TED BERRY COMPANY INC v. EXCELSIOR INSURANCE COMPANY

Filing 28

DECISION AND ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT- denying 21 Motion to Amend. ; granting 23 Motion for Summary Judgment; denying 25 Motion for Summary Judgment. By JUDGE D. BROCK HORNBY. (mnw)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
TED BERRY COMPANY, INC.,
PLAINTIFF
v.
EXCELSIOR INSURANCE
COMPANY,
DEFENDANT

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CIVIL NO. 2:13-CV-342-DBH

DECISION AND ORDER ON CROSS-MOTIONS
FOR SUMMARY JUDGMENT
This is a dispute about an insurance company’s duty to defend its
insured for property damages under a commercial general liability (CGL) policy
and exclusions associated with such a policy. On the duty to defend (Counts I
and II), the record is stipulated. It consists of the applicable CGL policy and a
New Hampshire complaint against the insured for breach of contract (for which
the insured unsuccessfully requested a defense).

I conclude that on the

stipulated record the insurance company is entitled to judgment under Maine
law, and that it had no duty to defend.

There is also an unfair claims

settlement practice claim under Maine law, 24-A M.R.S.A. § 2436-A (Count III).
On that issue, I conclude that, because there is no duty to defend, the
insurance company is entitled to judgment as a matter of law.

CHOICE OF LAW
The insured is a Maine corporation with its principal place of business in
Maine.

The insurance company is a New Hampshire corporation with its

principal place of business in Massachusetts. The insurance policy was issued
in Maine through a Maine agent.1 The damage for which the insured seeks
coverage occurred to a municipality in New Hampshire.
The insurance company newly contends that New Hampshire law
applies, whereas the insured argues that Maine law applies, as the parties
previously had agreed in a conference before me. If I were to ignore that earlier
agreement and apply Maine choice-of-law principles, I would probably find that
New Hampshire law applies to this dispute.2 At a pre-filing conference held
pursuant to Local Rule 56(h), however, both parties asserted that Maine law
applied to this case.

The insured asserts that I should hold the insurance

company to its earlier commitment. I agree.3

The parties agree on this. See Def. Mot. for Summ. J. at 9 (ECF No. 23) and Aff. of Matt
Timberlake ¶ 4 (ECF No. 24-1).
2 See Baybutt Const. Corp. v. Commercial Union Ins. Co., 455 A.2d 914, 919 (Me. 1983) (“In a
multiple risk policy . . . .the authorities have treated such policies in respect to the location of a
particular risk in one of the states covered by the contract as if a separate policy had been
issued to cover only the risks in that state. The rationale for such a holding is based on the
fact that the location of the insurance risk in a particular state pinpoints the jurisdiction that
has the greatest interests in the contract and any issues arising therefrom.”); Gates Formed
Fibre Products, Inc., v. Plasti-Vac, Inc., 687 F. Supp. 688, 690 (D. Me. 1988) (citing Baybutt).
Although Baybutt was overruled on other grounds by Peerless Ins. Co. v. Brennon, 564 A.2d
383 (Me. 1989), Baybutt’s choice-of-law analysis is still good law.
3 Fed. R. Civ. P. 16(a) allows the court to hold pretrial conferences to expedite disposition of the
action and discourage wasteful pretrial activities. Rule 16(c) lists the matters for consideration
at such conferences, and they include “determining the appropriateness and timing of
summary adjudication under Rule 56,” Fed. R. Civ. P. 16(c)(2)(E). At such a conference
counsel must be authorized “to make stipulations and admissions about all matters that can
reasonably be anticipated for discussion at a pretrial conference.” Fed. R. Civ. P. 16(c)(1). This
court conducts such conferences under Local Rule 56(h) before summary judgment motions
are filed in order to consider, among other things, ”the issues to be addressed by a motion for
summary judgment.” Where an insurer has notified opposing counsel and the court that it has
1

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2

DUTY TO DEFEND

“‘Whether an insurer has a duty to defend in a particular case is a
question of law.’” Penney v. Capitol City Transfer, Inc., 707 A.2d 387, 388 (Me.
1998) (citations omitted).

Maine law is clear on how to determine duty to

defend: the judge must compare the allegations in the underlying complaint to
the provisions of the insurance policy without considering the merits of the
complaint or looking at extraneous evidence.4 York Golf and Tennis Club v.
Tudor Ins. Co., 845 A.2d 1173, 1175 (Me. 2004). “The duty to defend arises if
there is any potential basis for recovery against the insured and the recovery is
an insured risk.” Id. See also Auto Europe, LLC v. Conn. Indemnity Co., 321
F.3d 60, 66 (1st Cir. 2003) (“If the complaint shows even a possibility that the
events giving rise to it are within the policy coverage, the insurer must defend

grounds to file a motion for summary judgment, it is reasonable to conclude that it has
considered what is the governing law. At the conference in this case, the lawyers were
discussing only Maine law on duty to defend, and it was I who raised the choice-of-law
question in light of New Hampshire’s involvement. When I raised the issue, both parties agreed
unequivocally, however, that Maine law applied. As a result, I issued a report that stated “[a]t
the conference, the parties agreed that Maine law applies.” Report of Pre-Filing Conference
Under Local Rule 56 (ECF No. 20). After receiving the report, the insurance company filed a
motion to amend that report and an affidavit by its attorney stating that “I have not yet
researched the question” whether Maine law applies and “would like the opportunity to
research the question.” Aff. of John Whitman ¶¶ 4 and 6 (ECF No. 21-1). The motion to
amend the Report is DENIED. The Report correctly reports what the parties through counsel
agreed at the conference, and the topic was reasonably to be anticipated as a topic for
discussion. A party cannot contend that it is entitled to judgment as a matter of law without
examining what law applies.
4 In addition to the insurance policy provisions and the New Hampshire complaint, the
stipulated record includes copies of correspondence sent via e-mail and certified mail. (ECF
Nos. 22-3, 22-4, 22-5, 22-6, 22-7 and 22-8). On its cross-motion for summary judgment the
insured also submitted a separate statement of fact and the affidavit of Matt Timberlake. (ECF
Nos. 24-1 and 24-2). Relying on Mitchell v. Allstate Ins. Co., 36 A.3d 876 (Me. 2011), the
insured argues that I should consider these additional factual materials in determining the
duty to defend. But Mitchell did not broaden the universe of documents that I can consider on
the legal question of the duty to defend: “Only the complaint and the policy are considered in
determining whether the insurer has a duty to defend.” Mitchell, 36 A.3d at 879. I have,
therefore, not considered the additional documents in the stipulated record or those filed by
the insured in support of its cross-motion for summary judgment.
3

the suit.”) (quoting Mass. Bay Ins. Co. v. Ferraiolo Constr. Co., 584 A.2d 608,
609 (Me.1990)).

An insurer has a duty to defend claims “that could be

developed either legally or factually at trial so as to fall within the policy’s
coverage,” Auto Europe, LLC, 321 F.3d at 68. Nevertheless, a court may not
“speculate about causes of action that were not stated.”

Lyman Morse

Boatbuilding, Inc. v. Northern Assur. Co. of America, 2013 WL 5435204 *1 (D.
Me. Sept. 27, 2013) (quoting York Golf and Tennis Club, 845 A.2d at 1175).
Here, the Town of Meredith, New Hampshire, sued the insured, Ted Berry
Company, in New Hampshire Superior Court. Town of Meredith Compl. (ECF
No. 22-1).

The Town of Meredith’s complaint shows no possibility that the

facts ultimately proven in that lawsuit will fall within the insurance policy’s
CGL coverage.

The complaint characterizes the lawsuit as a “breach of

contract for [Ted Berry Company’s] failure to undertake and complete in a
competent and workmanlike way its agreement to repair a town sewer line.” Id.
at 1. The relevant allegations of the complaint state:
3.
In the spring of 2011, the Town of Meredith
responded to the discovery of “sink holes” then developing
on Routes 3 and 25 in downtown Meredith, New
Hampshire.
4.
Camera investigation of a sewer line revealed that the
line was failing and that the sink holes were the result of
groundwater washing silt into cracks in a sewer pipe (“the
pipe”).
5.
Daniel Leonard is the Director of the Water
Department of Meredith, N.H. and the Town’s agent
responsible for the maintenance and repair of the municipal
water and sewer system.
....

4

7.
On February 23, 2011, Daniel Leonard made email
contact with Ted Berry through its authorized agent, Dave
Beauchamp, and invited a quote to repair the pipe.
....
10.
At the May 4th meeting, [a representative of Ted
Berry] proposed that the “pipe bursting” method of repair
would solve the problem presented, later changed to the
“pipe lining” method of repair.
....
13.
By May 23, 2011, the Town and Ted Berry finalized
the pipe repair agreement for a contract price of
$29,850.00.
14.

Ted Berry commenced pipe repair on May 23, 2011.

15.
The repair undertaken by Ted Berry failed and Ted
Berry abandoned the site.
....
17.
In breach of the contract of the parties, Ted Berry
failed to employ the requisite skills to repair the pipe and,
in the course of the repair process, damaged the pipe
beyond repair.
18.
In consequence of Ted Berry’s breach, and to
mitigate its damage, the Town hired another contractor who
was required to replace the damaged pipe at a cost to the
Town of $139,532.14.

Id.
Ted Berry Company, the insured, asserts that these allegations support
its position that the property damage for which the Town has sued was a
covered “occurrence” under the policy. I accept that assertion for purposes of
this ruling.5

The policy defines “occurrence” as an “accident, including continuous and repeated exposure
to substantially the same general harmful conditions.” CGL Policy Section V(13) (ECF No. 222). Where faulty workmanship results in damage to other property, some courts have ruled
that such consequential damage constitutes an “occurrence.” See e.g., Greystone Constr., Inc.
5

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5

In this case, however, the CGL policy’s “property damage” provision6
excludes coverage for “[t]hat particular part of any property that must be
restored, repaired or replaced because ‘your work’ was incorrectly performed on
it.”

CGL Policy Section 1, Coverage A(2)(j)(6).7

The Town of Meredith’s

complaint alleges that “Ted Berry failed to employ the requisite skills to repair
the pipe and, in the course of the repair process, damaged the pipe beyond
repair” and that “[i]n consequence of Ted Berry’s breach . . . the Town hired
another contractor who was required to replace the damaged pipe at a cost to
the Town of $139,532.14.”

Compl. ¶¶ 17-18 (emphasis added).

These are

assertions that the insured’s negligent work damaged the Town’s pipe and
caused the need to replace it.

Therefore, the “property damage” exclusion

applies. The facts alleged in the Town of Meredith’s complaint do not have the
potential to result in covered liability.

“An insurer may properly refuse to

v. Nat’l Fire & Marine Ins. Co., 661 F.3d 1272 (10th Cir. 2011) (for purposes of an insurer’s
duty to defend, unforeseen property damage to otherwise non-defective property, arising from
faulty workmanship, can constitute an “occurrence” under general liability policy); Aten v.
Scottsdale Ins. Co., 511 F.3d 818 (8th Cir. 2008) (water damage caused by improper
construction work constitutes an allegation of an “occurrence” in a CGL policy); Webster v.
Acadia Ins. Co., 934 A.2d 567 (N.H. 2007) (defective workmanship that results in damage to
property separate and apart from insured’s work product constitutes an “occurrence”).
6 The insured does not argue that the damage is to real property, Pl.’s Opp’n to Def.’s Mot. for
Summ. J. and Cross-Mot. for Summ. J. at 23 (ECF No. 24), and I therefore do not consider the
insurer’s arguments as to why an exclusion for real property damage applies.
7 “Your work” is defined in the policy as “[w]ork or operations performed by you or on your
behalf.” CGL Policy at Section V(22)(a)(1). I reject the insurer’s argument in its opening
memorandum that the damage here was only to the insured’s “own work” and therefore
excluded from coverage for that reason under a different exclusion. Def. Mot. for Summ. J. at
12-16. The New Hampshire complaint clearly alleges damage to the Town’s sewer pipe, not
simply the failure of the repair that the insured undertook. The insurer’s final memorandum
seems to recognize that the New Hampshire complaint asserts damage to more than the
insured’s own work: “At the outset, the Town had a sewer pipe with some cracks through
which groundwater was leaking. After Ted Berry’s attempted repair had not only failed to
correct this problem but had ‘damaged the pipe beyond repair,’ the Town was confronted with a
much more expensive problem.” Def.’s Opp’n to Pl.’s Mot. for Summ. J. & Reply Mem. in
Support of Def.’s Mot. for Summ. J. at 6 (ECF No. 27).
6

defend a policyholder if the allegations of the complaint fall entirely within a
policy exclusion.” Mitchell v. Allstate Ins. Co., 36 A.3d 876, 880 (Me. 2011).8
The insured correctly asserts that, at the end of the property damage
exclusion, the CGL policy states that “this exclusion does not apply to ‘property
damage’ included in the ‘products-completed operations hazard.’” CGL Policy
Section 1, Coverage A(2)(j). “Products-completed operations hazard” in turn is
defined as “’property damage’ occurring away from premises you own or rent
and arising out of ‘your product’ or ‘your work’ except . . . [w]ork that has not
yet been completed or abandoned.” Id. at Section V (16)(a)(2) (emphasis added).
Relevant to that provision, the Town of Meredith’s complaint states that the
insured “in the course of the repair process, damaged the pipe beyond repair,”
Complaint ¶ 17 (emphasis added), i.e., at a time before completion or
abandonment, and therefore not within the Products-completed operations
hazard definition. It is true that the Complaint also says that at some point the
insured “abandoned the site,” Complaint ¶ 15, but that statement is in the
following context: “Ted Berry commenced pipe repair on May 23, 2011. The
repair undertaken by Ted Berry failed and Ted Berry abandoned the site.” Id.
¶¶ 14-15.

In other words, the abandonment occurred after the insured

damaged the pipe while trying to repair it. Thus, the exception to the exclusion
does not apply; the damage the insured caused is not within the completed

The insured refers to claims of other damages that the Town apparently made before it sued.
Pl.’s Opp’n to Def.’s Mot. for Summ. J. & Cross Mot. for Summ. J. at 16-17. If, for purposes of
the lawsuit, the Town has chosen to narrow its complaint to only damage to the pipe, as it has
here, then that is the measure of the duty to defend. The insurer has no duty to defend
against claims that are not made.
8

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operations hazard as damage occurring after the abandonment,9 and the
property damage to the Town of Meredith is not covered under the policy.
CONCLUSION
Because there was no duty to defend, the unfair claims settlement
practice claim falls as well. Accordingly, summary judgment shall be GRANTED
for the defendant insurer and against the insured plaintiff on all Counts.10
SO ORDERED.
DATED THIS 4TH DAY OF FEBRUARY, 2014
/s/D. Brock Hornby
D. BROCK HORNBY
UNITED STATES DISTRICT JUDGE

“Completed operations coverage, typically referred to in comprehensive liability policies as
‘completed operations hazards,’ includes within its scope protection against ‘injury or damage
which occurs (1) away from premises owned or controlled by the insured, and (2) after the
insured’s operations as to a particular activity have been completed or abandoned.’” Southern
Guar. Ins. Co. v. Zantop Int’l Airlines, Inc., 767 F.2d 795, 799 (11th Cir. 1985) (citations
omitted) (emphasis added); accord State Auto Property and Cas. Ins. Co. v. Midwest Computers
& More, 147 F. Supp. 2d 1113, 1117 (W.D. Okla. 2001) (“the ‘completed operations hazard’
applies, and the exclusion invoked by plaintiff does not, if defendant had completed or
abandoned its work when the ‘property damage’ occurred”).
10 By virtue of the stipulated record and my refusal to consider items other than the New
Hampshire complaint and the insurance policy, this could also be considered not as summary
judgment, but as judgment on a stipulated record.
9

8