Ryan v. Royal Ins. Co. of America

Decision Date05 June 1990
Docket NumberNo. 90-1217,90-1217
Citation916 F.2d 731
Parties, 59 USLW 2259, 21 Envtl. L. Rep. 20,397 Maury A. RYAN, et al., d/b/a Ryan, Klimek, Ryan Partnership, Plaintiffs, Appellants, v. ROYAL INSURANCE COMPANY OF AMERICA, etc., Defendant, Appellee. . Heard
CourtU.S. Court of Appeals — First Circuit

Hugh N. Fryer, with whom Edward M. Joyce, John P. Gasior, Fryer, Ross & Gowen, New York City, Maury A. Ryan, and Willey & Ryan, Providence, R.I., were on brief, for plaintiffs, appellants.

Kenneth P. Borden, with whom Linda E. Buffardi and Higgins, Cavanagh and Cooney, Providence, R.I., were on brief, for defendant, appellee.

Wiley, Rein & Fielding, Thomas W. Brunner, Laura A. Foggan, Jo Anne B. Hennigan and Carol A. Laham, Washington D.C., on brief, for Ins. Environmental Litigation Ass'n, amicus curiae.

Before CAMPBELL, Circuit Judge, COFFIN, Senior Circuit Judge, and SELYA, Circuit Judge.

SELYA, Circuit Judge.

Invoking diversity jurisdiction, 28 U.S.C. Sec. 1332, appellants Maury A. Ryan, James H. Ryan and Stanley Klimek, trading as the Ryan, Klimek, Ryan Partnership (collectively, "Ryan"), brought suit in the United States District Court for the District of Rhode Island against appellee Royal Insurance Company of America ("Royal"). Appellants alleged inter alia that Royal had failed to defend and indemnify according to the tenor of a series of insurance policies issued by it. The district court granted summary judgment in Royal's favor on all counts of the amended complaint. Ryan, Klimek, Ryan Partnership v. Royal Ins. Co., 728 F.Supp. 862 (D.R.I.1990). We affirm.

I. BACKGROUND

Ryan owned real property in Henrietta, N.Y. Until 1987, the site was leased to Stuart-Oliver-Holtz, Inc. ("SOH"), a corporation owned by the individual appellants. SOH conducted a plating and painting business there. Its operations contaminated the site with trichlorethylene ("TCE") and other hazardous chemicals.

On December 20, 1974, a fire severely damaged the premises. Appellant had $553,000 in insurance coverage available at the time. Arm's-length negotiations between them and Royal, meticulously detailed by the district court, id. at 864-65, resulted in a settlement of all insurance claims for $474,929. Though the list of lost materials included two drums of TCE, neither side raised the issue of potential groundwater contamination and no claim for pollution cleanup costs was advanced. Following consummation of the settlement, the structural damage was repaired and SOH resumed full operations, apparently discontinuing its TCE usage at that juncture.

In 1986, SOH sought the protection of Chapter 11 of the Bankruptcy Code. Ryan, glimpsing the handwriting on the wall, began attempting to sell the property. Concerned about toxic waste contamination, Ryan hired Lozier Architects/Engineers ("Lozier") to conduct an environmental study. Lozier's site assessment report ("SAR") confirmed appellants' fears of pollution, indicating the presence of TCE in the groundwater.

Ryan reported Lozier's findings to both the New York Department of Environmental Conservation ("NYDEC") and the federal Environmental Protection Agency ("EPA"), sending each agency a copy of the SAR. Ryan's counsel discussed the situation with NYDEC personnel over the telephone and in person during the spring of 1987. On April 1, NYDEC sent Ryan a letter confirming the substance of these discussions. Pointing out that federal law required correction of hazardous waste contamination, NYDEC wrote that the "EPA retains primary responsibility for the implementation authority of the corrective action provision," and elaborated the kinds of corrective activities usually required in EPA consent orders. As to state action, NYDEC indicated only that (1) it would place the Henrietta site on the New York State Registry, an informational listing of all sites known or suspected to contain hazardous wastes; and (2) the state superfund program would address the site in the event that the EPA did not do so. The letter explained what the state's superfund program customarily entailed, remarked deficiencies in Lozier's SAR, and requested Ryan to submit plans for any proposed remedial work.

In two subsequent letters, dated April 27 and June 2 respectively, NYDEC first advised SOH of the need to submit a complete closure plan and thereafter told SOH that it (NYDEC) would likely not pursue certain treatment, storage, and disposal ("TSD") violations at the site if SOH accomplished closure in an approved manner. 1 In none of these letters did NYDEC demand that SOH or Ryan undertake to clean up the site. Throughout, the agency's mien was conciliatory rather than belligerent. It called for voluntary cooperation "in addressing the site contamination," stating, in its final communique, that it was seeking to explore ways of meeting this goal that would not "cause undue hardship to [SOH]." To this date, neither NYDEC nor EPA has ever insisted upon decontamination of the site or demanded reimbursement of cleanup costs. 2 And as the district court observed, "none of the parties involved have expended any sums for the cleanup of the ... property." Ryan, Klimek, Ryan Partnership, 728 F.Supp. at 865.

Before and during the events in question, Royal insured Ryan under a series of comprehensive general liability ("CGL") policies. Soon after initiating the dialogue with NYDEC, appellants requested that Royal "defend" them against the state agency's "claim," and "indemnify" them for the "damages" sustained by reason of the site contamination. 3 Royal not only refused but cancelled the policy, effective July 13, 1987. To put appellants' requests and appellee's demurrer into proper perspective, we quote the pertinent policy language:

The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an occurrence, and the Company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the Company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the Company's liability [under the CGL policy] has been exhausted by payment of judgments or settlements.

In November 1987, Ryan entered into an agreement to sell the Henrietta property for $987,900. The sale was closed in due course. Taking the position that, absent toxic waste contamination, the value of the property was $2,100,000, appellants sued Royal, charging breach of contract and arguing that their "loss" from the sale, namely, the difference in property value with and without pollution, was the appropriate measure of the liability against which Royal insured.

II. PROCEEDINGS BELOW

Appellants' amended complaint contained five counts. The gravamen of counts I and II was that defendant failed to indemnify or defend the insureds with respect to what plaintiffs characterized as NYDEC's claim. The district court, describing these counts as charging "that Royal willfully, maliciously, and in bad faith refused to defend the NYDEC's cleanup order and refused to reimburse [the insureds] for cleanup costs," Ryan, Klimek, Ryan Partnership, 728 F.Supp. at 865, granted summary judgment for the defendant. It ruled that Royal's duty to defend was not triggered because NYDEC's participation never "rose to the level of [making] coercive, adversarial demands," pointed out that the insureds had never "expend[ed] any money towards a cleanup," and reasoned that the duty to indemnify could not accrue "until actual costs or damages arise." Id. at 868.

In counts III and IV, appellants sought to set aside the fire loss settlement, see supra p. 732, on equitable grounds, e.g., fraud or mutual mistake, presumably believing that, if the 1974 fire loss were reopened, appellants could claim some of the cleanup expenses under the debris removal coverage. The district court also granted summary judgment on these two statements of claim. See id. at 869-71. Ryan has not pursued this aspect of the lower court's order and we do not remark the topic further.

In the amended complaint's last count, appellants prayed unsuccessfully for an award of consequential damages referable to Royal's cancellation of the CGL policy in an "untimely" fashion and without "proper explanation." The district court, on what it termed "the 'cancellation' issue," granted summary judgment. See id. at 871-72.

On appeal, Ryan has briefed and argued the viability of counts I and II while ignoring counts III and IV. The status of count V is muddled. In briefing the argument that Royal was liable for consequential damages, appellants did allude to the "wrongful" termination of the CGL policy. Yet, they never explain how or why the cancellation was at odds with the applicable policy provisions or governing law. It is settled in this circuit that issues adverted to on appeal in a perfunctory manner, unaccompanied by some developed argumentation, are deemed to have been abandoned. See United States v. Zannino, 895 F.2d 1, 17 (1st Cir.), cert. denied, --- U.S. ----, 110 S.Ct. 1814, 108 L.Ed.2d 944 (1990); Collins v. Marina-Martinez, 894 F.2d 474, 481 n. 9 (1st Cir.1990); Brown v. Trustees of Boston Univ., 891 F.2d 337, 352 (1st Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 3217, 110 L.Ed.2d 664 (1990). Appellants' passing reference did not succeed in preserving the question of wrongful cancellation for review. Appellants' reply brief is a bit more focused, but it does not supply the missing argumentation. At any rate, it constitutes too little and comes too late. See Sandstrom v. Chemlawn Corp., 904 F.2d 83, 86-87 (1st Cir.1990) (app...

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