METROPOLITAN PROPERTY AND CASUALTY INSURANCE COMPANY v. MCCARTHY et al

Filing 44

OPINION AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT granting 26 Motion for Summary Judgment; denying 15 Motion for Summary Judgment By JUDGE NANCY TORRESEN. (dfr)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE

METROPOLITAN PROPERTY
)
AND CASUALTY INSURANCE CO., )
)
Plaintiff
)
v.
)
)
SUSAN MCCARTHY and
)
GLYNIS DIXON MCCORMACK,
)
)
Defendants.
)

Civil No. 2:12-CV-151-NT

OPINION AND ORDER ON
CROSS-MOTIONS FOR SUMMARY JUDGMENT
This case comes before the Court on the Plaintiff’s and Defendant
McCormack’s cross-motions for summary judgment (ECF Nos. 15 & 26). For the
reasons that follow, the Plaintiff’s motion for summary judgment is denied and
Defendant McCormack’s motion for summary judgment is granted.
Introduction
Defendant Susan McCarthy brought a complaint in York County Superior
Court against Defendant McCormack alleging that McCormack’s ward sexually and
physically abused McCarthy’s son. At all times relevant to the McCarthy complaint,
McCormack held a homeowner’s insurance policy with Metropolitan Property and
Casualty Insurance Co. (Metropolitan).
Metropolitan brought this action against both McCormack and McCarthy
seeking a declaratory judgment that Metropolitan has: (1) no duty to defend

McCormack in the McCarthy suit, (2) no duty to indemnify McCormack for any
judgment in the McCarthy suit, (3) no obligation to indemnify McCormack for her
costs and fees incurred in defense of the McCarthy complaint, and (4) no obligation
in any reach-and-apply actions under 24-A M.R.S.A. § 2904 for any judgment
obtained by McCarthy. Compl. for Declaratory Relief 7 (ECF No. 1). Metropolitan
and McCormack’s cross-motions for summary judgment followed.
Standard of Review
Under Federal Rule of Civil Procedure 56, “[t]he court shall grant summary
judgment if the movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). Ordinarily when a party moves for summary judgment, the Court goes
beyond the facts alleged in the pleadings and considers the discovery materials in
the record, including depositions, documents, and affidavits, to determine whether
there is a genuine dispute of material fact for trial. Fed. R. Civ. P. 56(c). In a duty to
defend declaratory judgment action, the Court decides as a matter of law whether
the insurer has a duty to defend the insured in the underlying lawsuit. Mitchell v.
Allstate Ins. Co., 36 A.3d 876, 879 (Me. 2011). This determination is based solely on
the Court’s comparison of the allegations in the underlying complaint with the
insured’s insurance policy. Id. On a motion for summary judgment in a duty to
defend case, the Court goes beyond the parties’ pleadings but only to look at these

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two documents. Here, the parties agree on the relevant complaint and the relevant
insurance policies.1
Relevant Law
An insurance company’s duty to defend its policyholders in lawsuits brought
against them is construed very broadly. Mitchell, 36 A.3d at 879. “Whether an
insurer has a duty to defend is determined by comparing the provisions of the
insurance contract with the allegations in the underlying complaint. If there is any
legal or factual basis that could be developed at trial, which would obligate the
insurer to pay under the policy, the insured is entitled to a defense.” J.A.J., Inc. v.
Aetna Cas. & Sur. Co., 529 A.2d 806, 808 (Me. 1987). The insurance company’s duty
to defend is based “exclusively on the facts as alleged rather than on the facts as
they actually are.” Am. Policyholders’ Ins. Co. v. Cumberland Cold Storage Co., 373
A.2d 247, 249 (Me. 1977).
[T]he duty to defend is broader than the duty to pay or indemnify.
Whereas the duty to defend depends only upon the facts as alleged to
be, the duty to indemnify, i.e. ultimate liability, depends rather upon
the true facts. Thus it is not uncommon that an insurer will have a
duty to defend based on the allegations in the complaint, yet have no
subsequent duty to indemnify the insured.
Id. at 250.
“Because the duty to defend is broad, any ambiguity in the policy regarding
the insurer’s duty to defend is resolved against the insurer . . . .” Mitchell, 36 A.3d
at 879. “An insurer may properly refuse to defend a policyholder if the allegations of
the complaint fall entirely within a policy exclusion.” Id. at 880. But, “[e]xclusions
There are four insurance policies covering 2006-2007, 2007-2008, 2008-2009, and 2009-2010.
The pertinent provisions of the policies are identical.
1

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and exceptions in insurance policies are disfavored, and are construed strictly
against the insurer.” Foremost Ins. Co. v. Levesque, 868 A.2d 244, 246 (Me. 2005)
(internal citation omitted).
Factual Background
A. McCarthy Complaint
The McCarthy complaint is brought individually and on behalf of McCarthy’s
son, MM, against McCormack individually and as guardian of ZC. It alleges that in
2007, MM stayed at McCormack’s house in Eliot, Maine during February school
vacation and was physically, psychologically, and sexually abused by ZC. The
complaint alleges that the sexual and physical abuse continued on a regular and
repeated basis between February of 2007 and April of 2009. The complaint alleges
that in August of 2007, McCormack became aware that ZC had abused another
minor child. McCarthy asserts three causes of action against McCormack: (1)
negligent supervision, (2) assault and battery, and (3) breach of fiduciary duty.
B. McCormack’s Insurance Policy
McCormack’s homeowner’s insurance policy with Metropolitan provides
liability insurance for “bodily injury and property damage to others for which
the law holds you responsible because of an occurrence to which this coverage
applies.” Pl.’s Compl. Ex. B, at 28 (Doc. No. 1-2).2 The policy provides that: “We will
defend you, at our expense with counsel of our choice, against any suit seeking
these damages. We may investigate, negotiate, or settle any suit. We are not

Defined terms are highlighted in bold in the policy. The Court retains the bold font when it
quotes the policy.
2

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obligated to defend any claim or suit seeking damages not covered under this
policy.” Id.
The policy defines “bodily injury” as “any physical harm to the body including
any resulting sickness or disease.” Id. at 6. But: “Bodily injury does not include . . .
the actual, alleged or threatened sexual molestation of a person . . . .” Id. The policy
defines “occurrence” as “an accident, including continuous or repeated exposure to
substantially the same general harmful conditions during the term of the policy.”
Id. at 7.
The policy excludes from its liability coverage: “Intentional Loss. We do not
cover bodily injury or property damage which is reasonably expected or
intended by you or which is the result of your intentional and criminal acts or
omissions.” Id. at 28.
The policy also excludes from liability coverage:
Abuse. We do not cover bodily injury caused by or resulting from the
actual, alleged or threatened sexual molestation or contact, corporal
punishment, physical abuse, mental abuse or emotional abuse of a
person. This exclusion applies whether the bodily injury is inflicted
by you or directed by you for another person to inflict sexual
molestation or contact, corporal punishment, physical abuse, mental
abuse or emotional abuse upon a person.
Id. at 32.
The policy also defines “you” and “your” as:
1.
the person or persons named in the Declarations and if a
resident of the same household:
A.
the spouse of such person or persons;
B.
the relatives of either; or
C.
any other person under the age of twenty-one in the care
of any of the above . . . .

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Id. at 7.
Discussion
The Plaintiff claims that it has no duty to defend McCormack because the
McCarthy complaint does not allege an occurrence causing bodily injury, the policy’s
exclusion for abuse applies, and the policy’s exclusion for intentional loss applies.
A. Duty to Defend
1. “Bodily Injury” Caused By An “Occurrence”
The policy defines bodily injury as “any physical harm to the body” but not
“the actual, alleged or threatened sexual molestation of a person.” In addition to
sexual abuse allegations, McCarthy’s complaint alleges that MM was “otherwise
physically abused” by ZC, that ZC “physically beat” MM, and that ZC “violently and
forcefully struck [MM] in the abdomen.” Pl.’s Compl. Ex. E ¶¶ 9, 11, 21 (ECF No. 15). These facts, if proven, would fall under the policy’s “bodily injury” definition.
The policy defines an occurrence as “an accident.” The complaint alleges that
MM was injured because McCormack negligently failed to supervise ZC, warn
McCarthy about ZC, or protect MM from ZC, despite her knowledge after August of
2007 that ZC had abused another child. Pl.s’ Compl. Ex. E. ¶¶ 12-13, 17, 18. The
Law Court’s opinion in Hanover Ins. Co. v. Crocker, 688 A.2d 928 (Me. 1997) is
dispositive. In that case, Mary Crocker brought a complaint against her father and
mother, Thomas and Ngoclien Crocker, alleging that her father abused her and
Ngoclien saw the abuse but failed to protect Mary from her father. The Crockers’

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insurance company refused to defend Ngoclien in the suit because Mary did not
allege an “occurrence,” which was defined in the Crockers’ homeowner’s insurance
policy as “an accident.” The Law Court held that the insurance company did have a
duty to defend Ngoclien Crocker because:
The complaint alleges “negligent” conduct by Ngoclien in that she had
knowledge that the abuse had occurred and negligently failed to
protect Mary from any further abuse. The general rule is that injuries
resulting from negligent conduct are considered “accidental” and not
“expected or intended” and that those injuries are therefore caused by
an occurrence within the language of the homeowner’s policy. . . . The
negligent conduct of Ngoclien alleged in Mary’s complaint falls within
the meaning of an accident, and accordingly is an occurrence within
the language of Hanover’s policy.
Crocker, 688 A.2d at 930-31. The McCarthy complaint’s allegations that MM was
physically injured because of McCormack’s negligent supervision are allegations of
“bodily injury” caused by an “occurrence” that fall within McCormack’s policy’s
grant of coverage.
2. The Exclusions
The Plaintiff claims that the facts alleged in the McCarthy complaint trigger
both the policy’s exclusion for abuse and the exclusion for intentional conduct. The
Defendants respond that the abuse and intentional conduct exclusions do not apply
because the McCarthy complaint does not allege that ZC was an insured under the
policy. Alternatively, if ZC was an insured under the policy, the Defendants argue
that policy’s use of the term “you” as used in the exclusions is ambiguous.
a. Abuse Exclusion
The abuse exclusion excludes liability coverage for:

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bodily injury caused by or resulting from the actual, alleged or
threatened sexual molestation or contact, corporal punishment,
physical abuse, mental abuse or emotional abuse of a person. This
exclusion applies whether the bodily injury is inflicted by you or
directed by you for another person to inflict sexual molestation or
contact, corporal punishment, physical abuse, mental abuse or
emotional abuse upon a person.
Pl.’s Compl. Ex. B, at 32.
The Plaintiff’s first argument is that “you,” as defined by the policy,3 includes
ZC. All of MM’s bodily injury was caused by either sexual molestation or physical
abuse perpetrated by ZC, so under the Plaintiff’s argument, this provision excludes
all of the facts alleged in the McCarthy complaint from coverage. Defendants
respond that because the McCarthy complaint does not allege that ZC resided with
McCormack, ZC does not fall within the policy’s definition of “you,” and the abuse
exclusion does not apply to him.
The Defendants have the better argument. The complaint alleges that
McCormack is ZC’s guardian, that ZC is a minor, and that both McCormack and ZC
live in Eliot, Maine. Pl.’s Compl. Ex. E ¶¶ 2, 4. But the complaint does not allege
that ZC lived with McCormack. It is, of course, possible, even likely, that ZC, who
was twelve when the abuse began, was a resident of McCormack’s household. But,
under the allegations of the complaint, it is also possible that ZC was not resident of
3

The policy defines “you” and “your” as:
1.
the person or persons named in the Declarations and if a resident of the same
household:
A. the spouse of such person or persons;
B. the relatives of either; or
C. any other person under the age of twenty-one in the care of any of the above .
...

Pl.’s Compl. Ex. B, at 7.

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McCormack’s household. If this were proven, “you” as defined by the policy would
not apply to ZC, and any abuse perpetrated by ZC would not be excluded from
McCormack’s policy’s coverage.
In its reply, the Plaintiff changes course and argues that the abuse exclusion
“is not limited to abuse perpetrated by person or persons within the definitions of
the policy term you. . . . The abuse exclusion is not in any way limited by the policy
definition of the term you but is triggered by abuse perpetrated by any person.”
Pl.’s Reply to Def. Glynis Dixon McCormack’s Am. Opp’n to Pl.’s Mot. for Summ. J.
4 (ECF No. 34). The Plaintiff interpreted the abuse exclusion differently in its own
motion for summary judgment: “The exclusion for abuse applies to abuse
committed by persons included in the policy definition of you.” Pl.’s Mot. for Summ.
J. with Inc. Mem. of Law 9 (ECF No. 15). Language in an insurance policy is
ambiguous “if it is reasonably susceptible of different interpretations.” Brackett v.
Middlesex Ins. Co., 486 A.2d 1188, 1189 (Me. 1985). The Plaintiff’s own conflicting
interpretations demonstrate that the abuse exclusion is ambiguous with respect to
whether it (1) excludes bodily injury either perpetrated by an insured or by a noninsured but at an insured’s direction, or (2) excludes all bodily injury caused by
abuse no matter the perpetrator.
Under Maine law, ambiguous policy terms are interpreted against the
insurer, Mitchell, 36 A.3d at 879, and exclusions are read narrowly, Foremost Ins.
Co., 868 A.2d at 246. The McCarthy complaint contains no allegations that ZC
resided in McCormack’s household, and accordingly, ZC may not be considered an

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insured under the policy, which we interpret narrowly to exclude only abuse
committed by an insured or directed by an insured.
Because the Court concludes that the complaint does not allege that ZC is an
insured, the Court does not reach the parties’ arguments about whether “you” as
used in the abuse and intentional loss exclusions refers to “the insured” or to “any
insured” or “all insureds.” Compare Johnson v. Allstate Ins. Co., 687 A.2d 642, 644
(Me. 1997), with Crocker, 688 A.2d at 931.
b. Intentional Loss Exclusion
The policy excludes from coverage “bodily injury or property damage
which is reasonably expected or intended by you or which is the result of your
intentional and criminal acts or omissions.” As discussed above, the complaint
alleges that ZC acted intentionally and McCormack acted negligently. Because the
complaint contains no allegation that ZC resided in McCormack’s household, it is
possible that he will not fall within the term “you.” Because McCormack is alleged
to have acted negligently, she does not fall within the intentional loss exclusion.
B. Metropolitan’s Duty to Indemnify and Obligations Under Any Reachand-Apply Actions
Metropolitan may not litigate its potential duty to indemnify McCormack
before McCormack’s liability is determined. Crocker, 688 A.2d at 928 n.1. It follows
that Metropolitan may not litigate its potential liability in any reach-and-apply
action brought by McCarthy for any judgment obtained by McCarthy.

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3. Attorney’s Fees
Both McCormack and McCarthy seek attorney’s fees and costs under 24-A
M.R.S. § 2436-B(2). “In an action pursuant to Title 14, chapter 707, to determine an
insurer’s contractual duty to defend an insured under an insurance policy, if the
insured prevails in such action, the insurer shall pay court costs and reasonable
attorney’s fees. 24-A M.R.S.A. § 2436-B(2). McCormack is the prevailing party in
this action and so Metropolitan shall pay McCormack’s court costs and reasonable
attorney’s fees. McCarthy is responsible for her own costs and attorney’s fees
incurred in this action. See 24-A M.R.S.A. § 2436-B(4) (“This section may not be
construed to . . . create or extend any right or cause of action for a 3 rd-party
claimant under an insurance policy.”).
Conclusion
The Court DECLARES that the Plaintiff has a duty to defend McCormack in
the McCarthy suit. The Plaintiff’s motion for summary judgment is DENIED,
Defendant McCormack’s motion for summary judgment is GRANTED, and the
Court ORDERS that judgment shall enter in favor of McCormack. Metropolitan
shall reimburse McCormack for her costs and reasonable attorney’s fees incurred in
this action.

SO ORDERED.
Dated this 10th day of June, 2013.
/s/ Nancy Torresen
United States District Judge

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