Citizens Communications Co. v. American Home Assurance Co.
| Decision Date | 11 December 2004 |
| Docket Number | PEN CV-02-237 |
| Parties | CITIZENS COMMUNICATIONS COMPANY, Plaintiff v. AMERICAN HOME ASSURANCE COMPANY, et al., Defendant |
| Court | Maine Superior Court |
This matter is before the Court on the Defendant's International Insurance Company's[1], (herein "International") Motion to Dismiss the Plaintiff's, Citizens Communications Company's (herein, "Citizens") Complaint for Failure to State a Claim pursuant to Rule 12(b)(6) of the Maine Rules of Civil Procedure.
On November 22, 2002, the City of Bangor, Maine commenced suit[2] in the U.S. District Court against Citizens for alleged property damage and diminution of property value from contamination involving materials stored generated, or disposed of by Citizens at its former manufacturing gas plant in Bangor. The City of Bangor seeks money damages, injunctive relief, and declaratory relief claiming Citizens is responsible for pollution of the Penobscot River from 1851 to 1963. This suit is still pending.
On December 27, 2002, Citizens filed this suit in the Penobscot Superior Court against twenty insurance companies, which (allegedly) issued either primary or excess insurance policies to Citizens, or its predecessor entities, from 1940 through 1986. Citizens seeks a declaration of coverage and an award of money damages regarding the Insurers' defense and indemnity obligations under the primary and excess comprehensive general liability insurance policies as they relate to Citizens' actual and potential liabilities arising from the environmental claims asserted against them in the underlying suit.
The present motion concerns only one of the insurers International, an excess carrier that Citizens alleges to have provided coverage for damages and costs it incurred which have arisen out of property damage, diminution of property value and personal injury associated with Citizens' former manufactured gas plant in Bangor. International sold three excess liability insurance policies (policy numbers XSI6244, XDI7469, and CUXO6905-82) to Citizens covering the period from June 1, 1980 to June 1 1983. Citizens alleges that International has failed or refused to honor its policy obligations by providing defense and indemnity coverage with respect to the underlying suit and claims against Citizens regarding its former manufactured gas plant in Bangor.
International seeks to be dismissed from this lawsuit arguing that according to the terms of the three excess insurance policies at issue, it has no duty to defend Citizens in the underlying suit, and that the question of whether it will eventually have a duty to indemnify Citizens is premature and not justiciable at this time. Citizens responds by arguing that it is entitled to have its insurers defend the underlying environmental action brought by the City of Bangor because the allegations of the complaint, along with the terms of the insurance policies, create a potential for liability, thus triggering a duty to defend and indemnify. Citizens further asserts that interests if judicial efficiency and economy weigh heavily against granting International a dismissal without prejudice.
A civil action may be dismissed when the complaint fails to state a claim upon which relief can be granted. M.R.Civ.P. 12(b)(6). Such a motion tests the legal sufficiency of the plaintiff's complaint, Plimpton v. Gerrard, 668 A.2d 882, 885 (Me. 1995), and not the sufficiency of the evidence the plaintiff is likely able to present. Barnes v. McGough, 623 A.2d 144, 146 (Me. 1993). The allegations of the complainant are viewed as true for purposes of the motion and cast in a light most favorable to the plaintiff. In re Wage Payment Litigation, 2000 ME 162, ¶3, 752 A.2d 217, 220. Thus, a motion to dismiss is properly granted when it appears beyond doubt that the plaintiff is entitled to no relief under the facts that might be proved in support of the claim. Dutil v. Burns. 674 A.2d 910, 911 (Me. 1996). The legal sufficiency of a complaint is a question of law. Thompson v. Department of Inland Fisheries and Wildlife, 2002 ME 78, ¶4, 796 A.2d 674.
Environmental or pollution claims that involve continuous or progressive injuries or losses, which span over several policy periods, provide a good example of continuous losses that are problematic and burden our courts as well as the insured and insurer. This is because standard insurance policy provisions do not neatly fit the complex factual scenarios presented by losses that span years or under the circumstances of the case at hand, decades. This type of continuous loss "triggers"[3] multiple insurance policies, including the three excess insurance policies provided by International to Citizens from 1980 to 1982.
The Law Court has identified two separate but interrelated duties: (1) the duty to defend; and (2) the duty to indemnify. Ordinarily when an insurer challenges the extent of the coverage provided by the insurance policy, these two duties are analyzed separately. American Home Assurance Co. v. Ingeneri, 479 A.2d 897, 898 (Me. 1984). Whether an insurer has a duty to defend its insured against a complaint brought by a third party is a question of law. Northern Security Ins. Co., Inc., v. Dolley, 669 A.2d 1320 (Me., 1996).
Under Maine law, the duty to defend is determined more or less mechanically by comparing the allegations in the underlying lawsuit (here, the City of Bangor's Complaint) with the insurance policy to determine if "there exists any legal or factual basis which could be developed at trial which would obligate the insurers to pay under the policy." United Bank v. Chicago Title Ins. Co., 168 F.3d 37, 39 (1st Cir., 1999) . This comparison test is based "exclusively on the facts as alleged rather than on the facts as they are." American Policyholders' Ins. Co. v. Cumberland Cold Storage Co., 373 A.2d 247, 249 (Me. 1977). A duty to defend exists if there is a "potential shown in the complaint that the facts ultimately proved may come within coverage ..." Merrimack Mutual Fire Ins. Co. v. Brennan, 534 A.2d 353, 354 (Me. 1987). In applying this comparison test, the Courts in Maine seek to discourage mini-trials on the issue of the duty to defend. Maine Bonding & Casualty Co. v. Douglas Dynamics, Inc., 594 A.2d 1079, 1080 (Me. 1991).
In bringing a declaratory action against its primary and excess insurers, Citizens contends that the insurance policies at issue in this present motion create a duty on behalf of International to defend and indemnify it in the underlying litigation. International, as the party that brought this motion to dismiss, has the burden of proving that the underlying litigation is not within the policies' coverage when it declined to defend Citizens' claim. Elliot v. Hanover Ins. Co., 1998 ME 138, ¶11, 711 A.2d 1310 (citing Polaroid Corp. v. Travelers Indemnity Co., 610 N.E.2d 912, 922 (Mass. 1993)).
The duty to defend is based on the insurance contract. Any doubts as to the insurer's duty to defend raised by the underlying complaint will be resolved in the insured's favor. See e.g., Ritter v. United States Fid. & Guar. Co., 434 F.Supp. 1127, 1129-30 (D. Ark. 1977) (, "[i]f there is a question as to whether insurer has a duty to defend, the cardinal rule is that any doubt will be resolved in favor of the insured."); L. Ray Packing Co. v. Commercial Union Ins. Co., 469 A.2d 832, 833 (Me. 1983) (). Citizens did attach a copy of the underlying complaint; however, the Court does not know the terms of the excess insurance policies at issue. In the absence of the insurance policies to show otherwise, the Court will accept Citizens' allegations as true in this motion to dismiss. Thus, without knowing the terms of the insurance policies at issue, it would be premature for the Court to determine whether International has a duty to defend on this motion to dismiss.
Furthermore, a motion to dismiss is not the proper vehicle to make a determination, even a preliminary one, of the substantive merits. Rather, the declaratory judgment process is the better practical and efficacious means to resolve disputes over insurance coverage. See, e.g., Maine Bonding & Casualty Co. v. Douglas Dynamics, Inc., 594 A.2d 353 (Me. 1987) (); American Policyholders' Ins. Co. v. Cumberland Cold Storage Co., 373 A.2d 247 (Me. 1977) ().
The duty to defend is broader than the duty to indemnify. American Policyholders' Ins. Co., 373 A.2d at 250. The duty to defend depends only on the facts as alleged in the complaint while the duty to indemnify depends on the true facts. Northern Security Ins. Co., Inc., 669 A.2d at 1322-1323. Resolution of the indemnification issue ordinarily requires a trial on the merits after the underlying litigation has been resolved.[4] Id. at 1323 ( that generally courts should defer ruling on indemnity, since facts may come out in the course of the underlying proceedings that are material to the issue);
see also Home Ins. Co. v. St. Paul Fire & Marine Ins Co., 229 F.3d 56, 66 (1st Cir., 2000) (...
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