Filed: Sep. 19, 2003
Latest Update: Feb. 22, 2020
Summary: interpretation of the policy language.not need the temporary coverage provided in section A.5., 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.
Not for Publication in West's Federal Reporter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
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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.
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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.
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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.
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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.
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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
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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.
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