Maine Bonding & Cas. Co. v. Douglas Dynamics, Inc.

• Decision Date: 29 July 1991
• Parties: MAINE BONDING & CASUALTY CO. v. DOUGLAS DYNAMICS, INC.
• Court: Maine Supreme Court

Page 1079

594 A.2d 1079

MAINE BONDING & CASUALTY CO. v. DOUGLAS DYNAMICS, INC.

Supreme Judicial Court of Maine.

Argued June 19, 1991.

Decided July 29, 1991.

James R. Erwin (orally), Pierce, Atwood, Scribner, Allen, Smith & Lancaster, Portland, for plaintiff.

Carl F. Rella (orally), Leen & Emery, Bangor, for defendant.

Before ROBERTS, WATHEN, GLASSMAN, COLLINS and BRODY, JJ.

BRODY, Justice.

Douglas Dynamics, Inc. ("Douglas Dynamics") appeals from a summary judgment entered in the Superior Court (Penobscot County, Silsby, J.) in favor of Maine Bonding & Casualty Co. ("Maine Bonding") in a declaratory judgment action to determine whether Maine Bonding has a duty to defend Douglas Dynamics in a suit filed against Douglas Dynamics by a former employee. On appeal, Douglas Dynamics contends that summary judgment should not have been granted because Maine Bonding has a duty to defend count six of the former employee's amended complaint which alleges emotional distress resulting from wrongful discharge. We agree and vacate the summary judgment.

In January, 1989, Douglas Dynamics discharged the general manager of its Fisher Engineering Division in Rockland. Several months later, the discharged employee sued Douglas Dynamics alleging, among other things, wrongful discharge and seeking damages for emotional distress. At the time of the discharge, Douglas Dynamics was insured under a comprehensive general liability insurance policy issued by Maine Bonding. The policy provides three general areas of coverage: (i) "bodily injury" and "property damage" caused by an "occurrence;" (ii) "personal injury" and "advertising injury;" and (iii) medical payments. Maine Bonding denied Douglas Dynamic's request for a defense and initiated a declaratory judgment action to determine whether it had a duty under its policy to defend Douglas Dynamics in the lawsuit. Both parties moved for summary judgment and the court granted judgment to Maine Bonding finding no duty to defend. Following an unsuccessful motion to alter or amend the judgment pursuant to M.R.Civ.P. 59(2), Douglas Dynamics appealed.

Douglas Dynamics argues that Maine Bonding has a duty, pursuant to the "bodily injury" coverage provided by the policy, to defend count six of the employee's amended complaint. We agree.

To determine the scope of an insurer's duty to defend an insured in pending litigation, the court uses a comparison test: "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." 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. Lavoie v. Dorchester Mut. Fire Ins. Co., 560 A.2d 570, 571 (Me.1989). Even if a complaint is insufficient to withstand a motion to dismiss, it may still give rise to a duty to defend if it states facts that could potentially fall within the insurance coverage. Id. And, because the duty to defend is broader than the duty to indemnify, application of the comparison test may sometimes require an insurer to defend when there may be no ultimate duty to indemnify. Bragg, 589 A.2d at 36. In applying the comparison test, we seek to discourage mini-trials on the issue of the duty to defend.

In ruling on Douglas Dynamics' motion to alter or amend the judgment, the court stated that there was no duty to defend the emotional distress claim because "the Law Court has never recognized the tort of wrongful discharge." Although the court correctly noted that we have never recognized a cause of action in tort for wrongful discharge, Bard v. Bath Iron Works Corp., 590 A.2d 152, 156 (Me.1991), it should not have based its ruling on the legal insufficiency of the complaint. ¹ Rather the court simply should have looked at the complaint to determine whether there is any possibility for coverage under any set of facts that might be established by the discharged employee. Lavoie, 560 A.2d at 571.

A correct application of the comparison test reveals that there is a duty to defend. Section I of the policy provides in pertinent part:

COVERAGE A. BODILY INJURY ... LIABILITY

1. Insuring Agreement.

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" ... to which this insurance applies. No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under SUPPLEMENTARY PAYMENTS--COVERAGES A AND B. This insurance applies only to "bodily injury" ... which occurs during the policy period. The "bodily injury" ... must be caused by an "occurrence." ... We will have the right and duty to defend any "suit" seeking those damages.

The policy defines "bodily injury" as "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time" and defines "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The policy explicitly excludes coverage for " 'bodily injury' expected or intended from the standpoint of the insured."

Count six of the discharged...