United States Court of Appeals For the First Circuit

No. 19-1826

NEWTON COVENANT CHURCH, GARRETT SMITH, CARMEN ALDINGER, ANDERS BROWNSWORTH, THOMAS DEVOL, HAROLD JONES, DORIS KELLOM, KRISTEN LUCKEN, ROGER MARK, ROSELIND PICARD, DANIEL ROMAINE, BEATRICE YANKEY,

Plaintiffs, Appellants,

v.

GREAT AMERICAN INSURANCE COMPANY,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Richard G. Stearns, U.S. District Judge]

Before

Lynch, Circuit Judge, Souter, Associate Justice, and Lipez, Circuit Judge.

Kimberly L. Wehle, with whom Miller Friel, PLLC, Robert J. Gilbert, and Latham & Watkins, LLP were on brief, for appellants. Ashly Scheufele, with whom Barry S. Pollack and Pollack Solomon Duffy LLP were on brief, for appellee.

April 10, 2020

 Hon. David H. Souter, Associate Justice (Ret.) of the Supreme Court of the United States, sitting by designation. SOUTER, Associate Justice. Plaintiffs Newton Covenant

Church and its individual officers appeal from a judgment

dismissing their breach-of-contract action against Defendant Great

American Insurance Company. We affirm.

I

Newton Presbyterian Church (NPC) is a member church of

a national Presbyterian denomination known as the Presbyterian

Church (USA) (PCUSA). On January 15, 2017, a majority of NPC's

members voted to withdraw from PCUSA and to affiliate with a non-

Presbyterian organization: the Evangelical Covenant Church. The

withdrawing members called themselves the "Newton Covenant Church"

(NCC).

On March 17, 2017, NPC and the Presbytery of Boston1

brought suit in Suffolk Superior Court against NCC and those

individuals chosen to act as its officers, alleging trespass and

conversion. According to the complaint, the NCC and its officers

had succeeded in unlawfully exerting control over NPC real

property, as well as NPC bank accounts, following a dispute over

PCUSA's "progressive stances" on same-sex marriage and the

ordination of gay, lesbian, bisexual and transgender ministers.

App. 41. The complaint alleged that the "break-away" group had

rejected the Presbytery's authority to resolve the ecclesiastical

1The Presbytery of Boston governs PCUSA member churches in the greater Boston area.

- 2 - schism, and instead conducted a "vote" not authorized under the

PCUSA's Constitution. App. 42-43. Among other things, NPC and

the Presbytery sought a declaratory judgment that NPC owned church

property at 75 Vernon Street, in Newton, Massachusetts.

On March 23, 2017, the group known as NCC submitted

documentation to the Secretary of the Commonwealth that resulted

in changing the congregation's name from "Newton Presbyterian

Church" to "Newton Covenant Church." It then submitted a notice

to the Great American Insurance Company (GAIC) requesting a defense

in the Suffolk Superior Court action under a $1 million Directors

and Officers insurance policy (Policy). Acknowledging that the

named insured under the Policy was NPC, not NCC, the notice

asserted that NCC was, as a matter of law, the same legal entity

as the named insured. App. 134-135. On April 26, 2017, GAIC sent

a letter denying coverage.

On November 6, 2017, the Superior Court awarded partial

summary judgment to NPC and the Presbytery of Boston. In a

separate judgment, the court later declared that "NPC is the sole

and exclusive owner of the property" in question and ordered NCC

and its members to vacate the premises. App. 85. Accordingly,

the Secretary of the Commonwealth restored the registered entity

name to "Newton Presbyterian Church." App. 127. NCC's officers

then filed Articles of Organization with the Secretary of the

Commonwealth to create a new entity called the "Newton Covenant

- 3 - Church." On June 14, 2018, the parties reached a settlement

agreement to dismiss the lawsuit with prejudice and to vacate the

partial summary judgment order.2

On December 21, 2018, Plaintiffs NCC and its individual

officers brought this action against GAIC for breach of contract,

alleging that GAIC, as their insurer, failed to defend and

indemnify them in the state court action. The district court

granted GAIC's motion to dismiss the complaint for failure to state

a claim under Fed. R. Civ. P. 12(b)(6).

II

We review de novo an order granting a motion to dismiss.

Rodi v. New England Sch. of Law,

(1st Cir. 2004).

"To survive a motion to dismiss, a complaint must contain

sufficient factual matter, accepted as true, to 'state a claim to

relief that is plausible on its face.'" Ashcroft v. Iqbal,

(2009) (quoting Bell Atl. Corp. v. Twombly,

(2007)). While "a district court is generally limited to

considering 'facts and documents that are part of . . . the

complaint,'" Giragosian v. Ryan,

(1st Cir. 2008)

(quoting Trans-Spec Truck Serv., Inc. v. Caterpillar Inc., 524

2GAIC asserts that the plaintiffs "knowingly relinquished any right they might have had to file this lawsuit" when they signed the settlement agreement. Brief of Appellee 19. Because we affirm on the basis of the Policy, we need not determine the significance of this agreement.

- 4 - F.3d 315, 321 (1st Cir. 2008)), it may also consider "documents

incorporated by reference in [the complaint], matters of public

record, and other matters susceptible to judicial notice," In re

Colonial Mortgage Bankers Corp.,

(1st Cir. 2003).

An insurer must defend its insured "when the allegations

in a complaint [against the insured] are reasonably susceptible of

an interpretation that states or roughly sketches a claim covered

by the policy terms." Billings v. Commerce Ins. Co.,

(Mass. 2010). As relevant here, the Policy defines

"Insured" to include both the "Organization" and "Insured

Persons."

. "Organization" refers to "the entity named"

in certain declarations, here the NPC, while "Insured Persons"

includes, among others, "persons who were, now are, or shall be

directors, trustees, [or] officers . . . of the Organization."

Plaintiffs assert that, at the time of the state court action,

they qualified as "Insured[s]": the NCC as an "Organization" and

the individual officers as "Insured Persons." App. 15-16.

Plaintiffs' allegations are not reasonably susceptible

of an interpretation that would state a claim covered under the

Policy. Although the Policy covers "legal fees . . . incurred in

the investigation or defense of any Claim," it defines "Claim" to

include only, as relevant here, a "civil proceeding . . . made

against any Insured."

(emphasis added). It is uncontested

that the only "Organization" named under the Policy as an "Insured"

- 5 - is an entity called "Newton Presbyterian Church." Therefore, to

the extent that NCC claims it was a distinct organization even

prior to its separate registration with the State, it was not

within the definition of an insured "Organization." To the extent

that NCC claims instead that it was a segment of the original NPC

at the time of the state court complaint, coverage is barred for

another reason: § IV.H of the Policy. That provision, one of a

handful of "Exclusions" under the Policy, precludes coverage for

claims between insureds.3 See Mt. Airy Ins. Co. v. Greenbaum,

(1st Cir. 1997) ("There is . . . no duty to defend a

claim that is specifically excluded from coverage" under

Massachusetts law). And, finally, to the extent that NCC claims

it was the original organization that had simply undergone a formal

name change, once again that would implicate § IV.H's exclusion.

As the district court observed, "the complaint alleges that NPC

and NCC were, at best, the same entity."

. Because

3 Section IV.H provides that: "This Policy does not apply to any Claim made against any Insured . . . by, or for the benefit of, or at the behest of the Organization or any Subsidiary or any entity which controls, is controlled by, or is under common control with the Organization or any Subsidiary, or any person or entity which succeeds to the interests of the Organization or any Subsidiary, provided, however, this exclusion shall not apply to any Claim brought by the receiver, conservator, liquidator, trustee, rehabilitator, examiner or similar official of the Organization, if any, in the event of Financial Insolvency."

(emphases omitted).

- 6 - "insureds would be on both sides of the litigation,"

the

exclusion would apply.4

As for the individual plaintiffs who are current

officers of the NCC, § IV.H of the Policy works a similar effect,

given any of the alternative assumptions just discussed. Thus,

because current NCC officers claim to have been "Insured Persons"

as defined by the Policy, their claim must be that they were

officers of the named insured, NPC, at the time of the state court

action. If so, NPC would be in litigation against its own

officers. Accordingly, the Policy expressly precludes claims of

this nature.5

Affirmed.

4 Because we affirm on the basis of this exclusion, we need not address plaintiffs' other contentions concerning the district court's alternative grounds for dismissal. 5 It is also apparent from the underlying state pleadings that plaintiffs here were not sued for wrongdoing within the meaning of the policy. The Policy covers "Wrongful Act[s]" claimed against insured persons only when such persons are "acting in their capacity" with the "Organization," "solely by reason of their status" with the "Organization," or "arising out of their service" as officers of an outside entity, "but only if such service is at the request of the Organization."

. In state court, the NCC officers were sued not in any such official capacity as NPC officers, but as members of the "'Leadership Team' of NCC." App. 44-45. Indeed, the state pleadings described NCC as a "religious organization founded in early 2017 by former members of NPC" and clearly not at the request of NPC.

(emphasis added).

- 7 -