Coverage Analysis
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MAINE

  ACCIDENTS OR OCCURRENCES

  Maine courts have adopted a strict subjective standard for determining whether bodily injury or property damage is expected or intended by the insured.  Maine Bonding & Cas. Co. v. Douglas Dynamics, Inc., 594 A.2d 1079, 1081 (Me. 1991)(wrongful discharge claims).  

  Thus, coverage is required unless the insured "subjectively wanted" (intended) the injury to happen or "in fact subjectively foresaw as practically certain" (expected).  Burns v. Middlesex Ins. Co., 558 A.2d 701, 702 (Me. 1989). Intent will be inferred as a matter of law cases where the insured's conduct is inherently injurious.  Perreault v. Maine Bonding & Cas. Co., 568 A.2d 1100, 1101 (Me. 1990)(sexual molestation) and Mutual Fire Ins. Co. v. Hancock, 634 A.2d 1312 (Me. 1993)(physical evidence of violence precluded any finding that the assault was an "accident" or that injuries resulting from the beating were not "expected" even if the insured had been intoxicated at the time).

  In Landry v.  Leonard, 720 A.2d 907 (Me. 1998) that an insured who had been an accomplice to an armed robbery was collaterally estopped to claim coverage as the plaintiff’s injuries were so likely to occur in the course of the armed robbery that “the intent and expectation of injury was inherent as a matter of law in the commission of the crime.”  the court noted that “people who purchase homeowners policies do not intend that victim’s injuries caused by convicted robbers during an armed robbery be covered by the robber’s insurance nor do they expect to pay premiums to share in the coverage of such risks.  Our holding today is consistent with public policy.”  Even though the underlying suit alleged that the insured had “negligently participated in a venture” that resulted in the plaintiff’s injuries, the court declared that such framed claims of negligence are irrelevant where there is substantial certainty that injury will result from the insured’s intentional acts.  Although a finding of intentional conduct does not necessarily and in all situations preclude a finding of negligence, when there is deliberate criminal conduct with a substantial certainty of injury, that conduct excludes a finding of negligence for injuries to the victim of the criminal conduct.”  

  An insurer may have an obligation to provide a defense even to intentional torts if the insured did not subjectively desire or foresee the resulting bodily injury.  Burns v. Middlesex Insurance Company, 558 A.2d 701, 702, (Me. 1989).  See also Massachusetts Bay Insurance Company v. Ferriaolo Construction Company, 584 A.2d 608, (Me. 1990)(Gravel Pit Excavator did not "intend" to cause injuries).  In Gibson v. Farm Family Mutual Insurance Company, 673 A.2d 1350 (Me. 1996), the Supreme Judicial Court found a duty to defend trespass allegations by a neighboring property owner, holding that the insurer could only avoid a defense if under any circumstances the harms alleged in the underlying suits could not constitute "an accidental unintended consequence of an act allegedly committed intentionally by [the insured]."  
 

  In several recent cases, the Supreme Judicial Court has taken a very broad view of what constitutes an "occurrence."  See Hanover Ins. Co. v. Crocker, 688 A.2d 928, 930 (Me. 1997) (negligent infliction of emotional distress) and Maine State Academy and Hair Design, Inc. v. Commercial Union Ins. Co., 699 A.2d 1153 (Me.1997) (wrongful discharge/sexual harassment).  Allegations that an employer intentionally inflicted emotional distress on an employee  have been found to set forth an “occurrence” so as to trigger a liability insurer’s duty to defend.  Continuing its expansive interpretation of coverage issues, the Maine Supreme Judicial Court ruled in Maine Mutual Fire Ins.  Co. v.  Gervais, 715 A.2d 938, 942 (Me.  1998) that such conduct did not necessarily imply an intent to injure as recovery might be had on the basis of reckless conduct or conscious disregard of the truth, neither of which required a subjective intent to cause injury.  In these cases, the court has emphasized that whether injuries are “accidental” depends not on the voluntariness of the insured’s act but whether the resulting consequences were intended.  Maine Mutual Fire Ins.  Co.  v.  Gervais, 1999 ME 134 (Me.  August 31, 1999).

  On the other hand, an insured may not compel coverage for intentionally-caused injuries by claiming that he acted negligently in self-defense.  In  Royal Insurance Company v. Pinette, 2000 Me. 155 (Me. August 10, 2000), the SJC ruled that an incident in which the insured shot and killed someone was not the result of an “accident” despite the insured’s contention that he acted in self-defense.  The court noted that self-defense is a tort doctrine that may immunize the insured from the legal consequences of intentional acts but does not alter the fact that the insured acted with the expectation of causing injury.   

  There is no coverage for claims against innocent co-insureds where a policy contains an exclusion for injuries expected or intended by "an insured." Johnson v. Allstate Ins. Co., No. FED-96-170 (Me. January 6, 1997).
 

  ALLOCATION AND SCOPE ISSUES

  The Maine Supreme Judicial Court has ruled that a trial court did not abuse its discretion in requiring a predecessor carrier to reimburse a second carrier for half of the costs of defending a mutual insurer for a suit that potentially triggered both policies. Commercial Union Ins. Co. v. Royal Ins. Co., 658 A.2d 1081 (Me. 1995).

  Allocation of defense between covered and non-covered claims was rejected by the Maine Supreme Judicial Court in Gibson v. Farm Family Mutual Ins. Co., 673 A.2d 1350 (Me. 1996).  While refusing to rule out the possibility of apportionment completely, the court declared that a trial court had no obligation to permit apportionment where defense costs could not readily be allocated between covered and uncovered claims.

  Where allegations against a sky diving school were paid by a homeowner's insurer, despite an aircraft liability exclusion, the homeowner's carrier could recover in full from the aviation liability insurer for all fees and damages paid to settle the claims.  Anderson v. Virginia Surety Co., 1998 WL 24213 (D. Me. January 12, 1998). 
 

  APPELLATE PROCEDURES

   All appeals are heard by the Maine Supreme Judicial Court.
 

  BAD FAITH

  Unfair or deceptive consumer practices are proscribed by Me. Rev. Stat. Ann. tit. 5, § 206 (1989 & Supp. 1992). Unfair claims handling by insurers is regulated under Mich. Comp. Laws § 500.2026 (1977).

  The Maine Supreme Judicial Court has refused to recognize an independent tort of bad faith in the first party context but has adopted a broad interpretation of a policyholder's contract remedies. Marquis v. Farm Family Mut. Ins. Co., 628 A.2d 644, 652 (Me. 1993) (refusing to recognize independent tort of bad faith;  insurer’s duty of good faith and fair dealing arises from an implied covenant in the insurance contract and limits an insured’s remedies for breach of the duty to the traditional remedies for breach of contract).

  Even so, tort claims against the insurer must be based on conduct independent of the insurer’s denial of the claim.  Colford v. Chubb Life Insurance Company, 687 A.2d 609, 616 (Ma. 1996); Marquee v. Farm Family Mutual Insurance Company, 628 A.2d 644 (Me. 1989) and Stahl v. First American Title Insurance Company, 745 A. 2d 975 (Me. 2000).  

  A third-party tort claimant has no right to assert bad faith claims against the tortfeasor’s liability insurer.  Linscott v.  State Farm Mutual Automobile Insurance Company, 368 A.2nd 1161 (Me. 1977).
 

  "BODILY INJURY"

  Allegations of extreme emotional distress resulting from the insured's civil rights violations were held to be a "bodily injury" in Old Town v. American Employers Ins. Co., 858 F.Supp. 264 (D. Me. 1994).  See also Nationwide Mut. Fire Ins. Co. v. Charles, 1996 U.S. Dist. LEXIS 9988 (D. Me. 1996)(D. Me. 1996)(insurer had duty to defend claims for emotional distress arising out of libel and slander action).  See also Vigna v. Allstate Ins. Co., 686 A.2d 598 (Me. 1996)(allowing coverage for emotional distress that a building contractor suffered due to the insured's delay in paying for renovations to their home).
 

  BREACH OF POLICY CONDITIONS

  Insurer must prove prejudice.  Ouelette v. Maine Bonding and Cas. Co., 495 A.2d 1232 (Me. 1985).  Maine courts have ruled that even the entry of a default judgment is not sufficient to bar coverage unless the insurer can show that the court would  not have set aside the default even had it intervened and petitioned to have the default removed.  Franco v. Selective Insurance Company, 1999 WL 486385 (1st Cir. July 14, 1999).

  An insured that settles a claim or otherwise makes a "voluntary payment" without the knowledge or consent of the insurer forfeits its rights under the policy. Gates Formed Fibre Products, Inc. v. Imperial Cas. and Indemnity Co., 702 F.Supp. 343 (D. Me. 1988).
 

  BROAD FORM COVERAGES

  Current "wrongful invasion" language limits coverage to trespasses committed by the owner, landlord or lessor of premises that the plaintiff occupies.  USF&G v. Goodwin, 950 F.Supp. 24, 26 (D. Me. 1996). 

  An insurer was held to owe “personal injury” coverage for an employment discrimination suit where the claim contained factual allegations of “verbal sexual harassment” that might support a defamation claim. Maine State Academy and Hair Design, Inc. v. Commercial Union Ins. Co., 699 A.2d 1153 (Me. 1997).

  Trademark infringement claims are covered as involving a “style of doing business” within the definition of “advertising injury.”  American Employers Insurance Company v.  DeLorme Publishing Company, 39 F. Supp.2d 64 (D. Me. 1999).

  Allegations that the insured induced others to infringe the plaintiff’s patent for biomedical products potentially fell with the scope of both “personal injury” and “advertising injury” for “belittling” (disparaging) products.  In Foundation for Blood Research v. St. Paul Fire & Marine Insurance Company, 1999 ME 98 (Me. June 3, 1999), the Supreme Judicial Court declared that “belittlement” is a synonym for the tort commonly known as trade libel.  Even though the underlying complaint did not specifically allege disparagement by the insured, the court declared that the allegations of patent infringement could give rise to a potential set of facts that establish coverage.
 

  CHOICE OF LAWS

  Maine has adopted the Restatement's "most significant relationship" test. Baybutt Construction Corp. v. Commercial Union Ins. Co., 455 A.2d 914, 918 (Maine 1983) and Gates Formed Fibre Products v. Plastic-Vac, Inc., 687 F.Supp. 688, 689 (D. Me 1988). Its courts will apply the law of the state which the parties understood was to be the principal location of the insured risk during the terms of the policy, unless with respect to the particular issue involved some othr state has a more significant relationship to the transaction and the parties, in which event the local law of the other state will be applied.  In general, therefore, the location of the insured facility causing the pollution will govern. Lido and Steego.   A Massachusetts court, interpreting Maine law, has further found in A. Johnson & Co., Inc. v. The Aetna Cas. & Surety Co., 741 F.Supp. 298 (D. Mass. 1990), affirmed, 933 F.2d 66 (1st Cir. 1991) that the location of the pollution itself is the most significant factor.

  CONFLICTS OF INTEREST
 
  Where an insurer offers to defend its insured, albeit under a reservation of rights with respect to denying coverage, an insurer’s interest in the liability phase of the proceeding is contingent on the resolution of the coverage issue.  Donna C. v. Kalamares, 485 A.2d 222, 223-24 (Me. 1984).  Therefore, an insurer which reserves the right to disclaim coverage cannot control the defense of a lawsuit brought against its insured by an injured party.  Travelers Indemnity Co. v. Dingwell, et al, 884 F.2d 629, 638-39 (1st Cir. 1989).
 

  "DAMAGES"

  Under Maine law, “damages" are sums which are paid to a third party in compensation for damage to the third party's person or property for which the insured is legally liable.  Gibson v. Farm " Family Mutual Ins. Co., 673 A.2d 1350, 1353 (Me. 1996) ("damages" are "amounts that might be awarded against an insured to "recompense" a third-party for damages to the third party's property for which the insured is held legally liable").  Likewise, the cost of planting and growing trees to replace those wrongfully felled by the insured were held to be covered "damages" in USF&G v. Goodwin, 950 F.Supp. 24, 27 (D. Me. 1996).  
  
  Maine holds the unusual distinction of being one of only two states whose supreme court has held that clean-up costs do not encompass "damages."  In Lido Co. of New England, Inc. v. Firemans Fund Ins. Co., 574 A.2d 299 (Maine 1990) and Patrons Oxford Mutual Ins. Co. v. Marois, 573 A.2d 16 (Me. 1990), the Supreme Judicial Court of Maine ruled that costs incurred to clean up pollution on the insured's own property are not covered.  The court noted, however, that coverage would be required for the cost of cleaning up pollution on the property of third parties or for reimbursement claims that might be received from the groundwater oil clean up fund of third party contamination.  See also A. Johnson & Co. v. Aetna Casualty & Surety Co., 741 F.Supp. 298, 303 (D. Mass. 1990) (interpreting Maine law).  

  The court was given the opportunity to reverse Marois in 1997 but stated in Central Maine Power Co. v. Moore, 692 A.2d 943 (Maine 1997) that it would not do so as the justices were evenly split on the issue of whether clean up costs fell within the definition of "damages."  However, the court expressed no such reluctance to find coverage under a policy that covered "any and all sums which the assured shall by law become legally liable to pay...."  the court rejected the insurer's contention that this was equivalent to the "as damages" language in a CGL policy.  

  In Maine State Academy and Hair Design, Inc. v. Commercial Union Ins. Co., 699 A.2d 1153 (Me. 1997), the court ruled that an insurer had no duty to defend administrative proceedings before the Maine Human Rights Commission as the Commission had no power to impose damages upon the insured for its alleged sexual harassment of the plaintiff.
 

  DECLARATORY JUDGMENT ACTIONS

  Ordinarily, an insurer is not entitled to a declaration of summary judgment while the underlying claims are still pending.  This general rule is subject to several exceptions, however, as where the insured has assigned all of its rights to the plaintiff.  Royal Insurance Company v. Pinette, 2000 Me. 155 (Me. August 10, 2000).
  The Maine Judicial Court has refused to permit an insurer to intervene in the case against its insured to resolve questions of coverage.  Donna C. v. Kalamaras, 485 A.2d 222, 223 (Me. 1984).

  Under Maine law, an insured may be entitled to recover its fees for prosecuting a claim for breach of contract where the insurer has wrongfully refused to provide a defense even though the insurer's duty is clear under prevailing law.  Union Mutual Fire Ins. Co. v. Town of Topsham, 441 A.2d at 1019.  Although the issue in Topsham involved a policyholder's defense of an action commenced by its liability insurer, the Supreme Judicial Court of Maine extended this holding in Gibson v. Farm Family Mutual Ins. Co., 673 A.2d 1350 (Me. 1996), declaring that an insurer's wrongful breach of its defense obligation should entitle the policyholder to recover fees, whether the DJ is brought by the policyholder or the liability insurer.  The court noted, however, that this was not an absolute right of recovery and that policyholders should only recover fees in either circumstance where the insurer's contractual obligations are clear from the policy and the pleadings filed against the insured.  The court emphasized the rule again in Maine Mutual Fire Ins.  Co.  v.  Gervais, 1999 ME 134 (Me.  August 31, 1999), declaring that a lower court had erred in limiting the insured’s right of recovery to situations in which the insurer had acted in bad faith.

  The Maine Supreme Judicial Court has ruled that although pre-judgment interest is included within the damages subject to an insurer’s liability limits, post-judgment interest must be paid in excess of those limits.  In Moorland v. Empire Fire & Marine Insurance Company, 2000 Me. 26 (Me. February 11, 2000), the court declared that pre-judgment interest is a species of compensatory damages awarded against the policyholder and is therefore governed by policy language limiting an insurer’s exposure for damages.  The court found, however, that post-judgment interest is a form of “costs” intended to ensure that just compensation will not be delayed and is therefore not subject to the policy’s contractual limitations on indemnity.
 

  DIRECT ACTIONS

  Tort claimants are permitted by statute to pursue actions directly against liability insurers.
 

  DISCOVERY ISSUES

   --Claims Manuals
 

   --Drafting History
 

   --Other Policyholder Claims
 

   --Reinsurance Information

   --Reserves
 

  DUTY TO DEFEND

  Maine requires that an insurer defend any suit that alleges a potential occurrence within the scope of its coverage.  Merrimack Mutual Fire Ins. Co. v. Brennan, 534 A.2d 353 (Me. 1987) and Travelers v. Dingwell, 414 A.2d 220, 226 (1980); Union Mutual Fire Ins. Co. v. Town of Topsham, 441 A.2d 1012, 1015 (Me. 1982).  This questions is resolved by comparing the allegations of the complaint with the provisions of the policy.  Baywood Corp. v. Maine Bonding & Casualty Co., 628 A.2d 1029, 1030 (Me. 1993).  

  A duty to defend is still required even if the actual facts are contrary to what is alleged against the insured.  J.A.J., Inc. v. Aetna Casualty & Surety Co., 529 A.2d 806, 808 (Me. 1987).  Indeed, in Brennan, the court firmly declared that Maine courts did not need to consider extrinsic evidence and, indeed, in most cases did not need any sort of evidentiary hearing to resolve this issue.  In Lavoie v. Dorchester Mutual Fire Ins. Co., 560 A.2d 570 (Me. 1989), the court went so far as to say that a conclusory allegation of negligence was sufficient to trigger an insurer's defense obligation, even without supporting factual allegations.  In Me. Bonding & Cas. Co. v. Douglas Dynamics, 594 A.2d 1079 (Me. 1991), the court reversed a lower court's ruling that no duty to defend existed where the underlying suit did not allege a recognized theory of liability under Maine law.  Information discovered after the fact cannot retroactively eliminate a duty to defend that existed up to that point.  Worcester Ins. Co. v. Dairyland Ins. Co., 555 A.2d 1050, 1053 (Me. 1989).  The "comparison" test requires a defense if the underlying complaint does not preclude the possibility that the claimed loss is covered.   Commercial Union Ins. Co. v. Royal Ins. Co., 658 A.2d 1081 (Me. 1995).

  In general, an insurer's duty to defend extends to all counts of the complaint, including non-covered theories of liability, where the counts arise out of a common set of facts.  Gibson v. Farm Family Mutual Ins. Co., 673 A.2d 1350 (Me.1996).  See also Travelers Indemnity Co. v. Dingwell, 414 A.2d 220, 226 (Me. 1980) and J.A.J., Inc. v. Aetna Casualty & Surety Co., 529 A.2d at 808.  In Gibson, the court suggested that the possibility that apportionment might be appropriate where non-covered claims arose out of a different set of facts than the allegations giving rise to a duty to defend.  However, it refused to find in that case that a trial court had erred as a matter of law in declining to permit apportionment between the costs of defending a neighbor's tort claims and separate counts seeking clarification of title in a boundary dispute between the insured and its neighbors since all of the claims arose out of the same factual set of circumstances.  

  In Maine State Academy and Hair Design, Inc. v. Commercial Union Ins. Co., 699 A.2d 1153 (Me. 1997), the court refused to find that a liability insurer had a duty to defend administrative proceedings brought by an aggrieved employee before the Maine Human Rights Commission.  The court pointed out that the Commission had no power to award damages.  Further, it noted that filing a proceeding before the Commission was not a legal prerequisite to a civil suit for damages and merely enabled the plaintiff to obtain attorneys fees in any subsequent civil action.

  EXCESS INSURERS

  "Excess insurance is routinely written with the expectation that the primary insurer will conduct the investigation, negotiation and defense of claims until its limits are exhausted."  Progressive Cas. Ins. Co. v. Travelers Ins. Co., 735 F.Supp. 15, 19 (D. Me. 1990).
 

  NUMBER OF OCCURRENCES

  "Cause" tested adopted in Honeycomb Systems, Inc. v. Admiral Ins. Co., 567 F.Supp. 1400 (D. Me. 1983)(where machinery broke down a few years after original incident because of a different problem, court holds claims involve two "occurrences").
 

  “OTHER INSURANCE”

  Where “other insurance” clauses are mutually repugnant, each insurer must share the loss equally.  Carriers Insurance Company v. American Policyholders Insurance Company, 404 A.2d 216 (Me. 1979).  The court rejected earlier “arbitrary” rules such as requiring the insurer whose policy was closer to the risk to pay first.  Id. at 219.  

  This rule has been held to apply even to cases in which “excess” language is not contained in an “other insurance” clause.  See  Home Ins. Co. v. St. Paul Fire & Marine Ins. Co., No. 99-1909 (1st Cir. October 11, 2000)(E&O policy with “excess” language in prior acts clause held to conflict with “excess” other insurance language in other E&O policy such that both policies had to contribute equally).
 

  POLLUTION EXCLUSION

  There have been very few pollution rulings in Maine, probably owing to the Supreme Judicial Court’s “as damages” stance.

  In Travelers Ind. Co. v. Dingwell, supra, the Maine Supreme Judicial Court ruled in 1980 that liability insurers must defend private claims that pollution had occurred as part of an "ongoing, deliberate process" since the suit did not specify whether the "on-going" pollution was the initial release of pollutants or their "post-discharge" presence in the environment.  Since the suit did not specify whether pollution resulted from "intentional dumping or burial", which would have been excluded, or "unintentional spills, leaks or other accidents", which would not be, a duty to defend existed.  A federal judge in Massachusetts, interpreting Maine law, later predicted in A. Johnson that Maine would join the "emerging national consensus" in finding that deliberate disposal activity over an extended period of time is not "sudden and accidental."

  Although the First Circuit upheld the absolute pollution exclusion in the context  of an oil spill clean up on the insured’s own property   (Guilford Industries, Inc. v. Liberty Mutual Ins. Co., 682 F.Supp. 792 (D. Maine 1988), affirmed per curiam, 879 F.2d 853 (1st Cir. 1989)), it has refused to extend its scope to “non-environmental” claims.  In Nautilus Ins.  Co.  v.  Jabar, 188 F.3d 127 (1st Cir.  1999) ruled that the exclusion was ambiguous as applied to claims by office workers who were exposed to toxic fumes from a contractor’s operations because “an ordinarily intelligent insured could reasonably interpret the pollution exclusion clause as only applying to environmental pollution.”  Accordingly, it concluded that the exclusion should only apply to “environmental pollution” and not to “damages due to routine commercial hazards.” 
 

  PROPERTY DAMAGE

  Pure economic loss or damage to intangible property is not covered as a general rule. L. Ray Packing Co. v. Commercial Union Ins. Co., 469 A.2d 832, 835 (Me. 1983).
 

  PUNITIVE DAMAGES

  Coverage only allowed for punitive damages based on insured's vicarious liability.  Braley v. Berkshire Mut. Ins. co., 440 A.2d 359 (Me. 1982) and Concord Gen. Mut. Ins. Co., 345 F.Supp. 1090 (D. Me. 1972).
 

  STANDARDS FOR POLICY INTERPRETATION

  Doctrine of "reasonable expectations" followed in Maine.  Baybutt Construction Corp. v. Commercial Union Ins. Co., supra.

  In general, the scope of intended coverage must be determined based upon the written terms of the contract, "not from what the parties said or did or thought they intended."  Hartford Fire Insurance Company v. Merrimack Mutual Insurance Company, 457 A.2d 410, 414 (Me. 1983).                 
 

  THEORIES OF ALTERNATIVE LIABILITY

   None adopted yet. In re All Maine Asbestos Litigation, 575 F.Supp. 1375 (D. Me. 1983). 
 

  TRIGGER OF COVERAGE

  Maine follows the majority rule in the United States that the time of an "occurrence" is when the claimant sustains actual damage and not when the act or omission that caused such damage was committed.  Kraul v. Maine Bonding & Cas. Co., 559 A.2d 338 (Me. 1989).  As yet, the Maine Supreme Judicial Court has not construed this general principle in the context of latent injury claims.  However, a federal district court (Judge Carter) adopted a "manifestation" trigger in a case involving the breakdown of paper drying machinery. Honeycomb Systems, Inc. v. Admiral Ins. Co., 567 F.Supp. 1400 (D. Me. 1983).

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