Fajardo Shopping Center, S.E. v. Sun Alliance Ins. Co. of Puerto Rico, Inc.

Plaintiff Fajardo Shopping Center, S.E. ("FSC") filed this action against Defendant Sun Alliance Insurance Company of Puerto Rico, Inc. ("SAIC") to recover insurance policy benefits in connection with damage to commercial leasehold property allegedly sustained during Hurricane Hugo. After approximately five years of discovery, the district court granted summary judgment in favor of FSC on the issues of liability and damages and ordered SAIC to pay FSC $1,301,856.77. The district judge also awarded FSC prejudgment interest in the amount of $868,826.60 plus attorneys' fees. SAIC appeals both the district court's grant of summary judgment and its award of prejudgment interest and attorneys' fees.

The Fajardo Shopping Center ("Shopping Center" or "FSC") is a three-building structure located in the northeastern municipality of Fajardo, Puerto Rico. For the past twelve years, it has been owned by an entity known as the Fajardo Partnership, a partnership organized under the laws of the state of New Jersey. Its principal building, Building I, is an L-shaped structure, units of which are leased to more than a dozen retail merchants, including Pueblo Supermarkets, its main tenant. The remaining two structures, Buildings II and III, have throughout the relevant time period been rented to a Firestone and a Kentucky Fried Chicken franchise, respectively.

On December 19, 1988, the Fajardo Partnership obtained a special multi-peril insurance policy from SAIC for the period of December 19, 1988 through April 22, 1991. (See J.A. at 778). The policy insured the Shopping Center against "all risks of direct physical loss subject to the provisions and stipulations herein and in the policy of which this form is made a part." (Id. at 785). The policy also insured against the loss of rents by the Fajardo Partnership caused by a covered risk. (See id. at 779). One of the pertinent exclusions included in the policy excepted from coverage losses caused by "faulty design, specifications, workmanship, construction, or materials if a peril excluded by this policy contributed to the loss at any time." (Id. at 786).1 None of the provisions or stipulations made a part of the policy excluded losses caused by a hurricane or windstorm.2

On September 18, 1989, Hurricane Hugo struck the island of Puerto Rico. At maximum sustained winds of 125 miles per hour, the western part of Hurricane Hugo's eyewall passed directly through the municipalities of Ceiba, Fajardo and Luquillo. The intense winds did not, however, translate into unusually heavy rainstorms. San Juan reported only 1.4 inches of rain while Fajardo reported approximately 6.25 inches.3

During Hurricane Hugo, the FSC property suffered extensive damages. Specifically, structural double-tee beams ("DT beams") supporting the roof of the Shopping Center deflected, losing their structural integrity. As a result of this deflection, portions of the FSC roof collapsed. Other portions of the roof, although not collapsed, were rendered structurally unsound and posed a risk of collapse.

Upon plaintiff's request, SAIC advanced FSC $150,000 to cover emergency repairs and to prevent further damage to the Shopping Center property. Shortly thereafter, FSC engaged an engineering firm, Izquierdo, Rueda & Associates ("IR & A"), to prepare an estimate of damages. The firm concluded that approximately 75,000 square feet of roof would have to be replaced because of structural damage. IR & A estimated the total cost of repairs to be $1,496,218. In early 1991, FSC submitted the firm's report and estimate to SAIC.

On May 7, 1991, a meeting was held at the SAIC offices to discuss FSC's claim. SAIC followed up the meeting with a letter to FSC dated July 1, 1991. In its letter, SAIC requested additional information and permission to carry out inspections of the property. The letter also stated that, despite its advance of $150,000, SAIC was reserving all of its rights under the policy because it had concluded that most of the damage to the roof was caused by preexisting structural defects in the DT beams, and not by Hurricane Hugo.

In a subsequent letter dated August 19, 1991, SAIC informed FSC of the results of an inspection of the FSC property performed by its engineer, Emiliano Ruiz ("Ruiz"). According to Ruiz, the deflections of the DT beams were not caused by windstorm but rather by the ponding of water due to a faulty and inadequate drainage system. SAIC further stated that such water ponding, "plus other factors such as inherent or latent defect of the beams ... construction and design deficiencies, and the fact that the building was not built according to the best engineering practices indicate that the damages claimed ... are excluded under Part VIII, Items 2 and 4C of the above policy." (J.A. at 2797).4 As a result, SAIC agreed to pay exclusively for: (1) the removal and replacement of built-up roofing and hung ceiling; (2) the removal of debris and clean-up; (3) repair to air conditioning and electrical systems; and, (4) the replacement of store front glass, flashings, paint work, and parking illumination. SAIC calculated its liability under the policy to be $96,584.46, after subtracting the advanced amount ($150,000), the coinsurance penalty ($127,292), and the deductible ($3,000). SAIC submitted this amount to FSC as a proposed proof of loss.

Upon examining SAIC's proposal, FSC conducted further investigations to prove that the damages suffered resulted from the hurricane and not from inherent or latent design defects. FSC's investigation included: (1) a survey of the damage performed by Sousa Surveying Services; (2) an opinion as to the cause of the damage from structural expert Jose M. Izquierdo ("Izquierdo"); (3) an accountant's report prepared by CPA Rafael Perez-Villarini ("Perez-Villarini") detailing the amount of rent lost; and (4) a second cost estimate rendered by the late Engineer Jose Carbia. As a result of this investigation, FSC submitted its own proof of loss to SAIC on October 27, 1992, claiming damages in the amount of $1,944,356.73. SAIC promptly rejected FSC's proof of loss, reasserted its theory of causation, and resubmitted its previous offer of $96,584.46. Shortly thereafter, FSC filed the instant action.5II. THE APPOINTMENT OF A SPECIAL MASTER

On July 5, 1995, FSC moved for a jury trial. SAIC opposed the motion on the ground that the case was "extremely technical in nature and involve[d] construction issues ... which are beyond the knowledge of the common citizen." (J.A. at 135-36). In response, the court scheduled a conference for December 11, 1995, to address the issues raised by the parties and to explore settlement possibilities. After hearing arguments from both parties, the court denied FSC's motion for a jury trial. In addition, the court determined that "the appointment of a [Special] Master [would] be appropriate in this case." (Mins. of 12/11/95 Proceedings).6 The court granted the parties until January 15, 1996 to submit three candidates for appointment as special master.

On March 18, 1996, FSC informed the court that, of all the candidates it contacted, only one--Engineer Efrahim Murati-Martnez ("Murati")--was willing to serve as a special master in an adversarial proceeding. SAIC never objected to FSC's motion proposing Murati's appointment. Nor did SAIC submit names of candidates for special master. Therefore, after considering his qualifications, the court appointed Murati to serve as special master.

Pursuant to Rule 53(c), the court's order of appointment enumerated Murati's rights, powers, and responsibilities as special master. Specifically, the court's order granted the special master "all the rights, powers, and duties as provided for a master under Rule 53 of the Federal Rules of Civil Procedure." (J.A. at 158).7 On June 5, 1996, Murati accepted his appointment. The very next day, SAIC submitted--for the first time--its proposed candidate for special master. In its Motion Requesting Appointment of Special Master, SAIC never objected to the court's power to appoint a master. Nor did SAIC object to Murati's actual mandate. Rather, the essence of SAIC's objection was that Murati did not have sufficient formal training in structural problems to act as master in this case. (See id. at 162). In its order denying SAIC's motion, the court addressed this issue by stating: "Special Master Murati will remain as Master in this case. His performance so far belies any claims by defendant as to his suitability for the post." (Id. at 169).

SAIC now argues on appeal that the district court's appointment of a special master in this case violated Fed.R.Civ.P. 53 and Article III of the United States Constitution. Because we conclude that SAIC's failure to object to the district court's appointment of a special master amounts to consent, we do not reach the merits of this claim.

As this court has recognized, "parties to a civil case may consent to the appointment of a master under any circumstances." See Stauble v. Warrob, 977 F.2d 690, 694 (1st Cir.1992); see also Peretz v. United States, 501 U.S. 923, 936, 111 S.Ct. 2661, 115 L.Ed.2d 808 (1991) ("litigants may waive their personal right to have an Article III judge preside over a civil trial"); Goldstein v. Kelleher, 728 F.2d 32, 35 (1st Cir.1984) ("insofar as Article III protects individual litigants, those protections can be waived"). Even if SAIC did not explicitly consent to the appointment of a special master, failure to make a timely objection amounts to consent.

A party who desires to contest the propriety of a reference to a master under Rule 53 should move the trial court for revocation of the reference. Inaction in this regard is tantamount to acquiescence and the reference cannot be challenged later on appeal.

9A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure Civil 2d § 2605 (2d ed.1994); see also Adriana Int'l Corp. v. Thoeren, 913 F.2d 1406, 1410 (9th Cir.1990) ("[A]n objection to the appointment of a special master must be made at the time of the appointment or within a reasonable time thereafter or the party's objection is waived."); Johnson Controls, Inc. v. Phoenix Control Systems, Inc., 886 F.2d 1173, 1176 (9th Cir.1989) (party "waived any objections it had to the appointment of a master by failing to raise the issue, or moving to have the reference revoked"); Charles A. Wright, Inc. v. F.D. Rich Co., 354 F.2d 710, 714 (1st Cir.1966) ("Both parties consented to the court's order of reference to the master and ... plaintiff cannot now object to the order of reference.").

Not only did SAIC not make a timely objection, SAIC never made any objection at all to the district court's power to appoint a special master in this case.8 Indeed, the district court's decision to appoint a master appears to have at least in part resulted from SAIC's opposition to FSC's Motion for Jury Trial on the ground that the issues involved were "beyond the knowledge of the common citizen." (J.A. at 135-36). SAIC even proposed its own candidate to serve as master. Such conduct does not amount to a timely objection to an order of reference.

Because SAIC consented to the appointment of a special master and to the district court's order of reference, SAIC cannot now object. Moreover, SAIC waived any objection it may have had by not presenting it to the district court when the district court first raised the idea of appointing a special master. We do not hear arguments which were not raised with the district court. See United States v. Bongiorno, 106 F.3d 1027, 1034 (1st Cir.1997) (matters not squarely presented below generally cannot be advanced on appeal); Daigle v. Maine Medical Center, Inc., 14 F.3d 684, 687 (1st Cir.1994) ("Our law is clear that a party ordinarily may not raise on appeal issues that were not seasonably advanced (and hence, preserved) below."); United States v. Slade, 980 F.2d 27, 30 (1st Cir.1992) ("It is a bedrock rule that when a party has not presented an argument to the district court, she may not unveil it in the court of appeals."). Accordingly, we decline to reach the merits of SAIC's special master claims.

The question presented by this lawsuit is whether the damage suffered by the Shopping Center was caused by the forces of Hurricane Hugo (a covered peril) or by the faulty design and structure of the DT beams and the Shopping Center roof (excluded perils).9 Concluding that no genuine issues of material fact existed as to the cause of the damage to the Shopping Center, the district court granted summary judgment on the issue of liability in favor of FSC. SAIC appeals. We review the district court's grant of summary judgment de novo, viewing the facts in the light most favorable to the nonmovant, defendant SAIC. See Dominique v. Weld, 73 F.3d 1156, 1158 (1st Cir.1996).

Summary judgment is appropriate when "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 this context, an issue is "genuine" if the evidence presented is such that a reasonable jury could resolve the issue in favor of the nonmoving party and a "material" fact is one that might affect the outcome of the suit under governing law. See Pagano v. Frank, 983 F.2d 343, 347 (1st Cir.1993).

On issues where the nonmovant bears the burden of proof at trial, he may not defeat a motion for summary judgment by relying upon evidence that is "merely colorable" or "not significantly probative." Id. (internal quotations and citations omitted). Instead, the nonmovant must present "definite, competent evidence" to rebut the motion. Id. (quoting Mesnick v. General Elec. Co., 950 F.2d 816, 822 (1st Cir.1991)). Summary judgment will be properly entered against a party who, "after adequate time for discovery ... fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

a. Applicable Law

Both parties concede that Puerto Rican law governs the instant insurance contract dispute. Nevertheless, the Puerto Rico Supreme Court has recently established that since most of the insurance contracts sold in Puerto Rico are modeled after contracts drafted in the United States, both federal and state law principles are useful and persuasive. See Quinones Lpez v. Manzano Pozas, 96 J.T.S. 95, at 1307, P.R. Offic. Trans. No. RE-91-567, slip op. at 11-12, 1996 WL 499244 (P.R. June 25, 1996). We thus expand our analysis beyond Puerto Rican civil law principles.

Under an all-risk insurance policy, the insured has the burden of establishing a prima facie case for recovery by proving the existence of the all-risk policy and the loss of the covered property. See Jomark Textiles, Inc. v. Int'l Fire & Marine Ins. Co., 771 F.Supp. 577, 578-79 (S.D.N.Y.1989) (quotations omitted). Once the insured has established a prima facie case, the burden shifts to the insurer to prove that the claimed loss is excluded from coverage under the policy. See id. (quotations omitted).

In the instant case, SAIC admitted that the applicable exclusion clause was Section VI, Item 9, which excepts from coverage losses caused by "faulty design, specifications, workmanship, construction, or materials if a peril excluded by this policy contributed to the loss at any time." (J.A. at 786). Thus, to avoid entry of summary judgment against it, SAIC bears the burden of making "a showing sufficient to establish," Celotex, 477 U.S. at 322, 106 S.Ct. 2548, that the damage to the FSC property was caused by "faulty design, specifications, workmanship, and construction"--damage excluded from coverage under the policy. See Jomark, 771 F.Supp. at 578-79.10 More specifically, in order to avoid liability under the policy, SAIC ultimately must prove that the defective design of the DT beams and the FSC roof--not Hurricane Hugo--was the proximate cause of the damage to the Shopping Center. See id. Moreover, under Puerto Rico law, insurance contracts, by virtue of being considered adhesion contracts, are liberally construed in favor of the insured. Quinones Lpez, 96 J.T.S. 95, at 1306, P.R. Offic. Trans. No. RE-91-567, slip op. at 10, 1996 WL 499244 (P.R. June 25, 1996) (quotations omitted). Likewise, exclusion clauses--not usually favored in an insurance contract--should be strictly construed against the insurer. See id.

To determine whether a particular risk was the proximate cause of the damage suffered, one must examine whether the resulting damage was to be expected within the ordinary course of events. See Cardenas Maxan v. Rodrguez, 90 J.T.S. 36, at 7559, P.R. Offic. Trans. No. RE-88-223, slip op. at 6 (P.R. Mar. 9, 1990); Arroyo Lpez v. Comm. of Puerto Rico, 90 J.T.S. 101, at 7937, P.R. Offic. rans. No. RE-88-379, slip op. at 8 (P.R. June 29, 1990). In cases where concurrent causes are alleged to have caused the damage, we must determine which cause is the most "efficient" one. See Valle v. American Int'l Insurance Co., 108 D.P.R. 692, 697-98, 1979 WL 59104 (P.R.1979); see also Allstate Ins. Co. v. Smith, 929 F.2d 447, 451 (9th Cir.1991) ("In determining whether a loss is within an exception in a policy, where there is a concurrence of different causes, the efficient cause--the one that sets others in motion--is the cause to which the loss is to be attributed ....") (quoting Sabella v. Wisler, 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889 (Cal.1963) (internal quotations and citations omitted)).

Applying this analysis to windstorm insurance cases, most courts have agreed that wind need not be the only cause of a loss for it to be considered the proximate or efficient cause.11 In order to recover under windstorm insurance coverage, "it is sufficient to show that wind was the proximate or efficient cause of loss or damage notwithstanding other factors contributed to the loss." Kemp v. American Universal Ins. Co., 391 F.2d 533, 534-35 (5th Cir.1968). For example, in Milan v. Providence Washington Ins. Co., the district court concluded that alleged structural defects in a building were immaterial to the issue of liability under a windstorm insurance policy. The court reiterated that "[i]n order to recover ... it is not necessary that windstorm be the sole cause of the damage.... If the damage would not have occurred in the absence of a windstorm, the loss is covered by the policy." 227 F.Supp. 251, 253 (E.D.La.1964). One court has even gone so far as to hold that "where a policy expressly insures against direct loss and damage by one element but excludes loss or damage by another element, the coverage extends to the loss even though the excluded element is a contributory cause." General Am. Transp. Corp. v. Sun Ins. Office, Ltd., 369 F.2d 906, 908 (6th Cir.1966).

b. The Evidence

FSC maintains that downburst forces accompanying Hurricane Hugo proximately caused the damage to the Shopping Center. FSC further maintains that the damage could not have been caused by faulty design or structural defects. FSC's basic argument is: but for the hurricane, no damage would have resulted.

In support of this contention, FSC offers the expert testimony of its structural experts Izquierdo and Khan. Both Izquierdo and Khan specifically concluded that the Shopping Center was properly constructed. (See Izquierdo Dep. at 51; J.A. at 2417; Khan 7/17/96 Dep. at 119). Khan further concluded, after conducting extensive testing on the DT beams, that the original design of all of the DT beams met the design and deflection criteria required by the Puerto Rico Building Code applicable at the time of construction. (See J.A. at 2417). Both experts concluded that faulty design and construction could not have caused the deflections existing after Hurricane Hugo.

In support of its theory that Hurricane Hugo was the proximate cause of the damage to the FSC property, FSC points to the fact that all of the experts--including SAIC's own expert Emiliano Ruiz--agree that there was a danger of collapse after Hugo that did not exist prior thereto. (See Ruiz Dep. at 93; Izquierdo Dep. at 102; Khan 7/17/96 Dep. at 119, 147). FSC further points to the deposition testimony of meteorologist Edwin Nnez who concluded that because conditions favorable for microbursts existed over Fajardo, it is quite possible that a microburst did in fact occur in the FSC area. (See J.A. at 2846).12 Nnez also concluded that--whether characterized by a microburst or flow separation and turbulence--the "severe conditions, as the hurricane's eyewall passed over the Fajardo Shopping Center, very likely produced the collapse of its roof." (J.A. at 2851). As proof that such wind damage is possible, FSC makes reference to the most recent revisions to the ASCE-ANSI Building Code, which confirm that hurricanes have downburst forces capable of causing damage like that suffered by FSC.13

In order to rule out the possibility that water ponding due to faulty design caused the damage to the roof, FSC points to the fact that the Shopping Center roof had never undergone such severe deflections in the twenty years prior to Hugo--even during times of much more intense rainfall. (See Izquierdo Dep. at 91). As SAIC points out, Izquierdo conceded that the Shopping Center roof may have been compromised before Hugo, but Izquierdo also testified that every structure designed, is designed to suffer deflections "because no structure whatsoever, or nobody can attain [sic][a structure] without deflection." (Izquierdo Dep. at 102). Izquierdo further testified that even if the FSC roof had deflected prior to Hugo, the structure "had been inspected [before Hugo] by the insurers, the structure had been inspected and had been accepted as a good structure." (Izquierdo Dep. at 104). Most importantly, the structural analysis of FSC expert Siddiq Khan demonstrated that it was "physically impossible" for water ponding alone to have caused the damage to the FSC roof because the height of water necessary to cause the amount of deflection that occurred was higher than the elevation of the DT beams. (See J.A. at 2411-12, 2429, Appendix VIII at 2627; Khan 7/16/96 Dep. at 51-52, 75). In other words, it would be physically impossible to place on the roof the amount of water necessary to cause the deflections that resulted because the water would spill over the sides of the roof before reaching the necessary depth. (See Khan 7/16/96 Dep. at 51-52, 75-76).

To rebut this evidence and meet its own burden of proving that faulty design and construction was the proximate cause of the damage to the FSC roof, SAIC points to the "overwhelming evidence" in the record that the FSC building suffered inherent structural defects. SAIC's "overwhelming evidence" consists of a letter written by Engineer Alfonso Vick ("Vick") in 1974 in which reference is made to a deflection of up to 14 inches in the DT beams due to water ponding. Unfortunately for SAIC, the Vick letter is inadmissible hearsay, and, as a result, may not be considered on summary judgment. See Vazquez v. Lpez-Rosario, 134 F.3d 28, 33 (1st Cir.1998) ("Evidence that is inadmissible at trial, such as inadmissible hearsay, may not be considered on summary judgment.").14

As further evidence of the Shopping Center's preexisting structural defects, SAIC points to Engineer David McCloskey's ("McCloskey") 1980 inspection report of the FSC property.15 According to McCloskey's visual inspection of the FSC property, there was "excessive ponding" over Pueblo and "some ponding" over Walgreens. (See Letter from McCloskey to Edward Kildare of 4/14/80, at 1). SAIC maintains that these observations, made by a "totally independent" structural engineer, prove that the FSC property was structurally defective. However, we agree with the district court that SAIC has grossly mischaracterized McCloskey's conclusions. In fact, McCloskey's report concludes that "in general the structures are in good condition" and that "[t]he only immediate repair required is the roof of the Pueblo Store Expansion." (Letter from McCloskey to Edward Kildare of 5/21/80, at 3). McCloskey further explains that DT beams "typically continue to deflect over the years causing portions of the roofs which were ridges to become valleys, and vice versa. Therefore, roof drains end up at the high points of the roof which leads to ponding." (Id. at 1). To address this "fairly common" phenomenon, McCloskey suggested the installation of additional roof drains to the new low points of the roof. (See id. at 1). As SAIC's own evidence demonstrates, FSC constantly monitored this situation by installing additional drains in the roof of the Shopping Center.16 More importantly, when asked in his deposition whether the roof was structurally sound as built and designed, Engineer McCloskey answered in the affirmative. (See McCloskey Dep. at 51). In sum, McCloskey's report in no way supports SAIC's contention that the Shopping Center had preexisting structural or construction defects.

In addition, SAIC maintains that FSC's own expert, Engineer Izquierdo, admitted that DT beams "have had a considerable amount of quality control problems [in Puerto Rico], which is why they are rarely used anymore in this jurisdiction." However, SAIC offers no evidence that the particular DT beams used in the Shopping Center roof suffered from quality control problems. Indeed, as discussed above, SAIC's evidence suggests that FSC closely monitored any deflections of the DT beams by constantly installing additional roof drains. See supra note 16, at 10.

With respect to the expert testimony of meteorologist Nnez, SAIC points out that Nnez admitted that he had "no way of knowing if [a microburst] occurred ... because there is no particular study" and that it was only possible that a microburst occurred in the area. (Nnez Dep. at 80). SAIC also argues that the very report Nnez relied upon in forming his expert opinion--the NOAA Survey--"found no evidence from which one could reasonably infer that microbursts occurred in the Fajardo area." (J.A. at 322). Again, we agree with the district court that SAIC has seriously mischaracterized Nnez's testimony as well as the conclusions of the NOAA Survey. Nnez in fact concluded that "the damages sustained by the Fajardo Shopping Center were the direct result of the intense and turbulent winds produced by Hurricane Hugo on September 18, 1989." (Id. at 2853). To reach this conclusion, Nnez examined the maximum wind speeds and corresponding mean recurrence interval for Hurricane Hugo at different locations in Puerto Rico, including the nearby Roosevelt Roads Naval Base.17 (See id. at 2844). According to Nnez, these winds were "above the magnitude specified in the ANSI A58.1-1982 code." (Id.). More importantly, Nnez explained in his deposition testimony that despite the lack of availability of a Doppler radar or a debris analysis, it was his expert opinion, based on the NOAA Survey and the damage he observed on site, that downburst forces quite possibly occurred. (See Nnez Dep. at 79-81). We agree with the district court that Nnez reasonably relied on his expert opinion and the NOAA Survey for this conclusion. We further conclude that SAIC again mischaracterized the findings of the NOAA Survey. In sharp contrast to SAIC's assertion that this team of highly qualified experts "found no evidence from which one could reasonably infer that microbursts occurred in the Fajardo area", (J.A. at 322), the NOAA Survey concluded that "damage surveys suggested possible microbursts on St. Croix, Culebra and Vieques." (Id. at 1699). The Survey also stated that "[r]esidents, including personnel at the Roosevelt Road Naval Station believe that some tornadoes did occur although none could be confirmed." (Id.). Despite SAIC's assertions to the contrary, these findings clearly do not preclude the possibility that downbursts occurred in the FSC area.

Finally, we agree with the district court that SAIC's reliance on Engineer Ruiz's future testimony at trial is insufficient to defeat summary judgment as to the issue of proximate causation.18 It is an established rule of law that "establishing a genuine issue of material fact requires more than effusive rhetoric and optimistic surmise." Cadle Company v. Hayes, 116 F.3d 957, 960 (1st Cir.1997). Neither "unsupported speculation, nor brash conjecture coupled with earnest hope that something concrete will materialize" is sufficient to block summary judgment. Euromotion, Inc. v. BMW of North America, Inc., 136 F.3d 866, 869 (1st Cir.1998) (quoting J.Geils Band Employee Benefit Plan v. Smith Barney Shearson, Inc., 76 F.3d 1245, 1251 (1st Cir.1996)) (internal quotations and citations omitted). We conclude that SAIC has failed to present any "genuine" evidence that water ponding due to inherent structural or construction defects proximately caused the damage to the FSC property. We point out that although there is evidence in the record that DT beams in the FSC roof had deflected prior to Hugo, FSC need not prove that wind was the sole cause of the damage to its property in order to prevail on summary judgment. See supra, at 12-14. "In order to recover [under windstorm insurance coverage] it is not necessary that windstorm be the sole cause of the damage.... If the damage would not have occurred in the absence of a windstorm, the loss is covered by the policy." Milan v. Providence Washington Ins. Co., 227 F.Supp. at 253. Because FSC has presented unrefuted evidence that the damage to its property would not have occurred but for Hurricane Hugo, we affirm the district court's entry of summary judgment on the issue of liability in its favor.

SAIC next argues that the district court erred in granting summary judgment in favor of FSC on the issue of the co-insurance penalty. The insurance policy contains a coinsurance clause which provides that:

[t]he Company shall not be liable for a greater proportion of any loss to property covered than the limit of liability under this policy for such property bears to the amount produced by multiplying the actual cash value of such property at the time of the loss by the coinsurance percentage stated in the Declarations.

(J.A. at 2769). SAIC maintains that the FSC property is worth more than the amount declared in the policy. As a result, SAIC claims that, if liable, it is only obligated to pay that proportion of the damages equal to the proportion of the declared value to the actual value pursuant to the terms of the coinsurance clause.19

Another pertinent endorsement excludes from coverage "[p]roperty which is more specifically covered in whole or in part by this or any other contract of insurance, except for the amount of loss which is in excess of the amount due from such more specific insurance." (J.A. at 2777). FSC proffers the lease agreements between FSC and its Building I and Building II tenants, which provide that the tenants would purchase their own insurance to cover all leasehold improvements, to prove that SAIC only insured the structure of the buildings--not the leasehold improvements. As a result, FSC argues that the declared value of the property is in fact equal to the actual value of the insured structure and thus the coinsurance clause is inapplicable.20

In further support of this contention, FSC points to the Pretrial Report, submitted by both parties in December 1993, which includes as an undisputed fact the following information:

Under the terms of the leases, tenants in the L-shaped building (Building "1") are responsible for the integrity and maintenance of their own leasehold improvements and insurance therefor. The policy does not cover property not owned by the landlord ... including leasehold improvements made by Tenants.... Tenants are required to maintain their own insurance, and all damage to leasehold improvements ... are for the account and responsibility of the respective tenants. The tenants have their own insurance policies covering their leasehold improvements. The lease for the Firestone Store (Building "2") contains similar provisions. The Kentucky Fried Chicken building (Building "3") had a different lease, according to which the Landlord provided, paid for, and owned what would otherwise have been the tenant leasehold improvements (i.e. a "turnkey" location), and the Landlord insured them. Since the plaintiff herein owned the leasehold improvements, the valuation limits under the Policy reflected a higher per-unit insurable value for Building "3".

(J.A. at 64).

Despite this earlier admission, SAIC now contends that Buildings I and II should now be appraised to include the value of the leasehold improvements, thus triggering the coinsurance penalty clause. We agree with the district court that by agreeing to the preceding "undisputed facts" in the Pretrial Report, SAIC has waived this argument. See Correa v. Hospital San Francisco, 69 F.3d 1184, 1195 (1st Cir.1995). We further agree that, even absent waiver, SAIC has failed to conclusively rebut the evidence proffered by FSC. As a result, we conclude that FSC is entitled to judgment as a matter of law that the coinsurance penalty clause does not apply to reduce SAIC's liability under the terms of the policy.

SAIC next appeals the district court's grant of summary judgment in favor of FSC with respect to its right to set off amounts spent by Pueblo Supermarkets for repairs against the $150,000 advanced by SAIC for emergency repairs immediately after the hurricane. SAIC objects to this ruling on the ground that the Pueblo setoff is essentially a new claim, and that for this claim to proceed, FSC should be required to request leave to file an amended complaint. Absent such a request, SAIC maintains that the district court "flagrantly deviated from the mandates provided by the Federal Rules of Civil Procedure" by accommodating FSC's attempt at "ambush litigation." (Appellant's Br. at 45).

It is undisputed that SAIC advanced FSC the sum of $150,000 for emergency repairs. After