Citizens Ins. Co. of Am. v. Phx. Bay State Constr. Co.

• Decision Date: 04 October 2017
• Docket Number: SUPERIOR COURT CIVIL ACTION DOCKET NO. CV-17-097
• Parties: CITIZENS INSURANCE COMPANY OF AMERICA, Plaintiff v. PHOENIX BAY STATE CONSTRUCTION CO., INC., WILLIAM A. BERRY & SON, INC., SUFFOLK CONSTRUCTION COMPANY, INC., MAINE MEDICAL CENTER, INC., and NORTH RIVER INSURANCE COMPANY, Defendants
• Court: Maine Superior Court

CITIZENS INSURANCE COMPANY OF AMERICA, Plaintiff v. PHOENIX BAY STATE CONSTRUCTION CO., INC., WILLIAM A. BERRY & SON, INC.,SUFFOLK CONSTRUCTION COMPANY, INC., MAINE MEDICAL CENTER, INC.,and NORTH RIVER INSURANCE COMPANY, Defendants

SUPERIOR COURT CIVIL ACTION DOCKET NO. CV-17-097

Superior Court of Maine

RECEIVED: October 5, 2017

October 4, 2017

STATE OF MAINE

CUMBERLAND, ss

ORDER ON PLAINTIFF'S MOTION TO DISMISS DEFENDANT MAINE MEDICAL CENTER'S COUNTERCLAIM

Before the court is plaintiff and counterclaim defendant Citizens Insurance Company of America's motion to dismiss defendant Maine Medical Center's counterclaim. For the following reasons, the motion to dismiss is denied.

FACTS

The present action stems from an underlying lawsuit MMC brought against defendants William A. Berry & Son, Inc. and Suffolk Construction Company, Inc. in the United States District Court for the District of Maine. (Compl. ¶¶ 8-9; MMC's Ans. ¶¶ 8-9.) Phoenix Bay State Construction Co., Inc. is a third-party defendant in the underlying lawsuit. (Compl. ¶ 10; MMC's Ans. ¶ 10.) In that action, MMC is seeking to recover damages against Berry and Suffolk for alleged property damage to substantial additions made to the hospital located at 22 Bramhall Street in the City of Portland, Maine. (Compl. ¶ 11; MMC's Ans. ¶ 11.) MMC hired Berry to manage and lead the construction of the additions.¹ (MMC's Countercl. ¶ 5.) Berry then hired Phoenix as a subcontractor to perform certain work for the additions. (Id.) The construction began in 2006. (Compl. ¶ 11; MMC's Ans. ¶ 11.)

MMC's contract with Berry mandated all subcontractors procure and maintain insurance coverage for their work on the addition and name MMC as an additional insured on the insurance policies. (MMC's Countercl. ¶¶ 19, 23.) In accordance with that requirement, Berry's subcontract with Phoenix provided as follows: "[Phoenix], at its own expense shall procure, carry and maintain on all its operations hereunder policies of insurance with coverage at a minimum in the amounts and limits as provided in Rider B . . . ." (Id. ¶ 20.) Moreover, the subcontract obligates Phoenix to "indemnify, defend and hold . . . [MMC] harmless to the fullest extent allowed by law from any and all loss, damage, cost or expense . . . resulting from or arising from the negligence of [Phoenix] . . . ." (Id. ¶ 24.) MMC asserts Phoenix procured insurance policies through Citizens, Employers' Fire Insurance Company, and North River Insurance Company to fulfill the subcontract's insurance requirements. (Id. ¶¶ 25, 85.) MMC also alleges it may be third party beneficiary of Citizens and North River's obligations because of the requirement that MMC be named as an additional insured under the Citizens, Employers, and North River policies. (Id. ¶¶ 27, 87.)

Citizens initiated this action on February 10, 2017 when it filed a complaint against defendants Phoenix, Berry, Suffolk, and MMC. In the complaint, Citizens seeks a declaratory judgment that with regard to the underlying suit, Citizens does not have a duty (1) to indemnify Phoenix for any judgment in the underlying lawsuit; (2) to defend or indemnify Berry or Suffolk in the underlying lawsuit; or (3) to indemnify MMC for any judgment it obtains in the underlyinglawsuit; or, in the alternative, (4) if it does have a duty indemnify any of the defendants, their recovery is limited to a maximum of one per occurrence policy limit, $1,000,000.²

MMC filed its answer, counterclaims, and cross-claims on April 10, 2017.³ In its counterclaim, MMC alleges four counts against Citizens. MMC seeks a (1) declaratory judgment that with regard to the underlying suit, Citizens has a duty to indemnify MMC; and alleges (2) Citizens breached the implied duty of good faith and fair dealing owed to MMC; (3) violated MASS. GEN. LAWS ch. 93A, §§ 2, 9; and (4) violated MASS. GEN. LAWS ch. 93A, §§ 2, 11. (MMC countercl. ¶¶ 30 - 47.)

Citizens filed its motion to dismiss on June 22, 2017.⁴ MMC opposed the motion on July 20, 2017.

DISCUSSION

1. Standard of Review

"A motion to dismiss pursuant to M.R. Civ. P. 12(b)(6) tests the legal sufficiency of the [counterclaim]." Seacoast Hangar Condo. II Ass'n v. Martel, 2001 ME 112, ¶ 16, 775 A.2d 1166 (quoting New Orleans Tanker Corp. v. Dep't of Transp., 1999 ME 67, ¶ 3, 728 A.2d 673). When the court reviews a motion to dismiss, "the [counterclaim] is examined 'in the light most favorable to the [counterclaim] plaintiff to determine whether it sets forth elements of a cause of action or alleges facts that would entitle the [counterclaim] plaintiff to relief pursuant to some legal theory.'" Lalonde v. Cent. Me. Med. Ctr., 2017 ME 22, ¶ 11, 155 A.3d 426 (quoting Moody v. State Liquor & Lottery Comm'n, 2004 ME 20, ¶ 7, 843 A.2d 43). Allegations in the counterclaim are deemedtrue, Id., and "dismissal should only occur when it appears beyond doubt that a plaintiff is entitled to no relief under any set of facts that he might prove in support of his claim." Moody, 2004 ME 20, ¶ 7, 843 A.2d 43 (quoting McAfee v. Cole, 637 A.2d 463, 465 (Me. 1994)) (internal quotations omitted).

2. Choice-of-Law

Citizens argues Maine law governs MMC's claims. MMC counters that the court cannot decide what law to apply at this stage in the litigation because the inquiry is too fact intensive. Courts have decided the choice-of-law issue on a motion to dismiss. See Beaulieu v. Beaulieu, 265 A.2d 610, 611 (Me. 1970) (considering and deciding choice-of-law issue raised in a M.R. Civ. P. 12(b)(6)); Flaherty v. Allstate Ins. Co., 2003 ME 72, ¶¶ 6, 11-22, 822 A.2d 1159 (holding the trial court improperly granted a motion to dismiss, not because it ruled on which jurisdiction's law applied, but because its ruling that Connecticut law applied was wrong because Maine had more significant contacts and relationships).

Maine courts apply Maine's choice-of-law rules to establish "which state's substantive rules apply to the liability questions raised . . ." because "Maine is the forum state." State Farm Mut. Auto. Ins. Co. v. Koshy, 2010 ME 44, ¶ 21, 995 A.2d 651. "Maine has adopted the approach of sections 186 to 188 of the Restatement (Second) of Conflict of Laws (1971), to govern choice of law for contract issues." Id. ¶ 46. Section 188 applies when a contract does not include a choice of law provision.⁵ Id. ¶ 47. Section 188 provides as follows:

(1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6.

(2) In the absence of an effective choice of law by the parties (see § 187), the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:

(a) the place of contracting,

(b) the place of negotiation of the contract,

(c) the place of performance,

(d) the location of the subject matter of the contract, and

(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.

These contacts are to be evaluated according to their relative importance with respect to the particular issue.

Restatement (Second) Conflict of Laws § 188.

In Baybutt Constr. Corp. v. Commercial Union Ins. Co., decided by the trial court on a motion for summary judgment, the plaintiff sought "a judgment which declared that the provisions of its [comprehensive general liability] insurance contract with the defendant obligated the defendant both to cover and defend the plaintiff in [an underlying suit.]" 455 A.2d 914, 917 (Me. 1983), overruled in part on other grounds by Peerless Ins. Co. v. Brennon, 564 A.2d 383, 386-87 (Me. 1989). The Law Court held Maine law governed the rights and duties of the parties to the insurance contract when the insured construction company was principally based in New Hampshire, the insurer was principally based in Massachusetts, the insurance policy was purchased in New Hampshire through a New Hampshire insurance agency, and the policy covered insured construction projects in Maine, New Hampshire, and Vermont because the "specific insured risk" was located in Maine. Id. at 917, 919. The court explained:

[I]n a casualty insurance contract, as is involved in the instant case, the validity of the contract and the rights and duties created thereby, are to be determined, in the absence of an express effective choice of law by the parties, by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless with respect to the particular issue involved, some other 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.

Id. at 918 (emphasis added).

As in Baybutt, this case includes many parties based out of state. Citizens is a Massachusetts based insurer; Berry, Suffolk, and Phoenix are (or were) all incorporated and principally based in Massachusetts. Although under Baybutt it may be tempting to conclude those contacts are less important than the location of the insured risk in determining which jurisdiction's law should apply, the court agrees with MMC that the court has insufficient facts to determine the choice-of-law issue. See Walker v. Unum Life Ins. Co. of Am., 530 F. Supp. 2d 351, 354 (D. Me. 2008); In re: Montreal Maine & Atlantic Railway, Ltd., No. 13-10670, WL 2954537, at *7 (Bankr. D. Me. July 7, 2017); see also Restatement (Second) Conflict of Laws § 188; Koshy, 2010 ME 44, ¶ 22, 995 A.2d 651.

"[A] defendant in a contract case governed by one state's law nonetheless may be subject to the provisions of another state's unfair trade practices statute[.]" Crellin Techs. v. Equipmentlease Corp., 18 F.3d 1, 11 (1st Cir. 1994); see also Koshy, 2010 ME 44, ¶¶ 21, 46, 995 A.2d 651 (applying contract and tort choice-of-law rules to separate...