Centennial Ins. Co. v. Patterson

• Decision Date: 23 April 2009
• Docket Number: No. 08-1521.,08-1521.
• Citation: 564 F.3d 46
• Parties: CENTENNIAL INSURANCE COMPANY, Plaintiff, Appellant, v. Robert PATTERSON, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

564 F.3d 46

CENTENNIAL INSURANCE COMPANY, Plaintiff, Appellant, v. Robert PATTERSON, Defendant, Appellee.

No. 08-1521.

United States Court of Appeals, First Circuit.

Submitted October 7, 2008.

Decided April 23, 2009.

Jeffrey T. Edwards and Preti, Flaherty, Beliveau & Pachios, LLP, on brief for appellant.

David M. Sanders, on brief for appellee.

Before LYNCH, Chief Judge, TORRUELLA and STAHL, Circuit Judges.

TORRUELLA, Circuit Judge.

In this insurance coverage dispute, appellant-insurer Centennial Insurance Company ("Centennial") seeks review of the district court's grant of summary judgment to appellee-insured veterinarian Dr. Robert Patterson. The district court declared that Centennial was obligated under an insurance policy to legally defend Patterson in a lawsuit instituted against him by Carol Murphy. After careful consideration, we affirm the grant of summary judgment in favor of Patterson.

I. Background

For the purposes of summary judgment the facts are as follows. Centennial is a New York insurance company authorized to do business in Maine. Dr. Patterson is a doctor of veterinary medicine who practices in Maine. Centennial provided insurance coverage to Patterson pursuant to a Veterinarian's Professional Liability Policy in effect between the parties during the period January 1, 2003 through January 1, 2005 ("the Policy").

The Policy states, in relevant part:

II. Defense, Settlement, Supplementary Payments

With respect to such insurance as is afforded by this certificate:

A. The Company shall have the right and duty to investigate any Claim or defend any Suit brought against the Insured alleging a Veterinary Incident and seeking damages on account thereof, to which this insurance applies, even if such Claim or Suit is groundless, false, or fraudulent. . . .

Common Certificate Definitions Form

D. Claim means any of the following: . . .

2. A Suit, arbitration or other proceeding served on an Insured for damages resulting from a Veterinary Incident.

. . .

M. Veterinary Incident means any malpractice, negligent act or omission, utterance or publication of a libel or slander, or other defamatory or disparaging material:

1. in the furnishing of professional veterinary services, . . . by the Named Insured or by any person for whom the Named Insured is legally responsible.

. . .

Relevant to this dispute, the Policy also contains the following exclusions:

III. Exclusions

This certificate does not apply to Claim or Suit based upon, arising out of, or related to: . . .

H. any actual or alleged;

1. dishonest, fraudulent, criminal, malicious act, or malicious omission by any Insured;

2. willful violation of any law, statute, ordinance, rule or regulation by any Insured.

In September 2006, Murphy initiated a pro se civil action in federal court against the State of Maine and eighty or more defendants, including Dr. Patterson, alleging various claims arising from proceedings brought against Murphy by the State of Maine for animal cruelty. Murphy had been charged by the State with animal cruelty for not providing proper food, water or shelter to approximately sixty animals on her farm. She sought "compensatory and punitive damages" and injunctive relief, namely, the "return of all [her] property."

The claims against Dr. Patterson arose from his alleged testimony against Murphy at an Animal Possession Hearing, which was held on March 19, 2004 (the "Hearing"), and also, Dr. Patterson's alleged examination of her animals in connection with those proceedings.¹

Dr. Patterson submitted a copy of Murphy's complaint to Centennial and requested that Centennial tender a defense on his behalf, pursuant to the Policy. Centennial denied Dr. Patterson's request on the ground that it did not have a duty to defend or indemnify Dr. Patterson with respect to the Murphy suit because the suit fell outside the Policy's coverage. Centennial then brought the instant declaratory judgment action in the federal district court for the District of Maine, seeking a declaration that it did not have an obligation to defend and indemnify Dr. Patterson against the claims asserted by Murphy. Meanwhile, Dr. Patterson hired an attorney and provided for his own defense in the Murphy suit. On June 25, 2007, while Centennial's action was pending before the district court, Murphy's complaint was dismissed with prejudice. Centennial's subsequent motion to dismiss this action as moot, based on the dismissal of the underlying suit, was denied on grounds that a factual dispute remained over "whether [Dr. Patterson] had incurred attorneys fees and costs and, if so, a legal dispute over whether they are recoverable from the plaintiff under a duty to defend." The parties then each filed motions for summary judgment. A magistrate judge recommended that Dr. Patterson's motion for summary judgment be granted, and Centennial's be denied, finding that Centennial had a duty under the Policy to defend Dr. Patterson in the Murphy action. On March 26, 2008 the district court entered an order adopting that recommendation. At that point in time, Dr. Patterson had already incurred costs defending himself in the underlying Murphy action, and in connection with establishing Centennial's duty to defend in the instant suit. Centennial now appeals.

II. Discussion

A. Standard of Review

This case comes before us under our diversity jurisdiction and the parties agree that we must apply Maine law to the resolution of the issues in dispute. See Douglas v. York County, 433 F.3d 143, 149 (1st Cir.2005).

We apply de novo review to the district court's decision because the issues were "resolved on summary judgment and because under Maine law `[w]hether an insurer has an obligation to defend its insured against a complaint is a question of law.'" Bucci v. Essex Ins. Co., 393 F.3d 285, 290 (1st Cir.2005) (quoting Elliott v. Hanover Ins. Co., 711 A.2d 1310, 1312 (Me.1998)) (alteration in original).

B. Applicable Law

Both Centennial and Dr. Patterson agree that Maine law employs the "comparison test" to determine whether an insurer has a duty to defend an insured. See Barrett Paving Materials, Inc. v. Cont'l Ins. Co., 488 F.3d 59, 63 (1st Cir. 2007) (citing Travelers Indem. Co. v. Dingwell, 414 A.2d 220, 224 (Me.1980)). "The reviewing court is required to `[lay] the underlying damage complaint[ ] alongside the insurance policy and then determine[ ] [whether] the pleadings [are] adequate to encompass an occurrence within the coverage of the policy.'" Id. (quoting Dingwell, 414 A.2d at 224) (modifications in original). "Under this comparison test, the insurer has a duty to defend if the underlying complaint discloses a `potential or a possibility' for liability within the policy's coverage." Bucci, 393 F.3d at 290 (quoting Elliott, 711 A.2d at 1312) (emphasis in original). In other words, "`[g]iven the possible existence of any legal or factual basis for payment under a policy, an insurer's duty to defend should be decided summarily in favor of the insured.'" Id. at 292 (quoting Gibson v. Farm Family Mut. Ins. Co., 673 A.2d 1350, 1352 (Me.1996)) (emphasis in original); see also NE Props., Inc. v. Chi. Title Ins. Co., 660 A.2d 926, 927 (Me.1995) ("The insured is entitled to a defense if there exists any legal or factual basis which could be developed at trial which would obligate the insurers to pay under the policy." (internal quotation marks omitted)). "Significantly, `[t]he duty to defend is broader than the duty to indemnify, and an insurer may have to defend before it is clear whether there is a duty to indemnify.'" Bucci, 393 F.3d at 292 (quoting Commercial Union Ins. Co. v. Royal Ins. Co., 658 A.2d 1081, 1083 (Me.1995)).

"Maine law is very clear that the inquiry [under the comparison test] `is based exclusively on the facts as alleged rather than on the facts as they actually are.'" Barrett Paving, 488 F.3d at 63 (quoting Dingwell, 414 A.2d at 224). Moreover, we note that under Maine law, at least in some circumstances, "the duty of an insurance company to defend one count in a lawsuit imposes a duty to defend all counts." Gibson, 673 A.2d at 1354. Finally, as a general rule, "a standard policy of insurance" under Maine law must be interpreted "most strongly against the insurer." Id. at 1353 (internal quotation marks omitted).

C. Potential for Coverage within Scope of Policy

Centennial argues that it had no duty to defend Dr. Patterson in the Murphy action because the Murphy complaint did not allege a "veterinary incident," as the term is defined in the Policy. As noted above, the Policy defines "veterinary incident" as "any malpractice, negligent act or omission, utterance or publication of a libel or slander, or other defamatory or disparaging material . . . [i]n the furnishing of professional veterinary services." In support of its position that no "veterinary incident" was alleged, Centennial argues that (a) the Murphy complaint makes no claims of malpractice or negligence in the "furnishing of professional veterinary services" and that (b) the Murphy complaint makes no claims of libel, slander or defamation against Dr. Patterson — but only against certain media outlets. We disagree.

As to Centennial's first argument, it is true that the Murphy complaint does not explicitly assert that Dr. Patterson was negligent or committed malpractice in the furnishing of professional veterinary services. However, the complaint does contain several allegations of wrongful conduct by Dr. Patterson that could "potentially" be so construed.

As a threshold matter, we reject Centennial's contention that the claims asserted against Dr. Patterson related "exclusively to Dr. Patterson's testimony at the Animal Possession Hearing." Rather, Murphy's statement, at paragraph 184 of the complaint, that Dr. Patterson "testified that two calves that died expired because they had no food and water" implies that Dr. Patterson examined the deceased calves in order to...