J.I. Corp. v. Federal Ins. Co., 90-1249

• Decision Date: 12 September 1990
• Docket Number: No. 90-1249,90-1249
• Citation: 920 F.2d 118
• Parties: J.I. CORP., f/k/a New England Rare Coin Galleries, Inc., Plaintiff, Appellant, v. FEDERAL INSURANCE COMPANY, d/b/a Chubb Group of Insurance Companies, Defendant, Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 118

920 F.2d 118

J.I. CORP., f/k/a New England Rare Coin Galleries, Inc. Plaintiff, Appellant, v. FEDERAL INSURANCE COMPANY, d/b/a Chubb Group of Insurance Companies, Defendant, Appellee.

No. 90-1249.

United States Court of Appeals First Circuit.

Heard Sept. 12, 1990.

Decided Dec. 7, 1990.

Richard D'A. Belin, with whom Foley, Hoag & Eliot, Boston, Mass., was on brief, for plaintiff, appellant.

Paul R. Devin, with whom George C. Rockas, Lisa A. Pake and Peabody & Arnold, Boston, Mass., were on brief, for defendant, appellee.

Before TORRUELLA, Circuit Judge, BOWNES, Senior Circuit Judge, and CYR, Circuit Judge.

TORRUELLA, Circuit Judge.

On appeal is the grant of summary judgment by the United States District Court for the District of Massachusetts against J.I. Corporation a/k/a New England Rare Coin Galleries, Inc. The district court based its decision on appellant's failure to comply with the unambiguous discovery and notice provisions of its insurance policy. Although we affirm on the basis of the district court's decision, we find it appropriate to briefly discuss our reasons.

This case arose out of a dispute concerning the interpretation of a fidelity insurance policy which insured appellant against losses sustained as a result of employee dishonesty. The facts are reproduced in more detail in the district court's memorandum and order. J.I. Corporation v. Federal Insurance Company, 730 F.Supp. 1187 (D.Mass.1990).

THE APPLICABLE LEGAL STANDARDS

Summary judgment is appropriate only when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). Our review of a summary judgment is plenary. Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir.1990). We are required to view the record in the light most favorable to the party against whom a motion for summary judgment is directed, and give that party the benefit of all the reasonable inferences to be drawn therefrom. Mack v. Great Atlantic and Pacific Tea Co. Inc., 871 F.2d 179, 181 (1st Cir.1989).

"[T]he responsibility of construing the language of an insurance contract is a question of law for the trial judge." Jet Line Services, Inc. v. American Employers Insurance Co., 404 Mass. 706, 710 n. 5, 537 N.E.2d 107 (1989) (citing Cody v. Connecticut General Life Insurance Co., 387 Mass 142, 146, 439 N.E.2d 234 (1986)). An insurance contract is construed according to the "fair and reasonable meaning of the words in which the agreement of the parties is expressed." Cody v. Connecticut General Life Insurance Co., 387 Mass. at 146, 439 N.E.2d 234.

The language of a contract is considered ambiguous only if the terms of the contract are fairly susceptible to more than one construction. See Prudential Insurance Co. v. Miller Brewing, 789 F.2d 1269, 1275 (7th Cir.1986); Bradley Bank v. Hartford Acc. & Indemnity, 737 F.2d 657, 660 (7th Cir.1984). Where there is no ambiguity, we will construe a contract according to the ordinary meaning of the words contained in its provisions. See Thomas v. Hartford Accident & Indemnity Co., 398 Mass. 782, 784, 500 N.E.2d 810 (1986) (citing Royal-Globe Ins. Co. v. Schultz, 385 Mass. 1013, 434 N.E.2d 213 (1982)); see also Prudential Insurance Co. v. Miller Brewing, 789 F.2d at 1275. Moreover, where the contract language is unambiguous the interpretation becomes a question of law and hence appropriate for summary judgment. Boston Five Cents Savings Bank v. Secretary of the Department of Housing and Urban Development, 768 F.2d 5 (1st Cir.1985); Edmonds v. United States, 642 F.2d 877, 881 (1st Cir.1981).

DISCUSSION

Appellant avers that the district court erred in granting summary judgment in favor of appellee Federal Insurance Company ("FIC"). Essentially, appellant alleges that the district court erred in enforcing the discovery provisions contained in the policy. It avers that there was a genuine issue of material fact with regard to its failure to discover the losses due to "adverse domination and control" as established in Kehoe v. Peerless Insurance Co., [1980 Transfer Binder] Fed.Sec.L.Rep. (CCH) p 97,583, 1980 WL 1425 (D.Mass. June 22, 1980), and Admiralty Fund v. Peerless Insurance Co., 143 Cal.App.3d 379, 191 Cal.Rptr. 753 (1983). ¹ Finally, appellant contends that the district court erred, as a matter of law, in interpreting and enforcing the notice requirement provisions.

I. Discovery Provision

The district court found that no tolling of the discovery or notice period was available to the insured because, even if the principle of equitable tolling were applicable, the undisputed facts revealed that the dishonest employees had not exerted adverse domination and control over the company. The district court stated that the principle of equitable tolling applied in Kehoe v. Peerless Insurance Co., [1980 Transfer Binder] Fed.Sec.L.Rep. (CCH) p 97,583 and in Admiralty Fund v. Peerless Insurance Co. 143 Cal.App.3d 379, 191 Cal.Rptr. 753 (1983), should be distinguished as the limited exceptions to the general rule which they represent, and which are apparent from their facts.

We agree with the district court's distinction of the Kehoe and Admiralty cases. In these cases the courts found that summary judgment was precluded because the facts indicated an issue as to whether "adverse domination and control" existed. Clearly, in both cases the use of the equity tolling principle was a result of legislative concern for the protection of innocent investors. In the instant situation the critical distinguishing element is that appellant was in control and was defrauded by those employees over whom it had control. There being no disputed fact, and the law being properly applied, we reject appellant's argument.

II. Notice Provision

The district court further rejected appellant's request that it extend Johnson Controls v. Bowes, 381 Mass. 278, 409 N.E.2d 185 (1980), to obligations other than liability insurance policies. In that case the court held that a liability insurer must establish actual prejudice resulting from late notice in order to deny coverage. The district court further stated that, contrary to appellant's allegations below, in Boston Mutual Life Insurance Co. v. Fireman's Fund Insurance Co., 613 F.Supp. 1090, 1106 (D.Mass.1985), the court rejected the notion that the Johnson holding be automatically extended to all types of insurance policies. Therefore it concluded that the fidelity policy at issue did not fall under the Johnson Controls doctrine.

On appeal, it is alleged by appellant that Johnson Controls v. Bowes, supra, be applied to the instant situation. Appellant argues that the Supreme Judicial Court of Massachusetts clarified the...