Spurlin v. Merchants Ins. Co. of New Hampshire, 94-2232

• Decision Date: 08 September 1994
• Docket Number: No. 94-2232,94-2232
• Citation: 57 F.3d 9
• Parties: Edgar SPURLIN, Plaintiff, Appellant, v. MERCHANTS INSURANCE COMPANY OF NEW HAMPSHIRE, d/b/a Merchants Insurance Group, Defendant, Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 9

57 F.3d 9

Edgar SPURLIN, Plaintiff, Appellant, v. MERCHANTS INSURANCE COMPANY OF NEW HAMPSHIRE, d/b/a Merchants Insurance Group, Defendant, Appellee.

No. 94-2232.

United States Court of Appeals First Circuit.

Heard Sept. 8, 1994.

Decided June 7, 1995.

W. Stanley Cooke, Pittsfield, MA, for appellant.

Carol A. Griffin with whom Robert M. Mack and Morrison, Mahoney & Miller, Springfield, MA were on brief, for appellee.

Before SELYA, Circuit Judge, BOWNES, Senior Circuit Judge, and BOUDIN, Circuit Judge.

BOUDIN, Circuit Judge.

On June 8, 1984, Gilbert Fox left his car for repairs at Yankee Dodge, a Schenectady, New York, car dealership and service shop. Yankee Dodge gave him a "loaner" car to use until the repairs were completed. Later that day, Fox was involved in an auto accident in Massachusetts while driving the loaner car. His passenger, Edgar Spurlin, was badly injured.

In August 1986, Spurlin filed a tort action against Fox and Yankee Dodge in Massachusetts superior court based on the accident. Fox was insured by Travelers Insurance Company, and Yankee Dodge was insured by Merchants Insurance Company of New Hampshire under a "garage policy." After negotiations, Spurlin dismissed his claim against Yankee Dodge with prejudice. He also negotiated a settlement with Travelers for $100,000, the limit of Fox's policy. In exchange, Spurlin released Fox from any liability for the accident except to the extent that Fox was covered by other insurance policies.

Spurlin's case against Fox proceeded to trial in the state court and resulted in a jury verdict of $615,000 in favor of Spurlin. The execution of judgment issued in the amount of $962,487.25, which represented the $615,000 jury verdict plus $436,650 in interest, less the $100,000 settlement from Travelers. Spurlin demanded payment by Merchants on the ground that Fox was an insured under the Yankee Dodge garage policy. Merchants disclaimed coverage.

On July 9, 1993, Spurlin filed the instant action against Merchants in Massachusetts superior court, alleging in the first count that his injuries were compensable under Merchants' insurance policy and in the second count that Merchants had violated Mass.Gen.L. ch. 93A, and Mass.Gen.L. ch. 176D. Merchants removed the case to the district court based on diversity jurisdiction. On cross motions for summary judgment, the district judge granted summary judgment in favor of Merchants. Spurlin v. Merchants Ins. Co., 866 F.Supp. 57 (D.Mass.1994). Spurlin now appeals.

The parties agree that under Massachusetts choice of law rules, which bind the federal court in a diversity case, New York law governs the coverage issue. Under the Yankee Dodge garage policy, apparently a standard form, liability insurance is provided for "an insured" in an accident involving a "covered auto." The loaner car is admittedly a covered auto under the policy, and "an insured" includes not only Yankee Dodge but also "anyone else ... using with your [Yankee Dodge's] permission a covered auto" except:

(3) Your customers, if your business is shown in ITEM ONE of the declarations as an auto dealership. However, if a customer of yours:

(a) Has no other available insurance ..., he or she is an insured but only up to the compulsory or financial responsibility law limits where the covered auto is principally garaged.

(b) Has other available insurance ... less than the compulsory or financial responsibility law limits where the covered auto is principally garaged, he or she is an insured only for the amount by which the compulsory or financial responsibility law limits exceed the limits of his or her other insurance.

The protection provided to Yankee Dodge's customers, such as Fox, accorded with New York insurance law requiring carriers to provide at least $10,000 in liability coverage to "permissive users" of insured vehicles. See Davis v. DeFrank, 33 A.D.2d 236, 306 N.Y.S.2d 827, aff'd, 27 N.Y.2d 924, 318 N.Y.S.2d 142, 266 N.E.2d 822 (1970). But New York law only requires such coverage for permissive users to the extent that they are not otherwise insured, which explains the "However" proviso in the Yankee Dodge policy. Fox did have more than $10,000 in liability coverage under his own policy.

The district court held that Fox, being so insured, was excluded from "insured" status by the plain language of exception (3), quoted above. Reviewing the interpretation of contract language de novo, Bird v. Centennial Ins. Co., 11 F.3d 228 (1st Cir.1993), we agree. If this were all that the case involved, it would be sufficient to affirm on the basis of the district court's very able opinion. But Spurlin offers a counter-argument that deserves brief comment.

Spurlin's theory is that the clause (3), with its reference to an auto dealership, applies only to Yankee Dodge's supply of new cars; its repair work, Spurlin argues, is a different phase of Yankee Dodge's business; the loaner car was supplied to Fox as a repair customer; and clause (3) therefore does not apply to Fox. In other words, Spurlin wishes to read clause (3) as if it excepted...