Middlesex Mut. Assur. Co. v. Fish

Decision Date24 August 2010
Docket NumberNo. CV-09-375-B-W,CV-09-375-B-W
Citation738 F.Supp.2d 124
PartiesMIDDLESEX MUTUAL ASSURANCE COMPANY, Plaintiff/Counterclaim Defendant, v. Dorothy M. FISH, Defendant/Counterclaim Plaintiff.
CourtU.S. District Court — District of Maine

John S. Whitman, Richardson, Whitman, Large & Badger, Portland, ME, for Plaintiff/Counterclaim Defendant.

Steven D. Silin, Robert Furbish, Berman & Simmons, P.A., Lewiston, ME, for Defendant/Counterclaim Plaintiff.

ORDER AFFIRMING THE RECOMMENDED DECISION

JOHN A. WOODCOCK, JR., Chief Judge.

This case is an example of the occasionally counterintuitive world of insurance contract law. To secure insurance coverage, the injured party, Dorothy M. Fish, argues that the tortfeasor was not an insured and therefore Middlesex Mutual Assurance Company (Middlesex) must cover her injuries, and to avoid indemnifying Ms. Fish, Middlesex argues that the tortfeasor was an insured and therefore it provided no coverage. The Court concludes that the tortfeasor was not an insured but that coverage is still precluded under the auto exclusion provision of Middlesex's comprehensive general liability (CGL) policy because the tortfeasor had loaned his motor vehicle to his business. Finally, the Court concludes that the parking exception to the auto exclusion does not apply for the same reason.

The Magistrate Judge found that the automobile exclusion precludes coverage and recommended that the Court grant summary judgment in favor of the insurance company. The Court has reviewed and considered the Magistrate Judge's Recommended Decision, together with the entire record, and has made a de novo determination of all matters adjudicated by the Magistrate Judge's Recommended Decision. Adopting some, but not all of the Magistrate Judge's reasoning, the Court affirms the Magistrate Judge's Recommended Decisions for the reasons in her recommendation and for the additional reasons in this Order.

I. STATEMENT OF FACTS

On January 19, 2006, Ms. Fish was injured when she hit Robert E. Clark, Jr.'s truck that was blocking part of Main Street in Readfield, Maine. At the time of the accident, Mr. Clark, who is president of Clark's Custom Cabinetry, a closely owned family corporation, had just returned from installing cabinets for Clark's Custom Cabinetry and was unloading tools and materials from his personal truck to take to the shop.1 The truck Mr. Clark owned and was operating at the time of the accident was a 2000 GMC extended cab truck, and he was hauling a Hallmark closed trailer, which he personally owned as well.

Mr. Clark's personal auto insurance policy with Allstate Insurance Company (Allstate) provided up to $100,000 in coverage for each occurrence, and Clark's Custom Cabinetry held a CGL policy with Middlesex Mutual Assurance Company (Middlesex)that provided up to $1,000,000 for an occurrence. Clark's Custom Cabinetry did not hold commercial auto insurance at the time of the accident, having let its commercial auto policy for a company vehicle expire. Id.

In March 2007, Ms. Fish sued Mr. Clark in Maine Superior Court and in November 2007 she amended her complaint to add Clark's Custom Cabinetry as a defendant. Although notified of the initial and amended lawsuit, Middlesex refused to defend or indemnify, maintaining that the policy excluded coverage. In June, 2008, in return for an Assignment of Rights and Covenant not to execute against either of them, Mr. Clark and Clark's Custom Cabinetry stipulated to entry of judgment in favor of Ms. Fish in an amount to be determined by the court. On May 29, 2009, the Maine Superior Court awarded Ms. Fish $1,448,691.21 plus interest and costs. Middlesex received notice of the damages hearing but did not participate.

On August 17, 2009, Middlesex sued Ms. Fish in federal court for a declaratory judgment that under the terms of the Middlesex policy it was not obligated to pay the judgment awarded Ms. Fish. Compl. at 3 (Docket # 1). On September 11, 2009, Ms. Fish answered and counterclaimed, seeking the full amount of the state court judgment pursuant to Maine's "reach and apply" statute, 24-A M.R.S.A. § 2904. Answer to Am. Compl. and Counterclaim at 7 (Docket # 7).

On October 15, 2009, Ms. Fish moved for summary judgment. Fish's Mot. for Summ. J. (Docket # 13). She argued that Middlesex's policy provided coverage because Mr. Clark is not an insured under the plain language of the policy and the automobile was not operated by or loaned to an insured. On November 5, 2009, Middlesex responded and also moved for summary judgment. Middlesex's Resp. in Opp'n to Fish's Mot. for Summ. J. (Docket # 15) ( Middlesex's Resp.); Middlesex's Mot. for Summ. J. (Docket # 17) ( Middlesex's Mot.). Middlesex argued that its policy excluded coverage because Mr. Clarke is an insured and the vehicle was loaned to and operated by Clarke's Custom Cabinetry, a named insured.

On November 25, 2009, Ms. Fish responded to Middlesex's motion for summary judgment and in the same motion, replied to Middlesex's response to her motion for summary judgment. Fish's Resp. in Opp'n to Middlesex's Mot. for Summ. J. and Reply to Middlesex's Resp. in Opp'n to Fish's Mot. for Summ. J. (Docket # 24) ( Fish's Resp.). On December 9, 2009, Middlesex replied to Ms. Fish's response. Middlesex's Reply to Fish's Resp. in Opp'n to Middlesex's Mot. for Summ. J. (Docket # 32). On February 16, 2010, the Magistrate Judge recommended that the Court grant Middlesex's motion for summary judgment. Report and Recommended Decision (Docket # 33) ( Rec. Dec.). On February 23, 2010, Middlesex objected to the Recommended Decision. Middlesex's Obj. to Rec. Dec. (Docket # 34) ( Middlesex's Obj.). On March 2, 2010, Ms. Fish objected to the Recommended Decision and requested oral argument. Fish's Obj. to Rec. Dec. (Docket # 35) ( Fish's Obj.). On March 16, 2010, Middlesex responded to Ms. Fish's objections. Middlesex's Resp. to Fish's Obj. The Court held oral argument on June 29, 2010.

A. The Middlesex Policy

The Middlesex policy provides Clark's Custom Cabinetry with $1,000,000 in coverage for "those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies." Middlesex policy, part 2b Attach. 3 at 4(Docket # 23). The CGL policy gives a detailed definition of who is an insured:

1. If you are designated in the Declarations as:
...
d. An organization other than a partnership, joint venture or limited liability company, you are an insured. Your "executive officers" and directors are insureds, but only with respect to their duties as your officers or directors
...
2. Each of the following is also an insured:
a. Your ... "employees", other than ... your "executive officers" ... but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business....

Id. at 12. An Automobile Exclusion limits the policy's applicability to automobile accidents. It excludes from coverage

"[b]odily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading."

Id. at 7. The policy also includes a Parking Exception to the exclusion. The exception specifies that the Automobile Exclusion does not apply to "[p]arking an 'auto' on, or on the ways next to, premises you own or rent, provided the 'auto' is not owned by or rented or loaned to you or the insured." Id.

B. The Recommended Decision

The Magistrate Judge focused her Recommended Decision around two central questions: whether Mr. Clark was "an insured" when performing non-executive functions and whether the automobile exclusion applies. The Magistrate Judge concluded that the answer to the first question was factual. Rec. Dec. at 9. She found that a "reasonable person of ordinary intelligence in Mr. Clark's position" would find the language covering Mr. Clark's non-executive functions ambiguous: on one hand, excluding him from coverage would "frustrate the primary purpose for which someone in Mr. Clark's position would secure CGL coverage," but on the other hand, the literal language of the policy limits coverage of Mr. Clark to when he is performing executive functions. Id. at 8-9. Having found an ambiguity, the Magistrate Judge found it could only be resolved in relation to "the basic understanding of the contracting parties." Id. at 9. Because such information was not in the record, the Magistrate Judge recommended that the "Court should deny summary judgment to either party on the issue of whether Mr. Clark was an insured." Id. at 9-10.

In answer to the second question, the Magistrate Judge recommended that the Court grant summary judgment in favor of Middlesex. Even assuming Mr. Clark is not an insured, the Magistrate Judge found that the automobile exclusion applies as a matter of law. Id. at 10. Working backwards, she determined that the parking exception does not override the automobile exclusion because at the time of the accident Mr. Clark's vehicle was transporting Clark's Custom Cabinetry's tools and employees. Because the truck "was being put in service to Clark's Custom Cabinetry and was being operated by an agent of the corporation," the Magistrate Judge concluded that it was loaned to Clark's Custom Cabinetry. Id. at 11. These same facts caused the Magistrate Judge to find that the automobile exclusion did apply: the vehicle was used by an insured, Clark's Custom Cabinetry, when it was put in service to the corporation and it was operated by Clark's Custom Cabinetry when Mr. Clark, as an agent for the corporation,drove it. Id. Because the automobile exclusion applies and the parking exception does not, the Magistrate Judge concluded that "insurance proceeds are not available as a matter of law." Id.

C. The Position of the Parties
1. Ms. Fish

Ms. Fish objects to both of the Magistrate Judge's...

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