co. v. Morrison, 460 Mass. 352, 362-63 (2011).

           It is also a principle of Massachusetts law that "[m]ore

specific   contract   terms   ordinarily   control   over   more   general

contract terms."      Davis v. Dawson, Inc., 15 F. Supp. 2d 64, 109

(D. Mass. 1998) (citing Lawson v. Fed. Deposit Ins. Corp., 3 F.3d
11, 17 (1st Cir. 1993)). Therefore, if a policy provision is found

                                 - 11 -
to    provide     for       coverage,   then    general     exclusion   clauses    are

inapplicable.          See id.

                       B.     Definition of "Decay"

            The parties agree that we must first determine whether

the hidden decay section of the Additional Coverage - Collapse

provision applies.             If the ceiling collapse is covered by that

section, or if the language is ambiguous with respect to coverage,

then the general Faulty Construction and Wear and Tear Exclusions

are    inapplicable.            The   parties    further     agree   that   the   nail

withdrawal was "hidden," so that the disposition of this case turns

at the outset on the definition and application of the word

"decay."

            As we have said, the Policy does not define "decay."                    In

such    circumstances,           "courts    often    look    to   dictionaries     for

assistance in determining ordinary meaning."                      Fed. Ins. Co. v.

Raytheon Co., 426 F.3d 491, 498-99 (1st Cir. 2005) (citation

omitted).        Here, the district court consulted two dictionaries.

Easthampton, 322 F. Supp. 3d at 236.                   First, it looked to the

Merriam-Webster Dictionary, which defined "decay" (in noun form)

as a "gradual decline in strength, soundness, or prosperity or in

degree of excellence or perfection," "a wasting or wearing away,"

and a "rot . . . specifically[,] aerobic decomposition of proteins

chiefly     by        bacteria."        Decay,      Merriam-Webster     Dictionary,

available        at     https://www.merriam-webster.com/dictionary/decay.

                                           - 12 -
Second, it turned to the Oxford English Dictionary, which defined

"decay" as "[t]he process of falling off from a prosperous or

thriving condition; progressive decline; the condition of one who

has thus fallen off or declined," "falling off (in quantity,

volume,   intensity,         etc.);    dwindling,    decrease,"      and   "the

destructive decomposition or wasting of organic tissue; rotting."

Decay,       Oxford          English      Dictionary,        available       at

http://www.oed.com/view/Entry/48067?rskey=z7ljDr& result=1#eid.

             The district court held that "[t]he most reasonable

reading of the word 'decay' as it is used in the Policy is that it

refers to the broader concept of the word."             Easthampton, 322 F.

Supp. 3d at 236.        That is, a "gradual decline in strength" or

"progressive decline" as opposed to a narrower definition that

entails organic rotting.            Id. at 236-37.    In support, it noted

that the Policy used the word "rot" in a separate exclusion titled

"'Fungus,'    Wet     Rot,    Dry   Rot   and   Bacteria."     Id.    at   236.

Therefore, the district court reasoned that the Insurance Company

must have intended "decay" to mean something broader than rot.

Id. at 236-37.

             We agree with the district court's decision, although

not its reasoning.      As used in the Policy, the word "decay" could

plausibly be read to mean either "progressive decline" or "rot."

Accordingly, its meaning is ambiguous and that ambiguity must be

                                       - 13 -
resolved in the Church's favor.3    See U.S. Liab. Ins. Co., 797 F.3d

at 119-21; Allmerica Fin. Corp. v. Certain Underwriters at Lloyd's,

London, 449 Mass. 621, 628 (2007).     On that basis alone, we affirm

the district court's judgment.

          We note that other courts have resolved this issue in

the same way.      For example, in Stamm Theatres, Inc. v. Hartford

Cas. Ins. Co., 93 Cal. App. 4th 531, 535 (2001), the ceiling in

the insured's theater "was in a state of 'imminent collapse.'"

Several   wooden    trusses   supporting    the   ceiling   had   cracked

"completely through."    Id. at 536.   The theater produced an expert

who attributed the cracks to, inter alia, "the increased load

created by a partial reroofing." Id. The insurer produced experts

who similarly concluded that the cracks were caused by excessive

pressure on the trusses.      Id. at 537.     Considering an insurance

policy that, like the Policy in question here, covered losses

attributable to "hidden decay," the California Court of Appeals

rejected the insurer's argument that the definition of "decay"

should be limited to organic rot.         Id. at 538-41.    In doing so,

the court stated that the insurer's failure to define "decay,"

coupled with the existence of multiple dictionary definitions of

     3 Neither party argued that the term was ambiguous at the
district court. However, on appeal, the Church appears to have
raised an ambiguity argument.

                                 - 14 -
the term, created an ambiguity that must be resolved in favor of

the insured.4   Id. at 543.

          The Insurance Company raises a variety of arguments in

response, none of which are availing.   First, it suggests that the

cases the district court relied upon were inapposite because the

"'decay' that was the actual subject of each [case] was uniformly,

and more narrowly, associated with a discrete physical impairment

to the material quality of a component of the collapsed property."

However, that argument does nothing to refute the core holding of

the cited cases -- namely, that those "physical impairments" were

covered because they fell within a broader definition of "decay"

that included gradual degradation.

     4  It is also a principle that contract terms should be
construed in their plain and ordinary meaning.     AIG Prop. Cas.
Co., 892 F.3d at 27.     While "decay" has a definition connoting
"rot" in the biological sciences, other courts have found that its
"'ordinary, plain meaning' [] encompasses a 'generalized
definition of decomposition.'" Joy Tabernacle—The New Testament
Church v. State Farm Fire and Cas. Co., 616 F. App'x 802, 809 (6th
Cir. 2015) (unpublished) (quoting Hani & Ramiz, Inc. v. North
Pointe Ins. Co., No. 316453, 2014 WL 523492, at *3 (Mich. Ct. App.
Feb. 4, 2014) (unpublished per curiam opinion)); accord Quality
Time, Inc. v. West Bend Mut. Ins. Co., No. 12-1008-JTM, 2013 WL
474289, at *13 (D. Kan. Feb. 7, 2013) ("Because the term decay
may, consistent with popular understanding, be construed to mean
gradual    deterioration    or   degradation,   without    organic
decomposition, this is how the court construes the term here.");
Ne. Ctr. Inc. v. St. Paul Fire and Marine Ins. Co., No. 03-246-
TS, 2006 WL 842396, at *5 (N.D. Ind. Mar. 28, 2006) (concluding
that "decay" "is not ordinarily understood to mean only 'rot,'"
but rather connotes "a progressive failure in strength or
soundness" or "wasting and wearing away.").

                              - 15 -
            Second,   the   Insurance   Company   complains   that   the

district court's chosen definition would encompass all collapses,

because "it is difficult to imagine any collapse, of any structure,

being caused by something other than 'decay.'"        But, even if the

Insurance Company did not intend to provide coverage for collapses

like the one in question, that is a self-inflicted problem.          The

Insurance Company, which wrote the Policy, could simply have

defined "decay" narrowly or limited the coverage period.        Despite

the Insurance Company's protestations, our interpretation of the

Policy would not result in coverage for all collapses.          As the

district court correctly noted, "[t]he insured still has to prove

that one of the . . . enumerated causes of loss contributed to the

collapse, and where an insured relies on hidden decay, the insured

still has to show a gradual deterioration or decline in strength

or soundness that was not apparent to the insured."       Easthampton,
322 F. Supp. 3d at 241.

            Finally, the Insurance Company argues that the district

court's decision "cannot be reconciled with [the First Circuit's]

opinion in Parker v. Worcester Ins. Co., 247 F.3d 1 (1st Cir.

2001)." In that case, the plaintiff homeowner obtained homeowner's

insurance shortly after acquiring her Connecticut home.         Parker,
247 F.3d at 2.     Soon after moving in, she noticed hairline cracks

in the concrete walls of the basement but disregarded them as

cosmetic.    Id.   Approximately ten years later, she "noticed that

                                 - 16 -
the    cracks       were   growing   larger,"   threatening   the   home's

foundation, and filed a claim for collapse with the defendant

insurer.5     Id.    The insurer denied coverage based on an engineering

report which concluded that the cracks were caused by "defective

concrete" and "high lateral earth pressures due to poor drainage."

Id.   at 3.

              The district court granted summary judgment for the

insurer, finding that the claim was time-barred. Id. at 3-4. This

court reversed, concluding that the Connecticut Supreme Court6

would likely toll the limitations period until "the point of real

or imputed knowledge of such a threat [of loss]."               Id. at 5.

However, in dicta, the decision expressed skepticism as to the

merits of the claim, cautioning that the policy excluded coverage

for loss "due to faulty construction of the foundation."            Id. at

6.    While there was a coverage provision for "hidden decay," the

decision also stated that "'decay' is not a backdoor to coverage

for poor construction materials and workmanship."         Id.

              Here, because the second and third layers of the ceiling

were never fastened to the joists, the Insurance Company argues

      5In Connecticut, a property owner may file a claim for
collapse "as soon as structural integrity is substantially
impaired." Parker, 247 F.3d at 4 (citing Beach v. Middlesex Mut.
Assurance Co., 532 A.2d 1297, 1300-01 (Conn. 1987)).
      6In Parker, although the case was filed in Massachusetts,
the parties agreed that Connecticut law controlled. 247 F.3d at
3.

                                     - 17 -
that the collapse was attributable to defective workmanship and

that the above-quoted dicta from Parker compels reversal.           It

argues that to do otherwise would be to "sneak in through the

backdoor of coverage in the guise of 'hidden decay.'"      In support,

the Insurance Company claims that "[t]he policy language in the

two [cases] is essentially the same."

             Even ignoring the fact that the cited language was dicta,

which is not binding, there are important distinctions between

Parker and this case.    In Parker, the insurer limited coverage for

collapses attributable to "defective material or methods" only to

situations where the collapse occurred "during construction." 247
F.3d at 6.      By contrast, in this case, the Insurance Company

explicitly     granted   coverage   for   collapses   occurring   after

construction, provided the collapse was caused in part by hidden

decay.    Moreover, in Parker, because the concrete that caused the

collapse was defective to begin with, it was doubtful that it

"could be called 'decay,'" so the hidden decay provision was

inapplicable.     Id. at 6.   Here, even assuming that the ceiling as

put together at the time of collapse was defective, the Malo report

establishes that the cause of the collapse was the progressive

weakening of the smooth nails connecting the first layer of the

ceiling to the joists.        Our holding is not inconsistent with

Parker.

                                 - 18 -
          IV.   Conclusion

          Because ambiguities in the Policy result in coverage for

the collapse, we need not consider the application of the general

exclusions.     For the foregoing reasons, the judgment of the

district court is AFFIRMED.   Costs are awarded to the Church.

                              - 19 -