Pine Ridge Realty v. Mass. Bay Ins. Co.

• Decision Date: 26 May 2000
• Citation: 752 A.2d 595,2000 ME 100
• Parties: PINE RIDGE REALTY, INC. v. MASSACHUSETTS BAY INSURANCE CO. et al.
• Court: Maine Supreme Court

752 A.2d 595

2000 ME 100

PINE RIDGE REALTY, INC.¹ v. MASSACHUSETTS BAY INSURANCE CO. et al.

Supreme Judicial Court of Maine.

Argued March 7, 2000.

Decided May 26, 2000.

Richard L. Suter (orally), Suter & Assoc., P.A., Falmouth, Douglas F. Jennings, Augusta, Frank J. Kolb, Kolb Crisci & Eisenhandler, East Haven, CT, for plaintiff.

John S. Whitman (orally), Richardson, Whitman, Large & Badger, P.C., Portland, for Mass Bay Ins. Co.

Russell F. Hilliard (orally), Upton, Sanders & Smith, Concord, NH, for Anderson-Watkins Assoc. and St. Angelo.

Before WATHEN, C.J., and CLIFFORD, RUDMAN, DANA, SAUFLEY, ALEXANDER and CALKINS, JJ.

SAUFLEY, J.

[¶ 1] Pine Ridge Realty, Inc., appeals from a judgment of the Superior Court (York County, Fritzsche, J.), entered against it and in favor of Massachusetts Bay Insurance Company, Anderson-Watkins Associates, Inc., and Stephen P. St. Angelo, concluding that Pine Ridge was not entitled to insurance coverage for floodwater damage to its property, known as the Dunegrass Golf Course. Massachusetts Bay cross appeals from the court's denial of its request for attorney fees. We affirm the judgments.

I. BACKGROUND

[¶ 2] In October of 1996, Hurricane Lili roiled off the coast of New England. The Dunegrass Golf Course, which was in the process of being developed and expanded, suffered substantial damage as a result of flooding that followed torrential rains.² Pine Ridge sought recovery for those damages from its insurer, Massachusetts Bay Insurance Company. After investigation of the claim, Massachusetts Bay concluded that no insurance against the perils of flood or groundwater had been sought by Pine Ridge or provided under any of the current policies. It declined to pay for the costs of replacing the damaged areas of the golf course, thereby giving rise to this action.

[¶ 3] The golf course at issue is located in Old Orchard Beach. In the late eighties, Pine Ridge purchased the original nine-hole course along with 250 adjacent acres. In 1996, Pine Ridge began construction of an eighteen-hole "championship" golf course, anticipating the development of a significant number of surrounding residential units. Prospective lenders required Pine Ridge to obtain certain insurance. To comply with financing requirements, Ronald Boutet, on behalf of Pine Ridge, contacted Stephen St. Angelo of Anderson-Watkins Associates, an insurance agency. St. Angelo arranged for coverage through Massachusetts Bay during the course of construction of new holes at the Dunegrass Golf Course.

[¶ 4] Several different types of coverage were originally discussed, including tees and greens, general liability, builder's risk, and business interruption coverage. St. Angelo arranged to have a binder issued by Massachusetts Bay and provided the binder to Boutet. Boutet did not question the coverage addressed in the binder or request further coverage.

[¶ 5] Just over a month after the binder was issued, and before the new policy endorsements were issued, the flooding occurred, and Boutet was told that the policies he had purchased did not include flood insurance. He and his corporation brought suit against Massachusetts Bay, as well as St. Angelo and his firm, Anderson-Watkins Associates, Inc.

[¶ 6] Through an amended complaint, Pine Ridge presented a claim for breach of contract and breach of the implied covenant of good faith and fair dealing against Massachusetts Bay. It also claimed that Massachusetts Bay, St. Angelo, and Anderson-Watkins had knowingly misrepresented "pertinent facts and policy provisions" in violation of 24-A M.R.S.A. § 2436-A(1)(A), (D) (1990), and that St. Angelo and Anderson-Watkins had been negligent. Anderson-Watkins cross-claimed, asserting that it was entitled to indemnity from Massachusetts Bay to the extent Anderson-Watkins was found liable on Pine Ridge's complaint.

[¶ 7] Following a lengthy and somewhat contentious discovery period,³ Pine Ridge presented its case in a bench trial. Over seven days, the court heard testimony regarding the historical facts that led to the dispute. In the end it was faced with several questions central to the claims: whether Boutet requested flood insurance; whether Massachusetts Bay agreed to provide flood insurance; and whether Massachusetts Bay failed to live up to its commitment.⁴

[¶ 8] In a detailed and thoughtful decision, the trial court concluded that the answer to each question was "no." The court found that no request for flood insurance had been made by Boutet, notwithstanding St. Angelo's efforts to acquire Boutet's attention on the subject; that Massachusetts Bay had never agreed to provide flood insurance; and that neither Massachusetts Bay nor St. Angelo or his firm had breached a contractual, statutory, or common law duty to the developers.

[¶ 9] The evidence revealed that, except in federally designated flood zones, flood insurance is not included in standard property insurance policies. In most policies, including those in question, it is explicitly excluded from coverage. Thus, in the absence of a specific request, flood insurance would not be included in the policies sought by Boutet. In its opinion, the court credited St. Angelo's testimony, and declined to credit much of Boutet's testimony or the testimony of his expert witness.⁵ It found that Boutet was "a developer who gave his insurance needs little attention."⁶ It further found that St. Angelo specifically informed Boutet that he did not provide flood coverage, that Boutet failed to respond to many questions from St. Angelo, and that Boutet signed a flood insurance checklist indicating that the property was not in an identified flood hazard area and that National Flood Insurance was not being sought.⁷ In essence, the court found that Boutet did not request flood insurance despite the opportunity to do so, and that others involved had no reason to believe such insurance was necessary. As the court stated succinctly: "No one expected 19 inches of rain and no one planned on damage to a well drained golf course built on a back sand dune. It was a freak occurrence."

[¶ 10] Turning to the actions of the insurer and the agent, the court found St. Angelo to be a "capable honest insurance agent." It found, however, that Massachusetts Bay had made a mistake when, after the damage occurred, it issued a "named peril" tees and greens policy rather than the "all-risk" policy it had promised in its binder. This apparently occurred because Massachusetts Bay did not ordinarily issue general "all-risk" products for tees and greens coverage. The court then concluded that Massachusetts Bay had bound itself to provide "all-risk" coverage, but that exclusions for flood and groundwater damage were applicable under either type of policy. Because the relevant exclusions were applicable to all policies that Massachusetts Bay had bound itself to provide, whether or not Massachusetts Bay ordinarily issued such policies, Massachusetts Bay's denial of coverage was proper. The court ultimately determined that "the coverage that was requested would not have covered the losses suffered."

[¶ 11] As to the remaining counts, the court found that "coverage decisions were made with sufficient speed and that there were no knowing misrepresentations," and accordingly found no unfair claims settlement practice under 24-A M.R.S.A. § 2436-A. The court also found no breach of the implied covenant of good faith and fair dealing. Finally, the court found that, although Massachusetts Bay had prevailed, its conduct in mistakenly issuing the wrong policy contributed to the need for a trial. The court found insufficient evidence of fraud, misrepresentation, or concealment on the part of Boutet or Pine Ridge, and accordingly denied Massachusetts Bay's request for attorney fees. This appeal followed.

II. DISCUSSION

[¶ 12] Pine Ridge presents multiple theories under which it argues that the court's judgment must be vacated. Because the agreement of the parties is central to Pine Ridge's claims, we limit our discussion to determining whether the court erred when it concluded that Pine Ridge failed to meet its burden of proving that Massachusetts Bay breached its contract. In essence, Pine Ridge argues that the contracts at issue, consisting of the binder and new policy endorsements, are ambiguous and must be construed to include flood and groundwater coverage because Boutet sought, and Massachusetts Bay agreed to provide, that coverage.

[¶ 13] Neither the standard policy language nor the binder explicitly provided for flood or groundwater coverage. The new policy endorsements, as issued, as well as industry standard policies and Massachusetts Bay's standard policies, specifically excluded that coverage. Thus, Pine Ridge cannot obtain coverage under the contract unless an ambiguity in the contract is somehow read to include the coverage excluded by the policy language.

[¶ 14] Whether a contract is ambiguous is a question of law that we review de novo. See Devine v. Roche Biomedical Laboratories, Inc., 637 A.2d 441, 445 (Me. 1994)

. "Contract language is ambiguous when it is reasonably susceptible to different interpretations." Kandlis v. Huotari, 678 A.2d 41, 43 (Me.1996),

quoted in Spottiswoode v. Levine, 1999 ME 79, ¶ 16, 730 A.2d 166, 172. In the insurance context, when a loss occurs after a binder has been issued, but before a policy is written, the insurer is bound to provide coverage in line with its standard policies referenced in the binder, see Auto-Owners Ins. Co. v. Jensen, 667 F.2d 714, 723 (8th Cir.1981); Matousek v. South Dakota Farm Bureau Mut. Ins. Co., 450 N.W.2d 236, 238 (S.D. 1990), or policies standard throughout the industry, see Hartford Fire Ins. Co. v. Bonsera, 177 Misc.2d 55, 675 N.Y.S.2d 827, 829 (Sup.Ct.1998); 2 ALAN D. WINDT, INSURANCE CLAIMS & DISPUTES § 6.36 n.348 (3d ed. 1995 & Supp.1999). In those instances, when the terms of the binder conflict with the terms of the standard policy,...