983 F.3d 20
1st Cir.2020Background
- Performance Trans., Inc. (PTI) suffered a tanker overturn on Feb. 19, 2019, spilling ~4,300 gallons of gasoline/diesel into a roadway and nearby reservoir; cleanup has cost ~ $3 million to date.
- PTI's primary insurer had a $1,000,000 limit and covered the loss up to that limit; General Star issued an excess liability policy (Mar. 2018–Mar. 2019) providing $5,000,000 in excess coverage.
- The excess policy included a broad Total Pollution Exclusion (Endorsement 14) disallowing coverage for pollutant discharges and related cleanup costs, and a separate Special Hazards and Fluids Limitation Endorsement (Endorsement 13) that disclaims coverage for certain hazards but contains an item (item 4) that appears to provide limited coverage for losses from an "upset or overturn" of an auto.
- PTI (and its primary insurer Utica after a provisional $1M payment/assignment) claimed coverage under the Special Hazards Endorsement for the overturn; General Star denied coverage relying on the Total Pollution Exclusion (and initially disputed the applicability of the drilling-fluids language).
- The district court granted summary judgment to General Star, finding the policy unambiguous and the Total Pollution Exclusion dispositive. The First Circuit reversed as to the breach-of-contract claim, finding the Special Hazards Endorsement ambiguous and construing ambiguity for the insured; the Chapter 93A (Mass. Gen. Laws ch. 93A, § 11) claim was dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Special Hazards Endorsement (Endorsement 13) creates coverage for loss from an auto upset/overturn despite the Total Pollution Exclusion | Endorsement 13 (item 4) provides an affirmative, limited coverage guarantee for an "upset or overturn," so the spill is covered | The Total Pollution Exclusion (Endorsement 14) unambiguously bars coverage; the Special Hazards language is an exclusion/limitation that does not create coverage | The endorsement is ambiguous; on reasonable readings it can create coverage for the upset/overturn; ambiguity resolved for the insured → coverage available |
| Whether the policy is unambiguous or must be construed against the insurer | Ambiguity exists; any ambiguity must be resolved in favor of PTI | Policy is unambiguous; Special Hazards is merely an exclusion/limitation and cannot override the pollution exclusion | The court found the Special Hazards Endorsement ambiguous and applied Massachusetts rules construing ambiguities against the insurer |
| Whether extrinsic evidence or subsequent dealings (post-dispute premium change) defeat PTI's interpretation | The parties agreed this was a pure question of law; later renegotiation is insufficient to show one-sided extrinsic evidence | Later renegotiation narrowing the pollution exclusion shows parties understood scope and defeats PTI's reading | Court rejected General Star's extrinsic-evidence argument as not one-sided enough to overcome the textual ambiguity |
| Whether PTI stated a viable Mass. Gen. Laws ch. 93A claim for unfair/deceptive practices | (PTI argued) General Star's coverage denial supported a 93A claim | General Star's coverage position was reasonable; a good-faith coverage dispute does not support 93A relief | 93A claim dismissed with prejudice: General Star's interpretation was not so unreasonable as to support a 93A claim |
Key Cases Cited
- Dorchester Mut. Ins. Co. v. Krusell, 150 N.E.3d 731 (Mass. 2020) (courts apply an objectively reasonable insured standard when reading policy language)
- Holyoke Mut. Ins. Co. v. Vibram USA, Inc., 106 N.E.3d 572 (Mass. 2018) (interpret insurance words in light of plain meaning and give effect to the document as a whole)
- Metro. Prop. & Cas. Ins. Co. v. Morrison, 951 N.E.2d 662 (Mass. 2011) (ambiguities in insurance policies construed against insurer)
- Surabian Realty Co. v. NGM Ins. Co., 971 N.E.2d 268 (Mass. 2012) (policy language may support reasonable differences of opinion about meaning)
- Utica Mut. Ins. Co. v. Weathermark Invs., Inc., 292 F.3d 77 (1st Cir. 2002) (residual ambiguity is resolved against the insurer)
- Pac. Indem. Co. v. Deming, 828 F.3d 19 (1st Cir. 2016) (standard of review: de novo for summary judgment and contract interpretation)