Zurich American Ins. Co. v. Medical Properties Trust, Inc. ( 2024 )

United States Court of Appeals
For the First Circuit
_____________________
No. 23-1167
ZURICH AMERICAN INSURANCE COMPANY,
Plaintiff, Appellee,
v.
MEDICAL PROPERTIES TRUST, INC.,
Defendant, Appellant.
__________________
No. 23-1180
STEWARD HEALTH CARE SYSTEM, LLC,
Plaintiff, Appellant,
v.
AMERICAN GUARANTEE AND LIABILITY INSURANCE
COMPANY; ZURICH AMERICAN INSURANCE COMPANY,
Defendants, Appellees.
__________________
Before
Gelpí, Montecalvo, and Rikelman,
Circuit Judges.
__________________
JUDGMENT
Entered: July 29, 2024
This interlocutory appeal involves a dispute over whether the term "surface waters," as
used in a property insurance policy governed by Massachusetts law, includes rainwater that
accumulated on artificial surfaces one or more stories above the ground. The interpretation of
"surface waters" is dispositive of whether the insureds, appellants Medical Properties Trust, Inc.
("MPT") and Steward Health Care System LLC ("Steward"), are subject to coverage limitations
on "Flood" damage in the policies issued by appellees Zurich American Insurance Company
("Zurich") and American Guarantee and Liability Insurance Company ("AGLIC").
The Massachusetts Supreme Judicial Court ("SJC") had not previously addressed the term
"surface waters" in this context, and binding SJC case law made it uncertain how the SJC would
construe the term in the insurance policies here. On December 19, 2023, we certified the following
question to the SJC pursuant to Massachusetts SJC Rule 1:03:
Whether rainwater that lands and accumulates on either (i) a building's second-floor
outdoor rooftop courtyard or (ii) a building's parapet roof and that subsequently
inundates the interior of the building unambiguously constitutes "surface waters"
under Massachusetts law for the purposes of the insurance policies at issue in this
case?
Zurich Am. Ins. Co. v. Med. Props. Tr., Inc., 88 F.4th 1029, 1035 (1st Cir. 2023).
The SJC has since answered this certified question. In its ruling, the SJC concluded that
"[r]ainwater that lands and accumulates on either a building's second-floor outdoor rooftop
courtyard or a building's parapet roof does not unambiguously constitute 'surface waters' under
Massachusetts law for the purposes of the policies at issue in this case." Zurich Am. Ins. Co. v.
Med. Props. Tr., Inc., No. SJC-13535, 2024 WL 3504060, at *9 (Mass. July 23, 2024). The SJC
also made clear that "any such ambiguity as to the intended meaning of the words must be resolved
against the insurance company that employed them and in favor of the insured." Id.In granting Zurich's and AGLIC's respective partial summary judgment motions on the
"surface waters" issue, the district court held that "the SJC did not define 'surface waters' to exclude
accumulation of surface waters that are 'constrained' before flowing on the ground." Zurich Am.
Ins. Co. v. Med. Props. Tr., Inc., 636 F. Supp. 3d 239, 244 (D. Mass. 2022). Accordingly, the
district court found that the policy language unambiguously permitted the insurers to deny
coverage. See id. at 243.
But with a contrary and definitive answer from the SJC, we now reverse the district court's
rulings. We remand these cases to the district court for further proceedings consistent with the
SJC's opinion.
Reversed and remanded.
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By the Court:
Maria R. Hamilton, Clerk
cc: Hon. Patti B. Saris, Robert Farrell, Clerk, United States District Court for the District of
Massachusetts, Patrick F. Hofer, Martin C. Pentz, Creighton Page, Laura Diss Gradel, Natalie
Frances Panariello, Dale Jefferson, Nicholas D. Stellakis, Michael S. Levine, David H. Rich,
Howard M. Cooper, Matthew S. Furman, Jonathan David Mutch, Timothy D. Wenger
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