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Ardente v Standard Fire Insurance Company

Case No. 13-2000 (C.A. 1, Mar. 12, 2014)

Standard Fire Insurance Company appeals from a district court order awarding Evan Ardente summary judgment on his claim for breach of a yacht insurance policy. Because the policy does not cover the type of damage sustained by Ardente's yacht, we reverse.

I. Background



Standard Fire insured Ardente's yacht. At some point after purchasing the boat, Ardente noticed that its top speed had decreased and that it was not navigating properly. The parties agree that these were symptoms of water damage to the yacht's hull. They also agree about how water was getting into the hull. A ship's hull has holes for the installation of fixtures, such as port lights. Normally, the material surrounding these so-called "installation holes" is solid laminate, which is waterproof. But in Ardente's yacht, the installation holes are surrounded by balsa wood, which is not waterproof. Water seeping into the balsa wood around the installation holes then spread throughout the hull.

Ardente presented a claim to Standard Fire, which denied coverage on the ground that the claim fell within an exclusion for manufacturing defects. Ardente sued in state court, alleging, among other claims, breach of contract, whereafter Standard Fire removed the case to federal court. The parties then filed cross motions for summary judgment.
 

 

Judge(s): Juan Torruella
Jurisdiction: U.S. Court of Appeals, First Circuit
Related Categories: Contracts , Insurance
 
Circuit Court Judge(s)
Bruce Selya
David Souter
Juan Torruella

 
Trial Court Judge(s)
William Smith

 
Appellant Lawyer(s) Appellant Law Firm(s)
Wystan Ackerman Robinson & Cole LLP
Dana Horton Robinson & Cole LLP
Daniel Sullivan Robinson & Cole LLP

 
Appellee Lawyer(s) Appellee Law Firm(s)
Christopher Hultquist DarrowEverett LLP
Kurt Kalberer II DarrowEverett LLP

 

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Click the maroon box above for a formatted PDF of the decision.
is ambiguous. he urges us to interpret "material" to mean not the the parties agree that use of balsa wood instead of solid laminate interpretation courts might adopt in the absence of an explicit brooks, rivers, streams, harbors, oceans or for summary judgment and to enter judgment in standard fire's of the original building of the yacht, which is not discoverable by we acknowledge that redundancy may itself be a form of torruella, circuit judge, ardente, 906 f. supp. 2d at 27. because ambiguity in an insurance motions for summary judgment. if anything, the definition could be criticized not as reasonable expectations of the insured, the district court among other claims, breach of contract, whereafter standard fire torruella, circuit judge. standard fire insurance fatal one when it comes to insurance to a hidden flaw in the balsa wood. but in the case cited, the acadia ins. co., 392 f.3d 1, 6 (1st cir. 2004). not, through an effort to seek out ambiguity when there is no united states court of appeals this might have been proper had ambiguity marred the word district court is directed to grant standard fire's cross motion the one that avoids surplusage makes the text granting that ambiguity should be interpreted against the insurer is reversed, the judgment in favor of ardente is vacated, and the decreased and that it was not navigating properly. the parties inappropriate. policy defines the term. march 12, 2014 defect" guts the term of a broader meaning that it allegedly enjoys the defect falls within the latent-defect exception. where there are two ways to read the text--and "manufacture-defect exclusion," and the emphasized exception to court of the united states, sitting by designation. installation holes." part of that "stuff" is the balsa wood, and the sixth circuit -- about redundancy in insurance policies: ambiguous, it will be construed against the insurer. id. but "[a] that, the district court changed the word "material" to "yacht," ardente, constitutes the flaw. iii. conclusion -9- for the first circuit material fact and that the movant is entitled to judgment as a excludes from coverage damage caused by "[d]efects in manufacture, wood, which is not waterproof. water seeping into the balsa wood laminate to be placed around the installation holes, we could refer observation or methods of testing." the parties agree that the use the yacht accidentally calls for balsa wood instead of solid building of the yacht, which is not discoverable by ordinary explicitly excluded loss caused by both "latent defects" and definition of "latent defect" -- "a hidden flaw inherent in the interpreting the policy in such a way that the damage fell within granted ardente summary judgment with respect to liability, means "within" and conveys that the flaw must impugn the material responses. first, we note a general point -- colorfully made by but in the term "inherent flaw." souter,* sustained by ardente's yacht, we reverse. contracts . . . where redundancies abound. in against which mcgowan warns: deeming a policy ambiguous, and thus contract allegation. ardente v. standard fire ins. co., 906 f. policy. because the policy does not cover the type of damage truly redundant phrases . . . : (1) "loss or of balsa wood was a flaw that existed at the time of the original exclusion, standard fire -- not ardente -- was entitled to summary ambiguity; indeed, one canon of interpretation urges courts to give be no such thing as an inherent flaw. each word meaning, thereby avoiding surplusage. see andrukiewicz cir. 2010) (sutton, j.) (citations and internal quotation marks -6- defect" to include flaws that some other insurance policies capture one for flooding of "lakes, reservoirs, ponds, tmw enterprises, inc. v. fed. ins. co., 619 f.3d 574, 577-78 (6th before the language its plain, everyday meaning, see streicker, 583 a.2d -7- design." but it is clear that the policy meant to exclude from fire ins. co., 719 a.2d 1150, 1153-54 (r.i. 1998), and whatever must avoid interpreting contracts to contain policy is interpreted against the insurer, the district court they also agree about how water was getting into the hull. a type of material under consideration. -4- for creating ambiguity in the first place. ii. discussion agree that these were symptoms of water damage to the yacht's hull. afoot throughout--from an exclusion for "war -5- black's law dictionary, ardente contends that, at common law, while the balsa wood itself was not flawed, the use of balsa wood, means of emphasizing this same quality: in this context, inherent at 552, the gist is clear. the phrase refers to flaws in the contradictory. viewing the definition in its entirety and giving after purchasing the boat, ardente noticed that its top speed had given its plain, everyday meaning. id. at 552. where a policy is material. said the district court, "the use of balsa wood in these . . . . -2- plaintiff, appellee, including defects in construction, workmanship, and design other of an insurance policy are unambiguous, there is no further need and in light of the reasonable expectations of the insured, if matter of law. see id. this case presents no factual issues and and (3) "faulty, inadequate or defective." as in isolation or a phrase is taken out of context. a court should word "material" would allow the latent-defect exception to swallow hon. david h. souter, associate justice (ret.) of the supreme read, "a hidden flaw inherent in the material existing at the time the undefined term "latent defect" not to include faulty materials. ambiguous--applying the rule against insurance contract, there are at least three problems with a specific piece of material, stipulation with respect to damages, and the district court entered the policy must be viewed in its entirety and the language must be material used to build the boat that were not noticeable. a defendant, appellant. coverage for "loss or damage caused by or resulting from . . . penn-am. ins. co. v. lavigne, 617 f.3d 82, 84 (1st cir. 2010). "inherent" may not have been the best choice of words, and the material. the word "flaw" imposes the ordinary observation or methods of testing." but instead of doing interpretation of the policy. under rhode island law, if the terms wood, and that it did what balsa wood does -- absorb water. * workmanship." similarly, if an engineer drawing the blueprints of second, accepting that "inherent" in the policy's id. but standard fire was free to define "latent defect" to include damage"; (2) "caused by or resulting from"; around the installation holes, we could refer to the defect as a policy is not to be described as ambiguous because a word is viewed district court failed to give that term its everyday meaning by for judicial construction. amica mut. ins. co. v. streicker, 583 policy" (emphasis added). this provision is referred to as the for the district of rhode island latent-defect exception meaningless. instead, to reflect the of saying "hidden." indeed, the word "inherent" is yet a third as a last ditch effort to support affirmance, ardente workmanship and design other than latent defects as defined in the standard fire on all of ardente's claims except for the breach of reiterated an already redundant aspect of the definition, the [hon. william e. smith, u.s. district judge] [the] label ["redundancy"] surely is not a and military action" to one for "fraudulent, summary judgment is appropriate when the record, viewed in the making an insurer liable, by taking a term out of context and superfluous words. the canon is one among many supp. 2d 22 (d.r.i. 2012). on that claim, the district court according to the district court: of damages was reserved for trial, but the parties reached a darroweverett, llp, were on brief for appellee. daniel f. sullivan, with whom wystan m. ackerman, dana m. self-contradictory but as redundant. it mentions flaws that are favor. no costs are awarded. policy." mcgowan v. conn. gen. life ins. co., 289 a.2d 428, 429 material existing at the time of the original building of the constitutes a manufacturing defect, but they disagree over whether ardente's standard fire policy explicitly disclaims entail striking the word "inherent" so that the definition would standard fire insured ardente's yacht. at some point the reading adopted by the district court and urged by ardente. ambiguity lives in the phrase "inherent flaw," that phrase, and not summary judgment on his claim for breach of a yacht insurance than latent defects." to say that "material" in the definition of coverage on the ground that the claim fell within an exclusion for tools for dealing with ambiguity, not a tool the district court granted summary judgment in favor of appeal from the united states district court removed the case to federal court. the parties then filed cross the policy defines "latent defect" as "a hidden flaw ardente's interpretation would create surplusage, and not instead of solid laminate, was certainly a flaw. asks only whether ardente's loss is covered by the policy, a legal yacht accidentally affixes balsa wood instead of solid laminate with a separate "faulty materials" exception. ardente cites travco i. background any other body of water or watercourse" to in ardente's yacht, the installation holes are surrounded by balsa exact opposite requirement. it includes -10- wood, was not flawed in any way; that it was perfectly good balsa for his part, ardente does argue that the term "material" and selya, circuit judge. in so many insurance contracts, iteration is for the foregoing reasons, the district court's order insurance co. v. ward, 715 f. supp. 2d 699, 710 (e.d. va. 2010), a.2d 550, 551 (r.i. 1990). to determine whether ambiguity exists, summary judgment and its interpretation of the insurance policy. of testing" -- while not a model of precision, is not self- v. the word "inherent" requires that a latent interpreted "latent defect" to include the flawed use of unflawed company appeals from a district court order awarding evan ardente light most favorable to the nonmovant, reveals no genuine issue of around the installation holes then spread throughout the hull. "hidden" but goes on to add that they must be "not discoverable by quintessential example, we imagine, is a piece of wood with a no. 13-2000 in a way that evaded observation at the time it was handled. while "material," but the district court found ambiguity not in that term aff'd, 504 f. app'x 251 (4th cir. 2013), where, because the policy ship's hull has holes for the installation of fixtures, such as determined that the phrase, "flaw inherent in the material" -- part flaw as both "hidden" and "inherent." his interpretation of the under rhode island common law. citing one rhode island case and dishonest or criminal acts or omissions" to unsurprisingly, ardente takes the opposite tack and argues that "installation holes" is solid laminate, which is waterproof. but such that "latent defect" referred to a "hidden flaw in the yacht." kurt t. kalberer ii, with whom christopher e. hultquist and question properly resolved by summary judgment. see littlefield v. that of the relatively benign variety that comes with describing a their plain and reasonable meaning, there can granting ardente summary judgment on his breach of contract claim first, ardente argues that the policy's definition of "latent hairline fracture or with an undetectable termite infestation. balsa wood constitutes "a hidden flaw inherent in the material." superfluous and doing violence to the policy. the policy expressly constructing the yacht, but rather to a composite of various raw associate justice, omitted). we review de novo both the district court's grant of "latent defect" refers not to an individual raw ingredient used in (r.i. 1972). we fear that the district court committed the error within the latent-defect exception to the manufacture-defect "stuff" surrounding the installation holes -- that, according to all of this helps to reveal the limits ambiguity, make an insurer assume a liability not imposed by the yacht, which is not discoverable by ordinary observation or methods [d]efects in manufacture, including defects in construction, makes two arguments based on sources that are irrelevant here. standard fire claims that the material, in this case the balsa reading it to require that the flaw inhere in every piece of the v. andrukiewicz, 860 a.2d 235, 239 (r.i. 2004). but we offer two areas was a flaw in the construction of the yacht, even if it was an exception to the exclusion for manufacturing defects. the issue judgment on the breach of contract claim. we need not reach another, should be so construed. that remedy might, for example, evan ardente, -11- faulty materials and, given that its policy contains no separate because the damage to ardente's yacht does not fall balsa wood, but something like, "all of the stuff that is near the policy definition has no bearing on this case, where ardente's manufacturing defects. ardente sued in state court, alleging, ingredients that appear in close proximity in a particular area of observation or methods of testing. the only dispute is whether the but not problems characteristic of the defect be characteristic of or intrinsic to ordinary observation or methods of testing," which is another way not a flaw in the underlying material itself." id. at 28. standard fire did. the parties agree that rhode island law governs the building of the yacht and that it was not discoverable by ordinary definition is redundant, we fail to see how this redundancy invites -8- inherent in the material existing at the time of the original of the definition of "latent defect" -- contained a contradiction. "latent defect" instead of a "defect in construction or ardente presented a claim to standard fire, which denied numerous others. standard fire's alternative arguments supporting reversal. the ship, yields the following result: if a carpenter building the material itself. in short, giving the terms -3- of the interpretive canon . . . that courts judgment. standard fire appealed. to that defect as a "latent defect" instead of a "defect in the district court sided with ardente. it first policy did not define "latent defect," see neri v. nationwide mut. just this one provision of the 80-page horton and robinson & cole llp, were on brief for appellant. coverage precisely those types of defects. second, ardente accuses standard fire of defining "latent exclusion for "faulty materials," that seems to be precisely what surplusage is, absent other indications, viewing it in insolation. see 289 a.2d at 429. the policy's the manufacture-defect exclusion, rendering the exclusion "faulty materials," the court avoided surplusage by interpreting it is that fact -- the fact that balsa wood makes up some of the that exclusion is referred to as the "latent-defect exception." port lights. normally, the material surrounding these so-called "latent defect" would mean a hidden flaw in the yacht, as opposed refused to let this apparent contradiction render the entire the standard fire insurance company,


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