Arrowood Indemnitv Co. v. King, No. 11-5478 (2d Cir. 2012)

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Defendants appealed from a judgment by the district court in favor of insurance companies which had disclaimed any duty to defend or indemnify their policyholders in a separate state court action brought by a third party arising from an accident involving the operation of the policyholders' all-terrain vehicle (ATV). The Connecticut Supreme Court's answers to certified questions left no doubt that the district court correctly found that: (1) the only location relevant in determining whether the homeowner's policy provided the subject coverage was the site of the accident and (2) the accident did not occur at an "insured location," as that language was construed under Connecticut law. Accordingly, the district court properly granted summary judgment to Royal, declaring that the foundational homeowner's policy did not cover the ATV accident that allegedly caused injury to Connor. The court addressed remaining issues and subsequently affirmed the judgment of the district court.

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11-5478 (L) Arrowood Indem. Co. v. King 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2010 (Argued: May 22, 2009 Decided: November 7, 2012) Docket No. 11-5478 (Lead) 11-5479 (Con) ARROWOOD INDEMNITY CO., Plaintiff-Counter-Defendant-Cross-Defendant-Appellee, v. PENDLETON KING, DAPHNE KING, and PENDLETON KING JR., Defendants-Counterclaimants-Third-Party-Plaintiffs-Appellants, CONOR McENTEE, Defendant, NATIONAL SURETY CORPORATION, Third-Party-Defendant-Appellee, NEW ENGLAND BROKERAGE CORPORATION, Third-Party-Defendant-Cross-Claimant-Appellee. Before: KEARSE, LIVINGSTON, Circuit Judges, VITALIANO, District Judge.1 1 The Honorable Eric N. Vitaliano, District Judge, United States District Court for the Eastern District of New York, sitting by designation. 1 1 2 Appeal from a judgment of the United States District Court for the District of 3 Connecticut (Stefan R. Underhill, Judge) in favor of insurance companies which had disclaimed 4 any duty to defend or indemnify their policyholders in a separate state court action brought by a 5 third party arising from an accident involving the operation of the policyholders all-terrain 6 vehicle. Based largely upon the answers of the Supreme Court of Connecticut to our certified 7 questions, we affirm the judgment of the district court. 8 _____________________________________ 9 10 11 12 13 RALPH W. JOHNSON III, Halloran & Sage LLP (Daniel P. Scapellati, Coleman C. Duncan III, on the brief), Hartford, Conn., for Plaintiff-Counter-Defendant-Cross-DefendantAppellee. 14 15 16 17 18 19 JAMES T. HARGROVE, Goulston & Storrs (Peter F. Durning, on the brief), Boston, Mass. (Frederick P. Rickles, Gilbride, Tusa, Last & Spellane LLC, Greenwich, Conn., on the brief), for Defendants-Counterclaimants-Third-PartyPlaintiffs-Appellants. 20 21 22 23 ROBERT G. OLIVER, Mulvey, Oliver, Gould & Crotta (James D. Hine II, on the brief), New Haven, Conn., for Third-Party-Defendant-Appellee. 24 25 26 27 28 29 CHRISTOPHER B. WELDON, Keidel, Weldon & Cunningham, LLP, (Robert J. Grande, on the brief), Wilton, Conn., for Third-Party-Defendant-Cross-ClaimantAppellee. _____________________________________ 30 2 1 2 VITALIANO, District Judge: We return to our consideration of this appeal with the benefit of answers provided by the 3 Supreme Court of Connecticut in Arrowood Indem. Co. v. King, 304 Conn. 179, 39 A.3d 712 4 (2012) ( Arrowood IV ), reconsideration denied No. SC 18658 (Conn. Sup. Ct. May 2, 2012), in 5 response to three questions we certified to it in Arrowood Indem. Co. v. King, 605 F.3d 62, 80 6 (2d Cir. 2010) ( Arrowood III ). Familiarity with Arrowood III, which set forth the facts and 7 procedural history of this case, is presumed. Some of those background details are recounted 8 here, largely for the purpose of providing a contextual anchor for the Connecticut Supreme 9 Court s answers to our certified questions. 10 Background 11 Defendants-Appellants Pendleton King, Daphne King and Pendleton King Jr. ( Junior ) 12 (collectively, the Kings or Appellants ) appeal from a judgment of the United States District 13 Court for the District of Connecticut (Stefan R. Underhill, Judge). The district court held that 14 none of three separate liability insurance policies owned by the Kings covered their alleged 15 liability to a third-party child, Conor McEntee ( Conor ). Conor was injured when he fell from a 16 skateboard while being towed by a rope attached to an all-terrain vehicle (the ATV ) owned by 17 the Kings and operated by Junior. The accident occurred near the Kings home on a portion of a 18 private road located within the residential development managed by the Kings homeowners 19 association. 20 The three insurance policies in litigation are (1) a homeowner s liability policy issued by 21 Royal Indemnity Company ( RIC ); (2) an umbrella liability policy issued by Royal Insurance 22 Company of America ( RICA ); and (3) an excess liability policy issued by National Surety 3 1 Corporation ( National ).2 Each policy was procured through the Kings insurance broker, New 2 England Brokerage Corporation ( NEBC ). After investigating the accident, RIC and RICA 3 (collectively, Royal ) filed a declaratory judgment action in the district court seeking to 4 disclaim any duty under the homeowner s and umbrella policies to defend or indemnify the 5 Kings for claims arising from the ATV accident. Soon after, the McEntees filed a tort complaint 6 in Connecticut Superior Court, naming all three Kings as defendants. Among the causes of 7 action pleaded in the McEntees complaint were claims of negligent supervision of Junior and 8 negligent entrustment of the ATV to him. Meanwhile, the Kings answered Royal s complaint 9 and counterclaimed against Royal. They also filed a third-party complaint in which they named 10 National and NEBC as third-party defendants. Lastly, NEBC, filed cross-claims against Royal. 11 In granting summary judgment, the district court found that the homeowner s policy did 12 not cover the ATV accident because, in short, (1) the event location relevant to determining the 13 availability of coverage was the accident site (not, e.g., the place where the ATV was entrusted 14 to the minors) and (2) the accident site was not an insured location as provided in the 15 homeowner s policy. Royal Indem. Co. v. King, 512 F. Supp. 2d 117, 124-27 (D. Conn. 2007) 16 ( Arrowood I ). Coverage was also properly disclaimed under the umbrella policy, the court 17 found, because the Kings failed to list the ATV on a declarations page of that policy as required 18 by the policy s terms. Id. at 133. The Kings fared no better below on their remaining claims. 19 In our initial consideration of Appellants arguments, and with particular attention to 20 those regarding whether coverage existed under the homeowner s policy, we observed that 21 Connecticut law is unsettled as to whether a negligent entrustment claim in this context should 2 On March 31, 2008, we granted the motion of Plaintiffs-Appellees RIC and RICA to amend the caption to reflect the substitution of Arrowood Indemnity Co. ( Arrowood ) in their stead. For purposes of clarity and consistency with the district court record, this opinion will reference only the names and conduct of the predecessor entities. 4 1 be deemed to arise where the subject vehicle was entrusted, where the vehicle was housed, or 2 where the accident itself took place. Arrowood III, 605 F.3d at 69. We further noted that 3 Connecticut law lacked binding precedent for determining whether an insured location, as that 4 term was used in the homeowner s policy, could cover the portion of the private road where the 5 accident in this case occurred. Id. at 71. 6 Our first certified question sought guidance in addressing the issue of when and where 7 the tort of negligent entrustment is deemed to accrue under Connecticut law. The second 8 question sought guidance on the construction of the insured location language, an apparent 9 term of art when used in insurance policies which had been construed in a plethora of ways by 10 various American courts. See id. at 71-77. Our final certified question, directed at the Kings 11 delay in alerting their insurers of the accident, asked whether post-accident, friendly social 12 interactions belying any litigation intent, such as had occurred between the Kings and the 13 McEntees, could justify delaying notice to an insurer under Connecticut insurance law. 14 In answering our first two certified questions, the Connecticut Supreme Court (1) held 15 that under the Kings homeowner s policy a negligent entrustment claim brought under 16 Connecticut law, regardless of the locus of the entrustment, arises at the site of the injury-causing 17 accident and (2) determined that the portion of the private road where this accident happened 18 was not an insured location within the terms of the policy as that language is properly 19 construed under Connecticut insurance law. In answering our third question, the Connecticut 20 Supreme Court held that social interactions unrelated to litigation do not justify delayed notice. 5 1 The answer to the third certified question is rendered academic on this appeal by the Supreme 2 Court of Connecticut s answers to the first two questions.3 3 Standard of Review and Applicable Law 4 A district court s summary disposition of claims is reviewed de novo. Papelino v. Albany 5 Coll. of Pharmacy of Union Univ., 633 F.3d 81, 88 (2d Cir. 2011). A district court s denial of a 6 motion for leave to amend a pleading is reviewed de novo when based on rulings of law but is 7 otherwise reviewed for an abuse of discretion. Id. 8 Substantively, under Connecticut law, [a]n insurance policy is to be interpreted by the 9 same general rules that govern the construction of any written contract. Conn. Med. Ins. Co. v. 10 Kulikowski, 286 Conn. 1, 5, 942 A.2d 334, 338 (2008) (quoting Enviro Express, Inc. v. AIU Ins. 11 Co., 279 Conn. 194, 199, 901 A.2d 666, 669 (2006)). Consistent with the general rules of 12 contract construction, the intent of the parties, as expressed by the policy language, is 13 determinative in construing even the most opaque-appearing policy provisions. Hartford Cas. 14 Ins. Co. v. Litchfield Mut. Fire Ins. Co., 274 Conn. 457, 463, 876 A.2d 1139, 1143-44 (2005). 15 If the terms of the policy are clear and unambiguous, then the [contract] language . . . must be 16 accorded its natural and ordinary meaning. Schilberg Integrated Metals Corp. v. Cont l Cas. 17 Co., 263 Conn. 245, 267, 819 A.2d 773, 789 (2003) (citations omitted). In determining whether 18 the terms of an insurance policy are clear and unambiguous, a court will not torture words to 19 import ambiguity where the ordinary meaning leaves no room for ambiguity. . . . Similarly, any 20 ambiguity in a contract must emanate from the language used in the contract rather than from 3 That answer, however, may prove to be the most notable portion of that Court s opinion. Not only did the Court settle Connecticut law that friendly social interactions do not excuse an insured s late notice of claim but it also took its response to our certified questions as an opportunity to overturn its earlier case law by placing the burden of proving prejudice, resulting from a delayed notice of an accident, on the insurer and relieving the insured of the obligation to prove an absence of prejudice. See Arrowood IV, 304 Conn. at 197-203. 6 1 one party s subjective perception of the terms. Conn. Med. Ins. Co., 286 Conn. at 6, 942 A.2d 2 at 338 (citations, internal quotation marks, and brackets omitted). 3 Discussion 4 A. The Homeowner s Policy 5 The Connecticut Supreme Court s answers leave no doubt that the district court correctly 6 found (1) that the only location relevant in determining whether the homeowner s policy 7 provided the subject coverage was the site of the accident and (2) that the accident did not occur 8 at an insured location, as that language is construed under Connecticut law. Accordingly, the 9 district court properly granted summary judgment to Royal, declaring that the foundational 10 homeowner s policy did not cover the ATV accident that allegedly caused injury to Conor. 11 B. The Umbrella and Excess Policies 12 Appellants argue that the ruling of the district court which found that the umbrella policy 13 did not provide coverage is erroneous for two main reasons. They first contend that the policy 14 Royal claims was the policy in effect at the time of the accident was, at best, ambiguous with 15 regard to any requirement that, in order to secure coverage for any ATV, the ATV be listed in the 16 policy s declarations page. To support this conclusion, Appellants point out that the document 17 identified as the declarations page (1) lacks blank lines on which to list ATVs and (2) includes 18 language limiting its subject matter to off premises use of ATVs, which, they go on to assert, 19 implies coverage of on premises use of ATVs even if the ATV is not listed in the declarations. 20 But, even such tortured linguistic deconstruction cannot escape the obvious reality that there is 21 no ambiguity in the policy language itself. The umbrella policy specifically recites that the 22 policy does not cover liabilities arising from the use of an ATV unless the ATV is described as 23 being covered in the declarations. (Appellants Appendix at 1653.) It draws no distinction 7 1 between on and off premises ATV use. The two quibbles identified by the Kings in the 2 formatting and wording of the separate declarations page come nowhere near the showing that 3 would be required to render the policy language ambiguous. Given the policy s plain language, 4 the Kings failure to list the ATV in the declarations was fatal to coverage under the umbrella 5 policy. 6 Appellants second wave of attack sidesteps their failure to list the ATV on the 7 declarations page. They advance an earlier and different version of the umbrella policy, which, 8 they press, was the policy actually in effect at the time of the accident and, which, they say, did 9 not require a declarations page listing of the ATV. Specifically, Appellants argue the older 10 version of the policy was not updated in accordance with Conn. Gen. Stat § 38a-323 and, 11 therefore, any change, such as requiring the ATV to be listed, was ineffective as matter of law. 12 After a complete review, we reject this argument for substantially the same reasons stated in the 13 district court s thorough and carefully reasoned opinion. See Arrowood I, 512 F. Supp. 2d at 14 128-29; id. at 132 (holding that the policy change was valid (1) because it neither (a) constituted 15 a nonrenewal or conditional nonrenewal under Conn. Gen. Stat. § 38a-323, nor (b) triggered 16 that section s notice requirements, and (2) because a post-amendment regulatory agency 17 interpretation requiring notice had no retroactive effect). 18 Additionally, beyond determining the dispute regarding the umbrella policy, the district 19 court s finding that there was no coverage under the extant umbrella policy had a broader, 20 adverse reach for Appellants. Since it was uncontested that the excess liability policy followed 21 form with the umbrella policy, any potential liability excluded from coverage under the 22 umbrella policy was automatically excluded from coverage under the excess liability policy as 8 1 well. Consequently, the district court correctly granted National summary judgment on the 2 coverage claims brought against it. See id. at 132-33. 3 C. Appellants Counterclaims Against Royal 4 The Kings pleaded two non-contract counterclaims, one pursuant to the Connecticut 5 Unfair Trade Practices Act ( CUTPA ), Conn. Gen. Stat. §§ 42-110a et seq., and another 6 sounding in bad faith. Both were predicated entirely on allegations that Royal s investigation of 7 the accident was unreasonable because it concluded that the accident s situs was not a covered 8 location. (See Appellants Appendix at 172-73.) The counterclaims did not allege that Royal s 9 investigation was unreasonable in any other way. Appellants core argument on this point, of 10 course, is now foreclosed by the Connecticut Supreme Court s answers to our certified questions. 11 Royal s investigatory conclusion was more than reasonable it was correct. Appellants CUTPA 12 and bad faith counterclaims fail as a matter of law. Because Appellants limited their 13 counterclaims, we, like the district court, decline to consider whether, or under what other 14 circumstances, a claimant could state a valid CUTPA or bad faith cause of action when the 15 insurer correctly determined the contested coverage was unavailable under the policy as written. 16 D. The Claims Against NEBC 17 The negligence claim stated by the Kings, as would likely be suspected, rested soley on 18 NEBC s alleged failure to procure umbrella and excess policies that followed form to the 19 homeowner s policy. (Appellants Appendix at 134-35.) In light of the now affirmed finding 20 that the homeowner s policy did not cover the accident, no damages could possibly flow from 21 any failure by NEBC to see to it that the other policies were congruent in coverage with the 22 homeowner s policy. Appellants contention that they alleged negligence broader than a failure 23 to ensure the umbrella and excess policies followed form with the homeowner s policy has no 9 1 support in the pleadings and is, correspondingly, rejected. Appellants citation to their 2 presentation of this same argument to the district court during a teleconference (Appellants 3 Opening Brief at 33) adds nothing. Claims are to be supported by pleaded facts, see, e.g., 4 Ashcroft v. Iqbal, 556 U.S. 662, 677-78, 129 S. Ct. 1937, 1949 (2009), not by discussion or 5 argument. 6 Appellants fare no better in their attempt to salvage their breach of contract and breach of 7 fiduciary duty claims, which, they contend, were dismissed on April 27, 2005 with leave to 8 amend following discovery. (Appellants Opening Brief at 33.) Unharmoniously, Appellants 9 also state these same claims were dismissed sua sponte by the district court on October 31, 2007. 10 (Id. at 34.) The record is at odds with both contentions, revealing that the district court dismissed 11 those claims upon NEBC s motion on April 27, 2005, with 30 days leave to replead the contract 12 claim and four months leave to replead the breach of fiduciary duty claim. (Motion Hearing 13 Transcript, April 27, 2005, at 19-20.) Appellants made no attempt, the record further reveals, to 14 timely replead either claim.4 Instead, more than two years after dismissal, at a teleconference 15 held after the district court s Arrowood I summary judgment decision, Appellants tried to move 16 forward on their breach of contract claim. See generally Royal Indem. Co. v. King, 532 F. Supp. 17 2d 404, 408-09 & n.5 (D. Conn. 2008) ( Arrowood II ). But, as observed above and as noted 18 at the 2007 conference with the district court both claims originally pled against NEBC had 19 been dismissed over two years earlier. (Id.) Dispositively, moreover, that 2005 dismissal is not 20 challenged in Appellants opening brief. Accordingly, that dismissal presents no preserved issue 21 for review. See JP Morgan Chase Bank v. Altos Hornos de Mex., S.A. de C.V., 412 F.3d 418, 22 428 (2d Cir. 2005) ( [A]rguments not made in an appellant s opening brief are waived . . . . ). 4 Furthermore, the record reveals no application to extend the leave period before it expired, much less an order granting such relief. 10 1 E. The Denial of Further Leave to Amend 2 Lastly, Appellants take exception to the district court s denial of their motion to amend 3 the pleading of their CUTPA and bad faith claims against Royal and their negligence claim 4 against NEBC. (Appellants Opening Brief at 36.). The district court dismissed these claims 5 soon after granting summary judgment, finding they were not viable in light of that decision. See 6 generally Arrowood II, 532 F. Supp. 2d at 410-16 (denying reconsideration). The Kings motion 7 to amend these dismissed CUTPA and bad faith claims was made on November 19, 2007 as an 8 adjunct to their motion for reconsideration of the decision dismissing them. Id. at 416-17 ( The 9 Kings have moved, in the alternative, to amend their complaint to add new facts and legal 10 theories to support their rejected claims . . . . The Kings have not submitted a proposed amended 11 third-party complaint or proposed second amended counterclaims . . . . It is clear from their 12 briefing, however, that the Kings seek leave to allege an entirely new factual and legal basis for 13 their CUTPA/CUIPA and bad faith claims against Royal, and their negligence claim against 14 NEBC. ). This late-stage motion to amend, however, was made long after the April 30, 2005 15 deadline that the district court had set on April 20, 2005 for the filing of motions to amend.5 (See 16 Dist. Ct. Elec. Docket Entry Nos. 54-55.) Appellants point to nothing that explains their failure 17 to either meet or move timely to extend that deadline. Nor do they explain why they could not 18 have moved to amend these claims at some point long before November 19, 2007, when they 19 sought to do so. Knowing all along that dispositive motions were pending that could, and 20 ultimately did, end their case as pleaded, Appellants sat idly. Either by strategy or happenstance, 21 Appellants did not act until after the summary judgment motions had been decided adversely to 5 The deadlines that were set on April 27, 2005 for repleading the breach of contract and breach of fiduciary duty claims against NEBC, see supra at section D, did not apply to the CUTPA and bad faith claims against Royal and the negligence claim against NEBC. 11 1 them. Then, with the legal mine field mapped in the district court s decision, Appellants sought 2 leave to steer a new course hoping to snatch away the victors success. Denial of additional time 3 to amend in those circumstances was hardly an abuse of the discretion accorded the district court 4 by the letter and spirit of Rule 15 of the Federal Rules of Civil Procedure. Whether based on 5 Rule 15 alone or in tandem with the good cause requirement of Rule 16, we cannot say on this 6 record that the district court abused its discretion in denying Appellants motion. See Aetna Cas. 7 & Sur. Co. v. Aniero Concrete Co., Inc., 404 F.3d 566, 603 (2d Cir. 2005) (discussing Rule 15); 8 Grochowski v. Phoenix Constr., 318 F.3d 80, 86 (2d Cir. 2003) (discussing Rule 16). 9 10 11 Conclusion For the foregoing reasons, we AFFIRM the judgment of the district court. We thank the Supreme Court of Connecticut for its assistance. 12

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