Gargano v. Vigilant Insurance Company

Not for Publication in West's Federal Reporter
United States Court of Appeals
For the First Circuit
No. 11-1968
PAUL A. GARGANO and SHEILA GARGANO,
Plaintiffs, Appellants,
v.
VIGILANT INSURANCE COMPANY,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard Stearns, U.S. District Judge]
Before
Boudin, Circuit Judge,
Souter, Associate Justice,*
and Thompson, Circuit Judge.
Paul A. Gargano, with whom Gargano & Associates is on brief,
for appellant.
John J. McGivney, with whom Scott A. Aftuck and Rubin and
Rudman LLP were on brief, for appellee.
August 24, 2012
*
The Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
SOUTER, Associate Justice. Paul Gargano1 represents
himself and his wife in this suit (removed from a Massachusetts
state court) seeking a declaration that the defendant, Vigilant
Insurance Company, is liable under the Garganos’ homeowners’
insurance policy for the cost to remedy defective exterior staining
of the shingles of their house and barn in West Hyannisport,
Massachusetts, and for damages under state statutes aimed at false
and misleading commercial conduct. This appeal is from the
district court’s summary judgment for Vigilant, which we affirm.
The facts appear in the company’s unchallenged statement
of uncontested facts and documentary exhibits, all filed in support
of its motion for judgment under Federal Rule of Civil Procedure
56(a). Additional uncontested details are taken from the parties’
briefs. When the house was built in 1996, its shingled outer walls
were given a semi-transparent stain, but in 2002 the Garganos hired
a professional painter to treat the shingles with a primer and two
coats of stain, an application that was repeated in 2006. In 2007,
the Garganos noticed changes in the look of the surface of the
shingles, and over time it became apparent that the coating was
detaching from the wood underneath, to the point that in many
places it ultimately peeled off entirely. Two years went by, and
in 2009 they made a claim under their homeowners’ insurance policy
for the cost to remedy the failed staining.
1
A member of the bar at the time suit was filed.
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The company engaged two experts to determine the cause of
the damage, one an engineer, the other an authority on exterior
coating. If we combine their complementary analyses, the trouble
started with the failure to coat the shingles on all sides with the
primer, so that when the underlying wood absorbed moisture through
unprimed surfaces, it built up to abnormal levels when it could not
be released through the heavily coated front side of the shingles.
In time, the pressure of the trapped liquid caused cracking of the
primer and stain and ultimately forced the combined coating away
from the wood surface. Mr. Gargano was apparently dissatisfied
with these findings, to which he responded that he thought the
explanation was “product failure,” though he never offered any
expert opinion that placed the onus entirely on the primer and
stain (excluding manner of application). In any event, any such
difference of opinion appears to be insignificant under the policy
terms.
The company accordingly denied coverage for the Garganos’
loss on the authority of two policy exclusions. One provides that
there is no coverage for “gradual deterioration . . . however
caused, or any loss caused by . . . gradual deterioration.” The
other exclusion is for losses resulting from “faulty acts, errors
or omissions of [the insured] or any other person in planning,
construction or maintenance,” with “construction” being defined to
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include “materials [and] workmanship . . . used for construction or
repair.”
The denial was followed by this proceeding based on the
Garganos’ claim of coverage, joined with two statutory claims under
Massachusetts law. They alleged unfair and deceptive practice in
the business of insurance in violation of Mass. Gen. Laws ch. 176D,
§ 3(9), consisting of minimal investigation of facts followed by
inadequate explanation of the coverage disclaimer. And they
charged unfairness and deception under Mass Gen. Laws ch. 93A,
§ 11, owing to selectivity for the purpose of denying coverage.
The district court set a discovery deadline of April 21,
2011, in anticipation of which Vigilant’s counsel spoke on the
phone with Mr. Gargano on April 15, recounting the policy language
and advising him of the inapplicability of each of the statutory
provisions the plaintiffs specifically relied upon. He told Mr.
Gargano that unless he withdrew the coverage and ancillary claims,
Vigilant would move for summary judgment under Federal Rule of
Civil Procedure 56(a).
Mr. Gargano refused, and Vigilant immediately filed its
motion, supported by exhibits and the statement of uncontested
facts specified by local rule 56.1. In their opposition to the
motion, the Garganos filed no counterstatement, with the
consequence under the rule that Vigilant’s was deemed admitted. In
disregard of the expiration of the discovery period, the Garganos
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filed notices for depositions to be taken after April 21,
propounded interrogatories to be answered after that date, and
finally asked for an extension of the discovery period. To
summarize a complicated back-and-forth, the court enforced the
April 21 deadline by blocking the late discovery attempts and
denying the motion to extend. In due course, it granted the
judgment requested, after finding no genuine dispute about facts
entitling Vigilant to a judgment of no coverage based on each
exclusion, and after ruling that each statutory claim was mistaken:
there is no private cause of action solely under ch. 176D, § 3(9),2
and ch. 93A, § 11 applies only to a transaction the plaintiff has
entered into while engaged in trade or commerce, not for personal
reasons.
In our de novo review of the order granting summary
judgment, see McDonough v. Donahoe, 673 F.3d 41, 46 (1st Cir.
2012), the absence of merit in the appeal can be explained shortly.
Nothing more needs to be said about the dismissal of the statutory
claims, which are not discussed in the Garganos’ brief and are
consequently no longer in the case. Harriman v. Hancock Cnty., 627
2
Massachusetts law does provide consumers with a private
right of action for violations of ch. 176D, § 3(9), although the
Garganos’ complaint failed to cite the specific statutory provision
that authorizes such actions. See Mass. Gen. Laws ch. 93A, § 9(1)
(consumers’ right of action for violations of ch. 176D, § 3(9));
see also Wheatley v. Mass. Ins. Insolvency Fund, 925 N.E.2d 9,
12-13 (Mass. 2010) (overview of statutory scheme). The Garganos
have not appealed this part of the district court’s decision.
-5-
F.3d 22, 28-29 (1st Cir. 2010). As for the coverage claim, the
Garganos raise three arguments: that the policy exclusions do not
unambiguously exclude coverage, that it was an abuse of discretion
to grant summary judgment when discovery was incomplete, and it was
likewise an abuse to grant judgment when Vigilant had failed to
engage previously in good faith consultation with plaintiffs’
counsel with the aim of narrowing issues or settling, as required
by local rule 7.1. None of these arguments has any substance.
The first, that the exclusions cited do not unambiguously
exclude coverage implicates the general rules of insurance contract
construction, that terms are to be understood in accordance with
standard usage, with coverage exclusions and any ambiguity of
policy language being construed against the insurer. See Camp
Dresser & McGee, Inc. v. Home Ins. Co., 568 N.E.2d 631, 635 (Mass.
App. Ct. 1991). Uncertainty and ambiguity, however, come to the
fore only when they might reasonably affect the application of the
terms to facts at hand, and there is no such possibility in the
application of either exclusion here.
The gradual deterioration exclusion was invoked on the
basis of a change in the condition of the surface stain that
progressed over a period of more than a year before the coverage
was claimed in 2009. Even if we ignore the failure to counter
Vigilant’s fact statement, the Garganos’ own deposition testimony
admits the timing, although the district court noted that their
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statements variously identified the start of the peeling as
anywhere from 7 to 19 months after the 2006 job. Given such a
stretch of time, Mr. Gargano’s claim that the deterioration was
progressing “rapidly,” not gradually, did not rise above word play,
and failed to create any genuine fact dispute justifying a trial.
While, to be sure, “gradual” has no mathematically fixed range, the
pace of the detaching stain was a long way from a lightning bolt or
a falling tree, and in calling it gradual the district court was
drawing no fine line.
Applying the faulty construction or maintenance exclusion
is just as obvious. “Faulty” here does not mean negligent or
blameworthy on the part of a homeowner or his contractor, but
simply tainted by imperfection. See In re Chinese Manufactured
Drywall Prods. Liability Litig., 759 F. Supp. 2d 822, 844 (E.D. La.
2010). Thus, the uncontradicted conclusion relied on by the
district court, that a cause of the damage was the failure to prime
coat the shingles on all surfaces, counts as faulty maintenance,
there being no question that periodically covering the exterior
surface of a wooden house is an element of maintaining it. And
even if Mr. Gargano’s general attribution to inadequate “product”
were competent evidence, it is hard to see why the choice to use
the product would not be a faulty act of maintenance, with coverage
for ensuing loss excluded.
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And for the very reasons that no subtlety is required to
apply the exclusions, there is nothing to the Garganos’ argument
that the policy was so defective in its ambiguous terms, left
undefined in Vigilant’s responses to discovery requests, as to make
the policy itself “voidable.” For that matter, even assuming that
the pleadings were adequate to allow such a voidability claim to be
raised, it is unclear what the Garganos might hope to gain by an
election to ask that the policy be declared void; return of
premiums, perhaps.
There is, finally, no justification for the Garganos’ two
collateral arguments against the judgment. Their claims of abuse
of discretion in ruling on Vigilant’s motion before discovery
completely ignores the facts that their interrogatories and
deposition notices called for action after the discovery deadline,
and that their motion to extend discovery (itself made after that
deadline) was denied. They have failed even to raise an argument
that setting and enforcing the April 21 deadline was unreasonable.
Nor is there any support for their position that the
district court should have refused summary judgment as a penalty
for a failure on the part of Vigilant’s counsel to honor local rule
7.1(A)(2), providing that “[n]o motion shall be filed unless
counsel certify that they have conferred and have attempted in good
faith to resolve or narrow the issue.” Vigilant’s lawyer certified
he had complied with the rule, and we agree that he did. In an
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affidavit filed with the court he swore that he had called Mr.
Gargano, explained the applicability of the two exclusions and the
inapplicability of the provisions cited as support for the two
statutory claims, and requested that Mr. Gargano voluntarily
dismiss his action with prejudice or Vigilant would move for
summary judgment. Mr. Gargano, in his brief here, does not
disagree about the substance of the conversation, but says that
opposing counsel’s “brief phone call, with the sole unreasonable
request that the case be dismissed with prejudice to avoid a motion
for summary judgment, hardly qualifies” as compliance with the
rule, citing Converse, Inc. v. Reebok Int’l Ltd., 328 F. Supp. 2d
166, 173 (D. Mass. 2004). On the contrary, however, this is a case
in which good faith required nothing more.
Although we have refrained from a plenary recitation of
facts and detailed narrative of litigation history, what we have
mentioned so far is representative. Nothing brought to our
attention in the record justifies Mr. Gargano’s persistence in
claiming coverage in spite of the obviously pertinent exclusions,
or the suit against Vigilant, or the appeal from summary judgment.
The entire course of conduct has apparently been groundless at
least from the moment the exclusions were brought to Mr. Gargano’s
attention, and in these circumstances good faith did not require
Vigilant’s lawyer to humor his opponent by considering anything
less than he requested. We do not draw this conclusion lightly,
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for we are confronted daily with the costs that obstinacy imposes
on decent litigants and on the judicial system. But in this
extreme case Mr. Gargano appears to have acted intolerably.
Affirmed.
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