MARKLINE COMPANY, INC. vs. THE TRAVELERS INSURANCE COMPANY.

NOLAN, J. The defendant issued a policy of insurance called Storeowners 700 (policy) to the plaintiff for the period May 1, 1974, to May 1, 1975. It furnished coverage for property damage, general liability, and automobiles. The policy was in force at 2:03 P.M. on June 15, 1974, when the burglar alarm was activated at the plaintiff's store. Police and alarm company personnel arrived on the scene at approximately 2:42 P.M. The judge found that the

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plaintiff's president and one of its employees had closed and locked the plaintiff's store at 1 P.M. on June 15, 1974. In early July, when the owner first learned the alarm had been actuated, an inventory was taken. Ultimately, the judge found for the plaintiff in the amount of the inventory loss, which he determined to be $19,380, plus costs. This was error.

The plaintiff had purchased burglary coverage. The policy defines burglary as follows: "`Burglary' means the felonious abstraction of insured property: (a) from within the premises by a person making felonious entry therein by actual force and violence, of which force and violence there are visible marks made by tools, explosives, electricity or chemicals upon, or physical damage to, the exterior of the premises at the place of such entry; (b) from within a showcase or show window outside the premises by a person making felonious entry into such showcase or show window by actual force and violence, of which force and violence there are visible marks thereon; or (c) from within the premises by a person making felonious exit therefrom by actual force and violence, as evidenced by visible marks made by tools, explosives, electricity or chemicals upon, or physical damage to, the interior of the premises at the place of such exit." The judge found that "there were no visible marks of entry or exit by tools, explosives, electricity or chemicals or physical damage to the entry or exit." Therefore, there could be no recovery under burglary coverage. See Shattuck & Jones, Inc. v. Travelers Indem. Co., 323 Mass. 146, 147 (1948). It is the plaintiff's burden to prove that its loss was within the description of the risks covered. Tumblin v. American Ins. Co., 344 Mass. 318, 320 (1962). The reason for the visible marks restriction is to protect insurers from "inside jobs." 10 G. Couch, Insurance, Section 42:129 (2d ed. 1962).

The plaintiff presses the argument that the trial judge read the policy as providing coverage for theft, in addition to burglary coverage. The judge's findings and conclusions do not include his reasons for finding for the plaintiff. If the plaintiff is correct in its assumption of the judge's basis

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for recovery, the judge made a clearly erroneous ruling. The policy specifies the plaintiff's purchase of burglary coverage but not coverage for theft. The relevant provisions of the policy are reproduced in the margin. [Note 1]

There is no merit to the plaintiff's claim that the policy is sufficiently ambiguous to permit us to read "theft" coverage into the contract between the parties. Before we can apply the settled principles of law that any obscurity or vagueness must be construed against the defendant, see Slater v. United States Fidelity & Guar. Co., 379 Mass. 801, 804 (1980), we must conclude that there is an ambiguity. We are unable to do so. Rare, indeed, is the insurance policy which permits easy reading. The language is generally forbidding, if not esoteric. However, as insurance policies go, the one under review is reasonably clear in this respect. We have read those sections of the policy which define and limit "theft," but they do not solve the threshold problem of the coverage purchased by the plaintiff. In short, the plaintiff did not buy "theft" coverage.

Next, the plaintiff asks us to sustain the judgment below because of its "reasonable expectation" of coverage for this type of loss. The plaintiff concedes that no Massachusetts case can be found to support this position. It appears that

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the trial judge did not rely on this theory. We are not prepared to make this the first case in which this court adopts such an approach to the purchase of insurance. In any event, the testimony of the plaintiff's president that it was his understanding that the "[c]overage was complete fire, theft and liability insurance" falls fatally short of evidence to support the plaintiff's claim of "reasonable expectation" of coverage for this loss. Even if we were to adopt the theory of reasonable expectation, the plaintiff would not prevail. In the Restatement (Second) of Contracts Section 237, Comment f (Tent. Draft Nos. 1-7, 1973), the following description of "reasonable expectation" appears: "Although customers typically adhere to standardized agreements and are bound by them without even appearing to know the standard terms in detail, they are not bound to unknown terms which are beyond the range of reasonable expectation. A debtor who delivers a check to his creditor with the amount blank does not authorize the insertion of an infinite figure. Similarly, a party who adheres to the other party's standard terms does not assent to a term if the other party has reason to believe that the adhering party would not have accepted the agreement if he had known that the agreement contained the particular term. Such a belief or assumption may be shown by the prior negotiations or inferred from the circumstances. Reason to believe may be inferred from the fact that the term is bizarre or oppressive, from the fact that it eviscerates the non-standard terms explicitly agreed to, or from the fact that it eliminates the dominant purpose of the transaction. The inference is reinforced if the adhering party never had an opportunity to read the term, or if it is illegible or otherwise hidden from view. This rule is closely related to the policy against unconscionable terms and the rule of interpretation against the draftsman." There is nothing in the record before us to bring this case within the sweep of this language.

Equally without merit and authority are the plaintiff's arguments based on an implied warranty, see the Uniform Commercial Code -- G. L. c. 106, Section 2-315, and a consumer

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violation, G. L. c. 93A, Section 2. An attentive reading of the transcript fails to reveal any evidence to support these arguments. Further, the warranty section of the Uniform Commercial Code on which the plaintiff relies, at least by way of analogy, applies only "to transactions in goods." G. L. c. 106, Section 2-102, as appearing in St. 1957, c. 765, Section 1. The term "goods" is not sufficiently protean to include an insurance policy. See G. L. c. 106, Section 2-105 (1). The defendant's conduct does not offend either the principles of unconscionability recognized at common law (see Hodge v. Mackintosh, 248 Mass. 181, 184-186 [1924]), or provisions not entirely dissimilar, codified in G. L. c. 106, Section 2-302.

Judgment reversed.

Judgment for defendant.

LIACOS, J. (dissenting). The plaintiff purchased a "Storeowners 700" policy from the defendant through its agent. This policy purported on its face to provide coverage for (1) personal property damage, (2) general liability, and (3) crime, specifically "burglary." The word "burglary" is defined in later pages of the multipage policy to require "visible marks" before recovery might be had. [Note Liacos-1] The fact of loss is not in dispute.

The trial judge found there were no "visible marks" of entry or exit yet found for plaintiff without further explanation in the written findings and rulings. This court now sets aside that finding for reasons which seem to me to have little relevance to what occurred at trial. While the court's opinion discusses the possibility that the judge may have thought plaintiffs had theft coverage, the judge's findings do not mention that theory. Additionally, plaintiff submitted extensive requests for findings of fact and rulings of law, none of which are based on a theory of "theft" coverage. Those

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requests reflected instead alternative theories of recovery in which the reasonable expectations of the plaintiff as to the coverage he had secured played a prominent part. [Note Liacos-2] The

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judge made no explicit findings under this theory, but it appears that his findings were based on the theory of reasonable expectations. [Note Liacos-3] Despite this state of the record, the court now concludes as to the issue of reasonable expectations that "[i]t appears that the trial judge did not rely on this theory." Supra at 141-142. This conclusion of the court is warranted neither by the record nor by the evidence adduced at trial. In my view, this conclusion is unjust to the trial judge as well as to the parties.

It is not apparent which of five premises of law advanced by trial counsel was the basis for the judgment of the judge. I would agree that the judge erred if he relied on the language of the insurance policy and concluded that the plaintiff had theft coverage. I do not believe he did so. I would

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also agree that a claim based on G. L. c. 93A, Section 2, is without merit here, supra at 142-143, because the plaintiff has failed to demonstrate that he followed the procedural requisites of that statute. See Whitinsville Plaza, Inc. v. Kotseas, 378 Mass. 85, 100 (1979); Slaney v. Westwood Auto, Inc., 366 Mass. 688, 691, 704 (1975). There were, however, three other possible bases for this judgment, viz., the reasonable expectations doctrine, the unconscionability of the liability exclusion, or the breach of an implied warranty of fitness. See C & J Fertilizer, Inc. v. Allied Mut. Ins. Co., 227 N.W.2d 169 (Iowa 1975), and authorities cited. Cf. Avco Installment Sales Co. v. Edge, 83 Misc. 2d 1011, 1018 (N.Y. Civ. Ct. 1975). While I concur that there is little or no support in the record for the last theory, I feel that the court pays short shrift to the claim of reasonable expectations and the notions of unconscionability inherent therein. The Iowa court has succinctly stated this doctrine in these terms: "The objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations." Rodman v. State Farm Mut. Auto. Ins. Co., 208 N.W.2d 903, 906 (Iowa 1973). Professor Williston notes that unconscionability, though elusive of any single definition, lurks in "[t]he use of fine-print clauses negating the reasonable expectations of the nondrafting party." 15 S. Williston, Contracts Section 1763A, at 215 (3d ed. 1972).

It is patently inconsistent for this court to acknowledge on the one hand that the doctrine lacks precedent in our case law and at the same time to declare that the evidence on record falls short of a reasonable expectation standard. The majority, quoting Section 237 of the Restatement (Second) of Contracts, choose to ignore the clear parallel between this case and the Restatement: "Similarly, a party who adheres to the other party's standard terms does not assent to a term if the other party has reason to believe that the adhering party would not have accepted the agreement if he had known that the agreement contained the particular term.

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Such a belief or assumption may be shown by the prior negotiations or inferred from the circumstances." Also, "[r]eason to believe may be inferred from the fact that the term . . . eliminates the dominant purpose of the transaction." Supra at 142. Restatement (Second) of Contracts, Comment f, at 541 (Tent. Draft Nos. 1-7, 1973). The evidence here was that the plaintiff expected "comprehensive coverage," having been assured of such coverage by the insurer's agent. The interpretation of the circumstances of the plaintiff's entering the contract are highly material under the general principle that the intent and reasonable expectations of the parties govern the construction of insurance contracts. Ayres v. Prudential Ins. Co. of America, 602 F.2d 1309 (9th Cir. 1979). See 12 G.J. Couch, Insurance Section 45:5, at 107 (2d ed. 1964) (basic guide to insurance contract construction is that "parties apparently intended there should be effective coverage with respect to a particular kind or kinds or risk").

The Restatement informs us that "courts in construing and applying a standardized contract seek to effectuate the reasonable expectations of the average member of the public who accepts it." Restatement (Second) of Contracts Section 237, Comment e, at 540 (Tent. Draft Nos. 1-7 1973). Cf. Ayres, supra at 1313 ("the exclusion fails only if the insured can reasonably believe [burglary] is not excluded in light of what is publicly known of such exclusions"). Here, the judge found the plaintiff complied with the insurer's requirement that he install a burglar alarm. As soon as he received notice of the alarm's activation he notified the insurer. These facts, along with the agent's precontract assurances, bespeak the plaintiff's reasonable expectation that if the alarm was activated and a loss of inventory occurred, which was otherwise unexplainable, the loss was covered by the burglary provisions of his policy. The issue of reasonable expectation and the unconscionability of defeating those expectations by obscure exclusionary language was adequately raised in the plaintiff's trial brief requesting findings and rulings, and by the evidence at trial. If the judge

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did utilize these theories in reaching his conclusion, then the question of the plaintiff's reasonable expectation has been placed squarely before us. Rather than put our own gloss on the unclear rulings of the judge, I would remand for a more specific statement of the reasons underlying the judgment. I dissent.