United States District Court, E.D. Pennsylvania
March 31, 2004.
ADAM BROWN, d/b/a ILIAD ANTIK, Plaintiff,
ZURICH-AMERICAN INSURANCE CO., Defendant
The opinion of the court was delivered by: JAMES KELLY, Senior District Judge
MEMORANDUM AND ORDER
Presently before the Court is a Motion for Summary Judgment filed by
Plaintiff Adam Brown d/b/a Iliad Antik ("Plaintiff") seeking judgment as
a matter of law pursuant to Federal Rule of Civil Procedure 56(c) that
Defendant Zurich-American Insurance Company ("Defendant") must provide
coverage for Plaintiff's loss pursuant to the terms of a 12-month
all-risk insurance policy (the "Policy") issued by Defendant to
Plaintiff. Plaintiff is in the business of selling antiques and other
goods, and suffered a loss of its goods stored in a second floor workshop
in Prague, Czech Republic as a result of water damage. Defendant denied
Plaintiff's claim based on a "Territorial Limits" provision contained in
the Policy that excluded coverage in "the former Iron Curtain countries."
Plaintiff argues that the exclusionary provision does not apply in this
matter because its loss occurred in the Czech Republic, a country that
was born in 1993, after the fall of the Iron Curtain and, thus,
it cannot be considered a former Iron Curtain country. Plaintiff also
argues that, even if the Czech Republic can be considered a
former Iron Curtain
country, judgment in favor of coverage must be rendered to avoid an
absurd result. For the following reasons, Plaintiff's Motion for Summary
Judgment is DENIED.
Plaintiff is in the business of selling antiques, fine arts and other
goods from its principal location at 237 East 58th Street in New York
City. Plaintiff specializes in antiques known as Biedermeier Furniture,
which was popular more than 150 years ago in Austro-Hungary,
specifically, in and around the City of Prague. Plaintiff obtains most of
its inventory from residents living in and around Prague who possess such
furniture in various states of disrepair. Plaintiff's employees gather
this furniture in Prague and ship large parcels of it to their New York
City showroom. In January 2002, Plaintiff leased a workshop and holding
facility in Prague where it restores the furniture to museum quality
before shipping the furniture to New York City.
Previously, Plaintiff sought casualty insurance from his Pennsylvania
insurance agent, the Robert J. McCallister Agency, Inc. ("McCallister"),
to cover both consigned and purchased goods while in Plaintiff's custody
and in transit. McCallister enlisted the New York broker, DeWitt Stern
Group, Inc. ("DeWitt"), to obtain the coverage and, on or about December
26, 2001, Plaintiff was issued the Policy, No. 1M3501568-00, by
The Policy provided coverage for up to one million dollars for goods
damaged "[w]hile in the custody and control of the Insured or while
carried by any member of the Insured's firm or in transit to or from or
while at any conventions, shows or exhibitions and auctions worldwide."
(Pl.'s Ex. C, Declarations Page ¶ 8.) The Policy also contained a
form entitled "Antique and Fine Arts Dealers Wording," which set forth
"Territorial Limits," including the following limitation:
The Property insured is covered while at the
Insured premises and/or in transit and/or
exhibition and/or otherwise anywhere in the world
excluding the former Iron Curtain
countries subject to the limits defined in
Clause 4 below.
(Pl.'s Ex. D, Antique and Fine Arts Dealers Wording ¶ 3
(emphasis added).) The Policy does not contain any other provisions
defining the phrase "former Iron Curtain countries" or listing the
specific countries intended for inclusion in this phrase.
On or about August 12, 2002, a one-in-five-hundred-year flood occurred
in Prague, damaging approximately two million dollars worth of inventory
on the second floor of Plaintiff's Prague workshop. Plaintiff timely
submitted a claim to Defendant and, in a letter dated October 11, 2002,
Defendant denied Plaintiff's claim based on the "former Iron Curtain
countries" exclusion contained in the Policy.
Plaintiff brought the instant action against Defendant in this Court
seeking to recover for the loss of goods stored in the
second floor workshop in Prague, Czech Republic as a result of the
water damage.*fn1 Plaintiff now moves for summary judgment that it
should be entitled to coverage for its loss pursuant to the Policy issued
by Defendant. Defendant responded, and Plaintiff replied thereto.
II. STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 56(c), summary judgment is
appropriate "if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56
(c). In resolving a motion for summary judgment pursuant to Rule 56, the
Court must determine whether "the evidence is such that a reasonable jury
could return a verdict for the nonmoving party." Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). The evidence of the
nonmoving party is to be believed, and the district court must draw all
reasonable inferences in the nonmovant's favor. Id. at 255.
Credibility determinations, the weighing of the
evidence and the drawing of legitimate inferences from the facts
are jury functions, not those of a judge. Id.
Where the nonmoving party bears the burden of proof at trial, the party
moving for summary judgment may meet its burden by showing that the
evidentiary materials of record, if admissible, would be insufficient to
carry the nonmovant's burden of proof at trial. Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). Once the moving party satisfies
its burden, the burden shifts to the nonmoving party, who must go beyond
its pleadings, and designate specific facts by the use of affidavits,
depositions, admissions or answers to interrogatories showing that there
is a genuine issue for trial. Id. at 324.
Interpretation of an insurance policy is a question of law that a court
may resolve on a motion for summary judgment. Reliance Ins. Co. v.
Moessner, 121 F.3d 895, 900 (3d Cir. 1997); Harleysville
Insurance Company v. Aetna Casualty and Surety Insurance Company,
795 A.2d 383, 385 (Pa. 2002). The parties do not dispute that
Pennsylvania law governs this case.
Before addressing the merits of Plaintiff's arguments, we briefly turn
to the history of the term, "Iron Curtain," which the parties do not
dispute. Winston S. Churchill popularized the term "Iron
Curtain" in a speech he gave at Westminster College in
Fulton, Missouri on March 5, 1946, after being conferred
an honorary degree there. See Sinews of Peace (Iron Curtain)
Speech published by The Churchill Centre available at
introduced the term to describe the political, military and ideological
divide between Western Europe and the Soviet Bloc*fn2 from approximately
1945 to 1990, which ideological border extended approximately 1,600 miles
from Travemuende, Germany to Trieste, Italy. (See Def.'s Ex. 7,
Map of the Iron Curtain from 1945-1990, Iron Curtain Revisited
The parties also do not dispute the history of Czechoslovakia, that it
was among the Iron Curtain countries, formed following the First World
War by a merger of the closely-related Czechs and Slovaks of the former
Austro-Hungarian Empire, and fell within the Soviet sphere of influence
after the Second World War. (Pl.'s Ex. G, The World Factbook
Republic, available at
following the collapse of the Soviet authority in 1989, Czechoslovakia
regained its freedom through a peaceful "Velvet Revolution" and, on
January 1, 1993, underwent a "velvet divorce" into its two national
components, the Czech Republic and Slovakia. (Id.)
In support of summary judgment that Plaintiff's loss in the Czech
Republic is covered by the terms of the Policy, Plaintiff argues that the
phrase "former Iron Curtain countries" does not apply here, to a loss
that occurred in the Czech Republic, a country that did not exist at the
time of the Iron Curtain. Plaintiff also argues that, even if
the language of the exclusionary provision is clear and unambiguous to
include the Czech Republic in the phrase "former Iron Curtain countries,"
this Court should nevertheless find in favor of coverage to avoid an
absurd result. Defendant responds that the "Territorial Limits" language
is not capable of more than one reasonable interpretation and, further,
that Plaintiff's action must be dismissed for its failure to join
indispensable parties pursuant to Federal Rule of Civil Procedure 19. We
address the parties' arguments in turn.
A. Whether Contract Language Is Clear and Unambiguous
The narrow issue before the Court is whether the term "former Iron
Curtain countries" used in an exclusionary provision of an insurance
contract is clear and unambiguous such that Plaintiff is precluded from
coverage for a loss that occurred in the City of Prague, Czech Republic.
As discussed above, the parties do not dispute that Czechoslovakia was
among the Iron Curtain countries and that it ceased to exist as a country
in 1993, nor do they dispute that the Czech Republic, formed in 1993, is
not now an Iron Curtain country.
Instead, Plaintiff argues that, since its loss occurred in a
country that did not come into existence until after the fall of
the Iron Curtain, the phrase "former Iron Curtain country" cannot have
been contemplated to apply to the Czech Republic. Defendant counters that
coverage pursuant to the terms of the Policy is clearly precluded since
Plaintiff suffered its loss in the City of Prague, which, while currently
located in a country now known as the Czech Republic, is also the former
capital of Czechoslovakia, an indisputable former Iron Curtain country.
Under Pennsylvania law, the task of interpreting an insurance contract
is generally performed by a court rather than by a jury. Standard
Venetian Blind Co. v. American Empire Ins. Co., 469 A.2d 563, 566
(Pa. 1983). A court must ascertain the intent of the parties as
manifested by the language of the written agreement, and where the policy
language is clear and unambiguous, the court must give effect to the
language of the
contract. The Travelers Casualty & Surety Co. v.
Castegnaro, 772 A. 26. 456, 459 (Pa. 2001). Contractual
language is ambiguous "if it is reasonably susceptible of different
constructions and capable of being understood in more than one sense."
Hutchison v. Sunbeam Coal Co., 519 A.2d 385, 390 (Pa. 1986). A
court, however, will not distort the meaning of the language or resort to
a strained contrivance in order to find an ambiguity. Steuart v.
McChesney, 444 A.2d 659, 663 (Pa. 1982). If a material term is not
defined, it is to be construed according to its natural, plain and
ordinary meaning. Lititz Mutual Insur. Co. v. Steely,
785 A.2d 975, 980 (Pa. 2001). Furthermore, where an insurer relies on a policy
exclusion as the basis for its denial of coverage, the insurer has
asserted an affirmative defense that it bears the burden of proving.
Madison Construction Co. v. The Harlevsyille Mutual Insur.
Co., 735 A.2d 100, 106 (Pa. 1999).
Here, the Policy neither sets forth a definition of the phrase "former
Iron Curtain countries," nor enumerates the countries contemplated by
that phrase. Nevertheless, the parties do not dispute the origin or the
meaning of the term "Iron Curtain," or the geographic scope of that
ideological border. Rather, the ambiguity alleged by Plaintiff seems to
stem from the meaning of the words "former" and "country." Accordingly,
we interpret the remaining words in the phrase, "former Iron Curtain
countries," by invoking the canon of construction providing that words of
common usage in an insurance policy are to be construed
in their natural, plain, and ordinary sense. See Easton v.
Washington County Ins. Co., 137 A.2d 332, 335 (Pa. 1957). Thus, we
inform our understanding of these words by considering their dictionary
definitions. See Madison Construction Co., 735 A.2d at 108.
Webster's Ninth New Collegiate Dictionary provides the following
relevant definitions for the word "former:" "coming before in time,-"
"of, relating to, or occurring in the past;" and "having been
previously." Webster's Ninth New Collegiate Dictionary 485 (9th
ed. 1991). The relevant definition for "country" is "a political state
or nation or its territory." Id. at 298 (emphasis
added). As discussed above, the phrase, "former Iron Curtain countries,"
was found in the exclusionary provision of the Policy entitled
"Territorial Limits." "Territory" is defined, in relevant part, as "a
geographical area belonging to or under the
jurisdiction of a governmental authority." Id. at 1218
A reasonable interpretation of the phrase "former Iron Curtain
countries," located in the "Territorial Limits" section of the Policy,
then, is a geographic one that encompasses all of the territory
previously occupied by the Iron Curtain nations, of which Czechoslovakia
was indisputably one. Plaintiff concedes that in the place of the former
Czechoslovakia are two countries: Slovakia with its capital city of
Bratislava, and the Czech Republic with its capital city of Prague.
(See Pl.'s Ex. G.)
This interpretation, where the geographic scope of former
Czechoslovakia includes both the Czech Republic and Slovakia, requires a
determination that the Czech Republic derived from the geography of an
Iron Curtain country and is, thus, itself, a "former Iron Curtain
Examining the same phrase grammatically, we arrive at the same
conclusion that the Czech Republic is a "former Iron Curtain country."
The word, "former," used here to modify the phrase "Iron Curtain
country," or simply the word "country," means "coming before in time" or
"having been previously." Putting the words together, we understand the
phrase, "former Iron Curtain country," to include any political state
that was previously an Iron Curtain country, without regard for what form
that political state is in now. The Czech Republic, as discussed above,
was not fashioned from whole cloth, but derived from the divorce of the
Czechs and the Slovaks that made up Czechoslovakia. The Czech Republic,
then, was previously or at a time in the past, Czechoslovakia, an Iron
Against this backdrop, Plaintiff is hard-pressed to advance its
strained interpretation that the Czech Republic, simply because it did
not exist in its current geographic or political form before the fall of
the Iron Curtain, is not formerly known as Czechoslovakia, an
indisputable Iron Curtain country. Plaintiff's argument fails to persuade
this Court that the phrase "former Iron Curtain country" is ambiguous and
capable of more
than one reasonable interpretation, and we will not strain to
contrive some other seeming reasonable interpretation of the phrase to
find an ambiguity. Whether examined geographically or grammatically,
there is only one reasonable interpretation of the phrase "former Iron
Curtain countries," and we find that the Czech Republic is a "former Iron
Curtain country" as contemplated by the phrase contained in the
exclusionary provision of the Policy. Accordingly, judgment as a matter
of law is inappropriate here, and we deny Plaintiff's Motion for Summary
B. Whether Plaintiff's Complaint Should Be Dismissed
In its response to Plaintiff's Motion for Summary Judgment, Defendant
contends that Plaintiff's Complaint should be dismissed pursuant to
Federal Rule of Civil Procedure 19 for failure to join "indispensable
parties."*fn4 Specifically, Defendant argues that Plaintiff never dealt
directly with it, but, rather, with McCallister, a local broker in
Pennsylvania, who, in turn, passed on Plaintiff's application for
insurance to DeWitt, who acted as Defendant's agent for placing the
Policy, and that these parties are indispensable parties. Plaintiff
responds to Defendant's contentions in its Reply, explaining that neither
McCallister nor DeWitt is a necessary party.
Federal Rule of Civil Procedure 12 states that a defense of failure to
join a party indispensable under Rule 19 may be made
in any pleading permitted or ordered under Rule 7(a),*fn5 or by
motion for judgment on the pleadings, or at trial on the merits.
Fed.R.Civ.P. 12(h)(2). Here, Defendant argues its defense of failure to join
an indispensable party in a response to Plaintiff's summary judgment
motion, rather than in the manner prescribed by Rule 12. Accordingly, we
do not address the merits of Defendant's defense at this juncture.*fn6
For the foregoing reasons, Plaintiff has failed to meet its burden of
demonstrating that judgment as a matter of law is warranted in this
matter and, accordingly, Plaintiff's Motion for Summary Judgment is
AND NOW, this day of March, 2004, in consideration of the
Motion for Summary Judgment (Doc. No. 5) and Memorandum of Law in Support
of Summary Judgment (Doc. No. 4) filed by Plaintiff Adam Brown d/b/a
Iliad Antik ("Plaintiff"), the Memorandum in Opposition filed by
Defendant Zurich-American Insurance Company (Doc. No. 8), and Plaintiff's
Reply thereto (Doc. No. 9), IT IS ORDERED that Plaintiff's
Motion for Summary Judgment is DENIED.