916 F.3d 86
1st Cir.2019Background
- Easthampton Congregational Church had a property policy with Church Mutual; a section of the church ceiling (Fellowship Hall) collapsed on April 25, 2016.
- Forensic engineer Joseph Malo concluded the collapse resulted from progressive nail withdrawal (fastener failure over time) that was not visible to the insured.
- The policy's Causes of Loss — Special Form excluded many losses but the Additional Coverage — Collapse provision covered collapse caused in part by "decay that is hidden from view." The policy did not define "decay."
- Church claimed coverage under the hidden-decay clause; insurer denied coverage invoking faulty construction and wear-and-tear exclusions.
- District court adopted dictionary definitions of "decay" (broad, including gradual decline), held the collapse was caused in part by hidden decay, and granted summary judgment for the Church.
- First Circuit affirmed, holding the term "decay" is ambiguous and must be construed against the insurer, yielding coverage under the policy's hidden-decay collapse provision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether "decay" in the policy's hidden-decay collapse clause includes progressive nail withdrawal (non‑organic deterioration) | "Decay" reasonably means gradual deterioration or decline in strength; nail withdrawal is hidden decay contributing to collapse | "Decay" should be read narrowly as organic rot; collapse caused by faulty construction/materials or wear and tear is excluded | Ambiguous: "decay" susceptible to both meanings; ambiguity resolves for insured — includes gradual deterioration (coverage applies) |
| Whether faulty-construction and wear-and-tear exclusions bar recovery if hidden-decay clause applies | Hidden-decay is an express coverage exception; if it applies, broader exclusions do not defeat coverage | Exclusions (faulty construction, wear & tear) preclude coverage because collapse caused by inadequate fasteners and construction | Court did not reach exclusions because ambiguity in "decay" entitles insured to coverage; specific collapse coverage controls over general exclusions |
| Whether prior First Circuit dicta in Parker precludes using "decay" to reach defects in construction | Church: Parker is distinguishable; Parker limited hidden-decay coverage and involved defective material, not progressive weakening | Insurer: Parker cautions that "decay" is not a backdoor for coverage of poor workmanship/materials | Court: Parker's dicta not controlling and is distinguishable on facts and policy language; result here not inconsistent with Parker |
| Standard for resolving undefined policy terms | Undefined term should be given ordinary meaning; if ambiguous, construe against drafter (insurer) | Insurer urged narrower construction to avoid covering construction defects | Court applied ambiguity rule; construed "decay" in insured's favor and affirmed judgment for Church |
Key Cases Cited
- AJC Int'l, Inc. v. Triple-S Propiedad, 790 F.3d 1 (1st Cir.) (summary-judgment review of cross-motions)
- Littlefield v. Acadia Ins. Co., 392 F.3d 1 (1st Cir.) (cross-motions require determining whether either party deserves judgment as a matter of law)
- Sanders v. Phoenix Ins. Co., 843 F.3d 37 (1st Cir.) (Erie choice-of-law principle in diversity cases)
- U.S. Liab. Ins. Co. v. Benchmark Constr. Servs., Inc., 797 F.3d 116 (1st Cir.) (ambiguity in policy terms and construing against insurer)
- Allmerica Fin. Corp. v. Certain Underwriters at Lloyd's, London, 449 Mass. 621 (Mass.) (ambiguities in insurance contracts resolved for insured)
- Parker v. Worcester Ins. Co., 247 F.3d 1 (1st Cir.) (discussing limits of hidden-decay coverage and defective materials/workmanship)