Maine Drilling & Blasting, Inc. v. Insurance Co. of North America
| Decision Date | 29 September 1995 |
| Docket Number | Docket No. FED-94-711,No. 7410,7410 |
| Citation | 665 A.2d 671 |
| Parties | MAINE DRILLING & BLASTING, INC. v. INSURANCE COMPANY OF NORTH AMERICA. DecisionLaw |
| Court | Maine Supreme Court |
Stephen Wade (orally), Skelton, Taintor & Abbott, Auburn, for Plaintiff.
James D. Poliquin (orally), Norman, Hanson & DeTroy, Portland, for Defendant.
Before WATHEN, C.J., and ROBERTS, GLASSMAN, CLIFFORD, RUDMAN, DANA, and LIPEZ, JJ.
Maine Drilling & Blasting, Inc. (Maine Drilling) instituted the present action in the United States District Court for the District of Maine claiming that the Insurance Company of North America (INA) wrongfully refused to defend and indemnify Maine Drilling in an action brought by Brox Industries, Inc. against Maine Drilling. Following the entry of a summary judgment in favor of INA, Maine Drilling appealed to the United States Court of Appeals for the First Circuit. The Court of Appeals, pursuant to 4 M.R.S.A. § 57 (1989) and M.R.Civ.P. 76B, has certified the following question to us for our instruction concerning a matter of state law:
Does the Explosives Limitation Endorsement attached to the standard Comprehensive General Liability policy, when considered in conjunction with the business risk exclusions, j(5) and j(6), and any relevant history and general understanding of the insurance industry, create such an ambiguity that it should be interpreted against the insurer, i.e., that it should be read as providing business risk coverage for MD & B's claims against INA?
Because there is no dispute as to the material facts and our answer will be determinative of the case, the statutory requirements of our acceptance of the question have been met and our exercise of jurisdiction is proper. Lovell v. One Bancorp, 614 A.2d 56, 57 (Me.1992). We answer the presented question in the negative. 1
The factual background of the case, as certified to this Court, is summarized as follows. Brox Industries, Inc., an excavation contractor, subcontracted to Maine Drilling the blasting work necessary for the excavation required to construct a building. Maine Drilling was the named insured in a comprehensive general liability (CGL) policy issued by INA, to which an "Explosives Limitation Endorsement" was attached. After Maine Drilling had performed its work, Brox discovered that the blasting had caused the foundation ledge to be fragmented at a level lower than desired. Brox incurred expenses for extra excavation and additional structural gravel to raise the grade of the foundation to its planned level. Maine Drilling notified INA of the potential claim, seeking indemnity and defense costs, but INA refused to defend Maine Drilling in the ensuing litigation between Maine Drilling and the excavation contractor. This litigation resulted in arbitration and a stipulated judgment against Maine Drilling for approximately $330,000.
Maine Drilling brought the present action against INA alleging that INA had wrongfully refused to defend and indemnify Maine Drilling as required by the terms of its insurance contract. Although Maine Drilling conceded that coverage for Brox's claim ordinarily would be barred by certain exclusions contained in the policy, it contended that the attachment of the endorsement to the policy rendered the insurance policy ambiguous and that the ambiguous policy should be interpreted in favor of the insured. The District Court adopted the magistrate judge's recommendation that a summary judgment be entered in favor of INA on the ground that the insurance policy unambiguously excluded coverage for Maine Drilling's claims. Maine Drilling appealed.
The First Circuit concluded that, although we previously had held that the three specific exclusions in the CGL policy form were unambiguous in light of the distinction between business risks and occurrence of harm risks, 2 Peerless Ins. Co. v. Brennon, 564 A.2d 383, 386-87 (Me.1989), we never had addressed the construction of provisions in an attached endorsement that purport to modify such exclusions in a CGL policy. Accordingly, the Court of Appeals certified the issue to us.
INA contends that subsections (j)(5) and (j)(6) in the CGL policy, 3 which exclude coverage for "business risks," are not altered by any provision in the endorsement. According to INA, although the CGL policy form provides coverage for occurrence damages, the endorsement merely purports to limit the general coverage for occurrence damages by requiring Maine Drilling to pay a $25,000 deductible for property damage arising from its blasting activity and does not constitute a grant of coverage. As interpreted by INA, the endorsement simply increases the deductible payable for occurrence damages caused by blasting.
Maine Drilling concedes that subsections (j)(5) and (6) alone would exclude coverage but asserts the attachment of the endorsement creates an ambiguity as to coverage and the ambiguity is to be resolved against the insurer.
A contract of insurance, like any other contract, is to be construed in accordance with the intention of the parties, which is to be ascertained when there is ambiguity by examining the whole instrument. Baybutt Constr. Corp. v. Commercial Union Ins. Co., 455 A.2d 914, 919 (Me.1983) (). A liability insurance policy must be construed to resolve all ambiguities in favor of coverage. Massachusetts Bay Ins. Co. v. Ferraiolo Constr. Co., 584 A.2d 608, 609 (Me.1990).
Maine Drilling's CGL policy begins by providing that INA
will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend any "suit" seeking those damages. We may at our discretion investigate any "occurrence" and settle any claim or "suit" that may result.
The attached endorsement reads as follows.
THIS ENDORSEMENT CHANGES THE POLICY.
PLEASE READ IT CAREFULLY.
This endorsement modifies insurance provided under the following:
Commercial General Liability Coverage Part
This insurance does not apply to "property damage" included within the "explosion hazard" or "underground property damage hazard" except as modified below:
EXPLOSIVES LIMITATION ENDORSEMENT
This insurance will apply to those sums that the insured becomes legally obligated to pay as damages for occurrences included within the "explosion hazard" or "underground property damage hazard" which[sic] arise out of "covered operations" subject to the following schedule of deductibles:
Amount and Basis of Property Damage Liability Deductible
$25,000 per occurrence for intentional detonation
$0 per occurrence for unintentional detonation
The following definitions are added a. "Covered Materials" shall mean the following products:
Explosives, blasting agents, blasting materials, blasting supplies, and related products such as, but not limited to, ammonium nitrate, T.N.T., black powder, non-nitroglycerine explosives, nitroglycerine explosives, detonating cord, blasting caps, safety fuse, smokeless powder, nitro-carbon-nitrates, slurries, emulsions, explosives gels, and various carbonaceous material including fuel oil.
b. "Job site" means the premises where "covered materials" are to be used for their intended purposes or delivered to and received by the customer or his agent or consignee prior to use for their intended purposes.
c. "Covered operations" means the intentional detonation of the "covered materials" at a "job site" with your personnel present, or unintentional detonation of "covered materials" while being manufactured, prepared, processed, transported, or stored, other than when in or on an automobile. Storage includes loading or unloading of "covered materials" from a mobile magazine while such magazine is disconnected from an automobile power unit and parked at a temporary or permanent location.
d. "Explosion hazard" includes property damage arising out of blasting or explosion. The "explosion hazard" does not include "property damage" arising out of the explosion of air or steam vessels, piping under pressure, prime movers, machinery or power transmitting equipment.
e. "Underground property damage hazard" includes "underground property damage" and any resulting "property damage" to any property at any time.
f. "Underground property damage" means property damage to wires, conduits, pipes, mains, sewers, tanks, tunnels, any similar property, and any apparatus used with them beneath the surface of the ground or water, caused by and occurring during the use of explosives or mechanical equipment for the purpose of grading land, paving, excavating, drilling, mining, borrowing, filling, back-filling or pile-driving.
The insurance shall not apply to "property damage" arising from:
a. The demolition by you or others working on your behalf, of man made structures or from tunnel construction (including mine shafts, road tunnels, railroad tunnels and other large diameter tunnels used for water mains, sewer lines, etc., not open excavation) operations including, but not limited to, the preparing, approving or failing to approve maps, drawing, opinions, reports, surveys, change orders, designs, or specifications and supervisory inspection or engineering services related to demolition of man made structures and tunnel construction.
b. Shot coal.
c. Poor breakage, including any failure to obtain desired fragmentation or fracture.
d. Transportation by an automobile or loading or unloading of any automobile.
It is understood and agreed that Exclusion M of the Commercial General Liability Coverage Form is deleted in its entirety, as respects "covered materials" manufactured by an Insured, and replaced by the following:
m. "Property damage" to "impaired property" or property that has not been physically injured, arising out of:
(1) A defect, deficiency, inadequacy or dangerous condition in ...
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