USCA1 Opinion

UNITED STATES COURT OF APPEALS

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT

_________________________

No. 95-1435

UNITED STATES LIABILITY INSURANCE COMPANY,

Plaintiff, Appellant,

v.

LIVINGSTONE R. SELMAN, ET AL.,

Defendants, Appellees.

_________________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Joseph L. Tauro, U.S. District Judge]

___________________

_________________________

Before

Selya, Circuit Judge,

_____________

Bownes, Senior Circuit Judge,

____________________

and Boudin, Circuit Judge.

_____________

_________________________

Alice Olsen Mann,

________________

with whom

Mark P. Bailey and

_______________

Morrison,
_________

Mahoney & Miller were on brief, for appellant.

________________

Kenneth H. Soble and Soble, Van Dam, Pearlman and Gittelsohn

________________
_______________________________________

on brief for appellee Livingstone R. Selman.

Clyde D. Bergstresser,
_______________________
Bergstresser and Associates
____________________________

with

whom Angela M. Vieira

__________________

were on

brief, for

and

appellee Robin

Razza.

_________________________

November 28, 1995

_________________________

SELYA,

Circuit

Judge.

In

this

appeal,

plaintiff-

SELYA,

appellant

United

Circuit Judge.
______________

States

Liability

Insurance

Company

(USLIC)

strives to extricate itself from coverage obligations owed to its

insured, Livingstone R. Selman, vis-a-vis personal

_________

brought by

district

Robin Razza

court ruled that USLIC

with respect to

(D. Mass. 1995).

of her

minor daughter.

had a duty

those injuries that

policies were in force.

I.
I.

on behalf

injury claims

to indemnify Selman

occurred while the

See USLIC v. Selman, 882 F.

___ _____
______

USLIC appeals.

The

subject

Supp. 1163

We affirm.

BACKGROUND
BACKGROUND

The chronology

owned an

of events

apartment house situated

Massachusetts.

is not

at 2

in dispute.

North Avenue,

Selman

Roxbury,

In 1982, he rented apartment #3A to Robin Razza.

On May 6, 1983, Robin gave birth to Carol Ann Razza.

of

lead

1984, a

physician discovered

poisoning.

Massachusetts

On

Child

February 5,

Lead

that Carol Ann

1985,

Poisoning

Agency) found that both the

In the fall

had contracted

an inspector

Prevention

from the

Program

(the

Razzas' apartment and the building's

common areas contained lead paint.

The Agency informed Selman of

its findings.

a fire damaged apartment #3A,

and

Selman,

Shortly thereafter,

responding

to

relocate, moved the Razzas

his tenant's

expressed

to apartment #1A.

He

desire

to

also requested

that the Agency inspect the apartment.

The inspection occurred on March 7, 1985, and disclosed

the

made

presence of lead

arrangements

to

paint.

purge

The Agency

the

entire

notified Selman and he

building

(including

apartment #1A).1

Inspection reports reveal that by March 29 lead

removal in apartment #1A

the pace of

lead removal

was "95% complete."

in the Razzas'

Beyond

that date,

apartment is

unclear:

all that we can tell from the record is that, by September of the

following

year (when the

Razzas departed),

entire building of the residue of lead paint.

Selman had

rid the

At

insurance

periods

coverage

times

material

annually.

commencing May

house with

1985, his

all

4,

Mutual Fire

hereto,

For

four

1981, Selman

purchased

consecutive

insured the

& Marine Insurance

allegiance shifted.2

Selman

Company.

Coincident with

one-year

apartment

In

May of

the expiration

of the latest Mutual Fire policy, Selman bought a one-year policy

from USLIC, effective May 4, 1985.

The next year, USLIC issued a

renewal policy effective May 4, 1986.

for

bodily

maintenance,

injuries

and

use

arising

of the

"bodily injury" as "bodily

by

out

Each policy covered claims

of

Selman's

property.

ownership,

The policies

define

injury, sickness or disease sustained

any person which occurs during the policy period," and define

an "occurrence" as "an accident, including continuous or repeated

exposure

to

conditions,

which

results

in

bodily

injury

or

property damage neither expected nor intended from the standpoint

____________________

1Selman eliminated

the hazard

by scraping lead

paint from

the walls in some locations and covering over lead paint in other
locations.

Since the

method of abstersion is not

important for

present purposes, we refer to both processes as "removal."

2The

record

canceled Selman's

contains

no

coverage or

hint

either

that the change

that

Mutual

in carriers

Fire

was

somehow connected to the discovery of lead paint on the premises.

of the insured."

Long after the second

lapsed, Robin

Ann's

Razza asserted a

lead paint poisoning.

of USLIC's two one-year policies

claim against

Razzas

a declaratory

Massachusetts.3

P.

57.

judgment

in the United States

action against

District Court for

See 28 U.S.C.
___

this claim, USLIC

Selman and

the

the District of

2201-2202 (1988); Fed. R. Civ.

It premised jurisdiction on diversity of citizenship and

the existence of a controversy in

U.S.C.

Carol

Bent on exonerating itself from all

responsibility under its policies in regard to

brought

Selman for

the requisite amount.

See
___

28

1332(a).

In

due course, the parties tried the case to the court

on stipulations

of fact,

documentary submissions, and

the live

testimony of the

district

Selman

Razzas' expert

judge determined

in

respect to

witness, Dr. John

that USLIC

claims

had no duty

for injuries

ingestion of lead paint prior to May 4, 1985

of

its first policy), and

determination on appeal.

USLIC

had

arising

a duty

Graef.

the defendants do

The

to indemnify

resulting

from the

(the inception date

not challenge this

The judge also concluded, however, that

to indemnify

Selman

with respect

to claims

out of Carol Ann's ingestion of lead paint while USLIC's

____________________

3While

pretrial

discovery

Selman to her daughter's

seeking

was ongoing,

Robin

behoof in a Massachusetts

damages for injuries allegedly sustained

Carol Ann's

exposure to

lead paint in

Razza sued

state court,

as a result of

the apartment

building.

That suit is still pending.

policies were

in force, that is,

1987.4

the district court entered

After

from May 4, 1985

until May 3,

a declaratory judgment

to this effect,5 USLIC appealed.

II.
II.

STANDARD OF REVIEW
STANDARD OF REVIEW

We

standard

face a

of review.

preliminary

Citing

dispute as

to the

Pallet v. Gallagher,

applicable

725 F.2d 131,

______

134

_________

(1st Cir. 1984), the appellant insists that, inasmuch as its

claims

require construction of the terms of an insurance policy,

appellate review is plenary.

This generalization oversimplifies

the matter, and, in the end, is wide of the mark.

To

the

be sure, it is

for the court

to determine whether

terms of an integrated agreement are unambiguous and, if so,

to construe them according

to their plain meaning.

See Allen v.
___ _____

____________________

4In reality, the cutoff date is probably September 27,

1986

(when the Razzas moved from 2 North Avenue).

5The
reasoning,
opinion.

district

court's

is not

explicitly

The

holding,

final judgment

while

from

its

the

text of

its

cured this omission.

There,

the

articulated in

obvious

court declared that:

[I]n

regard

to

the

lawsuit

filed against

Livingstone

Selman by Robin Razza, as mother

and next friend of Carol Ann Razza . . .:

1.

The

plaintiff

has

no

indemnify Livingstone Selman with

injuries

to Carol

ingestions

of lead

Ann Razza
paint

duty

to

respect to

resulting from

prior

to May

4,

duty

to

1985;

2.

The

plaintiff

has

indemnify Livingstone Selman with

injuries

to Carol

Ann Razza

ingestions of lead paint

The case is closed.

resulting from

on and after May 4,

1985, and;

3.

respect to

Adage, Inc., 967

___________

Servs. Div. v.
___________

F.2d 695,

698 (1st Cir.

Boston Edison Co., 822 F.2d

__________________

1987);

Robert Indus., Inc.

____________________

(Mass.

1973).

contractual

In this

district court's

differential

answers

findings

of law, and

by

rest

the

evidence as to the

See
___

Cir. 1991).

not

on

trier

meaning of

we review the

ITT Corp. v. LTX

_________
___

However, when the

plain

of

Cir.

407, 409-10

about the

to them de novo.

F.2d 1258, 1261 (1st

199, 202 (1st

291 N.E.2d

sense, questions

district court's answers

extrinsic

v. Spence,
______

provisions are questions

Corp., 926
_____

1992); RCI Northeast

______________

meaning

fact,

parties' intent with

but

derived

on

from

regard to an

uncertain contract provision, appellate review proceeds under the

"clearly erroneous"

202.

standard.

See
___

RCI Northeast,
_____________

at

The same standard pertains whenever the trial court decides

factual matters

rights

in a

that are essential to

particular situation

880 F.2d 575, 576-77 (1st

the

issues

are

dominated, and,

to deference.

on the

See, e.g., Reliance Steel,

___ ____ ______________

In these types

fact-dominated

to that extent, the

them is entitled

1320,

Cir. 1989).

ordinarily

ascertaining the parties'

(though not dependent

meaning of contractual terms per se).

of

822 F.2d

rather

of cases,

than

law-

district court's resolution

See In re Howard, 996 F.2d

___ _____________

1328 (1st Cir. 1993) ("Many cases involve what courts term

`mixed' questions

resolved,

questions

which, if they are to

necessitate combining factfinding

be properly

with an elucidation

of

the applicable

law.

mixed questions usually

degree-of-deference

The standard

of review

depends upon where

continuum:

the

more

applicable to

they fall along

the

fact-dominated

the

question, the more likely it is that the trier's resolution of it

will be accepted unless shown

M.
__

to be clearly erroneous."); Roland

______

v. Concord Sch. Comm., 910 F.2d 983,

___________________

990-91 (1st Cir. 1990)

(similar), cert. denied, 499 U.S. 912 (1991).

_____ ______

These principles resonate here.

to escape

from its contractual obligations

grounds.

taking

First, it

the

denies that

position that

on three alternative

coverage was

discernible

injuries while its insurance policies were in force.

Second, the

with

that, because Carol Ann's injuries

her earlier

1984),

written

Ann

ever triggered,

sustained no

appellant says

Carol

The appellant attempts

ingestion of

they fell outside the

lead paint

scope of its

in 1985 and 1986, respectively).

were bound up

(first diagnosed

in

policies (which were

Both of these defenses

have sizeable factual components, hinging, as they do, on whether

the

evidence shows

relevant

coverage

that discrete

periods.

injuries occurred

Third,

the

during the

appellant says

that,

because

Selman knew about the looming liability on the inception

date of the first

from

policy, the known loss doctrine

insuring against the Razzas'

claims.

defense likewise depends on the facts:

he

knew

it.

At bottom,

then,

USLIC's appeal

Fed. R. Civ.

full

review

and

appellate

potency of this

what Selman knew and when

district court's factfinding;

flower;

The

precludes him

is

challenges the

P. 52(a) applies

circumscribed

by

in

the

jurisprudence of clear error.

This

is of appreciable

review ordinarily heralds a

importance because clear error

rocky road for an appellant.

Under

this standard, "appellate courts cannot presume to decide factual

issues

152

anew."

(1st

precedents

Cumpiano v.
________

Cir. 1990).

ordain,

that

Banco Santander P.R.,

____________________

Rather,

deference

assessment of the evidence."

Moreover, the

evidence

be

paid

rule loses

court's findings

determinations, but are based

52(a) commands,

to

the

and our

trier's

Id. (citing representative cases).

___

clearly erroneous

"when the [lower]

"Rule

902 F.2d 148,

do not

none

of its

rest on

vigor

credibility

instead on physical or documentary

or inferences from other

facts."

Anderson
________

v. City of
_______

Bessemer City, 470

_____________

U.S. 564, 574 (1985); accord In re Tully, 818

______ ___________

F.2d 106, 108-09 (1st Cir. 1987).

In the last analysis,

to upset findings

on

the

whole

of fact or conclusions drawn therefrom unless,

of

the

unyielding belief that a

F.2d at

152.

an appellate tribunal "ought not

As long

record,

[the

judges]

form

mistake has been made."

as the district court's

strong,

Cumpiano, 902
________

rendition of the

record is plausible, our inquiry is at an end.

III.
III.

ANALYSIS
ANALYSIS

We divide

the three grounds of

to the

our analysis

into four segments,

appeal just mentioned a matter

interrelationship of the liability

USLIC's two insurance policies.

adding to

that speaks

ceilings contained in

A.
A.

Was Coverage Triggered?

Was Coverage Triggered?
______________________

Massachusetts law supplies

this

78

diversity case.

(1938).

Under

the basis

for decision

in

See Erie R. Co. v. Tompkins, 304 U.S. 64,

___ ____________
________

Massachusetts

law,

the

insured bears

the

occurred within

the

initial burden

of proving

that

an injury

coverage ambit of the

Tufts Univ.
____________

insurance policy.

See, e.g.,
___ ____

v. Commercial Union Ins. Co.,

___________________________

(Mass. 1993).

Trustees of
___________

616 N.E.2d

68, 74

Once the insured establishes basic risk coverage,

the devoir of persuasion shifts to the insurer to prove a defense

to

coverage, say, the applicability of a policy exclusion or the

insured's

failure

to comply

with

conditions

precedent.

Gusson v.
______

Boston Mut. Life Ins. Co., 95 N.E.2d 670,

__________________________

See
___

672 (Mass.

1950).

The court below understood these rules and applied them

appropriately.

considering

poisoning

After

reviewing the

documentary

Dr. Graef's erudite testimony on

and its manifestations in

evidence

and

the nature of lead

Carol Ann Razza's case, the

court

found that

damages

arose as

apartment

"at least

building

policies.

a portion"

result of

during

USLIC, 882 F.
_____

of Carol

exposure

the

Ann's claimed

to lead

currency

Supp. at 1164.

of

If

paint

the

at the

appellant's

sustainable, this

finding evinces that the coverage trigger had been pulled: Selman

had

that

met his entry-level burden

some part of the

ambit of

by making a

prima facie showing

injury claimed falls

within the coverage

the subject policies.

this finding

hammer

and

Although the

tongs, we

believe

appellant attacks

it

is

adequately

supported by the record.

The nisi prius roll

blood

toxicity levels

(which,

includes a summary of Carol

after lead

first diagnosed, remained abnormally

paint poisoning

Ann's

was

high throughout her stay at

2 North Avenue).

In explaining the significance of the data, Dr.

Graef testified that the sharp increases which occurred from time

to time

(sometimes called

the child's sporadic

showed

and

in

force.

ingestion of

Dr. Graef

occurred during

"spikes") were directly

confirmed

lead paint chips.

that

the interval when the

Judge

Tauro

traceable to

queried Dr.

The

several such

data

episodes

appellant's policies were

Graef

as to

whether

he

regarded

the spikes as "a manifestation of lead that [Carol Ann]

had in her

system" before May

negatively,

indicating

that

4, 1985.

such

levels

reportable."

Moreover,

roentgenographic

evidence demonstrated

additional

chips

of lead

in

the

paint

The witness

were

"spontaneously

doctor's

opinion

that Carol

during

the

responded

the

Ann consumed

currency

of

the

appellant's policies.

The district

court's finding that these

new incidents

caused further injury, see id. at 1165, is also supportable.

___ ___

Dr.

Graef spelled out in considerable detail the effects of ingesting

lead

on

testified

neurological

that Carol

development

Ann had

in

early

suffered brain

childhood,

and

damage, including

"significant gaps" in her auditory and verbal performance, as the

direct

When

result of

Judge Tauro pressed Dr.

between

the

spikes

resulting injuries,

testified,

of

ingesting lead

in

Graef about whether

Carol

Ann's

a tie existed

toxicity levels

and

the doctor responded in the affirmative.

among other things,

each major

while USLIC was on the risk.

_____________________________

ingestion of

her

He

that the predictable consequence

lead paint

10

"probably is

that some

damage

is done

to the

brain," and

that increases

in toxicity

levels measurable by standard tests "reflect[] injury."6

Given this

example,

dialogue and

the appellant neither

certain other insights

impeached Dr.

nor adduced any contradictory evidence

error

and

to the judge's finding

further

injuries

during

Accordingly,

coverage

was

the

relevant

triggered

Graef's testimony

we cannot impute

that Carol Ann

and

for

clear

Razza suffered new

coverage

the

periods.

district

court

correctly shifted the burden to the appellant to demonstrate that

some

contractual

exclusion or

other policy

defense foreclosed

indemnification.

The appellant claims to

over.

The

district court

have carried that burden twice

disagreed.

It

is to those

disputed

defenses that we now turn.

B.
B.

The

defense

The Post-Manifestation Doctrine.

The Post-Manifestation Doctrine.
_______________________________

appellant raises

to coverage

here.

euphemistically terms

same inhibitory effect.

hypothesizes

that

manifests itself

injury

no

contractual

Instead, it

contends that

what it

the "post-manifestation doctrine"

has the

Under the guise of this euphemism, USLIC

when a

disease

process

before an insurance policy

of the same genre should be

original condition

provision as

even if

of a

certain

type

incepts, all future

deemed to relate back to the

the victim incurs

subsequent injury

____________________

6There is nothing unorthodox about these views.

Courts have

found

in other (similar) cases that each ingestion of lead paint

leads

to discrete

N.Y.S.2d

injury.

See,
___

e.g.,
____

USLIC v.
_____

Farley,
______

626

238, 239-40 (App. Div. 1995); General Accident Ins. Co.

_________________________
v. Idbar Realty Corp., 622 N.Y.S.2d 417, 419 (Sup. Ct. 1994).
__________________

11

from continued exposure to the causative agent during the

period.

policy

As applied in this case, the hypothesis holds that if a

person contracts

lead poisoning prior

to the

inception of

the

tortfeasor's insurance policy but continues to be exposed to lead

paint and thereby suffers

further injury while the policy

is in

force,

any claim that she may assert against the tortfeasor will

not be covered because lead poisoning constitutes a single injury

"occurring" before the policy incepted.

As doctrines go, this one has very little in the way of

a pedigree.

anything

The

that resembles

research has

come up

tarry over the

supra
_____

lead paint chips

Graef

such a

hypothesis.

that Carol

cites no

reported case

doctrine,7 and

equally dry.

Part III(A), the

evidence

and Dr.

appellant

In any

As we have

potentially could

event, we

each

cause) discrete

need not

meals" of

policies were in

such ingestion

injury.

see
___

before it compelling

ingested several "big

while the appellant's

testified that

our independent

already indicated,

district court had

Ann Razza

discussing

On this

force,

caused

(or

basis, the

district court

warrantably found

a "clear nexus"

between Carol

Ann's "big meals" and the spikes in her toxicity levels.

882 F. Supp. at

be seen as a

1165.

Each exposure can,

USLIC,
_____

therefore, reasonably

separate, injury-producing occurrence.

No

more is

____________________

7The

appellant does direct us

to an opinion

state court, Hartford Mut. Ins. Co. v. Jacobson,

________________________
________

of a Maryland
536 A.2d

120

(Md. App. 1988), and two unpublished dispositions of trial judges

(one
But

federal and one state), as

"authority" for the "doctrine."

none of these cases involves comparable issues or facts, and

none of them adverts by name to the elusive doctrine.

12

exigible.

C.
C.

The

doctrine

the

appellant

renders

uninsurable

the

next asseverates

risk

that his

further

that

the

injury

to

prior to the

known loss

Carol

apartment building

form.

Ann

inception date of

contained lead

that Carol Ann was suffering from lead poisoning.

argument takes the following

to

of

because Selman knew

initial policy

paint and

The Known Loss Doctrine.

The Known Loss Doctrine.
_______________________

The purpose of

The

insurance is

protect against misfortune by permitting an actor to whom the

law assigns

the risk of a

particular kind of loss

to shift the

burden of it to

the

an institution better able to assume

particular

categories.

risk

through

diversification

See Group Life & Health Ins. Co. v.

___ ____________________________

and manage

across

risk

Royal Drug Co.,

______________

440 U.S. 205, 211 (1979); see also 1 Ronald A. Anderson & Mark S.
___ ____

Rhodes,

1984).

Couch on Insurance (Second)

____________________________

2:7 (rev.

2d ed.

Thus, the presence of risk runs to the very essence of an

insurance contract.

loss

1:3,

has

insurance

spreading.

precludes

already

ceases to

Where there is no risk

occurred

before

serve its socially

of loss

policy

takes

utile purpose

as where a

effect

of risk-

Hence, the law, embodied in the known loss doctrine,

coverage when

the

insured knows

in

advance of

the

policy's effective date that a specific loss has already happened

or is substantially certain to happen.

There are

The

two iterations

doctrine exists both as

of the known

a function of

liability insurance contract and

loss doctrine.

the standard general

at common law.

We

discuss the

13

first iteration briefly, mainly for the sake of completeness.

Since

"occurrence"

as

1966,

the

that

word

insurance industry

is

used

in

has

defined

the standard

an

general

liability policy to

include only accidents that result in bodily

injury or property damage that is "neither

from the

Thomas

standpoint of the

R.

insured."

expected nor intended

See
___

Barry R.

Ostrager &

Newman, Handbook on Insurance Coverage Disputes

__________________________________________

8.03[a] (7th

ed. 1994); 11 Couch,

supra,
_____

44:289.

Under this

policy provision (which graces the policies in question here), it

has been held

substantial

that if an insured

probability that certain

from his acts or

meaning

. that there was

City of Carter Lake v.

____________________

brief a contract-based

within the

policy, and, hence, no coverage.

Aetna Cas. & Sur. Co.,

______________________

Cir. 1979).

consequences" would result

omissions, there is no "occurrence"

of a general liability

1058-59 (8th

"knew . .

In this case,

coverage defense on

604 F.2d

1052,

the appellant did

not

appeal, and at

oral

argument appellant's counsel expressly disclaimed any reliance on

such a

defense.

Accordingly, we do not pursue this iteration of

the known loss doctrine.

The common

part of the

law version of

warp and woof of

the known loss

doctrine is

Massachusetts insurance law.

The

Massachusetts Supreme Judicial Court (SJC) recently inspected its

composition in SCA Servs., Inc.

________________

N.E.2d 394, 397-98 (Mass.

site in

v. Transportation Ins. Co.,

_______________________

1995).

chemical

waste

nuisance

action, alleging that

There, the insured

Illinois.

Local

residents

its activities on

14

646

operated a

brought a

the site were

contaminating the local water supply, causing subsidence, filling

the air with dust,

and permitting the escape of

See Village of Wilsonville

___ ______________________

828-30 (Ill.

1981).

v. SCA Servs., Inc., 426

________________

The trial

N.E.2d 824,

court declared the site

public nuisance and closed the plant.

affirmed.

noxious gasses.

to be a

The Illinois Supreme Court

See id. at 827.

___ ___

Subsequently,

SCA

purchased

an

insurance

policy.

Several of the same residents then brought a class action seeking

damages for personal injuries suffered

to the conditions

limned in

sought a declaration

as the result of exposure

the initial nuisance

that its insurer had

the class action.

that,

adjudication

the prior

SCA

a duty to defend

indemnify with respect to

because

action.

The

and

SJC determined

in Illinois

put

SCA on

actual notice that the class members had suffered injuries as the

result

of

the

shutdown of the

liability

policy.

same conduct

site, it

for their

SCA,
___

and

conditions

that

had "full knowledge"

damages prior

646 N.E.2d at 398.

of its

to purchasing

Thus,

led to

the

probable

the insurance

the known loss doctrine

barred coverage inasmuch as the concept of insurable risk becomes

fiction

probability

Id. at 397.

"where

an

insured

knows

there

is

substantial

that it will suffer or has already suffered a loss."

___

Before we

can

measure the

specifications of the common

we

case

against

law doctrine as elucidated in

must address two threshold questions.

standard

at bar

objective or subjective

the

SCA,
___

The first concerns the

by which the insured's state

15

of

mind

is

to be

gauged.

Though

Massachusetts

law

is not

explicit

on the point, there is spoor

strongly

suggests the use of a

whether

a given

loss

was

"known."

a policy, that

See
___

id.
___

(stating

almost

there is a

identical

that

. where an insured knows, when

substantial probability

that it will suffer or has already suffered a loss").

language is

SCA
___

subjective standard to determine

"insurance risk is eliminated . .

it purchases

for the cognoscenti.

to

that

used

(and

The quoted

more

fully

explicated) in Quincy Mut. Fire Ins. Co. v. Abernathy, 469 N.E.2d

_________________________
_________

797

(Mass.

1984).

There,

iteration of the known loss

subjective test.

cases

relied

on

with

the

contract-based

doctrine, the SJC explicitly adopted

See id.
___ ___

in SCA
___

dealing

at 800.

deal

with

Moreover,

insureds

SCA and all the

___

that had

actual

knowledge of a probable

loss prior to securing coverage.8

e.g., Bartholomew v. Appalachian Ins. Co., 655 F.2d 27,

____ ___________
_____________________

Cir. 1981) (insured had

on its

actual knowledge of probable

own intentional misuse

of a

machine that

See,
___

28 (1st

loss based

had on

prior

occasions caused injury); Gloucester v. Maryland Cas. Co., 668 F.

__________
_________________

Supp.

394, 403

probable

closure of

Corp.
_____

(D.N.J. 1987) (insured

loss due

to environmental

its landfill

had actual

contamination based

by state authorities);

v. Liberty Mut. Ins. Co., 607 N.E.2d

______________________

1992) (insured

had

actual knowledge

knowledge of

of

on the

Outboard Marine
_______________

1204, 1209-11 (Ill.

probable loss

due

to

____________________

8The

SJC

repeatedly

emphasized

the

presence

of

actual

knowledge both in the case before it and in its discussion of the

precedents on

which it relied.

See, e.g.,
___ ____

SCA, 646 N.E.2d

___

at

397, 398.

16

environmental

administrative

contamination

order

citing

based

it

on

as

receipt

the

of

an

EPA

source

of

the

contamination).

Guided by these clearly visible signposts, we hold that

the

applicability vel
___

non of
___

the known

loss doctrine,

in its

common law form, depends on the insured's actual knowledge of the

looming loss.

The test, therefore, is subjective, not objective.

The remaining threshold issue

persuasion.

this

The

issue on

SJC apparently

the

relates to the devoir of

placed the burden

insurance company

in

a suit

of proof

invoking

on

the

contract-based interaction of the known loss doctrine, see, e.g.,

___ ____

City of Newton
_______________

v.

Krasnigor, 536
_________

N.E.2d 1078,

1989), and we see no reason why the court would

tack in allocating the

in

the

common

generally

invalidate

place

law

burden of proof on the

setting.

the burden

or avoid the

grounds, such as when an

Moreover,

of proof

on

application of a

1081-82 (Mass.

take a different

counterpart issue

Massachusetts

the party

courts

seeking to

contract on analogous

insurer raises the defense of

fraud in

the procurement of insurance.

See, e.g., Roger Williams Grocery

___ ____ _______________________

Co. v. Sykes, 258 N.E.2d 553, 555 (Mass. 1970).

___
_____

Finally, the SJC

appears to have treated the known loss doctrine as an affirmative

defense

in SCA, mimicking a majority of other courts, see, e.g.,

___
___ ____

Gloucester, 668 F. Supp.

__________

at 402-03, and the usual

rule, honored

by Massachusetts as by most jurisdictions, is to place the burden

of proving affirmative defenses on the

19

Couch,
_____

supra,
_____

79:368

party asserting them, see

___

(discussing

17

various

affirmative

defenses and assigning burden of proof to insurer).

For these

law,

the

applies

reasons, we

common law

when

the

effective date of

version of

insured

common law

affirmative

Accordingly,

defense

the

the

actually

under Massachusetts

known loss

knows

on

the policy either that a loss

that one is substantially

that the

hold that,

certain to occur.

version of

to

insurer

insured's actual knowledge.

suit

bears

the

or

before

we hold

doctrine is

Massachusetts

burden

the

has occurred or

Relatedly,

the known loss

on

doctrine only

of

an

policy.

proving

the

The district

court

seems to

have

these

rulings.

It treated the

defense.

After reviewing the evidence, it found the defense not

proven.

known loss doctrine

anticipated

See USLIC, 882 F.

___ _____

Supp. at 1164.

as an affirmative

The court concluded

that a "significant portion" of the injuries asserted arose after

May 4, 1985, and therefore could

that date.

to the

not be classified as "known" on

Extrapolating from this finding, the court held that,

extent Carol

Ann's injuries

stemmed from

ingestions of

lead paint occurring after May 4, 1985, but before the expiration

of appellant's second (and last) policy, Selman had not sought to

insure against a known loss.

for

the court

to come

See id.
___ ___

down the

While there was ample room

other way,

crucial finding withstands scrutiny.

we think

that its

To be sure, the

knew

paint.

by

the spring

matter is not open

of 1985

that

and shut.

his building

Selman

contained lead

He also knew that Carol Ann Razza was suffering from lead

18

poisoning.

But

necessarily

prove

Three

these two

facts, naked

that Selman

insured

critical elements are lacking.

and unadorned,

against

a known

do not

loss.

First, there is nothing in

the record to show

building

definitively that the lead paint

constituted the

(and, more to

source of

the point,

Carol Ann's

that Selman knew

in Selman's

lead poisoning

of the

connection).

Without such a showing,

the known loss doctrine does

Second, nothing

record establishes that

knew that

in the

Carol Ann would

not apply.

Selman actually

suffer further injury

from continued

exposure to lead paint, and the trial court found in essence that

he lacked any such appreciation of the

Third, by late March of 1985

USLIC

in

which

Selman could easily

exposed

six weeks before

policies became effective

apartment

to

any

lead

disease process.

have assumed

significant

dose

the first of the

the Razzas were

removal was

at

least

that Carol Ann

of

lead

See id.
___ ___

living in an

95% complete.

was no

paint,

and

longer

would

therefore suffer

no

further

injury.

These

are

not

merely

in

the

record

theoretical possibilities.

The

deposition

testimony

contained

strongly suggests that Selman had not drawn any connection in his

mind between the

ongoing removal of lead paint at 2 North Avenue

and the future medical

portended to

that

risks that the condition of

Carol Ann Razza.

testimony, see Anthony v.

___ _______

the premises

The court had the right to credit

Sundlun, 952 F.2d

_______

603, 606 (1st

Cir. 1991) (explaining that in a bench trial, credibility choices

are

for the trier); FDIC

____

v. La Rambla Shopping Ctr., Inc., 791

______________________________

19

F.2d 215, 222

familiar

virus,

diseases, once

to name a few

repeated

the

(1st Cir. 1986)

(similar), especially since

contracted

do not

measles,

many

mumps, the

HIV

result in further injury based on

exposure to the causative

agent.

There

is nothing in

record to show that Selman knew that, unlike these diseases,

lead poisoning was a cumulative disease.

The

utter

district court's

lack of any evidence

misrepresent the

finding is

strengthened

that Selman attempted

presence of lead

paint in his

by the

to conceal or

apartment house

when

he

applied

appellant's

for

insurance.

application form did

the appellant was the author of

Co.
___

v. Aetna Cas. & Sur. Co.,

_____________________

It

does

not

knowledgeable

buildings

seem

about

unfair

the

To

extent

not request

that

the

such information,

its own misfortune.

See Vappi &

___ _______

204 N.E.2d 273, 276 (Mass. 1965).

to

hold

prevalence

and hardened by the

the

an

of

insurance

lead

rough and tumble

paint

company,

in

older

of the business

world, to the consequences of which King Solomon long ago warned.

See Proverbs 11:15 ("He that is surety for a stranger shall smart
___

for it.").

The short of it is that the appellant had the burden to

prove that its

insured knew of a probable loss, and the district

court's finding that

he did not, viewed

in light of the

record

evidence, is not clearly erroneous.

The

appellant

attempts to

steer

different channel by way of two expedients.

treat this case

the

appeal into

First, it asks us to

and SCA as a matched pair of ponies.

___

But SCA is
___

20

horse

of

notification

much

that

different

Selman's

hue.

apartment

The

Agency's

building

informal

contained lead

paint

is at

nuisance.

finality

Moreover,

a considerable

The

and

remove from

agency action

the

preclusive

here

effect

the nature and causes

class action against SCA

prior nuisance suit.

the adjudication

at

issue

of

lacks both

court

of the injuries

the

judgment.

alleged in the

were identical to those alleged

As the SJC observed, the

of a

in the

insured actually

knew on the basis of the earlier litigation that the class action

plaintiffs claimed to have been injured

those claims

had already

and it also knew

been adjudicated (unfavorably

The scenario here is not the same.

The Agency

that

to it).

in this case only

informed Selman that his apartment building contained lead paint;

it did not conclude that any particular injuries, much less Carol

Ann's injuries, had been caused by the lead in Selman's building.

In a nutshell, accepting

a matter of law,
_________________

situation

the

known

the appellant's view that, as

__

loss

doctrine

this

would take us several steps beyond the holding in SCA.

___

We

are unwilling to take those steps.

to

suit

its

preference to

grouse

encompasses

if a

own

convenience,

The appellant, presumably

selected

an available

state forum.

federal court,

sitting in

It

federal

has

forum

in

no right

to

diversity jurisdiction,

declines to push state law past previously established frontiers.

See
___

Martel v.
______

Porter
______

Stafford, 992
________

F.2d 1244,

v. Nutter, 913 F.2d 37, 41

______

1247 (1st

Cir. 1993);

(1st Cir. 1990).

The organic

growth of state law is best left to state courts, particularly in

21

areas that

traditionally have

by, the states.

The

court's

knew

of his

related

to

and regulated

Insurance is such a field.

appellant's

factfinding

applied the

been committed to,

second effort

involves

wrong legal

its

to skirt

contention

that

standard in determining

likely liability

to Carol

future ingestions

of lead

the

court

whether Selman

Ann Razza

paint.

the district

for injuries

This

gambit is

conceptually

predicated

robbed

203.

to

sound

upon, or

in

the

sense

that

induced

by, a

misapprehension

of its customary vitality."

"finding

RCI Northeast,
_____________

of

of law

fact

is

822 F.2d at

The concept is inoperative, however, when a party attempts

play the

artful

Dodger, cf.
___

Charles Dickens,

Oliver Twist
____________

(1838), recasting its objections to the district court's findings

of fact as disputes about the governing law.

See Reliance Steel,

___ ______________

880

may not

F.2d at

577 (declaring

that litigants

dressing factual disputes in `legal' costumery").

"profit by

So it is here.

The appellant derides the district court's finding that

Selman

did not know Carol

after May 4, 1985.

is

Ann Razza would

sustain new injuries

Embedded in this finding,

appellant claims,

the legal benchmark by which the district court evaluated the

evidence

in

determining

Selman's

state of

knowledge.

This

benchmark is wrong, appellant postulates, because the substantive

law that

knowledge

governs

Selman's putative

but on strict liability.

liability is

based not

on

See Bencosme v. Kokoras, 507

___ ________
_______

N.E.2d 748, 749 (Mass. 1987).

This

is

a red

herring.

22

Whether Massachusetts

law

renders

Selman

irrelevant to

experience a

strictly

whether Selman

loss

as

the

continued exposure to lead

is

the

liable

answer

to

for

knew he

Carol

Ann's

damages

was virtually

inevitable result

of

is

certain to

his

tenant's

paint during the policy periods.

this pivotal

question

that

It

determines the

applicability of the known loss doctrine to this case

and that

question, as we have said, is predominantly a question of fact.

To

say

more would

be

district court's findings of fact

supererogatory.

Because

the

are not clearly erroneous, its

rejection of the appellant's known loss defense must be upheld.

D.
D.

Applicability of Policy Limits.

Applicability of Policy Limits.
______________________________

In this instance, the appellant issued two

one-year policies to

Selman.

consecutive

Each policy contains a stipulation

limiting the

insurer's liability

and each policy states

conditions" is

complaint for

a single "occurrence."

declaratory relief, the appellant

vis-a-vis the Razza

_________

occurrence,"

that "continuous or repeated exposure

to be treated as

it were found to have

any obligation at all to

claims, then

liability contained in its two

as to

to $300,000 "per

cap the insurer's

to

In its

prayed that, if

indemnify Selman

in such event,

the limits

of

policies should be interpreted so

total potential liability

at $300,000.

The district court did not entertain this prayer for relief.

appellant now invites us to do so.

We decline the invitation.

In general, declaratory relief is

e.g., Ernst & Young

____ _____________

F.3d 530, 534 (1st

The

discretionary.

See,
___

v. Depositors Economic Protection Corp., 45

_____________________________________

Cir. 1995); El Dia, Inc.

v. Hernandez Colon,

____________

_______________

23

963 F.2d 488, 493-94 (1st Cir. 1992).

Thus, we view the district

court's withholding of a declaration in regard to the appellant's

"policy

limit" question

process, we focus our

through

a deferential

inquiry on the whole of

confronting the district court.

glass.

In the

the circumstances

See El Dia, 963 F.2d at 492.

___ ______

The

trial judge

declining to declare the

courts should

v. Fair 808
____

did

not spell

out

his reasons

parties' rights in this regard.

articulate grounds for their

F.2d 163, 165-66

for

While

actions, see Pearson

___ _______

(1st Cir. 1986) (per

curiam), the

district court's failure to do so here is not fatal, as the basis

for

the

declination

seems

evident.

The

insurance

policies

contain no definition of the operative terms (e.g., "continuous,"

"repeated," "conditions");

were many conditions

exposed and

to which

which could

ingestion of lead paint.

in the record concerning

ingested by

Carol Ann

and the

record

suggests that

Carol Ann Razza

have been

sources

might have

of her

Consequently, the lack

the lower

court

been

deleterious

of development

the possible sources of the

placed

there

at so

lead paint

great

disadvantage

position to

that it reasonably could conclude that it was in no

rule

intelligently

on

the

appellant's

request.9

____________________

9Furthermore, the appellant made no compelling demonstration

of a need for the declaration.
that

Carol

Ann's claim

For instance, there is no showing

against

Selman

for the

injuries

sustained within the coverage period could support

more than $300,000,
concerned, the
academic.

and, thus,

policy limit

The Declaratory

insofar as the

question may

a recovery of

trial court

have

F.2d

at

494

Judgment Act notwithstanding,

(cautioning

declaratory judgments

when the

that

courts

need is remote

was

appeared to

have no obligation to answer hypothetical questions.

963

she

should

be

courts

See El Dia,
___ ______
not

issue

or speculative);

Washington Pub. Power Supply Sys. v. Pacific N.W. Power Co., 332
__________________________________
______________________

24

Accordingly, the

court acted within the realm

in refusing the declaration.

U.S. 476, 478-79 (1971)

judgment on the

of its discretion

See, e.g., Askew v.

___ ____ _____

Hargrave, 401
________

(cautioning against grant of declaratory

basis of sparse

and inadequate record);

Public
______

Affairs Assocs., Inc. v. Rickover, 369 U.S. 111, 112 (1962) (per
______________________
________

curiam)

(similar); A. L. Mechling Barge Lines, Inc.

__________________________________

v. United
______

States, 368 U.S. 324, 330-31 (1961) (similar).

______

IV.
IV.

CONCLUSION
CONCLUSION

We need go no further.

This case pivots on

the facts,

not on the

law

trial may not

and factual issues that are resolved in a bench

freely be

relitigated on appeal.

Discerning

error, we hold the appellant to its contractual duty.

Affirmed.
Affirmed.
________

no

____________________

F.2d 87, 88 (9th Cir. 1964) (similar).

25