Mutual Fire, Marine and Inland Ins. Co. v. Costa

• Decision Date: 29 April 1986
• Docket Number: 85-1590,Nos. 85-1572,s. 85-1572
• Citation: 789 F.2d 83
• Parties: The MUTUAL FIRE, MARINE AND INLAND INSURANCE COMPANY, Plaintiff, Appellee, v. Gerald COSTA and Ranger IV Corporation, Defendants, Appellees. Appeal of INLAND BROKERAGE CORPORATION, Defendant, Appellant. The MUTUAL FIRE, MARINE AND INLAND INSURANCE COMPANY, Plaintiff, Appellee, v. Gerald COSTA and Ranger IV Corporation, Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

Page 83

789 F.2d 83

1986 A.M.C. 2813

The MUTUAL FIRE, MARINE AND INLAND INSURANCE COMPANY, Plaintiff, Appellee, v. Gerald COSTA and Ranger IV Corporation, Defendants, Appellees.

Appeal of INLAND BROKERAGE CORPORATION, Defendant, Appellant.

The MUTUAL FIRE, MARINE AND INLAND INSURANCE COMPANY, Plaintiff, Appellee, v. Gerald COSTA and Ranger IV Corporation, Defendants, Appellants.

Nos. 85-1572, 85-1590.

United States Court of Appeals, First Circuit.

Argued Feb. 4, 1986.

Decided April 29, 1986.

Thomas W. Porter, Jr. with whom Robert P. Powers and Melick & Porter, Boston, Mass., were on brief, for Inland Brokerage Corp.

Paul F. Ware, Jr. with whom Loretta M. Smith and Goodwin, Procter & Hoar, Boston, Mass., were on brief, for Gerald Costa and Ranger IV Corp.

Erik Lund with whom John Egan and Posternak, Blankstein & Lund, Boston, Mass., were on brief, for Mut. Fire, Marine and Island Ins. Co.

Before COFFIN and BOWNES, Circuit Judges, and PETTINE, ^** Senior District Judge.

COFFIN, Circuit Judge.

These appeals require us to decide whether the district court appropriately awarded summary judgment in favor of the Mutual Fire, Marine and Inland Insurance Company (Mutual Fire), finding that the insurance policy issued by Mutual Fire did not cover liability incurred by Gerald Costa and the Ranger IV Corporation. We must also decide whether, in a third-party action between Costa and the Inland Brokerage Corporation (Inland), the district court erred in its instructions to the jury and in refusing to grant attorney's fees to Costa and the Ranger IV Corporation. We conclude that the district court properly awarded summary judgment to Mutual Fire and did not err in its instructions to the jury. We also conclude that the court should have granted attorney's fees to Costa and the Ranger IV Corporation.

I. BACKGROUND FACTS

Mutual Fire issued an insurance policy to a New York corporation, "Atomic Fishing", covering the company's vessel, ATOMIC II", for the period July 1982 to July 1983. The policy was procured for Atomic Fishing by Inland Brokerage Corporation, an insurance broker in New York. The policy covered the vessel against passenger claims for bodily injury and property damage. Under the column "Description of Hazards", the policy stated: "Name of Boat: Atomic II; Operating Season: 12 Months; Max. # of Passengers: 100". Below this description was stamped the statement: "Coverage under this policy is specifically limited to the description of hazards as above. Any hazard not specifically described is excluded from coverage."

In September 1982, Gerald Costa entered into an agreement to buy the ATOMIC II. Shortly thereafter, he contacted Inland regarding the insurance. On behalf of Costa, Inland requested that Mutual Fire's agent, North Island, issue an endorsement changing the name of the insured to "Captain Gerald Costa", the name of the boat to "RANGER IV", and the docking area to "McMillan Pier, Provincetown, Massachusetts." The endorsement further stated that all other terms and conditions of the policy remained the same.

In November 1982, purchase of the vessel was consummated by the Ranger IV Corporation, a corporation wholly owned by Costa's wife. In February 1983, the Ranger IV Corporation and the New England Aquarium Corporation (NEA) entered into an agreement to offer whale watching tours from the Aquarium's pier in Boston. Costa subsequently sent Inland two pages of the agreement which detailed the insurance required by the NEA in the agreement. The agreement noted that RANGER IV was licensed to carry 149 passengers. In February, Inland advised NEA that arrangements had been made to obtain additional insurance coverage.

On May 28, 1983, the RANGER IV was struck by the wake from an incoming freighter. Three passengers were injured and subsequently filed claims. At the time of the accident, the vessel was carrying 118 passengers. Mutual Fire filed a declaratory judgment action disclaiming coverage on various grounds, including the ground that the vessel was carrying more than the 100 passengers at the time. Costa filed a third-party complaint against Inland, claiming that if Mutual Fire obtained the declaration it sought, Inland would be liable to Costa for breach of contract and negligence in failing to procure the insurance it had promised to obtain.

Mutual Fire and Costa filed cross-motions for summary judgment. These motions were initially denied. Upon transfer of the case to a new judge for trial, the motions were renewed. The district court granted Mutual Fire's motion for summary judgment on the ground that the policy explicitly limited the risk insured to a vessel carrying a maximum of 100 passengers, and that a vessel carrying 118 passengers was thus not a risk covered by the insurance. Costa's third party claim against Inland continued to jury trial. The jury found that Costa had asked Inland to change the number of passengers covered and that Inland had been negligent in failing to do so. Judgment was subsequently entered against Inland.

Inland appeals from the summary judgment entered in favor of Mutual Fire and from the judgment against it in Costa's and Ranger IV's third party action. Costa and Ranger IV appeal from the summary judgment in favor of Mutual Fire and from the district court's refusal to allow it to recover from Inland the attorney's fees it incurred in defending against Mutual Fire's declaratory judgment action.

II. SUMMARY JUDGMENT

In order to grant summary judgment, a court must find that there is "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The party opposing the summary judgment motion must show the existence of an issue of fact that is both "genuine" and "material". Hahn v. Sargent, 523 F.2d 461, 464 (1st Cir.1975). To be considered "genuine", there must be "sufficient evidence supporting the claimed factual dispute ... to require a jury or judge to resolve the parties' differing versions of the truth at trial". First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 289, 88 S.Ct. 1575, 1592, 20 L.Ed.2d 569 (1968). The evidence manifesting the dispute must be "substantial", going beyond the allegations of the complaint. Hahn, 523 F.2d at 464.

We conclude that the district court appropriately granted summary judgment in favor of Mutual Fire. Under the heading "Description of Hazards", the policy clearly stated: "Max. # of passengers: 100". The policy further stated that the insurance was "specifically limited to the description of hazards as above." The district court correctly concluded that the plain and unambiguous language of the policy indicated that the number of passengers was to operate as a direct limitation on the insurer's exposure or "hazard". Coverage was afforded to Costa for the hazard of operating a vessel with a maximum of 100 passengers on board. The operation of a vessel with more than 100 passengers was not a hazard specifically described and was therefore expressly excluded from coverage.

Costa's argument that, to grant summary judgment for Mutual Fire, the policy was required to include an explicit statement that coverage would be nullified for any passenger if the vessel carried more than 100 passengers, regardless of the number injured, is without merit. It is clear that the presence of a larger number of potential claimants on board a vessel at any one time increases the risk of loss to an insurer, regardless of the number of individuals who may ultimately suffer injuries. In this case, the hazard described in the policy explicitly stated "max. # of passengers: 100" and the policy endorsement stated that "any hazard not specifically described is excluded from coverage." There was no need for yet an additional statement that a vessel carrying more than 100 passengers would not be covered at all. As the district court noted, the explicit description in the policy of the maximum number of passengers operated as the functional equivalent of a "condition precedent", whose violation would nullify coverage for any passenger on the ship. See e.g., Charles, Henry & Crowley Co., Inc. v. The Home Ins. Co., 349 Mass. 723, 726, 212 N.E.2d 240, 242 (1965) (when policy was interpreted as having a stated condition precedent that value of goods in a window display not exceed $14,500, no coverage was afforded when goods worth $13,620 were stolen because the value of the goods in the display at the time was $18,000). ¹

During trial, Inland introduced an expert witness, Howard Clark. Clark stated that, in his opinion, the language "maximum number of passengers: 100" was not a hazard under the policy but was rather a "description of the risk in general". In Clark's view, therefore, the addition of any number of passengers to the boat should not have allowed Mutual Fire to completely disclaim coverage.

In light of Clark's testimony, the district court allowed the reopening of the question of summary judgment. ² The court concluded, however, that its original disposition of the summary judgment question remained correct. We agree with that determination. We note, first, that the court, after considerable examination conducted solely by itself, see infra n. 4, ruled that Clark was not "qualified by experience to construe this type of policy or its language". Neither Inland nor Costa have argued that the trial judge erred in making this determination regarding Clark's qualifications. We therefore accept the determination of the district court on this matter.

Second, even had the trial court accepted Clark as qualified to interpret this particular type of insurance policy, Clark's testimony was so weak and internally inconsistent that the court did not err in refusing to change its summary judgment decision as a result of that testimony. Clark first testified that use of the term "minimum and deposit" in the policy indicated that the initial premium in the...