Navigators v. Goyard: Remand on Ambiguity in SR&CC Coverage and the Role of Extrinsic Evidence

Introduction

This commentary examines the recent judgment in Navigators Insurance Company v. Goyard, Inc., decided by the United States Court of Appeals for the Second Circuit on March 17, 2025. The dispute centers on the interpretation of insurance policy provisions, specifically surrounding Strikes, Riots, and Civil Commotion (“SR&CC”) coverage. The parties, Navigators Insurance Company (“Navigators”) and Goyard, Inc. (“Goyard”), each cross-appealed various aspects of the district court’s summary judgment. Navigators challenged the court’s interpretation of policy endorsements regarding coverage for lost retail goods, while Goyard contested the exclusion of its counterclaims for punitive damages and attorneys' fees related to a purported bad faith denial.

At the heart of the controversy are two key issues: whether the policy language unambiguously provides SR&CC coverage for goods stored at Goyard’s New York location (the “63rd Street Store”), and whether the district court’s summation of extrinsic evidence was sufficient when resolving ambiguities within the policy. This judgment offers critical insights into contract interpretation and the admissibility and weight of extrinsic evidence in resolving ambiguities in insurance policies.

Summary of the Judgment

The appellate court vacated and remanded the summary judgment rendered by the United States District Court for the Southern District of New York. In its decision, the Second Circuit emphasized that:

The district court erred in concluding that the policy unequivocally extended SR&CC coverage to lost retail goods at the 63rd Street Store.
Because the policy language is ambiguous concerning SR&CC coverage, the district court should have admitted and more thoroughly considered extrinsic evidence to resolve the ambiguity.
The rulings regarding the claimed loss amount and Goyard’s punitive damages and attorneys’ fees claim are also vacated and remanded.

The opinion reinforces the need for a comprehensive review of extrinsic evidence when contractual language is indeterminate, impacting both contract interpretation and the analysis of related damages claims.

Analysis

Precedents Cited

The judgment references several important precedents that have shaped the court’s approach:

Jones v. County of Suffolk, 936 F.3d 108 (2d Cir. 2019): This case underlines the de novo standard of review for summary judgment where all ambiguities should be resolved in favor of the nonmoving party. It reinforces that summary judgment is appropriate only when no material factual disputes exist.
Holtz v. Rockefeller & Co., 258 F.3d 62 (2d Cir. 2001): Although abrogated on certain grounds by later decisions, it still serves to illustrate the principle that if any reasonable jury could infer a factual dispute, the summary judgment should not have been granted.
IN RE DELTA AIR LINES, INC., 608 F.3d 139 (2d Cir. 2010): This precedent confirms that issues of contract interpretation are to be reviewed de novo, ensuring a fresh evaluation of the contractual language.
CGS Indus., Inc. v. Charter Oak Fire Ins. Co., 720 F.3d 71 (2d Cir. 2013): This case emphasizes that endorsements must be read in conjunction with the primary policy, a principle central to the dispute over the SR&CC coverage.
Ezrasons, Inc. v. Travelers Indem. Co., 89 F.4th 388 (2d Cir. 2023): This recent decision underlines the necessity of admitting extrinsic evidence when contractual terms are ambiguous, thereby directly influencing the present case.

Legal Reasoning

The appellate court’s decision pivots on two primary legal issues: the interpretation of the insurance policy regarding SR&CC coverage and the conclusive determination (or lack thereof) regarding the ambiguity of the policy language.

First, both parties agree that certain endorsements (Endorsement No. 1 and Endorsement No. 4) form part of the policy. While Endorsement No. 4 extends coverage to goods at the 63rd Street Store, the correct interpretation of Subsection 9(E) became crucial. Navigators contended that the language within Subsection 9(E) excludes losses related to SR&CC events, using the SR&CC Warranty Clause to bolster this argument. Conversely, Goyard argued that the clause must be viewed within the broader context of the Policy and its attachments, thereby potentially preserving coverage.

The court noted that the language of the policy is ambiguous. Because an unambiguous determination could not be made solely by examining the policy text, the court held that the district court should have admitted extrinsic evidence—such as evidence from policy negotiations, industry customs, and expert testimony—to resolve the ambiguity. This approach aligns with established precedents that caution against relying solely on the document’s four corners when multiple reasonable interpretations exist.

Impact

The decision has significant implications for the field of insurance law and contract interpretation. By emphasizing the necessity to consider extrinsic evidence when faced with ambiguous contractual language, the court sets a precedent for future cases where parties dispute the meaning of policy endorsements and warranties. Insurance companies may need to change how they draft policy language or prepare for additional evidence gathering in litigation. Similarly, this remand provides a roadmap for lower courts to carefully weigh both the intrinsic and extrinsic evidence before granting summary judgment.

Additionally, by vacating decisions on loss amounts and claims for punitive damages and attorneys’ fees, the judgment leaves open the possibility for further examination of how losses are classified (raw materials, supplies in storage, and/or used goods), potentially affecting future contractual disputes in similar circumstances.

Complex Concepts Simplified

Extrinsic Evidence: This refers to evidence outside the written terms of the contract that can help clarify ambiguous language. In this case, extrinsic evidence includes industry practices, negotiation records, and expert testimony.

Contra Proferentem: A legal doctrine that interprets ambiguous contract terms against the interests of the party that provided the wording. Although Navigators argued for this principle, the court did not reach a decision on it because the primary issue was the ambiguity itself.

Summary Judgment: A procedural device used to dispose of a case without a trial, granted only when there are no factual disputes that would require examination by a jury.

Conclusion

In summary, the United States Court of Appeals for the Second Circuit’s decision in Navigators v. Goyard underscores the complexities inherent in insurance policy interpretation. The appellate court’s remand for further consideration of extrinsic evidence reflects the necessity of a nuanced approach when faced with ambiguous contract language. By vacating the district court’s summary judgments and remanding with instructions to revisit the analysis of extrinsic evidence, the court has provided an important precedent that is likely to influence future disputes involving insurance coverage and contractual ambiguities.

Key takeaways include the reaffirmation of the de novo review standard for summary judgment and contract interpretation, the critical role of extrinsic evidence in resolving ambiguities, and the reminder that all relevant policy documents and endorsements must be read in concert. This Judgment ultimately enhances the clarity with which courts approach complex insurance disputes, ensuring that no reasonable interpretation is prematurely dismissed.