Monumental Paving v. Penn Manufacturers' ( 1999 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
MONUMENTAL PAVING & EXCAVATING,
INCORPORATED,
Plaintiff-Appellant,
v. No. 96-2858
PENNSYLVANIA MANUFACTURERS'
ASSOCIATION INSURANCE COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Andre M. Davis, District Judge.
(CA-96-1722-AMD)
Argued: June 6, 1997
Decided: May 18, 1999
Before RUSSELL,* WIDENER, and WILKINS, Circuit Judges.
_________________________________________________________________
Affirmed in part, reversed in part, and remanded with instructions by
published opinion. Judge Widener wrote the opinion, in which Judge
Wilkins concurred.
_________________________________________________________________
*Judge Russell heard oral argument in this case but died prior to the
time the decision was filed. The decision is filed by a quorum of the
panel. 28 U.S.C. § 46(d).
COUNSEL
ARGUED: James David Mathias, PIPER & MARBURY, L.L.P.,
Baltimore, Maryland, for Appellant. Geoffrey Stetson Gavett,
GAVETT & DATT, P.C., Rockville, Maryland, for Appellee. ON
BRIEF: Glen K. Allen, PIPER & MARBURY, L.L.P., Baltimore,
Maryland, for Appellant. Rhoda S. Barish, GAVETT & DATT, P.C.,
Rockville, Maryland, for Appellee.
_________________________________________________________________
OPINION
WIDENER, Circuit Judge:
Monumental Paving & Excavating, Inc. (Monumental) appeals
from a decision in favor of its insurer, Pennsylvania Manufacturers'
Association Insurance Company, the PMA Group, entered by the
United States District Court for the District of Maryland on cross-
motions by the parties for summary judgment. Monumental initiated
the action after PMA denied coverage of certain of the losses which
resulted from a fire on Monumental's premises. The decision of the
district court is affirmed in part and reversed in part.
I.
There is no dispute as to the material facts. On December 9, 1995
a fire destroyed Monumental's maintenance shop building on Monu-
mental's premises at 1805-1815 Edison Highway, in Baltimore,
Maryland. Among the items of personal business property contained
in the building and destroyed in the fire were two Patch Masters,
machines which Monumental utilized in its paving business to melt
and mix asphalt in the repairing of pot holes and other paving defects.
The Patch Masters functioned as melting pots for the materials used
in the paving and were equipped with radiant heat panels which
melted the area of pavement surrounding the repair, thereby prevent-
ing the creation of a weaker cold seam in the asphalt surface. Monu-
mental's Patch Masters were each permanently affixed to Ford truck
chassis and cab; however, it is possible to mount them on trailers.
Normally they were not kept in the burned maintenance building,
2
building number 002 on the insurance policy. According to Monu-
mental, they were inside at the time of the fire due to harsh weather.
There is no dispute but that at the time of the fire, Monumental had
a Commercial Package Policy of insurance with PMA. That plan con-
sisted of four Coverage Parts which included (1) Commercial Prop-
erty Coverage; (2) Commercial General Liability Coverage; (3)
Commercial Crime Coverage; and (4) Commercial Inland Marine
Coverage. The Commercial Property Coverage part of the policy pro-
vided Monumental with "blanket building and business personal
property coverage for all locations" at "replacement cost value" with
a total limit of $686,000. Replacement cost value is the cost of
replacement without deduction for depreciation. Additionally, this
portion of the policy provided coverage for lost business income in
the amount of $50,000. The Commercial Inland Marine part provided
insurance for those items of Contractor's Equipment specified in the
included schedule by Monumental. Monumental included therein the
Patch Masters which were valued at $37,500 each, or a total of
$75,000, which represented their actual cash value, or cost of restora-
tion or replacement, whichever be less, rather than their replacement
value.
Monumental and PMA settled a substantial portion of the claims
resulting from the fire. However, they could not agree on two issues.
First, Monumental claimed that under the Commercial Property Cov-
erage, it was entitled to recover from PMA the replacement value of
the Patch Masters, which Monumental estimates is about $425,000,
because the units fell within the blanket coverage as they were in the
maintenance building which burned. PMA refused to pay the replace-
ment value of the Patch Masters, asserting that Monumental was only
entitled to $75,000 because that was the amount Monumental had
listed on the Inland Marine Contractor's Equipment Schedule. The
second point of contention is that Monumental claimed it was entitled
to apply the $50,000 of business income coverage to the loss of busi-
ness income and extra expenses that it claimed resulted from the
destruction of the Patch Masters and other property. PMA refused
payment because it contended that the business income insurance
covered only the destruction of one specific building on the premises
(not the one destroyed) rather than the destruction of any of the build-
ings.
3
Monumental, in a two-count complaint, brought suit to settle the
outstanding claims, and subsequently the parties filed their respective
motions for summary judgment. The district court decided in favor of
PMA on both counts, and Monumental has appealed.
II.
Summary judgment is appropriate under Federal Rule of Civil Pro-
cedure 56(c) "if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law." Anderson v. Liberty
Lobby, 477 U.S. 242, 247 (1986). We review the district court's grant
of summary judgment de novo. Roe v. Doe , 28 F.3d 404, 406-7 (4th
Cir. 1994). In doing so, we consider the facts in the light most favor-
able to the non-moving party. Anderson, 477 U.S. at 255 (1986).
When considering motions from both parties for summary judgment,
the court applies the same standard of review and so may not resolve
genuine issues of material fact. ITCO Corp. v. Michelin Tire Corp.,
Com. Div., 722 F.2d 42, 45, n.3 (4th Cir. 1983), cert. denied, 469 U.S.
1215 (1985). Instead, we consider and rule upon each party's motion
separately and determine whether summary judgment is appropriate
as to each under the Rule 56 standard. See Charles A. Wright, Arthur
R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2720
(2d ed. 1983).
III.
The facts are not disputed, so what we are faced with is a question
of the legal effect of this insurance contract. Count One of Monumen-
tal's complaint alleges that the contractor is entitled to the replace-
ment value of the Patch Masters because they fit within the "Building
and Personal Property" coverage section of the policy's definition of
"covered property." That section defines "covered property" as
including equipment within the insured buildings.
1. Covered Property
Covered Property, as used in this Coverage Part, means
the following types of property for which a Limit of Insur-
ance is shown in the Declarations: . . .
4
b. Your Business Personal Property located in or on the
building described in the Declarations or in the open (or in
a vehicle) within 100 feet of the described premises, consist-
ing of the following unless otherwise specified in the Decla-
rations or on Your Business Personal Property - Separation
of Coverage form: . . .
(2) Machinery and equipment;
(3) Stock;
(4) All other personal property owned by you and used
in your business;
Building and Personal Property Coverage Form, A.1.b.(2)-(4)
(emphasis added). Monumental acknowledges that its Patch Masters
were specifically covered under the Commercial Inland Marine policy
for their actual cash value, or cost of restoration or replacement,
whichever be less, and that it would only have received that amount
of $75,000 had the units been destroyed with no coverage except the
Commercial Inland Marine section of the policy. Notwithstanding
this, Monumental asserts that the units fall within the definition of
covered property by virtue of being equipment that was within the
maintenance building at the time of the fire, and that Monumental is
entitled to their replacement value.
Like any insurance policy, this one contains exceptions to cover-
age, two of which PMA argues prevent Monumental from recovering
under the business personal property policy. First, Monumental
asserts, and the district court agreed, that Exclusion (k) prevented
coverage of the Patch Masters under the blanket policy.
k. Property that is covered under another coverage form of
this or any other policy in which it is more specifically
described, except for the excess of the amount due (whether
you can collect on it or not) from that insurance.
Building and Personal Property Coverage Form, A.2.k. PMA asserts
that where the Patch Masters were scheduled under the Contractor's
5
Equipment Coverage Form of the Inland Marine portion of the policy
at a total of $75,000, and where that form stated that the scheduled
amount was "the most that we will pay for a loss of that item," no
amount was due in accordance with Exclusion (k) as replacement
value over and above the $75,000 that PMA agreed to pay.
The district court agreed with PMA's analysis. Further because the
court found the replacement value of the blanket policy to be incon-
sistent with the scheduled actual value of the Patch Masters, the court
looked to whether, outside of the contract, there was any evidence
that the parties had ever intended that the replacement value apply
rather than the actual value that was due under the Commercial Inland
Marine policy. The district court determined that"Monumental has
failed to establish the existence of genuine material fact relative to its
expectation of replacement cost coverage for the Patch Masters at the
time it purchased the PMA policy." The court placed great weight on
the fact that in its statement of values, which PMA used to determine
the premium and limits of the blanket policy, Monumental listed the
personal property in the burned building as worth $15,000, an amount
far below the replacement value it was claiming for the Patch Mas-
ters. The court noted that while the blanket policy limit of $686,000
would cover the claimed $400,000 replacement value of the Patch
Masters, this was only possible because the limit was calculated at
90% of the value of the personal property in all four buildings (a total
of $116,667), and the buildings themselves, which were valued by
Monumental at $645,555. On this basis the court found that under
Exclusion (k) there was no evidence that Monumental had reasonably
expected to receive the replacement value of the Patch Masters when
it bought the policy, and therefore the court entered judgment as a
matter of law in favor of PMA.
IV.
We are of opinion that the definition of "covered property"
squarely includes the Patch Master units and that the district court
erred in its analysis of Exclusion (k). The district court felt that it was
inconsistent for the Inland Marine portion of the policy to provide
coverage at the actual value while the blanket policy provided for
replacement value. Based on this inconsistency, the court found there
was ambiguity which warranted the examination of extrinsic evidence
6
as to the intent of the parties and that their intent was that the cover-
age only insured the Patch Masters at their actual value.
We find no inconsistency between the two policy portions, and cer-
tainly no ambiguity in Exclusion (k). The district court found, and the
parties do not dispute, that the Commercial Property Coverage portion
provided Monumental "blanket" protection for the building and busi-
ness personal property up to a $686,000 limit. A blanket policy by
definition covers different types of property at one or more locations
and does not specify the valuation of the items protected under the
blanket, but allocates an overall limit to the policy, upon which pre-
miums are based.
A blanket, compound, or floater policy is written upon a risk
as a whole, embracing whatever articles or items are
included therein, often changing in nature; in contravention
thereto, a specific policy is one which allocated the amount
of risk in stated values upon the several items embraced in
the coverage. ...
6 Appleman, Insurance Law & Practice, § 3912. The blanket policy,
then, by definition, did not require that Monumental assign values to
each individual item of business personal property that fell within the
policy limit. "The statement of values used in connection with a blan-
ket policy is not a part of the policy but is furnished by an assured
. . . for the purpose of arriving at an average rate for a blanket policy."
Reliance Insurance Co. v. Orleans Parish School Board, 322 F.2d
803, 806 (5th Cir. 1963), cert. denied, 377 U.S. 916 (1964). In that
connection, we note that the term blanket policy has been judicially
defined in this circuit.
The expression "blanket policy" is a term of art in the field
of insurance. It appears to be most frequently used in con-
nection with fire insurance policies and has acquired a rather
precise connotation. A blanket policy is said to be one
which contemplates the risk of shifting, fluctuating or vary-
ing, and is applied to a class of property rather than to any
particular risk or thing . . . . A compound or blanket policy
invariably covers and attaches to every item of property
described in the policy and insures the property collectively,
7
without providing in the event of loss for a distribution of
the insurance to each item. Nat'l Bank v. Fidelity and Casu-
alty Co., 125 F.2d 920, 924 (4th Cir. 1942).
Applying the Orleans Parish and Nat'l. Bank cases to the facts of this
case requires the conclusion that because the Patch Masters were
business personal property in the building which burned they were
explicitly insured under the insuring clause of the policy, and the dis-
trict court erred in finding an ambiguity as to coverage. Its essential
error was in not recognizing the characteristics of a blanket policy.
Our construction of the policy is consistent with another provision of
the applicable section of the policy provided for in the Business and
Personal Property Coverage Form, "A. COVERAGE, Under part
1.b(2)" is the explicit provision for coverage of"Business Personal
Property, Machinery and Equipment" located "in or on the building
described" or "in the open (or in a vehicle) within 100 feet of the
described premises." So, if the Patch Masters had been in the open but
within 100 feet of the building, they would have been explicitly cov-
ered under the terms of the policy. It is a greater jump of logic than
we can subscribe to, to say that if the Patch Masters had been in the
open within 100 feet of the building which burned, they would have
been covered, but since they were in the burned building, they were
not covered. Finally, pre-Erie, and before the reorganization of the
Courts of Appeals, the Supreme Court construed, as we do here, a
blanket policy of insurance under Maryland law. Home Ins. Co. v.
Baltimore Warehouse Co., 93 U.S. 541 (1876). That case cautioned
against going outside the wording of the coverage of an insurance
policy, as the district court did here, to find ambiguity, and the Court,
in finding coverage, stated that ". . . the subject of the insurance, its
nature and its extent, are to be ascertained from words of the contract
which the parties have made." 93 U.S. at 541. The words of the con-
tract made by the parties in this case are plain. The business personal
property located in or on the building described, or in the open (or in
a vehicle) within 100 feet of the described premises, is insured. We
hold there is no ambiguity in this policy.
To repeat, Exclusion (k) provides:
k. Property that is covered under another coverage form of
this or any other policy in which it is more specifically
8
described, except for the excess of the amount due (whether
you can collect on it or not) from that insurance.
As Monumental has pointed out, Exclusion (k) is what is called in the
insurance business an "excess insurance clause." Notably, Exclusion
(k), like all the provisions of the "Building and Personal Property
Coverage Form," is an exact copy of the standard insurance form "CP
00 10 10 91," as indicated at the bottom of the pages by the label
"Copyright, ISO Commercial Risk Services, Inc. 1990CP 00 10 10
91." See Susan J. Miller & Philip Lefebvre, Miller's Standard Insur-
ance Policies Annotated, Vol I., p. 458, Form CPCOV (Business and
Personal Property Coverage Form), Subsection (k) 4th Ed. 1995). See
Clausen v. Colombia National Insurance Co., 510 N.W.2d 399, 401
(Neb. App. 1993) (finding coverage without discussion despite an
Exclusion (k) clause identical to the one here). Other courts have
found this standard clause to be an excess clause. See Utica Mut. Ins.
Co. v. Travelers Ins. Co., 624 N.Y.S.2d 485, 486-87 (N.Y. App. Div.
1995) (noting that an identical clause in that contract is "characterized
as an excess clause;" citing 71 N.Y. Jr. 2d Insurance § 1984, at 334-
35). See also Klotz Tailoring Co. v. Eastern Fire Ins. Co., 102 N.Y.
Supp. 82 (App. Div. 1907); Wilson & Co. v. Hartford Fire Ins. Co.,
254 S.W. 266 (Mo. 1923).
An "excess clause" is a type of "other insurance" which typically
provides that "`the policy' shall apply only as excess insurance over
any other insurance." R. Keeton & A. Widiss, Insurance Law
§ 3.11(a) (1988). Under an excess clause the insurer remains liable
"up to the limits of the policy containing the excess clause." Barry B.
Ostrager, Thomas R. Newman, Handbook on Insurance Coverage
Disputes, § 11.02(b) (5th ed. 1992). This is distinct from an "escape"
clause which provides that the insurer has no liability if there is other
insurance. Keeton & Widiss, Insurance Law§ 3.11(a). See Am. Jr. 2d
Insurance § 1789 (2d ed. 1982) (distinguishing excess clause under
which insurer "is liable only for the amount of loss or damage in
excess of the coverage provided by the other policy or policies of
insurance" from clauses that contain "an express provision against lia-
bility where there is other more specific insurance" which "absolve
the insurer from liability if other more specific insurance" is
obtained). See also Couch On Insurance,§§ 1:5; 148:27 (3d ed.
1998).
9
Thus, applying standard form Exclusion (k) to the case at hand, it
is clear that the Inland Marine Coverage section of the policy consti-
tuted a more specific form of insurance for the Patch Masters. The
two units were there collectively scheduled as having an actual value
of $75,000. Accordingly, that amount of $75,000 cannot be collected
under the Blanket Policy, because it is excepted from the blanket pol-
icy under Exclusion (k). However, under the second part of that same
Exclusion (k), because the blanket policy insures the personal busi-
ness property in the building at replacement value, and the replace-
ment value of the two Patch Masters purportedly exceeds $400,000,
the excess over the $75,000 due under the Inland Marine part of the
policy is excepted from Exclusion (k) and therefore is covered by the
blanket policy. The district court converted the Exclusion (k) excess
clause into an escape or non-liability clause by concluding that the
fact that the Inland Marine Policy provided for actual value rejected
the replacement value coverage provided under the blanket policy.
This was error, as there is nothing preventing a contractual agreement
for different standards of value for losses under different parts of the
policy.
Due to its ruling on Exclusion (k), the district court did not reach
the issue of whether Exclusion (o) removed the Patch Masters from
the blanket policy. It correctly assumed that the Patch Masters were
equipment. Exclusion (o) removes from the policy certain vehicles.
o. Vehicles or self-propelled machines (including aircraft
or watercraft) that:
(1) Are licensed for use on public roads; or
(2) Are operated principally away from the
described premises.
Building and Personal Property Coverage Form, A.2.o. PMA asserts
that once the Patch Masters were purchased, they were permanently
affixed to the chassis, creating mobile units which the company bro-
chures and the fire department report referred to as trucks. PMA
asserts that Monumental's brochures indicated that these vehicles
repaired asphalt away from the insured premises at the customer's
10
location, and its argument is that therefore the Patch Masters should
be excluded under Exclusion (o).
Monumental's brochures do refer to the Patch Masters as specially
equipped trucks. However, Monumental's advertisements and the fire
department's reports are hardly dispositive of how the Patch Masters
are to be treated under the insurance contract. The Patch Masters here
were scheduled under the Inland Marine Coverage part as separate
items of "Contractor's Equipment" (emphasis added). Moreover, the
Contractor's Equipment Coverage, similar to the business property
coverage, explicitly excludes "self-propelled vehicles that are
designed for highway use." Contractor's Equipment Coverage, exclu-
sion 6. Further, each Ford chassis and cab which bore a Patch Master
was separately insured under a distinct commercial automobile policy
not discussed previously herein.
We are of opinion that the Patch Master units do not fall within the
ordinary meaning of "vehicles or self-propelled machines" as
excluded by Exclusion (o), and thus they remain within the blanket
coverage.
Accordingly, the district court's ruling as to count One is reversed.
V.
The claim with respect to Count Two, for lost business income, is
less complicated. Monumental claims that it is entitled to apply the
$50,000 business income coverage towards income loss related to the
fire at building 2. In support of its claim, Monumental cites the lan-
guage of the Business Income Coverage Form which provides that
PMA
will pay for the actual loss of Business Income you sustain
due to the necessary suspension of your "operations" during
the "period of restoration." The suspension must be caused
by direct physical loss of or damage to property at the
premises described in the Declarations . . . .
Business Income Coverage Form ¶ A (emphasis added). Monumental
argues that the only premises described in the Declarations is "prem-
11
ises 001," which includes the entire Monumental property, all of
1805-1815 Edison Highway, including building 002.
The district court correctly rejected this claim. The loss of business
income is only as a result of "loss of or damage to property at the
premises described in the Declarations." The Declarations section of
the policy provides that:
__________________________________________________________
PREMISES PROVIDED: Insurance at the described premises applies
only for coverages for which a limit of insurance is shown. COIN-
SURANCE CLAUSE APPLIES IF o/o IS INDICATED.
__________________________________________________________
Prem Bldg Limit of
No No Coverage Insurance
BLANKET BUILDING AND BUSINESS
PERSONAL PROPERTY COVERAGE
FOR ALL LOCATIONS EXCEPT AS
LISTED BELOW:
001 001 BUSINESS INCOME INCLUDING EXTRA $50,000
EXPENSE OPTION III RENTAL VALUE
CONSTRUCTION: JOISTED MASONRY
__________________________________________________________
We thus see that the premises are 001 and the building number is 001.
The building is constructed of "joisted masonry". Referring back to
the Designation of Premises Schedule, we see that it is in the follow-
ing form:
__________________________________________________________
Prem Bldg Designated Premises
No No Address, City, State
__________________________________________________________
001 001 1805-1815 EDISON HIGHWAY, BALTIMORE, MD
21213-1527
001 002 1805-1815 EDISON HIGHWAY, BALTIMORE, MD
21213-1527
001 003 1805-1815 EDISON HIGHWAY, BALTIMORE, MD
21213-1527
12
001 004 1805-1815 EDISON HIGHWAY, BALTIMORE, MD
21213-1527
002 106-108 SORRENTO AVENUE, BALTIMORE, MD
21229-3422
__________________________________________________________
From this we see that there were two premises insured, 001 at 1805-
1815 Edison Highway, consisting of four buildings, 001-004; and
premises 002 at 106-108 Sorrento Avenue, with no building designa-
tion. We are of opinion that a fair reading of the phrase "the premises
described in the declarations" means building 001 at 1805-1815 Edi-
son Highway. The addition of "joisted masonry" to describe its con-
struction would have no other purpose than to describe the building,
and this is especially true in this case since building 002, the building
which burned, had frame construction.
We are thus of opinion that the loss of business income provision
does not cover that attributed to the burning of building 002.
VI.
For the reasons expressed, the decision of the district court with
respect to Count One, that is to say, liability on account of the
destruction of the two Patch Masters, is reversed; the decision of the
district court with respect to Count Two, that is to say, the business
income insurance, is affirmed. The case must be remanded for the dis-
trict court to ascertain the damages due to Monumental in accordance
with this decision. On remand, the district court will ascertain the
replacement value of the Patch Masters and enter its judgment in
favor of Monumental on that account.
AFFIRMED IN PART, REVERSED IN PART,
AND REMANDED WITH INSTRUCTIONS*
_________________________________________________________________
*Any defense of estoppel made by PMA is without merit.
13