New Castle County v. Natl Union Fire Ins

Opinions of the United

2001 Decisions States Court of Appeals

for the Third Circuit

3-21-2001

New Castle County v. Natl Union Fire Ins

Precedential or Non-Precedential:

Docket 00-5157

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Filed March 21, 2001

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 00-5157

NEW CASTLE COUNTY DE,

Appellant

v.

NATIONAL UNION FIRE INSURANCE COMPANY OF

PITTSBURGH, PA

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

(D.C. No. 96-cv-00504)

District Judge: The Honorable Roderick R. McKelvie

Argued: October 31, 2000

BEFORE: SCIRICA, NYGAARD, and BARRY,

Circuit Judges.

(Filed: March 21, 2001)

Richard E. Poole, Esq.

Peter J. Walsh, Jr., Esq. (Argued)

Potter, Anderson & Corroon

1313 Market Street

P.O. Box 951

Wilmington, DE 19899

Counsel for Appellant

Christopher J. Sipe, Esq. (Argued)

Bailey & Wetzel

716 Tatnall Street

P.O. Box 2034

Wilmington, DE 19801

Counsel for Appellee

Daniel E. Troy, Esq.

Wiley, Rein & Fielding

1776 K Street, N.W.

Washington, DC 20006

Counsel for Amicus-appellee

INS ENV Litigation

OPINION OF THE COURT

NYGAARD, Circuit Judge.

This appeal requires us to interpr et the phrase, "invasion

of the right of private occupancy," under Delawar e law and

determine whether it is ambiguous. The phrase is widely

used in insurance policies and has been the subject of

heated litigation throughout the entire country over the

past thirty years. Because Delaware case law pr ovides no

clear precedent, both parties cite numer ous decisions

outside the state. Some authority suggests that we should

apply the doctrine of ejusdem generis and construe the

phrase in relation to the more specific terms ("wrongful

eviction" and "wrongful entry") pr eceding it. Such a ruling,

however, would fly in the face of commonsense and declare

unambiguous a term that has generated hundr eds of law

suits and widely varying judicial interpretations. We refuse

to do that, and instead hold that an "invasion of the right

of private occupancy" is ambiguous and should be

construed in favor of New Castle County. We therefore

reverse the District Court's grant of summary judgment.

I.

New Castle County is a political subdivision of the State

of Delaware. It is responsible for , among other things, the

permitting and zoning of real property within its

2

geographical borders. In order to pr otect itself, its officials,

and its employees from legal liability, it is common practice

for New Castle to purchase insurance. Between 1991 and

1993, New Castle purchased a number of policies from

National Union Fire Insurance Company of Pittsburgh,

Pennsylvania. The policies were of two general types: (1)

Public Officials Liability ("POL") and (2) Commercial and

General Liability ("CGL"). This appeal focuses on a CGL

policy that New Castle purchased from National Union to

cover the period from July 1, 1992 to July 1, 1993.

The parties disagree whether National Union has an

obligation to defend and indemnify New Castle in a number

of law suits arising from zoning and per mitting decisions.

In 1992, a Delaware real estate developer named Frank

Acierno filed the first of three complaints, which eventually

cost the County approximately one million dollars in legal

expenses to defend.

Acierno owns two tracts of land within New Castle

County. The first is located near a shopping mall and the

second is referred to as Westhampton. In 1992, New Castle

frustrated Acierno's plans to develop both tracts. First, it

denied a building permit for the mall pr operty, and second,

it voided Acierno's record plan for the Westhampton

property and instead rezoned it.

On July 1, 1992, Acierno filed his first suit, contesting

the denial of the building permit for the mall property

("Acierno I"). He claimed, under 42 U.S.C. S 1983, that New

Castle had deprived him of property without due process of

law, and had violated the Equal Protection Clause of the

Fourteenth Amendment by arbitrarily treating him

differently than other developers. The District Court

granted preliminary injunctive relief in favor of Acierno. See

Acierno v. Mitchell, 1992 WL 694590 (D. Del. 1992). We

reversed, holding that the case was not ripe because the

County Board of Adjustment had yet to rule on the building

permit. See Acierno v. Mitchell, 6 F.3d 970 (3d Cir. 1993).

One day after filing his first claim, Acier no filed a second

suit, this time challenging New Castle's actions r egarding

the Westhampton property ("Acierno II"). He again claimed

he had suffered due process and equal protection

3

violations. A complicated series of rulings followed.1

Eventually, the District Court granted summary judgment

in favor of the County on most of Acierno's claims. A

number of his claims, however, remain undecided.

Acierno filed his third suit on December 17, 1993

("Acierno III"). In it, he ar gued that his claim in Acierno I

(regarding the mall property) had become ripe, because the

County Board of Adjustment had refused to issue a

building permit. The District Court again granted a

preliminary injunction in his favor. See Acierno v. New

Castle County, 1994 LEXIS 1683 (D. Del. 1994). W e

reversed and remanded the case for further proceedings.

See Acierno v. New Castle County, 40 F .3d 645 (3d Cir.

1994). On October 24, 1997, the parties settled Acierno III

with an agreement requiring New Castle to issue a building

permit for the mall property and pay Acierno's attorneys'

fees up to $250,000.

Shortly after Acierno filed his claims, the County

attempted to contact National Union to discuss the POL

and CGL policies. After almost a year of unsuccessful

inquiries by New Castle, National Union sent a letter on

June 25, 1993 stating that Acierno's claims"would not be

covered under the CGL policy." However , on July 9, 1993,

National Union indicated that it would tentatively

undertake New Castle's defense under the POL policy. Its

letter noted, in some detail, that National Union was not

_________________________________________________________________

1. First, the District Court granted summary judgment to the County on

the procedural due process claims. It denied summary judgment,

however, as to all other claims, including those against the individual

County officers who had sought legislative or qualified immunity. See

Acierno v. Cloutier, 1993 WL 215133 (D. Del. 1993). They appealed to

this Court. A panel of the Third Circuit r eversed the denial of summary

judgment to former officers, but found jurisdiction lacking in respect to

the current officers. Upon motion for r ehearing, this Court, sitting en

banc, vacated the panel decision, held that ther e was jurisdiction over

both current and former officers, and r eversed the District Court's

denial

of summary judgment to them. See Acierno v. Cloutier, 40 F.3d 597 (3d

Cir. 1994). The District Court conducted further proceedings, and on

May 23, 2000, it granted summary judgment to the County on some of

Acierno's outstanding claims. See Acier no v. New Castle County, C.A. No.

92-385 (D. Del. 2000).

4

waiving its rights to refuse coverage later . Over the following

year, legal expenses mounted and in May 1994, National

Union filed suit against the County, seeking a declaration

that it was not obligated to continue coverage. New Castle

contested the claim, but the parties eventually settled,

agreeing to a buy-out of the POL policy. The agreement

resolved the dispute over the POL policy, but expressly did

not address the CGL policy.

On June 13, 1996, New Castle sent a letter to National

Union renewing its request for coverage of its legal

expenses and liability under the CGL policy. National Union

denied coverage, and in response, the Countyfiled this

declaratory judgment action. On December 30, 1997, the

District Court granted National Union's motion for

summary judgment, holding that Acierno's suit, and its

associated expenses and liabilities, were not covered by the

CGL policy. Specifically, the court held that National Union

was only obligated to defend New Castle in suits arising

from one of the policy's enumerated "personal injuries." The

only arguably applicable provision, Definition 10(c), defines

"personal injury" as a harm resulting from:

c. The wrongful eviction from, wr ongful entry into, or

invasion of the right of private occupancy of a

room, dwelling or premises that a person occupies

by or on behalf of its owner, landlor d or lessor; . . .

The District Court held that this definition was

unambiguous and required the County to act as an "owner,

landlord or lessor" of Acierno's pr operty. Because it had

not, the court granted summary judgment in favor of

National Union. The District Court did not addr ess whether

Acierno's claims constituted an "invasion of the right of

private occupancy."

New Castle appealed, and we reversed. See New Castle

County v. National Union Fire Ins. Co., 174 F.3d 338, 342

(3d Cir. 1999). We held that the "by or on behalf of "

language of Definition 10(c) was ambiguous and should not

be construed to preclude coverage.2 We therefore remanded

_________________________________________________________________

2. The parties disagreed over which wor ds the disputed language

modified. National Union argued that the language modified the wrongful

5

the case to determine whether New Castle's alleged actions

could constitute an "invasion of [Acier no's] right of private

occupancy." Id. at 352. The District Court, on remand,

again ruled against the County, granting summary

judgment in favor of National Union. It held that the plain

meaning of the "invasion" language was ambiguous, but

that its context suggested it "should be construed to

encompass only those actions of the same general type or

class as `wrongful eviction' and `wr ongful entry.' " Because

Acierno failed to allege an eviction, wr ongful entry, or

similar injury, the District Court held that the CGL policy

did not apply. New Castle appealed.

II.

Jurisdiction is premised upon diversity of citizenship.

Therefore, we must apply the substantive law of Delaware.

See Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817,

82 L.Ed. 1188 (1938). The sole issue for review is whether

Acierno's claims, if true, constitute an "invasion of [his]

right of private occupancy." If they do, the CGL policy

requires National Union to cover the County's legal

expenses and liability. This is a legal question of

contractual interpretation. Because the Delawar e Supreme

_________________________________________________________________

acts. Under its interpretation, an eviction, entry, or invasion must be

committed by the "owner, landlord or lessor" of the premises. At oral

argument, counsel for National Union suggested that a proper reading of

the definition required one to stop and"breathe" between the words

"occupies" and "by." The same ef fect is achieved by ignoring a number

of words:

The wrongful eviction from, wrongful entry into, or invasion of the

right of private occupancy of a room, dwelling or premises . . . by

or

on behalf of its owner, landlord or lessor; . . .

New Castle, on the other hand, argued that the language modified the

words that immediately preceded it ("that a person occupies"). According

to New Castle, the disputed language described "the possessory interest

of the person aggrieved." New Castle Co., 174 F.3d at 346. The wrongful

acts must be committed against a person who has the right to occupy

the premises. We found both interpretations reasonable, and therefore

held the language was ambiguous.

6

Court has yet to address the issue directly, we must predict

how it would rule. See New Castle County v. National Union

Fire Ins. Co., 174 F.3d 338, 342 (3d Cir. 1999); Epstein

Family P'ship v. Kmart Corp., 13 F.3d 762, 766 (3d Cir.

1994).

The District Court construed the CGL policy narr owly

and granted summary judgment in favor of National Union.

Our review of the District Court's grant of summary

judgment is plenary. See New Castle County, 174 F.3d at

342; Pacific Indem. Co. v. Linn, 766 F .2d 754, 760 (3d Cir.

1985).

A. Delaware Insurance Law

This is the second time that we have reviewed allegedly

ambiguous language in Definition 10(c) of the CGL policy.

See New Castle County, 174 F.3d at 344-51. The previous

panel's discussion of Delaware law pertaining to insurance

policy interpretation is a good starting point for our

analysis:

Before an insurer is obligated to defend or indemnify a

policyholder, the insured must demonstrate that

coverage is available under the policy. An insur er's

duty to defend is broader than its duty to indemnify,

but `is limited to suits which assert claims for which it

has assumed liability under the policy.' `[W]here there

exists some doubt as to whether the complaint against

the insured alleges a risk insured against, that doubt

should be resolved in favor of the insur ed.' Most

importantly therefore, an insurer is`required to defend

any action which potentially states a claim which is

covered under the policy.' Thus, in this case, if the

Acierno actions potentially state a claim that is covered

under definition 10(c), National is requir ed to defend

the county in those actions.

Whether the Acierno actions potentially state a claim

for which National has assumed liability depends upon

how we interpret definition 10(c). As a basic matter,

Delaware law requires us to interpr et insurance

contracts `in a common sense manner.' W e must also

7

examine the disputed language in the context of the

entire policy.

`Absent some ambiguity, Delaware courts will not

destroy or twist policy language under the guise of

construing it,' because `creating an ambiguity where

none exists could, in effect, create a new contract with

rights, liabilities and duties to which the parties ha[ve]

not assented.' When policy language is ambiguous,

however, under Delaware law this Court must apply

the doctrine of contra proferentem . That is, ambiguous

language must be construed against the drafter and in

conformance with the reasonable expectations of the

insured.

The premise underlying the principle of contra

proferentem is that an insurance contract is one of

adhesion. As the Delaware Supreme Court r ecently

explained,

[T]he insurer . . . is the entity in control of the

process of articulating the terms [of an insurance

contract]. The other party . . . usually has very little

to say about those terms except to take them or

leave them or to select from limited options of fered

by the insurer. . . . Therefor e, it is incumbent upon

the dominant party to make the terms clear .

Convoluted or confusing terms are the pr oblem of

the insurer . . . not the insured. . . .

As noted earlier, due to the insurer's dominant

position, when an ambiguity is found in insurance

policy language, we must construe the language

against the insurer as a matter of Delawar e law. And

therefore, unlike with other types of contracts, we need

not inquire into the parties' actual intent.

Because ambiguous language is construed against the

insurer as a matter of law, we take special note of

Delaware law for determining whether language is

ambiguous. `The settled test for ambiguity is whether

the provisions in controversy are r easonably or fairly

susceptible of different interpretations or may have two

or more different meanings.' An insurance policy is not

ambiguous, however, `merely because two conflicting

8

interpretations may be suggested. Rather , both

interpretations must reflect a r easonable reading of the

contractual language.' Thus, we must examine, not

only whether the county's reading of definition 10(c) is

possible, but also whether it is reasonable.

New Castle County, 174 F.3d at 342-44 (citations omitted).

Thus, in order to assess National Union's obligations,

Delaware law requires us to ask whether the Acierno suits

potentially state a claim under Definition 10(c) of the CGL

policy. See id. at 343. We must answer in the affirmative if

the language of the policy is ambiguous as to its coverage

of the specific claims. An insurance policy is ambiguous if

there is more than one reasonable interpretation of its

terms. The Delaware Supreme Court has not addressed

whether an "invasion of the right of private occupancy" is

ambiguous, and both parties agree that lower court

opinions in the state provide no clear answer . As a result,

we must look outside of Delaware, to other state court

decisions and relevant public policy, to r each a decision.3

B. Non-Delaware Precedent

State courts outside of Delaware have disagr eed over

whether an "invasion of the right of private occupancy" is

ambiguous. A number of state courts have found the

disputed language unambiguous, suggesting that it is

inapplicable to Acierno's claims. A smaller , but not

insignificant, number of decisions have held the opposite --

that an invasion of the right of private occupancy is

ambiguous and must therefore be construed liberally.

Of the decisions that hold the language to be

unambiguous, most adopt one of three lines of r easoning.

These approaches, however, are not sharply defined and

often blur. The first and perhaps most commonly employed

strategy is to examine the context in which the phrase is

used (it almost always follows some variation of"wrongful

eviction" and "wrongful entry"). States cite the Latin maxim

_________________________________________________________________

3. Both parties refer extensively to dictionary definitions and the "plain

meaning" of the terms. Not surprisingly, their arguments conflict and are

ultimately inconclusive. As a result, we find this discussion unhelpful.

9

"ejusdem generis," a tool of construction that applies when

a general term or phrase follows an enumeration of specific

offenses.4 Ejusdem generis requires courts to construe the

general phrase narrowly, so that it relates only to offenses

of the same kind or class as those specifically enumerated.

As the Delaware Supreme Court clearly articulated over

eighty years ago in Donaghy v. State, 100 A. 696, 707 (Del.

1917):

The doctrine of ejusdem generis . . . is a rule of

statutory construction . . . that where general words

follow the enumeration of particular classes of persons

or things, the general words will be construed as

applicable only to persons or things of the same

general nature or class as those enumerated. . . .

[S]uch a rule is based on the obvious r eason that if it

was intended that the general words should be used in

their unrestricted sense, no mention would have been

made of the particular classes.

See also Triple C Railcar Serv., Inc. v. City of Wilmington,

630 A.2d 629, 631 (Del. 1993). Applying ejusdem generis

would limit the right of private occupancy to of fenses,

similar to eviction or wrongful entry, that include a

violation of the claimant's possessory inter est in real

property. See Groshong v. Mutual of Enumclaw Ins. Co., 329

Or. 303, 312-14 (1999) ("[T]he phrase,`other invasion of the

right of private occupancy' applies only to of fenses that

involve a possessory interest in the pr emises at issue.").5

_________________________________________________________________

4. They also cite a "related" canon of construction, noscitur a sociis.

Only

the amicus, however, presents a case that applies the concept. In City of

Delray Beach, 85 F.3d at 1534, the Eleventh Circuit refers to a Florida

state court decision that suggests that the two Latin maxims are more

than simply "related":

[Ejusdem generis] is actually an application of the broader maxim

`noscitur a sociis' which means that general and specific words

capable of analogous meaning when associated together take color

from each other so that the general wor ds are restricted to a

sense

analogous to the specific words.

Thus, noscitur a sociis is simply a br oad form of ejusdem generis and

requires no additional analysis.

5. In addition to Oregon, other states that have utilized ejusdem generis

in a similar context include Wisconsin, Florida, Massachusetts, Indiana,

10

Because Acierno's claims do not allege a violation of his

possessory interest, adopting this appr oach would require

us to rule in favor of National Union.

There is a critical distinction, however , between this case

and most of the decisions that apply ejusdem generis.

Almost all of the precedent invoking the Latin maxim

involve insurance policies that include the phrase"other

invasion of the right of private occupancy." Some courts

have explicitly focused on the presence of the word "other":

_________________________________________________________________

Michigan, Illinois, Oklahoma, California, and New York. See United

States v. Security Mgmt. Co., Inc., 96 F .3d 260, 264 n.4 (7th Cir. 1996)

(applying Wisconsin law and holding that"[t]he ejusdem generis rule

makes clear that [a] right of occupancy must exist before an individual

may be said to have suffered an `invasion of the right of private

occupancy' "); City of Delray Beach, Florida v. Agricultural Ins. Co., 85

F.3d 1527, 1534 (11th Cir. 1996) (applying Florida law and holding that

"when read in context, the phrase `other invasion of the right of private

occupancy' means an offense tantamount to wr ongful entry or eviction

and requires an impingement upon possessory rights); Dryden Oil Co. of

New England, Inc. v. Travelers Indem. Co., 91 F.3d 278, 288 (1st Cir.

1996) (applying ejusdem generis under Massachusetts law); Red Ball

Leasing, Inc. v. Hartford Accident and Indem. Co., 915 F.2d 306, 312 (7th

Cir. 1990) (applying ejusdem generis under Indiana law); Aetna Casualty

& Surety Co. v. Dow Chemical Co., 933 F .Supp. 675, 680 (E.D. Mich.

1996) (interpreting Michigan law as adopting ejusdem generis); Martin v.

Brunzelle, 699 F.Supp. 167, 170 (N.D. Ill. 1988) ("Ejusdem generis

principles draw on the sensible notion that wor ds such as `or other

invasion of the right of private occupancy' ar e intended to encompass

actions of the same general type as, though not specifically embraced

within, `wrongful entry or eviction.' "); Liberty Mutual Ins. Co. v. East

Central Oklahoma Elec. Coop., 97 F.3d 383, 390-91 (Okla. 1996)

("Instead of creating an ambiguity, the ter m `invasion of the right of

private occupancy' is included in insurance policies simply to provide a

`catch-all' category of offenses of the same general type as "wrongful

entry or eviction."); Stein-Brief Group, Inc. v. Home Indem. Co., 65

Cal.App.4th 364, 373 (1998); County of Columbia v. Continental Ins. Co.,

595 N.Y.S.2d 988, 991 (1993) ("By application of the principle of ejusdem

generis, the key to interpreting the phrase`other invasion of the right of

private occupancy' lies in the definition of `wrongful entry' and

`eviction,'

both of which involve actual interference with possessory rights to real

property.").

11

[T]his court has stated that `the rule of ejusdem generis

in contracts is peculiarly applicable where specific

enumeration precedes the word `other' followed by

general words. . . . use of the term`other' to connect

the phrase `invasion of the right of private occupancy'

to the wording that precedes it satisfies us that the

parties intended that such invasion also be limited to

claims that involve a possessory interest in the

premises.

Groshong, 329 Or. at 313-14; see also, e.g., Liberty Mutual,

97 F.3d at 390; Security Mgmt., 96 F .3d at n.4 (applying

ejusdem generis, but noting that its application"would

have more force if the word `other' preceded the general

term."). The policy at issue in this case does not include the

word "other."

Neither National Union nor the amicus address this

distinction, or why the principle should be applied. Instead,

the amicus conclusively states, without further elaboration,

that "[e]mploying the principle of ejusdem generis, rather

than contra proferentem, adher es to the requirement that

words be interpreted in the proper context and ensures

greater fidelity to the meaning of the disputed term and the

intentions of the parties to the insurance contract."6

_________________________________________________________________

6. Contra proferentem is yet another Latin maxim, which requires that

ambiguous and confusing policy language be construed against the

insurer. The amicus suggests that the court must choose between

applying contra preferentem and ejusdem generis. This is incorrect.

Ejusdem generis is used to determine whether a phrase is ambiguous.

Contra preferentem only applies after a determination of ambiguity is

made. See Penn Mut. Life Ins. Co. v. Oglesby, 695 A.2d 1146, 1149-50

(Del. 1997) ("[I]f the contract . . . is ambiguous, the principle of

contra

proferentem dictates that the contract must be construed against the

drafter."). The County, in contrast, r ecognizes this distinction, but

nonetheless argues that contra preferentem should be applied because

the District Court explicitly found the disputed language ambiguous. See

Appellant's brief at 26 ("[T]he District Court ignored the doctrine of

contra

proferentem and construed admittedly ambiguous policy language

against the insured.") (emphasis added). This is also incorrect. The

District Court merely found that the "plain meaning" of the phrase was

ambiguous. It then examined the context of the language, applied

ejusdem generis, and held that its meaning was clear. Before we can

apply contra proferentem, we must first review this holding and

determine whether the disputed phrase was ambiguous.

12

Amicus brief at 19 n.5. This begs the question, however, of

whether applying ejusdem generis in this case would help

clarify the parties' intentions. See White v. Cr owley, 1986

WL 5850, *2 (Del.Super. 1986) ("As with all rules of

statutory construction, [ejusdem generis] does not apply

when the context shows a contrary intention. In other

words, the goal of statutory construction is tofind the

intent of the [contracting parties], and rules of statutory

construction are merely means towar d that end."). Because

National Union has failed to demonstrate, and we fail to

believe, that applying ejusdem generis is r equired or even

helpful, our inquiry must continue.

Under the second approach, some states have concluded,

after reviewing the entirety of a policy, that an "invasion of

the right of private occupancy" is only available in a

landlord-tenant context. See Dryden Oil Co. of New

England, Inc. v. Travelers Indemnity Company , 91 F.3d 278,

288 (1st Cir. 1996) ("Under Massachusetts law, then, the

phrase `other invasion of the right of private occupancy'

would mean `other invasion of the [tenant's] right of private

occupancy,' since an actionable `wrongful entry or eviction'

claim under Massachusetts law may be brought only by a

tenant against a landlord.").7 There is no landlord-tenant

relationship in this case. However, New Castle cites a long

list of cases that have rejected this position. See Appellant's

Brief at 20 n.5. There is no need to discuss each of these

cases, except to note that a number of states allow a

property owner, like Mr. Acier no, to bring such a claim.8

Third, some states have held that an "invasion of the

right of private occupancy" requires a physical invasion,

_________________________________________________________________

7. See also State Farm Fire & Cas. Co. v. Burkhardt, 96 F.Supp.2d 1343,

1351 (M.D. Ala. 2000) (applying Alabama law); Decorative Ctr. v.

Employers Cas., 833 S.W.2d 257, 262 (T ex.App. 1992) ("The phrase

`other invasion of the right of private occupancy' provides coverage only

if there exists a landlord-tenant r elationship, or if the plaintiff has a

vested property right.").

8. See, e.g., Royal Ins. Co. of America v. Kirksville Coll. of Osteopathic

Med., 191 F.3d 959, 963 (8th Cir. 1999); Pipefitters Welfare Educ. Fund

v. Westchester Fire Ins. Co., 976 F.2d 1037, 1040 (7th Cir. 1992); Titan

Holdings Syndicate, Inc. v. City of Keene, 898 F .2d 265, 272-73 (1st Cir.

1990).

13

such as a trespass. See Sterling Builders, Inc. v. United

National Ins. Co., 79 Cal.App.4th 105, 108-09 (2000)

("[T]here is no such thing as a `non-physical invasion' of a

right of private occupancy. `Occupancy' r equires a physical

entry upon real property."). Accor ding to this line of

reasoning, merely impinging upon a claimant's right to use

or enjoy real property does not constitute such an invasion.

See Columbia National Ins. v. Pacesetter Homes, Inc. , 532

N.W.2d 1, 10 (Neb. 1995) ("[T]he right of private occupancy

is the legal right to occupy premises, not the right to enjoy

occupying those premises.").9 Acierno does not allege a

physical invasion of any sort, and therefor e his claims

would not qualify.

A smaller, but not insignificant, number of decisions

support New Castle's position. Although less unifor m in

their approach, these decisions, in aggr egate, address each

of National Union's arguments. First, some courts have

held that an "invasion of the right of private occupancy" is

ambiguous as a matter of law.10 The most factually relevant

decisions are those of New Hampshire. In Town of Goshen

v. Grange Mut. Ins. Co., 424 A.2d 822, 825 (N.H. 1980), a

_________________________________________________________________

9. The amicus makes a related argument by distinguishing between use

and occupancy. See Amicus brief at 10-16 (contending that the County's

policy only covers suits arising out of harm to a claimant's occupancy,

whereas Acierno's suits claim damages r elating to future use). For

authority, the amicus relies primarily upon a number of Delaware

statutes that refer to "use or occupancy." According to the amicus, the

presence of both terms indicates that "use" and "occupancy" are distinct

concepts. We find this unconvincing. In all of the examples presented,

the two words consistently appear together , amidst a long list of other

concepts. It is equally reasonable to conclude that the legislature used

the two words as synonyms.

10. See, e.g., Beltway Mgmt. Co. v. Lexington-Landmark Ins. Co., 746

F.Supp. 1145, 1150 (D.D.C. 1990) ("The phrase `other invasion of the

right of private occupancy' is ambiguous."); Gould Inc. v. Arkwright Mut.

Ins. Co., 829 F.Supp. 722, 729 (M.D. Pa 1993) ("We, therefore, find that

the personal injury endorsement with its coverage for `wrongful entry'

and `other invasion of the right of private occupancy', is, in the context

of the entire policy, . . . ambiguous."); Hirschberg v. Lumbermans Mut.

Cas., 798 F.Supp. 600, 604 (N.D. Cal. 1992) ("At a minimum, the term

`other invasion of the right of private occupancy' is ambiguous, and any

ambiguity is to be resolved against the insur er.")

14

property owner sued a town planning boar d for refusing to

allow him to develop a subdivision. He claimed civil rights

violations under 42 U.S.C. S 1983. The supr eme court of

the state held that the town's insurance policy, which

covered suits arising from "other invasion of the right of

private occupancy," was unclear. As a r esult, it construed

the policy against the insurer and held that coverage

extended to damages arising from the boar d's denial of

"plaintiff 's right to free enjoyment of his property." See id.

at 824-25. Later, the First Circuit Court of Appeals,

applying New Hampshire law, held that "other invasion of

the right of private occupancy" included har m resulting

from "noxious odors, noise and light" that interfered with

the use of property. See Titan Holdings Syndicate, Inc. v.

City of Keene, New Hampshire, 898 F .2d 265, 272-73 (1st

Cir. 1990). The Court noted that, "T own of Goshen does not

require an allegation of physical invasion before a claim

comes within coverage for liability arising fr om `other

invasion of the right of private occupancy.' " Id. at 273.

Although a number of states have criticized or r efused to

follow Town of Goshen, see Sterling Builders, 79

Cal.App.4th at 110-11, others have reached the same

conclusion. The Supreme Court of Washington has held

that both nuisance and trespass claims qualify as "other

invasion[s] of the right of private occupancy." See Kitsap

County v. Allstate Ins. Co., 964 P.2d 1173, 1185-86 (Wash.

1998). In Kitsap, the court noted that the"plain, ordinary,

and popular meaning that an average purchaser of

insurance would ascribe to the phrase `other invasion of the

right of private occupancy' would include a tr espass on or

against a person's right to use premises or land." Id. at

1185 (emphasis added). The court also consider ed and

rejected the application of ejusdem generis .

Even California, which has almost unifor mly rejected

New Hampshire's approach, has occasionally softened its

interpretation of the disputed language. In Martin Marietta

Corp. v. Insurance Co. of North America, 40 Cal.App.4th

1113, 1134 (1996), a state court of appeal held that" `other

invasion of the right of private occupancy' is susceptible to

numerous interpretations, and under California's rules of

contract interpretation, it must be construed in favor of the

15

insured." The case involved environmental claims by federal

and state entities against Martin Marietta.

Finally, some courts have held the language at issue is

ambiguous simply because of the wide variance among

judicial decisions. See Travelers Indem. Co. v. Summit Corp.

of America, 715 N.E.2d 926, 937-38 (Ind. 1999) ("This

disagreement among the courts further indicates the

ambiguity of the personal injury provisions."). We have, in

the past, adopted a similar, practical appr oach. See Little v.

MGIC Indem. Corp., 836 F.2d 789, 796 (3r d Cir. 1987)

("[T]hat different courts have arrived at conflicting

interpretations of the policy is strongly indicative of the

policy's essential ambiguity.").

In sum, a review of relevant, non-Delawar e case law,

suggests that there is a greater number of cases favoring

National Union's position. However, "our job is not simply

to count the number of cases on both sides," New Castle

County, 174 F.3d at 347. We must instead evaluate the

underlying reasoning. Reducing counsels' many arguments

to their most persuasive essence, we believe that the

existing non-Delaware caselaw can be characterized as

follows: on one hand, a fairly large number of state court

decisions apply the doctrine of ejusdem generis and find no

ambiguity; on the other, a smaller number of decisions rely

upon either broad, conclusory language or narr ow, fact-

specific analysis to reach the opposite r esult. We find

neither approach convincing. As a result, we turn to public

policy concerns and commonsense.

C. Public Policy and Commonsense

Of the three briefs submitted in this case, only the

amicus attempts a public policy argument:

[C]ourts create great uncertainty when they disregard

express, unambiguous provisions defining and

circumscribing the risks that the insur er agrees to

cover. Failure to enforce the insurance contract as

written can affect the price and availability of coverage

for those who lack the resources to self-insure -- most

notably, individuals and small businesses.

16

Amicus brief at 25 (citations omitted) (emphasis added). We

completely agree with this statement. In fact, one would be

hard-pressed to find anyone to disagree. The problem is

that this statement assumes away the central issue in this

case - whether the disputed policy language is ambiguous.

It is beyond peradventure, as the amicus contends, that

"[i]nsurance serves an important economic and social

function," and courts must enforce unambiguous policy

language in order to maintain its viability. The question

remains, however, whether the CGL policy is unambiguous,

and none of the parties provides any policy ar guments for

addressing that particular question.

In our opinion, the most important and relevant

observation in this case was only casually r eferenced by the

District Court. The court noted:

Insurance companies have included the clause

`wrongful eviction from, wrongful entry into, or invasion

of the right of private occupancy' in their policies for at

least twenty years, and litigants have repeatedly

disputed the meaning of the term `invasion of the right

of private occupancy.' . . .

After at least two decades of litigation over the meaning

of the term `invasion of the right of private occupancy,'

courts have not arrived at a uniform definition of the

term. Rather than attempt to construe the ter m

`invasion of the right of private occupancy' solely based

on its plain meaning, courts have concluded that the

term is ambiguous, and have resorted to other

techniques of contract interpretation. This court,

similarly will examine the meaning of the ter m in the

broader context of the CGL policy.

Insurance companies continue to employ the ter m

`invasion of the right of private occupancy' in their

policies, despite twenty years of legal decisionsfinding

that this term is ambiguous. It is instructive to ask

why.

We also find it instructive to ask "why?" -- because we

cannot conceive of an answer. The District Court concluded

that insurance companies intend the disputed language to

be read in context, to take meaning from the specific terms

17

it follows (almost always "wrongful eviction" and "wrongful

entry"). Perhaps this is true. But even if it is, their intent

has been, and continues to be, unclear.

A Westlaw search from 1973 to the present reveals 249

cases that include the phrase "invasion of the right of

private occupancy." Approximately half of those decisions

required a direct interpretation of the disputed language. In

fact, National Union itself has been forced to litigate the

meaning of the phrase on numerous occasions, and has

lost at least four times.11 Yet, in spite of this extensive

history of litigation, and obvious disagreement amongst

courts and parties alike, insurance companies, and

National Union in particular, continue to use the phrase

without any language defining its scope. Once again, we

must ask, "why?"

It is well settled under Delaware law that insurance

policies are contracts of adhesion. Ther efore it is the

responsibility of the insurer to write clear policies with

adequately defined terms:

[Insurance contracts] must be interpreted in a common

sense manner, giving effect to all pr ovisions so that a

reasonable policyholder can understand the scope and

limitation of coverage. It is the obligation of the insurer

to state clearly the terms of the policy . . ..

The policy behind this principle is that the insur er or

the issuer, as the case may be, is the entity in control

of the process of articulating the terms. The other

party, whether it be the ordinary insur ed or the

investor, usually has very little say about those terms

_________________________________________________________________

11. See Kitsap County, 964 P.2d at 1184-86; Rozet v. City Ins. Co., 24

F.3d 249 (9th Cir. 1994) (unpublished decision); Great Northern Nekoosa

Corp. v. Aetna Cas. & Sur. Co., 921 F .Supp. 401, 416-18 (N.D. Miss.

1996); Gould, 829 F.Supp. at 724, 729. National Union has, on other

occasions, prevailed in similar suits. See e.g., City of Oakland v.

National

Union Fire Ins. Co. of Pittsburgh, Pa , 56 F.3d 70 (9th Cir. 1995)

(unpublished opinion); Wackenhut Servs., Inc. v. National Union Fire Ins.

Co. of Pittsburgh, Pennsylvania, 15 F .Supp.2d 1314, 1323-24 (S.D. Fla.

1998); Stein-Brief, 65 Cal.App.4th at 368, 373; O'Brien Energy Sys., Inc.

v. American Employers' Ins. Co., 629 A.2d 957, 959, 963-63 (Pa.Super.

1993).

18

except to take them or leave them or to select fr om

limited options offered by the insur er or issuer.

Therefore, it is incumbent upon the dominant party to

make terms clear. Convoluted or confusing terms are

the problem of the insurer or issuer -- not the insured.

Penn Mutual, 695 A.2d at 1149-50. Because of the one-

sided nature of insurance policies, insurance companies

are in the best position to clarify potentially ambiguous

terms and avoid future disputes. The persistent litigation

surrounding the meaning of "invasion of the right of private

occupancy" strongly suggests that they indeed should do

so. A simple definition of the phrase, indicating, for

example, that it refers only to offenses requiring a physical

invasion (or only to those involving a tenant-landlord

dispute, etc.) would be dispositive.

At oral argument, we asked counsel why National Union

had chosen not to further define the contested phrase.

Counsel responded that "this phraseology makes the policy

marketable." In response to our follow-up question, counsel

denied that the phrase was "marketable" solely because it

created confusion; instead, he stated that"the purpose of

this policy language is that it covers fact patter ns and

situations and scenarios that don't narrowly fall within the

parameters of a `wrongful entry' or `wr ongful eviction.' "

Even if this is true, we fail to see how further defining the

scope of the language would undercut this purpose. If

anything, it would help clarify which fact patter ns,

situations, and scenarios are indeed cover ed. We will not

speculate as to why National Union has consistently

refused to clarify its language, but one thing is clear: The

provision at issue in the National Union CGL policy is

ambiguous.

There is a time and place for reliance upon Latin maxims

and principles of statutory construction, but not at the

expense of commonsense. See SI Mgmt. L.P . v. Wininger,

707 A.2d 37, 42 (Del. 1998) (holding that insurance

contracts "must be interpreted in a common sense manner,

giving effect to all provisions so that a reasonable

policyholder can understand the scope and limitation of

coverage. It is the obligation of the insurer to state clearly

the terms of the policy."). A single phrase, which insurance

19

companies have consistently refused to define, and that has

generated literally hundreds of lawsuits, with widely varying

results, cannot, under our application of commonsense, be

termed unambiguous. As such, we hold that an"invasion

of the right of private occupancy" must be construed

liberally, and that the CGL policy does cover the County's

legal expenses and its liability arising from Acierno's

claims.

We reverse the District Court's grant of summary

judgment in favor of National Union, and remand the cause

for further proceedings consistent with this opinion.

20

SCIRICA, Circuit Judge, dissenting.

Because I would affirm the judgment of the District

Court, I respectfully dissent.

Acierno sued New Castle County alleging that its denial

of a building permit unlawfully deprived him of his property

without due process of law and that it arbitrarily treated

him differently than other real estate developers in violation

of the Equal Protection Clause of the Fourteenth

Amendment. Acierno also alleged that the County violated

his rights to due process and equal protection when it

voided his development plan and rezoned his pr operty.

Contending Acierno alleges an "invasion of the right of

private occupancy," the County maintains National Union

Fire Insurance Company has a duty to defend. In essence,

the County asserts that Acierno alleged that the County's

regulatory actions impaired Acierno's right to use and enjoy

his property.1

Interpreting the policy, the District Court denied a "duty

to defend" holding that "personal injury" does not extend to

claims involving frustrated commercial expectations

regarding future development of pr operty. After declining to

construe the term "invasion of the right of private

occupancy" on a plain meaning reading, the District Court

employed the well known tools of construction of ejusdem

generis and noscitur a sociis.

As the District Court recognized, the ter m "invasion of

the right of private occupancy" follows the enumeration of

specific actions relating to possessory inter ests in real

property -- wrongful eviction and wr ongful entry.2 It would

_________________________________________________________________

1. As noted, the Commercial General Liability policy purchased from

National Union Fire Insurance provides in part:

10. "Personal injury" means injury, other than "bodily injury,"

arising out of one or more of the following of fenses:

* * *

c. The wrongful eviction from, wr ongful entry into, or invasion of

the right of private occupancy of a room, dwelling or premises that

a person occupies by or on behalf of its owner , landlord or

lessor.

2. See Sadler v. New Castle County, 565 A.2d 917, 923 (Del. 1989);

Hercules, Inc. v. Virginia, 1999 WL 167830, at *4 (Del. Super. Feb. 12,

21

seem, therefore, that applying a br oader definition, would

expand coverage beyond the intended scope of the policy

language.

The related doctrine of noscitur a sociis 3 also points to the

conclusion that when read in context, the phrase "invasion

of the right of occupancy" should be given a meaning

analogous to "wrongful eviction" and"wrongful entry." The

phrase "invasion of the right of private occupancy" does not

appear to encompass financial harms like the denial of a

building permit, the voiding of a development plan, and the

rezoning of land.

Acierno alleges that the County improperly deprived him

of his right to use and enjoy his land. He makes no

allegations of eviction, entry or similar wr ongful

disturbance.

The District Court found:

that the coverage of the CGL policy does not extend to

the County's liabilities arising from the Acierno

litigation. This conclusion is consistent with the nature

of the insurance policies purchased by the County. The

County bought a POL4 policy fr om National Union to

_________________________________________________________________

1999) ("Where general words follow an enumeration of persons or things,

by words of a particular and specific meaning, such general words are

not to be construed in their widest extent, but ar e to be held as

applying

only to persons or things of the same general kind or class as those

specifically mentioned.").

3. The doctrine of noscitur a sociis holds that "general and specific

words

capable of the analogous meaning when associated together take color

from each other so that the general wor ds are restricted to a sense

analogous to the specific words." City of Delray Beach v. Agric. Ins. Co.,

85 F.3d 1527, 1534 (11th Cir. 1996).

4. The District Court found that "in 1992, National Union sold the

County a Public Officials and Employees Liability Insurance Policy

(Policy No. 439-12-94) (the "POL policy"). The POL policy has a $1 million

limit of liability for the policy period May 12, 1992 to July 1, 1993. The

POL policy excludes coverage for claims arising fr om prior litigation,

stating that National Union shall not be made liable to make any

payment in connection with any claim for any wr ongful act occurring

prior to May 12, 1992, for which the County might r easonably expect

that such wrongful act would give rise to a claim." New Castle County v.

Nat'l Union Fire Ins. Co., 84 F.Supp.2d 550, 552 (D. Del. 2000).

22

insure it against potential liabilities arising from the

conduct of its officials and employees. Although the

parties disagreed whether the "prior litigation"

exclusion of the POL policy obligated National Union to

indemnify the County for the Acierno litigation, there is

no dispute that the POL policy covers the kinds of

liabilities incurred by the County in its zoning and

permitting activities. Recognizing that the County had

already insured itself under the POL policy against

liabilities arising from the exercise of its regulatory

authority, it is not surprising that its CGL policy covers

a different set of potential liabilities.

New Castle, 84 F.Supp.2d at 556.

Substantially for the reasons set forth by the District

Court, I would affirm its judgment.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

23