American Policyholders' Ins. Co. v. Cumberland Cold Storage Co.

• Decision Date: 18 May 1977
• Citation: 373 A.2d 247
• Parties: AMERICAN POLICYHOLDERS' INSURANCE COMPANY v. CUMBERLAND COLD STORAGE COMPANY et al.
• Court: Maine Supreme Court

Page 247

373 A.2d 247

AMERICAN POLICYHOLDERS' INSURANCE COMPANY v. CUMBERLAND COLD STORAGE COMPANY et al.

Supreme Judicial Court of Maine.

May 18, 1977.

Lowry, Platt, Fitzhenry, Lunt & Givertz by Robert D. Platt, Donald G. Lowry, Portland, for plaintiff.

Richardson, Hildreth, Tyler & Troubh by Ronald Russell, Harrison Richardson, Portland, Reef & Mooers by Daniel W. Mooers, Portland, for George I. Lewis.

Before DUFRESNE, C. J., and POMEROY, WERNICK, ARCHIBALD, DELAHANTY and GODFREY, JJ.

DELAHANTY, Justice.

This is an action for declaratory relief brought by American Policyholders' Insurance Company (American). The case is before us on American's appeal from the granting of summary judgment for defendant George I. Lewis (Lewis).

We deny the appeal and affirm the judgment of the Superior Court as modified pursuant to our discussion below.

On October 25, 1973, a fire occurred in a Portland cold storage warehouse owned by Pine State Beef Company (Pine State) and leased to Cumberland Cold Storage Company (Cumberland). Numerous lawsuits for damages resulting from the fire were filed in Cumberland County Superior Court by companies storing goods in the warehouse. On February 13, 1975 American filed a complaint for declaratory judgment seeking a declaration that the general liability insurance policy in question afforded no coverage to Lewis 'for either judgment or defense of any suits brought now or in the future, for destruction and/or damage resulting from the fire.' On April 30, 1975, Lewis moved to bring in, as additional defendants, various companies who purportedly had stored goods at the premises and were in the process of bringing suit against Lewis. On that same day, American's action against Lewis was consolidated with similar actions by the insurer for declaratory judgment against Pine State and against Cumberland. We are concerned here only with American's appeal from the grant of summary judgment for Lewis.

The policy under consideration provides various coverages, including comprehensive general liability and contractual liability insurance. Lewis is specifically listed in the declarations as a named insured and, according to the terms of the policy, he is thus insured as an individual. In addition, Lewis admitted in his answer that he is an officer of Cumberland, and thus he is also insured as an executive officer of a named organization.

By the terms of both the comprehensive general liability and the contractual liability insurance, American agreed to

pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

A. bodily injury or

B. property damage

to which this insurance applies, caused by any occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent . . ..'

Both types of coverage contain a specific exclusion for liability for damage to 'property in the care, custody or control of the insured as to which the insured is for any purpose exercising physical control.' American bottoms its denial of coverage on this provision, alleging that Lewis 'was, on behalf of said Cumberland Cold Storage Co., exercising care, custody or control of said damaged and destroyed property.'

On October 29, 1975 the presiding Justice granted Lewis' motion for summary judgment. Judgment was entered on November 12, 1975, ordering American to 'take necessary action to defend defendant, George I. Lewis, and to indemnify said defendant under the terms of said policy, against all claims asserted against defendant, George I. Lewis . . ..' We will consider separately the order to defend and the order to indemnify.

It is accepted in the overwhelming majority of jurisdictions that the obligation of a liability insurance company to defend an action brought against the insured by a third party is to be determined solely by the allegations contained in the complaint in that action. 7A J. Appleman, Insurance Law and Practice, § 4683 (1962); 14 G. Couch, Cyclopedia of Insurance Law, § 51:40 (2d ed. 1965); 50 A.L.R.2d 458, 465-69 (1956). Our Court recognized this pleading test in Marston v. Merchants Mutual Insurance Co., Me., 319 A.2d 111 (1974). We said in Marston that

the determiation of the question whether the insured has a duty to defend the action depends upon whether the complaint in that action states facts which appear to bring the claim of damage within the policy coverage. Id. at 114.

Accordingly, if the allegations in the underlying tort actions in the instant case are within the risk insured against and there is a potential basis for recovery, then American must defend Lewis, regardless of the actual facts or the ultimate grounds on which Lewis' liability to the injured parties may be predicated. 7A Appleman, supra at § 4683; 14 Couch, supra at § 51:45.

The judge below correctly engaged in this comparison test. It is apparent from his decree that he laid the underlying damage complaints alongside the insurance policy and then determined that the pleadings were adequate to encompass an occurrence within the coverage of the policy. He concluded:

The underlying claims against Pine State Beef Co. and George I. Lewis which American Policyholders' Insurance seeks to avoid the obligation to defend and indemnify are based on allegations that Pine State Beef Co. and/or George I. Lewis are the owner or owners of a building in which claimants' property had been stored pursuant to an arrangement with Cumberland Cold Storage, the lessee of Pine State Beef and/or George I. Lewis. Thus, the claims against these two Defendants are based upon their alleged responsibility and negligence as owners of a building. Such liability is clearly within the coverage of the insurance policy referred to. The underlying claims have given rise to a number of civil actions pending in the Superior Court in Cumberland County; this court has reviewed the pleadings in such actions. (emphasis added).

American contends that the justice committed a procedural error and engaged in improper judicial notice when he reviewed the pleadings in the underlying pending civil actions. We disagree. The consolidation order of April 30, 1975 consolidated not only the three declaratory judgment suits but also the related underlying actions brought by the parties whom Lewis had joined as additional defendants. Accordingly, the complaints in the underlying damage claims were properly before the justice, and his judicial notice of them was entirely appropriate. That those pleadings have not been included in the record to this Court is of no consequence.

The above-quoted language of the presiding Justice indicates that, in the underlying damage actions, Lewis was being sued as the owner or co-owner of the building. From the record before us, we cannot ascertain whether Lewis was, in fact, an owner. He admits in his answer that he is an officer of Cumberland, the lessee of Pine State, but this does not rule out the possibility that he is also an owner of the building. In any event, the pleading test for determination of the duty to defend is based exclusively on the facts as alleged rather than on the facts as they actually are. Lee v. Aetna Casualty & Surety Co., 178 F.2d 750 (2d Cir. 1949); see cases cited in 50 A.L.R.2d 458, 498-99 (1956). ¹ Thus, whether Lewis was, in fact, the owner of the building is totally irrelevant here. In each of the underlying claims Lewis is being sued for negligence as the owner of the building, not as a bailee of the stored goods. Were he sued for negligence as bailee, then the question of the applicability of the 'care, custody, or control' exclusion might indeed arise. But here, correctly or not, he is being sued as the owner of the building, and we agree...