New Castle County v. Natl Union Fire Ins ( 2001 )

Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit
3-21-2001
New Castle County v. Natl Union Fire Ins
Precedential or Non-Precedential:
Docket 00-5157
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Filed March 21, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 00-5157
NEW CASTLE COUNTY DE,
Appellant
v.
NATIONAL UNION FIRE INSURANCE COMPANY OF
PITTSBURGH, PA
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
(D.C. No. 96-cv-00504)
District Judge: The Honorable Roderick R. McKelvie
Argued: October 31, 2000
BEFORE: SCIRICA, NYGAARD, and BARRY,
Circuit Judges.
(Filed: March 21, 2001)
Richard E. Poole, Esq.
Peter J. Walsh, Jr., Esq. (Argued)
Potter, Anderson & Corroon
1313 Market Street
P.O. Box 951
Wilmington, DE 19899
Counsel for Appellant
Christopher J. Sipe, Esq. (Argued)
Bailey & Wetzel
716 Tatnall Street
P.O. Box 2034
Wilmington, DE 19801
Counsel for Appellee
Daniel E. Troy, Esq.
Wiley, Rein & Fielding
1776 K Street, N.W.
Washington, DC 20006
Counsel for Amicus-appellee
INS ENV Litigation
OPINION OF THE COURT
NYGAARD, Circuit Judge.
This appeal requires us to interpr et the phrase, "invasion
of the right of private occupancy," under Delawar e law and
determine whether it is ambiguous. The phrase is widely
used in insurance policies and has been the subject of
heated litigation throughout the entire country over the
past thirty years. Because Delaware case law pr ovides no
clear precedent, both parties cite numer ous decisions
outside the state. Some authority suggests that we should
apply the doctrine of ejusdem generis and construe the
phrase in relation to the more specific terms ("wrongful
eviction" and "wrongful entry") pr eceding it. Such a ruling,
however, would fly in the face of commonsense and declare
unambiguous a term that has generated hundr eds of law
suits and widely varying judicial interpretations. We refuse
to do that, and instead hold that an "invasion of the right
of private occupancy" is ambiguous and should be
construed in favor of New Castle County. We therefore
reverse the District Court's grant of summary judgment.
I.
New Castle County is a political subdivision of the State
of Delaware. It is responsible for , among other things, the
permitting and zoning of real property within its
2
geographical borders. In order to pr otect itself, its officials,
and its employees from legal liability, it is common practice
for New Castle to purchase insurance. Between 1991 and
1993, New Castle purchased a number of policies from
National Union Fire Insurance Company of Pittsburgh,
Pennsylvania. The policies were of two general types: (1)
Public Officials Liability ("POL") and (2) Commercial and
General Liability ("CGL"). This appeal focuses on a CGL
policy that New Castle purchased from National Union to
cover the period from July 1, 1992 to July 1, 1993.
The parties disagree whether National Union has an
obligation to defend and indemnify New Castle in a number
of law suits arising from zoning and per mitting decisions.
In 1992, a Delaware real estate developer named Frank
Acierno filed the first of three complaints, which eventually
cost the County approximately one million dollars in legal
expenses to defend.
Acierno owns two tracts of land within New Castle
County. The first is located near a shopping mall and the
second is referred to as Westhampton. In 1992, New Castle
frustrated Acierno's plans to develop both tracts. First, it
denied a building permit for the mall pr operty, and second,
it voided Acierno's record plan for the Westhampton
property and instead rezoned it.
On July 1, 1992, Acierno filed his first suit, contesting
the denial of the building permit for the mall property
("Acierno I"). He claimed, under 42 U.S.C. S 1983, that New
Castle had deprived him of property without due process of
law, and had violated the Equal Protection Clause of the
Fourteenth Amendment by arbitrarily treating him
differently than other developers. The District Court
granted preliminary injunctive relief in favor of Acierno. See
Acierno v. Mitchell, 1992 WL 694590 (D. Del. 1992). We
reversed, holding that the case was not ripe because the
County Board of Adjustment had yet to rule on the building
permit. See Acierno v. Mitchell, 6 F.3d 970 (3d Cir. 1993).
One day after filing his first claim, Acier no filed a second
suit, this time challenging New Castle's actions r egarding
the Westhampton property ("Acierno II"). He again claimed
he had suffered due process and equal protection
3
violations. A complicated series of rulings followed.1
Eventually, the District Court granted summary judgment
in favor of the County on most of Acierno's claims. A
number of his claims, however, remain undecided.
Acierno filed his third suit on December 17, 1993
("Acierno III"). In it, he ar gued that his claim in Acierno I
(regarding the mall property) had become ripe, because the
County Board of Adjustment had refused to issue a
building permit. The District Court again granted a
preliminary injunction in his favor. See Acierno v. New
Castle County, 1994 LEXIS 1683 (D. Del. 1994). W e
reversed and remanded the case for further proceedings.
See Acierno v. New Castle County, 40 F .3d 645 (3d Cir.
1994). On October 24, 1997, the parties settled Acierno III
with an agreement requiring New Castle to issue a building
permit for the mall property and pay Acierno's attorneys'
fees up to $250,000.
Shortly after Acierno filed his claims, the County
attempted to contact National Union to discuss the POL
and CGL policies. After almost a year of unsuccessful
inquiries by New Castle, National Union sent a letter on
June 25, 1993 stating that Acierno's claims"would not be
covered under the CGL policy." However , on July 9, 1993,
National Union indicated that it would tentatively
undertake New Castle's defense under the POL policy. Its
letter noted, in some detail, that National Union was not
_________________________________________________________________
1. First, the District Court granted summary judgment to the County on
the procedural due process claims. It denied summary judgment,
however, as to all other claims, including those against the individual
County officers who had sought legislative or qualified immunity. See
Acierno v. Cloutier, 1993 WL 215133 (D. Del. 1993). They appealed to
this Court. A panel of the Third Circuit r eversed the denial of summary
judgment to former officers, but found jurisdiction lacking in respect to
the current officers. Upon motion for r ehearing, this Court, sitting en
banc, vacated the panel decision, held that ther e was jurisdiction over
both current and former officers, and r eversed the District Court's
denial
of summary judgment to them. See Acierno v. Cloutier, 40 F.3d 597 (3d
Cir. 1994). The District Court conducted further proceedings, and on
May 23, 2000, it granted summary judgment to the County on some of
Acierno's outstanding claims. See Acier no v. New Castle County, C.A. No.
92-385 (D. Del. 2000).
4
waiving its rights to refuse coverage later . Over the following
year, legal expenses mounted and in May 1994, National
Union filed suit against the County, seeking a declaration
that it was not obligated to continue coverage. New Castle
contested the claim, but the parties eventually settled,
agreeing to a buy-out of the POL policy. The agreement
resolved the dispute over the POL policy, but expressly did
not address the CGL policy.
On June 13, 1996, New Castle sent a letter to National
Union renewing its request for coverage of its legal
expenses and liability under the CGL policy. National Union
denied coverage, and in response, the Countyfiled this
declaratory judgment action. On December 30, 1997, the
District Court granted National Union's motion for
summary judgment, holding that Acierno's suit, and its
associated expenses and liabilities, were not covered by the
CGL policy. Specifically, the court held that National Union
was only obligated to defend New Castle in suits arising
from one of the policy's enumerated "personal injuries." The
only arguably applicable provision, Definition 10(c), defines
"personal injury" as a harm resulting from:
c. The wrongful eviction from, wr ongful entry into, or
invasion of the right of private occupancy of a
room, dwelling or premises that a person occupies
by or on behalf of its owner, landlor d or lessor; . . .
The District Court held that this definition was
unambiguous and required the County to act as an "owner,
landlord or lessor" of Acierno's pr operty. Because it had
not, the court granted summary judgment in favor of
National Union. The District Court did not addr ess whether
Acierno's claims constituted an "invasion of the right of
private occupancy."
New Castle appealed, and we reversed. See New Castle
County v. National Union Fire Ins. Co., 174 F.3d 338, 342
(3d Cir. 1999). We held that the "by or on behalf of "
language of Definition 10(c) was ambiguous and should not
be construed to preclude coverage.2 We therefore remanded
_________________________________________________________________
2. The parties disagreed over which wor ds the disputed language
modified. National Union argued that the language modified the wrongful
5
the case to determine whether New Castle's alleged actions
could constitute an "invasion of [Acier no's] right of private
occupancy." Id. at 352. The District Court, on remand,
again ruled against the County, granting summary
judgment in favor of National Union. It held that the plain
meaning of the "invasion" language was ambiguous, but
that its context suggested it "should be construed to
encompass only those actions of the same general type or
class as ``wrongful eviction' and ``wr ongful entry.' " Because
Acierno failed to allege an eviction, wr ongful entry, or
similar injury, the District Court held that the CGL policy
did not apply. New Castle appealed.
II.
Jurisdiction is premised upon diversity of citizenship.
Therefore, we must apply the substantive law of Delaware.
See Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58 S. Ct. 817,
82 L. Ed. 1188 (1938). The sole issue for review is whether
Acierno's claims, if true, constitute an "invasion of [his]
right of private occupancy." If they do, the CGL policy
requires National Union to cover the County's legal
expenses and liability. This is a legal question of
contractual interpretation. Because the Delawar e Supreme
_________________________________________________________________
acts. Under its interpretation, an eviction, entry, or invasion must be
committed by the "owner, landlord or lessor" of the premises. At oral
argument, counsel for National Union suggested that a proper reading of
the definition required one to stop and"breathe" between the words
"occupies" and "by." The same ef fect is achieved by ignoring a number
of words:
The wrongful eviction from, wrongful entry into, or invasion of the
right of private occupancy of a room, dwelling or premises . . . by
or
on behalf of its owner, landlord or lessor; . . .
New Castle, on the other hand, argued that the language modified the
words that immediately preceded it ("that a person occupies"). According
to New Castle, the disputed language described "the possessory interest
of the person aggrieved." New Castle Co., 174 F.3d at 346. The wrongful
acts must be committed against a person who has the right to occupy
the premises. We found both interpretations reasonable, and therefore
held the language was ambiguous.
6
Court has yet to address the issue directly, we must predict
how it would rule. See New Castle County v. National Union
Fire Ins. Co., 174 F.3d 338, 342 (3d Cir. 1999); Epstein
Family P'ship v. Kmart Corp., 13 F.3d 762, 766 (3d Cir.
1994).
The District Court construed the CGL policy narr owly
and granted summary judgment in favor of National Union.
Our review of the District Court's grant of summary
judgment is plenary. See New Castle County, 174 F.3d at
342; Pacific Indem. Co. v. Linn, 766 F .2d 754, 760 (3d Cir.
1985).
A. Delaware Insurance Law
This is the second time that we have reviewed allegedly
ambiguous language in Definition 10(c) of the CGL policy.
See New Castle County, 174 F.3d at 344-51. The previous
panel's discussion of Delaware law pertaining to insurance
policy interpretation is a good starting point for our
analysis:
Before an insurer is obligated to defend or indemnify a
policyholder, the insured must demonstrate that
coverage is available under the policy. An insur er's
duty to defend is broader than its duty to indemnify,
but ``is limited to suits which assert claims for which it
has assumed liability under the policy.' ``[W]here there
exists some doubt as to whether the complaint against
the insured alleges a risk insured against, that doubt
should be resolved in favor of the insur ed.' Most
importantly therefore, an insurer is``required to defend
any action which potentially states a claim which is
covered under the policy.' Thus, in this case, if the
Acierno actions potentially state a claim that is covered
under definition 10(c), National is requir ed to defend
the county in those actions.
Whether the Acierno actions potentially state a claim
for which National has assumed liability depends upon
how we interpret definition 10(c). As a basic matter,
Delaware law requires us to interpr et insurance
contracts ``in a common sense manner.' W e must also
7
examine the disputed language in the context of the
entire policy.
``Absent some ambiguity, Delaware courts will not
destroy or twist policy language under the guise of
construing it,' because ``creating an ambiguity where
none exists could, in effect, create a new contract with
rights, liabilities and duties to which the parties ha[ve]
not assented.' When policy language is ambiguous,
however, under Delaware law this Court must apply
the doctrine of contra proferentem . That is, ambiguous
language must be construed against the drafter and in
conformance with the reasonable expectations of the
insured.
The premise underlying the principle of contra
proferentem is that an insurance contract is one of
adhesion. As the Delaware Supreme Court r ecently
explained,
[T]he insurer . . . is the entity in control of the
process of articulating the terms [of an insurance
contract]. The other party . . . usually has very little
to say about those terms except to take them or
leave them or to select from limited options of fered
by the insurer. . . . Therefor e, it is incumbent upon
the dominant party to make the terms clear .
Convoluted or confusing terms are the pr oblem of
the insurer . . . not the insured. . . .
As noted earlier, due to the insurer's dominant
position, when an ambiguity is found in insurance
policy language, we must construe the language
against the insurer as a matter of Delawar e law. And
therefore, unlike with other types of contracts, we need
not inquire into the parties' actual intent.
Because ambiguous language is construed against the
insurer as a matter of law, we take special note of
Delaware law for determining whether language is
ambiguous. ``The settled test for ambiguity is whether
the provisions in controversy are r easonably or fairly
susceptible of different interpretations or may have two
or more different meanings.' An insurance policy is not
ambiguous, however, ``merely because two conflicting
8
interpretations may be suggested. Rather , both
interpretations must reflect a r easonable reading of the
contractual language.' Thus, we must examine, not
only whether the county's reading of definition 10(c) is
possible, but also whether it is reasonable.
New Castle County, 174 F.3d at 342-44 (citations omitted).
Thus, in order to assess National Union's obligations,
Delaware law requires us to ask whether the Acierno suits
potentially state a claim under Definition 10(c) of the CGL
policy. See id. at 343. We must answer in the affirmative if
the language of the policy is ambiguous as to its coverage
of the specific claims. An insurance policy is ambiguous if
there is more than one reasonable interpretation of its
terms. The Delaware Supreme Court has not addressed
whether an "invasion of the right of private occupancy" is
ambiguous, and both parties agree that lower court
opinions in the state provide no clear answer . As a result,
we must look outside of Delaware, to other state court
decisions and relevant public policy, to r each a decision.3
B. Non-Delaware Precedent
State courts outside of Delaware have disagr eed over
whether an "invasion of the right of private occupancy" is
ambiguous. A number of state courts have found the
disputed language unambiguous, suggesting that it is
inapplicable to Acierno's claims. A smaller , but not
insignificant, number of decisions have held the opposite --
that an invasion of the right of private occupancy is
ambiguous and must therefore be construed liberally.
Of the decisions that hold the language to be
unambiguous, most adopt one of three lines of r easoning.
These approaches, however, are not sharply defined and
often blur. The first and perhaps most commonly employed
strategy is to examine the context in which the phrase is
used (it almost always follows some variation of"wrongful
eviction" and "wrongful entry"). States cite the Latin maxim
_________________________________________________________________
3. Both parties refer extensively to dictionary definitions and the "plain
meaning" of the terms. Not surprisingly, their arguments conflict and are
ultimately inconclusive. As a result, we find this discussion unhelpful.
9
"ejusdem generis," a tool of construction that applies when
a general term or phrase follows an enumeration of specific
offenses.4 Ejusdem generis requires courts to construe the
general phrase narrowly, so that it relates only to offenses
of the same kind or class as those specifically enumerated.
As the Delaware Supreme Court clearly articulated over
eighty years ago in Donaghy v. State, 100 A. 696, 707 (Del.
1917):
The doctrine of ejusdem generis . . . is a rule of
statutory construction . . . that where general words
follow the enumeration of particular classes of persons
or things, the general words will be construed as
applicable only to persons or things of the same
general nature or class as those enumerated. . . .
[S]uch a rule is based on the obvious r eason that if it
was intended that the general words should be used in
their unrestricted sense, no mention would have been
made of the particular classes.
See also Triple C Railcar Serv., Inc. v. City of Wilmington,
630 A.2d 629, 631 (Del. 1993). Applying ejusdem generis
would limit the right of private occupancy to of fenses,
similar to eviction or wrongful entry, that include a
violation of the claimant's possessory inter est in real
property. See Groshong v. Mutual of Enumclaw Ins. Co., 329
Or. 303, 312-14 (1999) ("[T]he phrase,``other invasion of the
right of private occupancy' applies only to of fenses that
involve a possessory interest in the pr emises at issue.").5
_________________________________________________________________
4. They also cite a "related" canon of construction, noscitur a sociis.
Only
the amicus, however, presents a case that applies the concept. In City of
Delray Beach, 85 F.3d at 1534, the Eleventh Circuit refers to a Florida
state court decision that suggests that the two Latin maxims are more
than simply "related":
[Ejusdem generis] is actually an application of the broader maxim
``noscitur a sociis' which means that general and specific words
capable of analogous meaning when associated together take color
from each other so that the general wor ds are restricted to a
sense
analogous to the specific words.
Thus, noscitur a sociis is simply a br oad form of ejusdem generis and
requires no additional analysis.
5. In addition to Oregon, other states that have utilized ejusdem generis
in a similar context include Wisconsin, Florida, Massachusetts, Indiana,
10
Because Acierno's claims do not allege a violation of his
possessory interest, adopting this appr oach would require
us to rule in favor of National Union.
There is a critical distinction, however , between this case
and most of the decisions that apply ejusdem generis.
Almost all of the precedent invoking the Latin maxim
involve insurance policies that include the phrase"other
invasion of the right of private occupancy." Some courts
have explicitly focused on the presence of the word "other":
_________________________________________________________________
Michigan, Illinois, Oklahoma, California, and New York. See United
States v. Security Mgmt. Co., Inc., 96 F .3d 260, 264 n.4 (7th Cir. 1996)
(applying Wisconsin law and holding that"[t]he ejusdem generis rule
makes clear that [a] right of occupancy must exist before an individual
may be said to have suffered an ``invasion of the right of private
occupancy' "); City of Delray Beach, Florida v. Agricultural Ins. Co., 85
F.3d 1527, 1534 (11th Cir. 1996) (applying Florida law and holding that
"when read in context, the phrase ``other invasion of the right of private
occupancy' means an offense tantamount to wr ongful entry or eviction
and requires an impingement upon possessory rights); Dryden Oil Co. of
New England, Inc. v. Travelers Indem. Co., 91 F.3d 278, 288 (1st Cir.
1996) (applying ejusdem generis under Massachusetts law); Red Ball
Leasing, Inc. v. Hartford Accident and Indem. Co., 915 F.2d 306, 312 (7th
Cir. 1990) (applying ejusdem generis under Indiana law); Aetna Casualty
& Surety Co. v. Dow Chemical Co., 933 F .Supp. 675, 680 (E.D. Mich.
1996) (interpreting Michigan law as adopting ejusdem generis); Martin v.
Brunzelle, 699 F. Supp. 167, 170 (N.D. Ill. 1988) ("Ejusdem generis
principles draw on the sensible notion that wor ds such as ``or other
invasion of the right of private occupancy' ar e intended to encompass
actions of the same general type as, though not specifically embraced
within, ``wrongful entry or eviction.' "); Liberty Mutual Ins. Co. v. East
Central Oklahoma Elec. Coop., 97 F.3d 383, 390-91 (Okla. 1996)
("Instead of creating an ambiguity, the ter m ``invasion of the right of
private occupancy' is included in insurance policies simply to provide a
``catch-all' category of offenses of the same general type as "wrongful
entry or eviction."); Stein-Brief Group, Inc. v. Home Indem. Co., 65
Cal. App. 4th 364, 373 (1998); County of Columbia v. Continental Ins. Co.,
595 N.Y.S.2d 988, 991 (1993) ("By application of the principle of ejusdem
generis, the key to interpreting the phrase``other invasion of the right of
private occupancy' lies in the definition of ``wrongful entry' and
``eviction,'
both of which involve actual interference with possessory rights to real
property.").
11
[T]his court has stated that ``the rule of ejusdem generis
in contracts is peculiarly applicable where specific
enumeration precedes the word ``other' followed by
general words. . . . use of the term``other' to connect
the phrase ``invasion of the right of private occupancy'
to the wording that precedes it satisfies us that the
parties intended that such invasion also be limited to
claims that involve a possessory interest in the
premises.
Groshong, 329 Or. at 313-14; see also, e.g., Liberty Mutual,
97 F.3d at 390; Security Mgmt., 96 F .3d at n.4 (applying
ejusdem generis, but noting that its application"would
have more force if the word ``other' preceded the general
term."). The policy at issue in this case does not include the
word "other."
Neither National Union nor the amicus address this
distinction, or why the principle should be applied. Instead,
the amicus conclusively states, without further elaboration,
that "[e]mploying the principle of ejusdem generis, rather
than contra proferentem, adher es to the requirement that
words be interpreted in the proper context and ensures
greater fidelity to the meaning of the disputed term and the
intentions of the parties to the insurance contract."6
_________________________________________________________________
6. Contra proferentem is yet another Latin maxim, which requires that
ambiguous and confusing policy language be construed against the
insurer. The amicus suggests that the court must choose between
applying contra preferentem and ejusdem generis. This is incorrect.
Ejusdem generis is used to determine whether a phrase is ambiguous.
Contra preferentem only applies after a determination of ambiguity is
made. See Penn Mut. Life Ins. Co. v. Oglesby, 695 A.2d 1146, 1149-50
(Del. 1997) ("[I]f the contract . . . is ambiguous, the principle of
contra
proferentem dictates that the contract must be construed against the
drafter."). The County, in contrast, r ecognizes this distinction, but
nonetheless argues that contra preferentem should be applied because
the District Court explicitly found the disputed language ambiguous. See
Appellant's brief at 26 ("[T]he District Court ignored the doctrine of
contra
proferentem and construed admittedly ambiguous policy language
against the insured.") (emphasis added). This is also incorrect. The
District Court merely found that the "plain meaning" of the phrase was
ambiguous. It then examined the context of the language, applied
ejusdem generis, and held that its meaning was clear. Before we can
apply contra proferentem, we must first review this holding and
determine whether the disputed phrase was ambiguous.
12
Amicus brief at 19 n.5. This begs the question, however, of
whether applying ejusdem generis in this case would help
clarify the parties' intentions. See White v. Cr owley, 1986
WL 5850, *2 (Del.Super. 1986) ("As with all rules of
statutory construction, [ejusdem generis] does not apply
when the context shows a contrary intention. In other
words, the goal of statutory construction is tofind the
intent of the [contracting parties], and rules of statutory
construction are merely means towar d that end."). Because
National Union has failed to demonstrate, and we fail to
believe, that applying ejusdem generis is r equired or even
helpful, our inquiry must continue.
Under the second approach, some states have concluded,
after reviewing the entirety of a policy, that an "invasion of
the right of private occupancy" is only available in a
landlord-tenant context. See Dryden Oil Co. of New
England, Inc. v. Travelers Indemnity Company , 91 F.3d 278,
288 (1st Cir. 1996) ("Under Massachusetts law, then, the
phrase ``other invasion of the right of private occupancy'
would mean ``other invasion of the [tenant's] right of private
occupancy,' since an actionable ``wrongful entry or eviction'
claim under Massachusetts law may be brought only by a
tenant against a landlord.").7 There is no landlord-tenant
relationship in this case. However, New Castle cites a long
list of cases that have rejected this position. See Appellant's
Brief at 20 n.5. There is no need to discuss each of these
cases, except to note that a number of states allow a
property owner, like Mr. Acier no, to bring such a claim.8
Third, some states have held that an "invasion of the
right of private occupancy" requires a physical invasion,
_________________________________________________________________
7. See also State Farm Fire & Cas. Co. v. Burkhardt, 96 F. Supp. 2d 1343,
1351 (M.D. Ala. 2000) (applying Alabama law); Decorative Ctr. v.
Employers Cas., 833 S.W.2d 257, 262 (T ex.App. 1992) ("The phrase
``other invasion of the right of private occupancy' provides coverage only
if there exists a landlord-tenant r elationship, or if the plaintiff has a
vested property right.").
8. See, e.g., Royal Ins. Co. of America v. Kirksville Coll. of Osteopathic
Med., 191 F.3d 959, 963 (8th Cir. 1999); Pipefitters Welfare Educ. Fund
v. Westchester Fire Ins. Co., 976 F.2d 1037, 1040 (7th Cir. 1992); Titan
Holdings Syndicate, Inc. v. City of Keene, 898 F .2d 265, 272-73 (1st Cir.
1990).
13
such as a trespass. See Sterling Builders, Inc. v. United
National Ins. Co., 79 Cal. App. 4th 105, 108-09 (2000)
("[T]here is no such thing as a ``non-physical invasion' of a
right of private occupancy. ``Occupancy' r equires a physical
entry upon real property."). Accor ding to this line of
reasoning, merely impinging upon a claimant's right to use
or enjoy real property does not constitute such an invasion.
See Columbia National Ins. v. Pacesetter Homes, Inc. , 532
N.W.2d 1, 10 (Neb. 1995) ("[T]he right of private occupancy
is the legal right to occupy premises, not the right to enjoy
occupying those premises.").9 Acierno does not allege a
physical invasion of any sort, and therefor e his claims
would not qualify.
A smaller, but not insignificant, number of decisions
support New Castle's position. Although less unifor m in
their approach, these decisions, in aggr egate, address each
of National Union's arguments. First, some courts have
held that an "invasion of the right of private occupancy" is
ambiguous as a matter of law.10 The most factually relevant
decisions are those of New Hampshire. In Town of Goshen
v. Grange Mut. Ins. Co., 424 A.2d 822, 825 (N.H. 1980), a
_________________________________________________________________
9. The amicus makes a related argument by distinguishing between use
and occupancy. See Amicus brief at 10-16 (contending that the County's
policy only covers suits arising out of harm to a claimant's occupancy,
whereas Acierno's suits claim damages r elating to future use). For
authority, the amicus relies primarily upon a number of Delaware
statutes that refer to "use or occupancy." According to the amicus, the
presence of both terms indicates that "use" and "occupancy" are distinct
concepts. We find this unconvincing. In all of the examples presented,
the two words consistently appear together , amidst a long list of other
concepts. It is equally reasonable to conclude that the legislature used
the two words as synonyms.
10. See, e.g., Beltway Mgmt. Co. v. Lexington-Landmark Ins. Co., 746
F. Supp. 1145, 1150 (D.D.C. 1990) ("The phrase ``other invasion of the
right of private occupancy' is ambiguous."); Gould Inc. v. Arkwright Mut.
Ins. Co., 829 F. Supp. 722, 729 (M.D. Pa 1993) ("We, therefore, find that
the personal injury endorsement with its coverage for ``wrongful entry'
and ``other invasion of the right of private occupancy', is, in the context
of the entire policy, . . . ambiguous."); Hirschberg v. Lumbermans Mut.
Cas., 798 F. Supp. 600, 604 (N.D. Cal. 1992) ("At a minimum, the term
``other invasion of the right of private occupancy' is ambiguous, and any
ambiguity is to be resolved against the insur er.")
14
property owner sued a town planning boar d for refusing to
allow him to develop a subdivision. He claimed civil rights
violations under 42 U.S.C. S 1983. The supr eme court of
the state held that the town's insurance policy, which
covered suits arising from "other invasion of the right of
private occupancy," was unclear. As a r esult, it construed
the policy against the insurer and held that coverage
extended to damages arising from the boar d's denial of
"plaintiff 's right to free enjoyment of his property." See id.
at 824-25. Later, the First Circuit Court of Appeals,
applying New Hampshire law, held that "other invasion of
the right of private occupancy" included har m resulting
from "noxious odors, noise and light" that interfered with
the use of property. See Titan Holdings Syndicate, Inc. v.
City of Keene, New Hampshire, 898 F .2d 265, 272-73 (1st
Cir. 1990). The Court noted that, "T own of Goshen does not
require an allegation of physical invasion before a claim
comes within coverage for liability arising fr om ``other
invasion of the right of private occupancy.' " Id. at 273.
Although a number of states have criticized or r efused to
follow Town of Goshen, see Sterling Builders, 79
Cal. App. 4th at 110-11, others have reached the same
conclusion. The Supreme Court of Washington has held
that both nuisance and trespass claims qualify as "other
invasion[s] of the right of private occupancy." See Kitsap
County v. Allstate Ins. Co., 964 P.2d 1173, 1185-86 (Wash.
1998). In Kitsap, the court noted that the"plain, ordinary,
and popular meaning that an average purchaser of
insurance would ascribe to the phrase ``other invasion of the
right of private occupancy' would include a tr espass on or
against a person's right to use premises or land." Id. at
1185 (emphasis added). The court also consider ed and
rejected the application of ejusdem generis .
Even California, which has almost unifor mly rejected
New Hampshire's approach, has occasionally softened its
interpretation of the disputed language. In Martin Marietta
Corp. v. Insurance Co. of North America, 40 Cal. App. 4th
1113, 1134 (1996), a state court of appeal held that" ``other
invasion of the right of private occupancy' is susceptible to
numerous interpretations, and under California's rules of
contract interpretation, it must be construed in favor of the
15
insured." The case involved environmental claims by federal
and state entities against Martin Marietta.
Finally, some courts have held the language at issue is
ambiguous simply because of the wide variance among
judicial decisions. See Travelers Indem. Co. v. Summit Corp.
of America, 715 N.E.2d 926, 937-38 (Ind. 1999) ("This
disagreement among the courts further indicates the
ambiguity of the personal injury provisions."). We have, in
the past, adopted a similar, practical appr oach. See Little v.
MGIC Indem. Corp., 836 F.2d 789, 796 (3r d Cir. 1987)
("[T]hat different courts have arrived at conflicting
interpretations of the policy is strongly indicative of the
policy's essential ambiguity.").
In sum, a review of relevant, non-Delawar e case law,
suggests that there is a greater number of cases favoring
National Union's position. However, "our job is not simply
to count the number of cases on both sides," New Castle
County, 174 F.3d at 347. We must instead evaluate the
underlying reasoning. Reducing counsels' many arguments
to their most persuasive essence, we believe that the
existing non-Delaware caselaw can be characterized as
follows: on one hand, a fairly large number of state court
decisions apply the doctrine of ejusdem generis and find no
ambiguity; on the other, a smaller number of decisions rely
upon either broad, conclusory language or narr ow, fact-
specific analysis to reach the opposite r esult. We find
neither approach convincing. As a result, we turn to public
policy concerns and commonsense.
C. Public Policy and Commonsense
Of the three briefs submitted in this case, only the
amicus attempts a public policy argument:
[C]ourts create great uncertainty when they disregard
express, unambiguous provisions defining and
circumscribing the risks that the insur er agrees to
cover. Failure to enforce the insurance contract as
written can affect the price and availability of coverage
for those who lack the resources to self-insure -- most
notably, individuals and small businesses.
16
Amicus brief at 25 (citations omitted) (emphasis added). We
completely agree with this statement. In fact, one would be
hard-pressed to find anyone to disagree. The problem is
that this statement assumes away the central issue in this
case - whether the disputed policy language is ambiguous.
It is beyond peradventure, as the amicus contends, that
"[i]nsurance serves an important economic and social
function," and courts must enforce unambiguous policy
language in order to maintain its viability. The question
remains, however, whether the CGL policy is unambiguous,
and none of the parties provides any policy ar guments for
addressing that particular question.
In our opinion, the most important and relevant
observation in this case was only casually r eferenced by the
District Court. The court noted:
Insurance companies have included the clause
``wrongful eviction from, wrongful entry into, or invasion
of the right of private occupancy' in their policies for at
least twenty years, and litigants have repeatedly
disputed the meaning of the term ``invasion of the right
of private occupancy.' . . .
After at least two decades of litigation over the meaning
of the term ``invasion of the right of private occupancy,'
courts have not arrived at a uniform definition of the
term. Rather than attempt to construe the ter m
``invasion of the right of private occupancy' solely based
on its plain meaning, courts have concluded that the
term is ambiguous, and have resorted to other
techniques of contract interpretation. This court,
similarly will examine the meaning of the ter m in the
broader context of the CGL policy.
Insurance companies continue to employ the ter m
``invasion of the right of private occupancy' in their
policies, despite twenty years of legal decisionsfinding
that this term is ambiguous. It is instructive to ask
why.
We also find it instructive to ask "why?" -- because we
cannot conceive of an answer. The District Court concluded
that insurance companies intend the disputed language to
be read in context, to take meaning from the specific terms
17
it follows (almost always "wrongful eviction" and "wrongful
entry"). Perhaps this is true. But even if it is, their intent
has been, and continues to be, unclear.
A Westlaw search from 1973 to the present reveals 249
cases that include the phrase "invasion of the right of
private occupancy." Approximately half of those decisions
required a direct interpretation of the disputed language. In
fact, National Union itself has been forced to litigate the
meaning of the phrase on numerous occasions, and has
lost at least four times.11 Yet, in spite of this extensive
history of litigation, and obvious disagreement amongst
courts and parties alike, insurance companies, and
National Union in particular, continue to use the phrase
without any language defining its scope. Once again, we
must ask, "why?"
It is well settled under Delaware law that insurance
policies are contracts of adhesion. Ther efore it is the
responsibility of the insurer to write clear policies with
adequately defined terms:
[Insurance contracts] must be interpreted in a common
sense manner, giving effect to all pr ovisions so that a
reasonable policyholder can understand the scope and
limitation of coverage. It is the obligation of the insurer
to state clearly the terms of the policy . . ..
The policy behind this principle is that the insur er or
the issuer, as the case may be, is the entity in control
of the process of articulating the terms. The other
party, whether it be the ordinary insur ed or the
investor, usually has very little say about those terms
_________________________________________________________________
11. See Kitsap County, 964 P.2d at 1184-86; Rozet v. City Ins. Co., 24
F.3d 249 (9th Cir. 1994) (unpublished decision); Great Northern Nekoosa
Corp. v. Aetna Cas. & Sur. Co., 921 F .Supp. 401, 416-18 (N.D. Miss.
1996); Gould, 829 F. Supp. at 724, 729. National Union has, on other
occasions, prevailed in similar suits. See e.g., City of Oakland v.
National
Union Fire Ins. Co. of Pittsburgh, Pa , 56 F.3d 70 (9th Cir. 1995)
(unpublished opinion); Wackenhut Servs., Inc. v. National Union Fire Ins.
Co. of Pittsburgh, Pennsylvania, 15 F .Supp.2d 1314, 1323-24 (S.D. Fla.
1998); Stein-Brief, 65 Cal. App. 4th at 368, 373; O'Brien Energy Sys., Inc.
v. American Employers' Ins. Co., 629 A.2d 957, 959, 963-63 (Pa.Super.
1993).
18
except to take them or leave them or to select fr om
limited options offered by the insur er or issuer.
Therefore, it is incumbent upon the dominant party to
make terms clear. Convoluted or confusing terms are
the problem of the insurer or issuer -- not the insured.
Penn Mutual, 695 A.2d at 1149-50. Because of the one-
sided nature of insurance policies, insurance companies
are in the best position to clarify potentially ambiguous
terms and avoid future disputes. The persistent litigation
surrounding the meaning of "invasion of the right of private
occupancy" strongly suggests that they indeed should do
so. A simple definition of the phrase, indicating, for
example, that it refers only to offenses requiring a physical
invasion (or only to those involving a tenant-landlord
dispute, etc.) would be dispositive.
At oral argument, we asked counsel why National Union
had chosen not to further define the contested phrase.
Counsel responded that "this phraseology makes the policy
marketable." In response to our follow-up question, counsel
denied that the phrase was "marketable" solely because it
created confusion; instead, he stated that"the purpose of
this policy language is that it covers fact patter ns and
situations and scenarios that don't narrowly fall within the
parameters of a ``wrongful entry' or ``wr ongful eviction.' "
Even if this is true, we fail to see how further defining the
scope of the language would undercut this purpose. If
anything, it would help clarify which fact patter ns,
situations, and scenarios are indeed cover ed. We will not
speculate as to why National Union has consistently
refused to clarify its language, but one thing is clear: The
provision at issue in the National Union CGL policy is
ambiguous.
There is a time and place for reliance upon Latin maxims
and principles of statutory construction, but not at the
expense of commonsense. See SI Mgmt. L.P . v. Wininger,
707 A.2d 37, 42 (Del. 1998) (holding that insurance
contracts "must be interpreted in a common sense manner,
giving effect to all provisions so that a reasonable
policyholder can understand the scope and limitation of
coverage. It is the obligation of the insurer to state clearly
the terms of the policy."). A single phrase, which insurance
19
companies have consistently refused to define, and that has
generated literally hundreds of lawsuits, with widely varying
results, cannot, under our application of commonsense, be
termed unambiguous. As such, we hold that an"invasion
of the right of private occupancy" must be construed
liberally, and that the CGL policy does cover the County's
legal expenses and its liability arising from Acierno's
claims.
We reverse the District Court's grant of summary
judgment in favor of National Union, and remand the cause
for further proceedings consistent with this opinion.
20
SCIRICA, Circuit Judge, dissenting.
Because I would affirm the judgment of the District
Court, I respectfully dissent.
Acierno sued New Castle County alleging that its denial
of a building permit unlawfully deprived him of his property
without due process of law and that it arbitrarily treated
him differently than other real estate developers in violation
of the Equal Protection Clause of the Fourteenth
Amendment. Acierno also alleged that the County violated
his rights to due process and equal protection when it
voided his development plan and rezoned his pr operty.
Contending Acierno alleges an "invasion of the right of
private occupancy," the County maintains National Union
Fire Insurance Company has a duty to defend. In essence,
the County asserts that Acierno alleged that the County's
regulatory actions impaired Acierno's right to use and enjoy
his property.1
Interpreting the policy, the District Court denied a "duty
to defend" holding that "personal injury" does not extend to
claims involving frustrated commercial expectations
regarding future development of pr operty. After declining to
construe the term "invasion of the right of private
occupancy" on a plain meaning reading, the District Court
employed the well known tools of construction of ejusdem
generis and noscitur a sociis.
As the District Court recognized, the ter m "invasion of
the right of private occupancy" follows the enumeration of
specific actions relating to possessory inter ests in real
property -- wrongful eviction and wr ongful entry.2 It would
_________________________________________________________________
1. As noted, the Commercial General Liability policy purchased from
National Union Fire Insurance provides in part:
10. "Personal injury" means injury, other than "bodily injury,"
arising out of one or more of the following of fenses:
* * *
c. The wrongful eviction from, wr ongful entry into, or invasion of
the right of private occupancy of a room, dwelling or premises that
a person occupies by or on behalf of its owner , landlord or
lessor.
2. See Sadler v. New Castle County, 565 A.2d 917, 923 (Del. 1989);
Hercules, Inc. v. Virginia, 1999 WL 167830, at *4 (Del. Super. Feb. 12,
21
seem, therefore, that applying a br oader definition, would
expand coverage beyond the intended scope of the policy
language.
The related doctrine of noscitur a sociis 3 also points to the
conclusion that when read in context, the phrase "invasion
of the right of occupancy" should be given a meaning
analogous to "wrongful eviction" and"wrongful entry." The
phrase "invasion of the right of private occupancy" does not
appear to encompass financial harms like the denial of a
building permit, the voiding of a development plan, and the
rezoning of land.
Acierno alleges that the County improperly deprived him
of his right to use and enjoy his land. He makes no
allegations of eviction, entry or similar wr ongful
disturbance.
The District Court found:
that the coverage of the CGL policy does not extend to
the County's liabilities arising from the Acierno
litigation. This conclusion is consistent with the nature
of the insurance policies purchased by the County. The
County bought a POL4 policy fr om National Union to
_________________________________________________________________
1999) ("Where general words follow an enumeration of persons or things,
by words of a particular and specific meaning, such general words are
not to be construed in their widest extent, but ar e to be held as
applying
only to persons or things of the same general kind or class as those
specifically mentioned.").
3. The doctrine of noscitur a sociis holds that "general and specific
words
capable of the analogous meaning when associated together take color
from each other so that the general wor ds are restricted to a sense
analogous to the specific words." City of Delray Beach v. Agric. Ins. Co.,
85 F.3d 1527, 1534 (11th Cir. 1996).
4. The District Court found that "in 1992, National Union sold the
County a Public Officials and Employees Liability Insurance Policy
(Policy No. 439-12-94) (the "POL policy"). The POL policy has a $1 million
limit of liability for the policy period May 12, 1992 to July 1, 1993. The
POL policy excludes coverage for claims arising fr om prior litigation,
stating that National Union shall not be made liable to make any
payment in connection with any claim for any wr ongful act occurring
prior to May 12, 1992, for which the County might r easonably expect
that such wrongful act would give rise to a claim." New Castle County v.
Nat'l Union Fire Ins. Co., 84 F. Supp. 2d 550, 552 (D. Del. 2000).
22
insure it against potential liabilities arising from the
conduct of its officials and employees. Although the
parties disagreed whether the "prior litigation"
exclusion of the POL policy obligated National Union to
indemnify the County for the Acierno litigation, there is
no dispute that the POL policy covers the kinds of
liabilities incurred by the County in its zoning and
permitting activities. Recognizing that the County had
already insured itself under the POL policy against
liabilities arising from the exercise of its regulatory
authority, it is not surprising that its CGL policy covers
a different set of potential liabilities.
New Castle, 84 F. Supp. 2d at 556.
Substantially for the reasons set forth by the District
Court, I would affirm its judgment.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
23