Newton Covenant Church v. Great American Insurance Co. ( 2020 )

United States Court of Appeals
For the First Circuit
No. 19-1826
NEWTON COVENANT CHURCH, GARRETT SMITH, CARMEN ALDINGER, ANDERS
BROWNSWORTH, THOMAS DEVOL, HAROLD JONES, DORIS KELLOM, KRISTEN
LUCKEN, ROGER MARK, ROSELIND PICARD, DANIEL ROMAINE, BEATRICE
YANKEY,
Plaintiffs, Appellants,
v.
GREAT AMERICAN INSURANCE COMPANY,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Lynch, Circuit Judge,
Souter, Associate Justice,
and Lipez, Circuit Judge.
Kimberly L. Wehle, with whom Miller Friel, PLLC, Robert J.
Gilbert, and Latham & Watkins, LLP were on brief, for appellants.
Ashly Scheufele, with whom Barry S. Pollack and Pollack
Solomon Duffy LLP were on brief, for appellee.
April 10, 2020

Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
SOUTER, Associate Justice. Plaintiffs Newton Covenant
Church and its individual officers appeal from a judgment
dismissing their breach-of-contract action against Defendant Great
American Insurance Company. We affirm.
I
Newton Presbyterian Church (NPC) is a member church of
a national Presbyterian denomination known as the Presbyterian
Church (USA) (PCUSA). On January 15, 2017, a majority of NPC's
members voted to withdraw from PCUSA and to affiliate with a non-
Presbyterian organization: the Evangelical Covenant Church. The
withdrawing members called themselves the "Newton Covenant Church"
(NCC).
On March 17, 2017, NPC and the Presbytery of Boston1
brought suit in Suffolk Superior Court against NCC and those
individuals chosen to act as its officers, alleging trespass and
conversion. According to the complaint, the NCC and its officers
had succeeded in unlawfully exerting control over NPC real
property, as well as NPC bank accounts, following a dispute over
PCUSA's "progressive stances" on same-sex marriage and the
ordination of gay, lesbian, bisexual and transgender ministers.
App. 41. The complaint alleged that the "break-away" group had
rejected the Presbytery's authority to resolve the ecclesiastical
1The Presbytery of Boston governs PCUSA member churches in
the greater Boston area.
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schism, and instead conducted a "vote" not authorized under the
PCUSA's Constitution. App. 42-43. Among other things, NPC and
the Presbytery sought a declaratory judgment that NPC owned church
property at 75 Vernon Street, in Newton, Massachusetts.
On March 23, 2017, the group known as NCC submitted
documentation to the Secretary of the Commonwealth that resulted
in changing the congregation's name from "Newton Presbyterian
Church" to "Newton Covenant Church." It then submitted a notice
to the Great American Insurance Company (GAIC) requesting a defense
in the Suffolk Superior Court action under a $1 million Directors
and Officers insurance policy (Policy). Acknowledging that the
named insured under the Policy was NPC, not NCC, the notice
asserted that NCC was, as a matter of law, the same legal entity
as the named insured. App. 134-135. On April 26, 2017, GAIC sent
a letter denying coverage.
On November 6, 2017, the Superior Court awarded partial
summary judgment to NPC and the Presbytery of Boston. In a
separate judgment, the court later declared that "NPC is the sole
and exclusive owner of the property" in question and ordered NCC
and its members to vacate the premises. App. 85. Accordingly,
the Secretary of the Commonwealth restored the registered entity
name to "Newton Presbyterian Church." App. 127. NCC's officers
then filed Articles of Organization with the Secretary of the
Commonwealth to create a new entity called the "Newton Covenant
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Church." On June 14, 2018, the parties reached a settlement
agreement to dismiss the lawsuit with prejudice and to vacate the
partial summary judgment order.2
On December 21, 2018, Plaintiffs NCC and its individual
officers brought this action against GAIC for breach of contract,
alleging that GAIC, as their insurer, failed to defend and
indemnify them in the state court action. The district court
granted GAIC's motion to dismiss the complaint for failure to state
a claim under Fed. R. Civ. P. 12(b)(6).
II
We review de novo an order granting a motion to dismiss.
Rodi v. New England Sch. of Law, 389 F.3d 5, 12 (1st Cir. 2004).
"To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to 'state a claim to
relief that is plausible on its face.'" Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)). While "a district court is generally limited to
considering 'facts and documents that are part of . . . the
complaint,'" Giragosian v. Ryan, 547 F.3d 59, 65 (1st Cir. 2008)
(quoting Trans-Spec Truck Serv., Inc. v. Caterpillar Inc., 524
2GAIC asserts that the plaintiffs "knowingly relinquished
any right they might have had to file this lawsuit" when they
signed the settlement agreement. Brief of Appellee 19. Because
we affirm on the basis of the Policy, we need not determine the
significance of this agreement.
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F.3d 315, 321 (1st Cir. 2008)), it may also consider "documents
incorporated by reference in [the complaint], matters of public
record, and other matters susceptible to judicial notice," In re
Colonial Mortgage Bankers Corp., 324 F.3d 12, 20 (1st Cir. 2003).
An insurer must defend its insured "when the allegations
in a complaint [against the insured] are reasonably susceptible of
an interpretation that states or roughly sketches a claim covered
by the policy terms." Billings v. Commerce Ins. Co., 936 N.E.2d
408, 414 (Mass. 2010). As relevant here, the Policy defines
"Insured" to include both the "Organization" and "Insured
Persons." Add. 12. "Organization" refers to "the entity named"
in certain declarations, here the NPC, while "Insured Persons"
includes, among others, "persons who were, now are, or shall be
directors, trustees, [or] officers . . . of the Organization."
Id. Plaintiffs assert that, at the time of the state court action,
they qualified as "Insured[s]": the NCC as an "Organization" and
the individual officers as "Insured Persons." App. 15-16.
Plaintiffs' allegations are not reasonably susceptible
of an interpretation that would state a claim covered under the
Policy. Although the Policy covers "legal fees . . . incurred in
the investigation or defense of any Claim," it defines "Claim" to
include only, as relevant here, a "civil proceeding . . . made
against any Insured." Add. 11 (emphasis added). It is uncontested
that the only "Organization" named under the Policy as an "Insured"
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is an entity called "Newton Presbyterian Church." Therefore, to
the extent that NCC claims it was a distinct organization even
prior to its separate registration with the State, it was not
within the definition of an insured "Organization." To the extent
that NCC claims instead that it was a segment of the original NPC
at the time of the state court complaint, coverage is barred for
another reason: § IV.H of the Policy. That provision, one of a
handful of "Exclusions" under the Policy, precludes coverage for
claims between insureds.3 See Mt. Airy Ins. Co. v. Greenbaum, 127
F.3d 15, 19 (1st Cir. 1997) ("There is . . . no duty to defend a
claim that is specifically excluded from coverage" under
Massachusetts law). And, finally, to the extent that NCC claims
it was the original organization that had simply undergone a formal
name change, once again that would implicate § IV.H's exclusion.
As the district court observed, "the complaint alleges that NPC
and NCC were, at best, the same entity." Add. 30. Because
3 Section IV.H provides that: "This Policy does not apply to
any Claim made against any Insured . . . by, or for the benefit
of, or at the behest of the Organization or any Subsidiary or any
entity which controls, is controlled by, or is under common control
with the Organization or any Subsidiary, or any person or entity
which succeeds to the interests of the Organization or any
Subsidiary, provided, however, this exclusion shall not apply to
any Claim brought by the receiver, conservator, liquidator,
trustee, rehabilitator, examiner or similar official of the
Organization, if any, in the event of Financial Insolvency." Add.
15 (emphases omitted).
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"insureds would be on both sides of the litigation," id., the
exclusion would apply.4
As for the individual plaintiffs who are current
officers of the NCC, § IV.H of the Policy works a similar effect,
given any of the alternative assumptions just discussed. Thus,
because current NCC officers claim to have been "Insured Persons"
as defined by the Policy, their claim must be that they were
officers of the named insured, NPC, at the time of the state court
action. If so, NPC would be in litigation against its own
officers. Accordingly, the Policy expressly precludes claims of
this nature.5
Affirmed.
4 Because we affirm on the basis of this exclusion, we need
not address plaintiffs' other contentions concerning the district
court's alternative grounds for dismissal.
5 It is also apparent from the underlying state pleadings that
plaintiffs here were not sued for wrongdoing within the meaning of
the policy. The Policy covers "Wrongful Act[s]" claimed against
insured persons only when such persons are "acting in their
capacity" with the "Organization," "solely by reason of their
status" with the "Organization," or "arising out of their service"
as officers of an outside entity, "but only if such service is at
the request of the Organization." Add. 14. In state court, the
NCC officers were sued not in any such official capacity as NPC
officers, but as members of the "'Leadership Team' of NCC." App.
44-45. Indeed, the state pleadings described NCC as a "religious
organization founded in early 2017 by former members of NPC" and
clearly not at the request of NPC. Id. at 44 (emphasis added).
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