Jackson v. North East Ins. Co.
| Decision Date | 13 April 2011 |
| Docket Number | Civil Action CV-07-178 |
| Parties | JAMIE M. JACKSON, Plaintiff, v. NORTH EAST INSURANCE COMPANY, Defendant |
| Court | Maine Superior Court |
Plaintiff Jamie Jackson's Motion for Partial Summary Judgment is before the Court, as is defendant North East Insurance Co.'s Motion for Summary Judgment. Jackson contends that North East Insurance Co. breached its duty to defend him in a personal injury action brought by Robert Duggan, and the only issue left to be determined is the measure of damages. North East Insurance Co. argues that it did not have a duty to provide Jackson with legal defense. Jackson's Motion is granted and North East Insurance Co.'s Motion is denied.
In July 2003, Colonial Auto Sales (Colonial) was the named insured under a commercial garage policy (the "Policy") issued by defendant North East Insurance Co. (Defendant). The Policy provided defense and indemnification for "all sums an 'insured' legally must pay as damages because of 'bodily injury' . . . to which this insurance applies, caused by an 'accident' and resulting from 'garage operations' involving the . . . use of covered 'autos'." Colonial's Policy covered "any '[a]uto, " and identified as "insured" Colonial and "[a]nyone else while using with [Colonial's] permission a covered 'auto' [Colonial] own[s], hire[s] or borrow[s] ." The Policy defines "garage operations" as including the "use of . . . covered 'autos.'"
On July 11, 2003, plaintiff Jamie Jackson (Plaintiff) was employed as Colonial's service writer. That evening Plaintiff and Robert Duggan entered Colonial's showroom and took two motorcycles from the sales floor without permission. The two men drove the motorcycles to multiple bars and became intoxicated. Still on the motorcycles, in the early hours of July 12, 2003 the men drove by a friend's home. Plaintiff turned to enter the friend's driveway, but in doing so he passed in front of Duggan. Duggan did not turn, but instead drove straight into Plaintiff causing a t-bone collision. Both men were seriously injured in the accident.
Shortly after the accident Plaintiff was fired from his employment with Colonial, and he signed a release of claims against Colonial. The release did not include Defendant. Duggan served Colonial with a Notice of Claim by a letter dated September 16, 2003, which Colonial forwarded to Defendant with another letter dated September 18, 2003. Defendant acknowledged that it was aware of Duggan's potential claims by letters dated September 24, 2003, and contacted Duggan's attorney via a letter dated October 1, 2003. Defendant did in fact proceed to conduct a full investigation of the accident.
Duggan filed a complaint against Plaintiff on September 24, 2004 alleging that on July 12, 2003 Plaintiff was riding a motorcycle and he negligently collided with Duggan, causing Duggan's injuries. The complaint did not reference Colonial or any of the events leading up to the accident. Plaintiff was aware of the suit's existence, but he did not take any action in his own defense or otherwise request legal assistance from Defendant.
In a letter dated December 14, 2004, Duggan's attorney notified Defendant that Plaintiff had been served with the complaint on October 16, 2004, no answer had been filed "and default judgment [had] been answered." The letter was accompanied by a scheduling order. Defendant received this letter on January 7, 2005. By letter dated April 8, 2005, Defendant's counsel informed Duggan's counsel that "[Defendant] provides no insurance coverage to [Plaintiff] in connection with the subject matter of your lawsuit." Finally, in a letter dated August 8, 2005 Duggan's counsel informed Defendant that a damages hearing had been scheduled for August 11, 2005.
At the August 11 damages hearing a final judgment was entered against Plaintiff in the amount of $1, 754, 000. Plaintiff appeared at the hearing, but did not speak in his own defense. Before the hearing, Mark Flanagan, owner of Colonial, and Tom Wilson, Colonial's counsel, spoke with Plaintiff and "offered to be there on the day of." It is not clear if Flanagan or Wilson actually attended the hearing. During the Duggan proceedings Defendant did not bring a declaratory action to clarify its relationship with Plaintiff.
On March 30, 2007 Plaintiff filed this action against Defendant claiming that Defendant breached its duty to defend Plaintiff against Duggan, constituting a breach of contract and violation of 24-A M.R.S.A. § 2436-B. On June 5, 2007 Plaintiff filed its Motion for Partial Summary Judgment on the issue of whether Defendant breached its duty to defend. On January 9, 2009 Defendant filed its Motion for Summary Judgment in its favor.
Summary judgment is appropriate where no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. M.R. Civ. P. 56(c); see also Levine v R.B.K. Caly Corp., 2001 ME 77, ¶ 4, 770 A.2d 653, 655.
Defendant argues that it had no duty to defend Plaintiff because his conduct resulting in the accident of July 12, 2003 indisputably placed the event beyond the Policy's coverage. Plaintiff correctly counters that the extrinsic facts of the accident are irrelevant to whether Defendant had a duty to defend Plaintiff against Duggan.
The Supreme Judicial Court has often stated that "the duty to defend is based exclusively on the facts as alleged rather than on the facts as they actually are." Travelers Indemnity Co. v. Dingwell, 414 A.2d 220, 224 (Me. 1980) (quoting American Policyholders' Ins. Co. v. Cumberland Cold Storage, 373 A.2d 247, 249-50 (Me. 1977)). "If, comparing an insurance policy with an underlying complaint there is any legal or factual basis that could obligate an insurer to indemnify, then the insured is entitled to a defense." Maine Bonding & Casualty Co. v. Douglas Dynamics, Inc., 594 A.2d 1079, 1080 (Me. 1991) (quoting State Mutual Ins. Co. v. Bragg, 589 A.2d 35, 36 (Me. 1991)). "The insurer has a duty to defend if the complaint shows any potential that the facts ultimately proved may come within the scope of coverage provided under the policy." Id. (quoting Lavoie v. Dorchester Mut. Fire Ins. Co., 560 A.2d 570, 571 (Me. 1989)). "Any doubt about the adequacy of the pleadings to bring the occurrence within the coverage of the insurance policy should be resolved in favor of the insured." J.A.J. Inc. v. Aetna Casualty & Surety Co., 529 A.2d 806, 808 (Me. 1987) (citing 7C Appleman, Insurance Law and Practice § 4683 (1979)). This broad construction of the duty to defend ensures that an insured receives its contractual benefit of defense without having to first prove the facts underlying the claim against which it wishes to be defended. Dingwell, 414 A.2d at 227; accord Federated Mutual Ins. Co. v. State Farm Mutual Automobile Ins. Co., 668 N.E.2d 627 (Ill.App.Ct. 1996).
The Policy provided coverage for accidents caused by Colonial's employees during their permitted use of covered autos. Duggan's complaint alleged that Plaintiff negligently collided with Duggan while the two were riding motorcycles. The complaint is silent as to Plaintiff's employment status, the motorcycles' ownership, or the nature of their use at the time of the accident. Due to these ambiguities Duggan could possibly have proven that Plaintiff was Colonial's employee, the motorcycles were covered autos, and that they were being used with permission when the collision occurred. However unlikely this scenario may be, it would bring the accident within the Policy's coverage. As a consequence, Defendant did have a duty to defend Plaintiff against Duggan in Duggan's tort action.
Defendant argues that the complaint's ambiguity should foreclose, rather than create, the duty to defend. Relying on the Ninth Circuit case of Bowie v. The Home Ins. Co., Defendant claims that it could not have been obliged to defend Plaintiff because Plaintiff is only contingently covered under Colonial's policy, and Duggan's complaint did not state any claim against Colonial. This argument is squarely contradicted by Dingwell, in which the Supreme Judicial Court stated that the insurer has a duty to defend "whenever the allegations show a potential that liability will be established within the insurance coverage, even when the allegations are broad, and uncertain as to specific facts . . . 'even when the insurer has knowledge of facts to the contrary.'" 414 A.2d at 226-27 (quoting Cumberland Cold Storage, 373 A.2d at 250). Defendant's argument also misreads Bowie.
In Bowie, the two plaintiffs were former officers and directors of both the Transit Casualty Co. (Transit) and the DMT Financial Group (DMT). Bowie v. The Home Ins. Co., 923 F.2d 705, 705 (9th Cir. 1991). The plaintiffs were insured expressly in their capacities as officers and directors of DMT. Id. at 708. They were named in a lawsuit exclusively in their capacities as officers and directors of Transit. Id. at 707. Based on the wording of the complaint, the courts concluded that there was no possible scenario under which the allegations against the officers and directors of Transit could give rise to a claim under DMT's insurance, so the insurer had no duty to defend. Id. at 708.
Defendant interprets Bowie to mean that a complaint must specifically allege that the individual being sued was acting on behalf of the primary insured to trigger coverage. It means no such thing. In fact, Bowie merely restates the rule of Dingwell and holds that the duty to defend is triggered if the complaint, as it is written, could give rise to a factual scenario implicating coverage. See id. at 709 (...
To continue reading
Request your trial