Peerless Indem. Ins. Co. v. Frost

• Decision Date: 10 July 2013
• Docket Number: No. 12–2370.,12–2370.
• Citation: 723 F.3d 12
• Parties: PEERLESS INDEMNITY INSURANCE COMPANY; Peerless Insurance Company, Plaintiffs, Appellees, v. Robbin W. FROST, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

723 F.3d 12

PEERLESS INDEMNITY INSURANCE COMPANY; Peerless Insurance Company, Plaintiffs, Appellees,

v.Robbin W. FROST, Defendant, Appellant.

No. 12–2370.

United States Court of Appeals, First Circuit.

July 10, 2013.

Robert H. Furbish, with whom Steven D. Silin and Berman & Simmons, P.A. were on brief, for appellant.

Carol I. Eisenberg, with whom John S. Whitman and Richardson, Whitman, Large, & Badger were on brief, for appellees.

Before LYNCH, Chief Judge, LIPEZ and THOMPSON, Circuit Judges.

LIPEZ, Circuit Judge.

Dr. Robbin Frost, a licensed podiatrist, was driving alone in her husband's Pontiac Bonneville when she was severely injured in a collision caused by an underinsured motorist. So far, she has collected $250,000 in insurance proceeds; she seeks further payment from Peerless Indemnity Insurance Co. and Peerless Insurance Co. (together, “Peerless”), who issued business owner's and excess/umbrella policies to Frost's podiatric practice, Lake Region Family Foot and Ankle Center, P.A. (“Lake Region”). Peerless sued in federal district court for a declaratory judgment that it had no duty to pay for any of Frost's injuries or damages. The district court granted summary judgment in favor of Peerless. Frost appeals.

We affirm the district court's decision on the ground that Maine's uninsured/underinsured motorist statute, Me.Rev.Stat. tit. 24–A, § 2902, does not apply to the Peerless policies issued to Lake Region.

I.

On appeal from the district court's summary judgment order, we review the relevant facts in the light most favorable to the party against whom judgment was granted (here, Frost) and draw all reasonable inferences in her favor. Kelley v. Corr. Med. Servs., Inc., 707 F.3d 108, 110 (1st Cir.2013). The facts here are drawn from the pleadings and statements submitted by Frost to the district court, as well as the undisputed documentary evidence.

A. The Accident

Frost is the sole stockholder and executive officer of Lake Region, a Maine professional association with a surgical practice office in Windham, Maine. On May 25, 2007, Frost set out from Lake Region's office in Windham to the Mercy Hospital in Portland, where she was scheduled to perform several podiatric surgical procedures. The car she was driving, a Pontiac Bonneville, was titled to her husband, but Frost was the primary user of the automobile and the vehicle registration showed both Frost and her husband as co-registrants.

While traveling east along Route 202, Frost brought the Pontiac to a stop at a traffic light in the town of Gray, Maine. The driver of a second vehicle stopped behind her. As Frost and the second driver waited at the traffic light, the driver of a third vehicle came from behind at an unsafe speed and failed to bring his vehicle to a halt, colliding with the second car and pushing it violently into the rear of the Pontiac Bonneville.

Frost suffered severe injuries as a result of the collision, including permanent disfigurement and near-total loss of her eyesight. The injuries have forced Frost to discontinue her podiatric practice. Frost has stated in her pleadings that her injuries and damages as a result of the collision are “well in excess” of $2.25 million. Peerless concedes that Frost's injuries and damages are at least in excess of $1.25 million.

B. The Insurance Policies

Frost and the driver of the second vehicle both sought to recover damages from the driver of the third vehicle, whose negligence appears to have been the sole proximate cause of the collision. The driver of the third vehicle was covered under an automobile insurance policy issued by AIU Insurance Co. (“AIU”). That policy provided coverage for bodily injury and property damage of up to a maximum of $125,000 per accident. Frost herself was covered under an automobile insurance policy issued by Progressive Northwestern Insurance Co. (“Progressive”), which provideduninsured/underinsured motorist coverage of up to a maximum of $250,000 per person.

AIU agreed to pay $99,745.98 to Frost in connection with the accident; this sum represented the full amount of coverage remaining under the negligent driver's liability policy after the second driver was compensated for his injuries. Meanwhile, Progressive agreed to pay Frost $150,254.02, which represented the maximum underinsured motorist coverage under the policy minus the amount Frost already had received from AIU.

Frost's podiatric practice, Lake Region, also had two insurance policies in effect at the time of the accident: a business owner's policy issued by Peerless Indemnity Insurance Co. and a commercial umbrella policy issued by Peerless Insurance Co. The business owner's policy provided coverage to Lake Region for liability and medical expenses of up to $1 million per occurrence; the umbrella policy provided additional coverage for up to $1 million.

1. Business Owner's Policy. The business owner's policy explicitly excluded liability coverage for “ ‘bodily injury’ or ‘property damage’ arising out of the ownership, maintenance, use or entrustment to others of any ... ‘auto’ ... owned or operated by or rented or loaned to any insured.” (An exception to that exclusion, however, effectively provided liability coverage for bodily injury or property damage arising out of valet parking on the business premises.)

Despite this explicit exclusion of automobile liability coverage, the business owner's policy was subject to an endorsement for “Hired Auto and Non–Owned Auto Liability,” which applied to bodily injury and property damage arising out of the use of a “hired auto” or “non-owned auto” by an employee of Lake Region in the course of business. The endorsement explicitly deleted the exclusion of automobile liability coverage “[f]or insurance provided by this endorsement only.”

The endorsement included a section entitled “Who Is An Insured,” which read, in relevant part:

Each of the following is an insured under this endorsement to the extent set forth below:

a. You;

b. Any other person using a “hired auto” with your permission;

c. For a “non-owned auto”, any partner or “executive officer” of yours, but only while such “non-owned auto” is being used in your business....

None of the following is an insured:

...

(2) Any partner or “executive officer” for any “auto” owned by such partner or officer or a member of his or her household....

The terms “hired auto” and “non-owned auto” were defined by the policy as follows:

“Hired Auto” means any “auto” you lease, hire, or borrow. This does not include any “auto” you lease, hire, or borrow from any of your “employees” or members of their households, or from any partners or “executive officers” of yours.

“Non–Owned Auto” means any “auto” you do not own, lease, hire, or borrow which is used in connection with your business....

2. Umbrella Policy. The umbrella policy likewise addressed automobile coverage. According to the policy terms:

[W]ith respect to the “auto hazard”:

a. You are an insured; b. Anyone else while using with your permission an “auto” you own, hire or borrow is also an insured except:

(1) The owner or anyone else from whom you hire or borrow an “auto”....

(2) Your “employee” if the “auto” is owned by that “employee” or a member of his or her household....

The umbrella policy defined “auto hazard” to mean “liability arising out of the ownership, maintenance, use or ‘loading or unloading’ of any auto.” The policy also stated that:

This insurance does not apply to:

...

f. Motor Vehicle Laws and Coverages

Motor vehicle no-fault law, first party physical damage coverage, personal injury protection coverage, uninsured motorists or underinsured motorists law; or other laws or coverages similar to any of the foregoing.

When Frost demanded payment from Peerless under the business owner's and umbrella policies for injuries and damages that resulted from the May 25, 2007 collision, Peerless refused on the ground that it had no obligation under either policy to pay uninsured/underinsured motorist benefits to Frost with respect to the accident. Peerless then filed a declaratory judgment complaint in federal district court in Maine, invoking the court's diversity jurisdiction under 28 U.S.C. § 1332(a) (2006).¹ Frost counterclaimed for judgment in the amount of $1 million against Peerless Indemnity Insurance Co. pursuant to the business owner's policy and another $1 million against Peerless Insurance Co. pursuant to the umbrella policy. After Peerless and Frost filed cross-motions for summary judgment, the district court concluded that the “unambiguous” language of both Peerless policies excluded coverage for Frost's injuries and damages in the collision. The court entered judgment in favor of Peerless on all claims, and this timely appeal followed.

II.

We review the grant of a motion for summary judgment de novo. Cruz v. Bristol–Myers Squibb Co., 699 F.3d 563, 570 (1st Cir.2012). Peerless argues that the terms of Lake Region's business owner's and umbrella policies explicitly exclude coverage for automobiles owned by Frost's family members. Frost concedes that the business owner's and umbrella policies exclude liability coverage with respect to automobiles owned by her family members, but she argues that under Maine law the Peerless policies must be deemed to provide uninsured/underinsured motorist coverage to Frost. Frost's argument is based on a Maine statute, Me.Rev.Stat. tit. 24–A, § 2902, and the Maine case law construing that statute.

A. Maine's Uninsured/Underinsured Motorist Statute

In 1967, the Maine Legislature first enacted a statute requiring automobile liability insurers to provide coverage in their policies for injuries caused by uninsured tortfeasors. See Connolly v. Royal Globe Ins. Co., 455 A.2d 932, 935 (Me.1983) (citing Pub.L. No.1967, ch. 93, § 1 (effective Jan. 1, 1968)). In 1975, the Legislature extended the mandatory coverage provision so that it would apply to victims injured by underinsured as well as uninsureddrivers. Se...