Narragansett Jewelry Co. v. St. Paul Fire & Marine Insurance

United States Court of Appeals
For the First Circuit
No. 08-1008
NARRAGANSETT JEWELRY CO., INC., d/b/a C&J JEWELRY, CO., INC.
Plaintiff, Appellant,
v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Ernest C. Torres, U.S. District Judge]
Before
Torruella, Baldock,* and Howard,
Circuit Judges.
James J. McGair, with whom Thomas C. Angelone and Hodosh,
Spinella & Angelone, P.C. were on brief, for appellant.
Paul S. Callaghan, with whom James A. Ruggieri and Higgins,
Cavanagh & Cooney, LLP were on brief, for appellee.
February 6, 2009
*
Of the Tenth Circuit, sitting by designation.
HOWARD, Circuit Judge. This appeal arises out of an
insurance coverage dispute between appellant Narragansett Jewelry
Co. Inc., d/b/a C & J Jewelry Co. Inc. ("Narragansett") and its
general liability insurer, appellee St. Paul Fire and Marine
Insurance Co. ("St. Paul"). Narragansett sought defense and
indemnity from St. Paul in connection with a civil action filed
against it by Slane & Slane Designs, LLC ("Slane") in the Southern
District of New York ("the underlying action" or "the Slane
lawsuit"). Following St. Paul's denial of coverage, Narragansett
filed suit in Rhode Island federal district court for breach of the
insurance contract and for a declaratory judgment that St. Paul was
required to provide coverage. Narragansett sought to recover money
it expended in the Slane lawsuit, including attorneys fees and the
amount it paid in settlement.1 The district court granted St.
Paul's motion for summary judgment, from which Narragansett
appeals. Finding no error in the district court's analysis or
conclusion, we affirm.
I.
Under Rhode Island law -- which both parties agree
governs this case -- an insurer's duty to provide a defense to
litigation brought against its insured is determined by comparing
the allegations in the underlying complaint against the insured to
1
The Slane lawsuit was settled while the instant matter was pending
in the district court.
-2-
the language of the relevant insurance policy. This is referred to
as "the pleadings test." Progressive Cas. Ins. Co. v. Narragansett
Auto Sales, 764 A.2d 722, 724 (R.I. 2001). "'[I]f the pleadings
recite facts bringing the injury complained of within the coverage
of the insurance policy, the insurer must defend irrespective of
the insured's ultimate liability . . . .'" Id. (quoting Peerless
Ins. Co. v. Viegas, 667 A.2d 785, 787 (R.I. 1995)).
II.
We begin our analysis by figuratively "laying the . . .
complaint alongside the policy . . . ." Employers' Fire Ins. Co.
v. Beals, 240 A.2d 397, 402 (R.I. 1968). We start with the
complaint.2 Slane is a jewelry design company that contracted with
Narragansett in 1996. Pursuant to the parties' agreement,
Narragansett was to develop jewelry models and molds based on Slane
designs, and to produce jewelry ordered by Slane. Once Slane
designed a particular piece of jewelry, it was Narragansett's job
to produce a model to serve as a template from which the jewelry
could be mass produced. Upon Slane's approval of the model, a mold
would be created for use in the mass production process.
The gist of Slane's complaint was that Narragansett
"failed and refused to develop models of consistent and usable
quality and which were free of defects." More specifically, Slane
2
Slane followed its original complaint with an amended complaint.
We refer to the latter unless otherwise indicated.
-3-
charged that Narragansett's models were not properly calibrated, or
were defective in other ways that prevented them from being used to
manufacture the final products. Slane also claimed that
Narragansett damaged and lost numerous models belonging to Slane.
Finally, Slane asserted that Narragansett either failed to deliver
the final product, or delivered goods long after the expected
delivery date.
Slane's original complaint, filed in May 2002, set forth
causes of action for breach of contract, breach of express and
implied warranties, negligence, negligent misrepresentation, and
breach of the covenant of good faith and fair dealing. After St.
Paul denied coverage, Slane filed an amended complaint in March
2003 adding a count entitled "Entrustment-Negligence," alleging
that Narragansett damaged jewelry models which Slane entrusted to
Narragansett for use in the production of jewelry. St. Paul again
denied coverage, and Narragansett's declaratory judgment action
followed.
In relevant part, the Comprehensive General Liability
policy St. Paul issued to Narragansett provides that St. Paul will
"pay amounts [Narragansett] is legally required to pay as damages
for covered . . . property damage that happens while this agreement
is in effect and is caused by an event." The policy defines
"property damage" as "physical damage to tangible property of
others, including all resulting loss of use of that property" or
-4-
"loss of use of tangible property of others that isn't physically
damaged." The St. Paul policy also contains several exclusions,
describing matters that are not covered by the policy. One of
these, the Control of Property exclusion, provides that the policy
does not "cover property damage to . . . [p]ersonal property that's
in the care, custody, or control of [Narragansett]."
III.
The district court granted St. Paul's motion for summary
judgment on the basis of the Control of Property exclusion,
concluding that the factual allegations in the "Entrustment-
Negligence" count3 ineluctably describe a loss related to Slane's
property -- molds and models -- in Narragansett's "care, custody or
control." We review the district court's summary judgment ruling
de novo, construing the record evidence in the light most favorable
to Narragansett. Dennis v. Osram Sylvania, Inc., 549 F.3d 851, 855
(1st Cir. 2008). "Summary judgment is appropriate 'where there is
no genuine issue as to any material fact . . . and the movant is
entitled to judgment as a matter of law.'" New Fed. Mortgage Corp.
v. Nat'l Union Fire Ins. Co., 543 F.3d 7, 11 (1st Cir.
2008)(quoting Fed. R. Civ. P. 56(c)).
In determining whether the allegations in a complaint are
sufficient to create a duty to defend, we apply general rules of
3
Narragansett conceded during the proceedings below that only the
"Entrustment-Negligence" count in the amended complaint could be
construed to afford it coverage.
-5-
contract construction and give words their "plain, ordinary
meaning." Allstate Ins. Co. v. Russo, 641 A.2d 1304, 1306-07 (R.I.
1994). Any doubts about the sufficiency of the allegations are
resolved in favor of the insured. Id.St. Paul argues that the explicit language of the
complaint compels a conclusion that the Control of Property
exclusion applies to deny coverage. Specifically, St. Paul points
out that the "Entrustment-Negligence" claim alleges that "Slane &
Slane owned certain models which it entrusted to [Narragansett] for
use in the production of jewelry," and that Narragansett "caused
physical damage to such models . . . ." Narragansett responds by
hypothesizing that the alleged loss and/or damage possibly occurred
during the shipment process when placed in the hands of a third-
party carrier, and thus not in Narragansett's care, custody or
control. We agree with the district court that Narragansett's
argument misses the mark.
Regardless of what might be "possible," there are no
allegations in the Slane lawsuit that support Narragansett's
hypothesis. Indeed, the exact opposite is true. The complaint
specifically and repeatedly alleges that Narragansett caused the
damage at issue. Narragansett relies on Shelby Ins. Co. v. Ne.
Structures, Inc., 767 A.2d 75 (R.I. 2001), a building-collapse case
in which the Rhode Island Supreme Court stated that the
"possibility" of coverage was sufficient to bring the complaint
-6-
within the scope of the relevant policy. Shelby, however, is
readily distinguishable. There, while the underlying complaint
charged faulty workmanship, which would be excluded from coverage,
id. at 77, the defendant/insured's underlying answer directly
raised the substantive defense that the collapse was caused by an
"Act of God," such as high winds, which might be covered. Id.Here, the pleadings in the underlying case contain no similar claim
that the alleged damage was caused by third party. Narragansett's
post-hoc speculation about third parties not referenced in the
underlying lawsuit cannot suffice to avoid the plain language of
both the complaint and the policy.4
The decision of the district court is Affirmed.
4
Because we affirm on the basis of the Control of Property
Exclusion, we do not address the other exclusions discussed by both
sides.
-7-