MMG INSURANCE COMPANY v. PODIATRY INSURANCE COMPANY OF AMERICA
ORDER granting in part and denying in part 5 Defendant's Motion to Dismiss. By JUDGE JOHN A. WOODCOCK, JR. (MFS)
UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
MMG INSURANCE COMPANY,
COMPANY OF AMERICA,
ORDER ON MOTION TO DISMISS
An insurance company alleges that, as part of the settlement of an underlying
personal injury action, it agreed to split a settlement amount with another insurer,
and that the insurers expressly reserved the right to seek recovery from the other
based on various coverage defenses.
Relying on its reservation of rights and
principles of equity, the insurance company filed suit, seeking reimbursement from
the other insurer for the portion of the settlement it paid, and claiming that the
accident was excluded under its policy and covered under the other insurer’s policy.
The insurer’s lawsuit contains three counts: (1) breach of agreement, (2) equitable
contribution, and (3) equitable subrogation.
The other insurer moves to dismiss all of the counts for failure to state a claim.
The Court dismisses the equitable contribution count because the doctrine is
inapplicable when a party seeks to be relieved of the entire burden of its loss. The
Court, however, denies the motion to dismiss the two remaining counts because the
insurance company has pleaded sufficient facts to demonstrate that it may be entitled
to recover its portion of the settlement payment from the other insurer, either based
on their agreement or on the doctrine of equitable subrogation.
On November 10, 2016, MMG Insurance Company (MMG) filed a complaint
against Podiatry Insurance Company of America (PICA) in the state of Maine
Cumberland County Superior Court claiming it was entitled to be reimbursed by
PICA for the amount of its contribution to the settlement in an underlying case.
Notice of Removal Attach. 3 Compl. (ECF No. 1); Aff. of Braden M. Clement Attach. 1
Docket R. (ECF No. 14). PICA removed the case to this Court on December 7, 2016.
Notice of Removal (ECF No. 1).
On December 7, 2016, PICA also filed the instant motion to dismiss. Def.’s
Mot. to Dismiss (ECF No. 5) (Def.’s Mot.). On December 27, 2016, MMG filed an
amended complaint. Am. Compl. (ECF No. 17). On the same day, it responded to
PICA’s motion to dismiss. Pl.’s Resp. to Def.’s Mot. to Dismiss (ECF No. 18) (Pl.’s
Opp’n). PICA replied on January 10, 2017, moving to dismiss both the Complaint
and Amended Complaint. Def.’s Reply in Supp. of its Mot. to Dismiss (ECF No. 25)
THE AMENDED COMPLAINT
As an initial matter, the Court addresses the amendment of the complaint after
PICA filed its motion to dismiss. Under Federal Rule of Civil Procedure 15(a), a party
“may amend its pleading once as a matter of course within . . . 21 days after service
of a motion under Rule 12(b).” FED. R. CIV. P. 15(a)(1)(B). MMG properly did so on
December 27, 2016, twenty days after PICA filed its motion to dismiss under Rule
In its opposition to the motion to dismiss, MMG explained that “[a]lthough [it]
does not believe its complaint is legally deficient, it has filed an Amended Complaint
as a matter of course pursuant to Rule 15(a)(1)(B) that more clearly sets forth the
multiple bases upon which MMG is entitled to assert its claims against PICA.” Pl.’s
Opp’n at 1 n.1. Specifically, MMG added three counts to the Amended Complaint not
explicitly stated in the original Complaint: Count I–Reapportionment/Contribution
by Agreement, Count II–Equitable Contribution, and Count III–Equitable
Subrogation. See Am. Compl. at 3–6. MMG also added details concerning the alleged
agreement and settlement payment: MMG alleges it expressly reserved its rights to
seek recovery from PICA and MMG further alleges that its settlement “payment was
not made as ‘volunteer’, but rather as an insurer against whom claims were asserted.”
See id. ¶¶ 8–9, 13, 19.
Typically, this amendment would render the pending motion to dismiss moot.
See Cate St. Capital Inc. v. Indus. Intelligence Inc., No. 1:14-cv-00200-JDL, 2014 U.S.
Dist. LEXIS 171548, at *2 (D. Me. Nov. 17, 2014), adopted by 2014 U.S. Dist. LEXIS
170629 (D. Me. Dec. 10, 2014) (“Because Plaintiff’s amended complaint is now the
operative pleading, Defendants’ response to the original complaint (i.e., the pending
motions to dismiss) is moot”). However, in its motion to dismiss, PICA anticipated
potential claims, including the claims for equitable contribution and subrogation that
MMG added in its Amended Complaint, and PICA addressed those claims in both its
motion to dismiss and reply. It would be futile to dismiss PICA’s motion without
prejudice, only to have PICA refile another motion to dismiss with effectively the
same arguments. As the later amendment of the Complaint does not affect the
substance of the pending motion to dismiss, the Court considers the Amended
Complaint as the operative complaint for purposes of the motion. See Edson v.
Riverview Psychiatric Ctr., No. 1:16-cv-00079-JAW, 2017 U.S. Dist. LEXIS 27808, at
*3 n.1 (D. Me. Feb. 28, 2017).
THE ALLEGATIONS IN THE AMENDED COMPLAINT1
MMG is an insurance company organized under the laws of the state of Maine
with authority to transact the business of insurance in the state of Maine. Am.
Compl. ¶ 1. PICA is an insurance company authorized to conduct business in the
state of Maine that issues professional liability insurance policies in the state of
Maine. Id. ¶ 2.
On or about May 15, 2013, William Dickson, now deceased, visited his
podiatrist Peter Ocampo, DPM, for treatment of his foot, specifically to perform a
debridement procedure. Id. ¶ 3. Debridement is a medical procedure involving the
removal of dead, damaged, and infected tissue to improve the healing potential of the
remaining healthy tissue.
Id. ¶ 4.
During the visit, Dr. Ocampo wheeled Mr.
Dickson’s wheelchair adjacent to a footrest of the treatment chair. Id. ¶ 5. Dr.
Consistent with First Circuit authority, the Court accepts as true the well-pleaded allegations
in the Amended Complaint and draws all reasonable inferences in the pleader’s favor for purposes of
the motion. See Román-Oliveras v. P.R. Elec. Power Auth., 655 F.3d 43, 45 (1st Cir. 2011).
Ocampo lifted Mr. Dickson’s foot approximately six to ten inches off the footrest of
the wheelchair, at which time the wheelchair flipped over backwards causing Mr.
Dickson to hit his head on the floor (the accident). Id.
The Estate of William Dickson commenced a civil action against Dr. Ocampo
in Cumberland County Superior Court with Docket No. CV-15-491 (the Civil Action)
for injuries sustained in the accident. Id. ¶ 6. Both MMG and PICA agreed to provide
Dr. Ocampo with a defense subject to a reservation of rights. Id. ¶ 7. A mediation of
the Civil Action took place on June 2, 2016; both MMG and PICA participated in the
mediation despite a coverage dispute between PICA and MMG. Id. ¶ 8. MMG and
PICA could not resolve their coverage dispute at the mediation but agreed to settle
the claims in the Civil Action by making equal contributions to the settlement, with
each insurer reserving the right to seek recovery from the other based on the various
coverage defenses. Id. ¶ 9.
MMG had issued a Businessowners policy to Southern Maine Foot and Ankle,
P.A. with Policy No. BP20936155 that was in effect at the time of the 2013 accident.
Id. ¶ 10. The MMG insurance policy contained an exclusion for professional services
that reads in part:
“Bodily injury”, “property damage”, “personal and advertising
injury” caused by the rendering or failure to render any
professional service. This includes but is not limited to:
Medical, surgical, dental, x-ray or nursing services
treatment, advice or instruction;
Any health or therapeutic service treatment, advice or
Any service, treatment, advice or instruction for the
purpose of appearance or skin enhancement, hair removal
or replacement or personal grooming.
PICA had issued a professional liability policy to Dr. Ocampo and Southern
Maine Foot and Ankle, P.A. with Policy No. 1PD0014194 that was in effect at the
time of the 2013 accident. Id. ¶ 11. The PICA insurance policy provided coverage for
liability arising out of the provision of “professional services” with the term
“professional services” being defined as:
“Professional services” means the providing of medical
services, including medical treatment, diagnosis of disease or
surgical intervention. It shall also include acting as a member of
a recognized accreditation committee, peer review committee or
like body, or the rendering of expert opinions about the propriety
of care as long as the subject of the opinion is within the scope of
practice of the person rendering such an opinion.
THE PARTIES’ POSITIONS
PICA’s Motion to Dismiss
First, PICA moves to dismiss any claim for equitable subrogation2 alleging that
“the action is barred by the voluntary payment doctrine.” Def.’s Mot. at 2. It argues
PICA also moved to dismiss the complaint arguing that MMG “fail[ed] to identify any cause of
action as the basis for its lawsuit against PICA.” Def.’s Mot. at 2 (emphasis in original). As already
discussed, MMG filed an Amended Complaint as a matter of course pursuant to Rule 15(a)(1)(B) that
“more clearly sets forth the multiple bases upon which [it] is entitled to assert its claims against PICA.”
Pl.’s Opp’n at 1 n.1. Because the Court concludes that the Amended Complaint is the operative
complaint for purposes of this motion, the Court views this ground for dismissal as moot.
that because MMG paid a portion of the settlement even though it contends its policy
excluded coverage for Dr. Ocampo, it made a voluntary payment. Id. at 2–3.
Second, PICA moves to dismiss any claim for equitable contribution. Id. at 3.
PICA distinguishes the doctrines of equitable contribution and equitable subrogation
and states that “the aim of equitable contribution is to apportion a loss between two
or more insurers who cover the same risk, so that each pays its fair share and one
does not profit at the expense of the others.” Id. (citing 16 COUCH ON INSURANCE §
222:98 (2016)). PICA asserts that “MMG does not contend that both it and PICA
covered the same risk, and MMG is not seeking reapportionment of the settlement
amounts paid by it and PICA” and therefore PICA argues that MMG does not state a
cause of action for equitable contribution. Id. at 3–4. Additionally, PICA claims that
the cause of action for equitable contribution, like that for equitable subrogation, is
barred by the voluntary payment doctrine. Id. at 4 n.1.
Finally, PICA argues that the complaint is barred by virtue of a settlement
agreement and release. Id. at 4. Relying on Butters v. Kane, 347 A.2d 602 (Me. 1975),
PICA argues that “because there is no language in the Release expressly reserving
the right of any party, including MMG, to proceed with a subrogation action for the
amounts paid,” MMG is barred from making an equitable subrogation claim, or for
that matter, any claim. Id. at 4–5.
In response, MMG states that “PICA in its motion to dismiss completely
ignores the express allegation in Paragraph 8 that both PICA and MMG made the
contributions to settlement reserving their rights to seek recovery from the other
based on various coverage defenses.” Pl.’s Opp’n at 4. It claims that this allegation
“constitutes an express statement of an agreement between the parties to resolve the
coverage issues at a later time in order to effectuate what both parties believed was
a reasonable settlement on the merits of the underlying case.” Id.
Additionally, MMG disputes PICA’s interpretation of what constitutes a
voluntary payment and argues that “the term ‘volunteer’ does not include every party
involved in contested litigation who ultimately is determined at the conclusion of the
litigation to not have a liability.” Id. at 4–5. It argues that PICA’s “overly rigid
interpretation of what constitutes a ‘volunteer’ directly contradicts the strong public
policy favoring settlement of disputes.” Id. at 5.
MMG also states that “[a]n insurer that pays a loss is equitably subrogated to
the claims possessed by its insured to recover amounts from another responsible
party.” Id. at 6. It says that “either insurer could have settled the case with its own
funds and become equitably subrogated to Dr. Ocampo’s claims against the other
insurer if in fact the other insurer was the sole carrier providing coverage.” Id. It
further argues that the voluntary payment doctrine fails in this context for the same
reason it fails in the equitable contribution context. Id. at 7.
Lastly, MMG argues that PICA’s release argument is an affirmative defense
and not a proper matter for a motion to dismiss when the release document is not a
part of the pleadings or necessary to any claim being asserted. Id. It submits that
the Court should not consider the release but that if it does, it should also consider
the extrinsic evidence submitted by MMG. Id. Additionally, MMG distinguishes the
cases relied upon by PICA stating that “[n]either PICA nor MMG were parties to the
underlying case that was settled and was the subject matter of the release.” Id. at 8.
It states that the release is between Dr. Ocampo and the Estate of Dickson and that
it is not seeking its equitable subrogation claim against the Estate of Dickson, and
therefore the release does not apply.
It argues that instead the express
agreements and statements made between PICA and MMG during the mediation
control. Id. at 9–10.
In reply, PICA maintains that MMG has no viable cause of action for
contribution by agreement because, it argues, there is “no allegation that MMG and
PICA made an express agreement to litigate allocation or indemnification of the
settlement amounts outside of whatever rights might exist under common and/or
Def.’s Reply at 1–2.
It claims that MMG and PICA are “both
sophisticated insurers who were represented by counsel at the mediation” and that
“MMG has not pled that the insurers or their counsel executed any sort of ‘agreement’
to support a Contribution by Agreement claim.” Id. at 2.
Additionally, PICA argues that MMG has not stated a cause of action for
equitable contribution because equitable contribution involves the apportionment of
a loss and here, MMG is seeking to shift the entire loss to PICA. Id. PICA also argues
that the equitable subrogation claim fails because Dr. Ocampo, “after being fully
indemnified by having MMG and PICA pay the settlement on his behalf, and after
releasing all claims in the Confidential Settlement Agreement and Release, has no
rights or claims against PICA to which MMG is subrogated.” Id. at 3. Essentially,
PICA argues that “MMG has no ‘shoes’ to step into.” Id. at 3–4.
Rule 12(b)(6) requires dismissal of a complaint that “fail[s] to state a claim
upon which relief can be granted.” FED. R. CIV. P. 12(b)(6). Under the general
pleading standards, a complaint must contain “a short and plain statement of the
claim showing that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). In
Ashcroft v. Iqbal, 556 U.S. 662 (2009), the United States Supreme Court elaborated
on this pleading standard in the context of a motion to dismiss: “To survive a motion
to dismiss, a complaint must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.’” 556 U.S. at 678 (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
The First Circuit explained that “[t]he plausibility inquiry necessitates a twostep pavane.” García-Catalán v. United States, 734 F.3d 100, 103 (1st Cir. 2013)
(citing Rodríguez–Reyes v. Molina–Rodríguez, 711 F.3d 49, 53 (1st Cir. 2013)). “First,
the court must distinguish ‘the complaint’s factual allegations (which must be
accepted as true) from its conclusory legal allegations (which need not be credited).’”
Id. (quoting Morales–Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)).
“Second, the court must determine whether the factual allegations are sufficient to
support ‘the reasonable inference that the defendant is liable for the misconduct
alleged.’” Id. (quoting Haley v. City of Boston, 657 F.3d 39, 46 (1st Cir. 2011) (quoting
Iqbal, 556 U.S. at 678)).
In the Amended Complaint, MMG alleges three counts against PICA: Count I–
Reapportionment/Contribution by Agreement; Count II–Equitable Contribution; and
Count III–Equitable Subrogation. PICA argues that MMG is barred from bringing
any action against it based on the Settlement Agreement and Release in the
underlying action and that MMG fails to state a claim with respect to each of the
PICA’s Affirmative Defense
PICA raises an affirmative defense that MMG’s claims are barred by the
Settlement Agreement and Release executed in the underlying action, which it
attaches to its motion. Def.’s Mot. at 4–5; Confidential Settlement Agreement &
Release (ECF No. 21) (Settlement Agreement). MMG urges the Court not to consider
the Settlement Agreement and Release, arguing that its consideration is not proper
at this stage. Pl.’s Opp’n at 7.
It is well established that affirmative defenses may be raised in a motion to
dismiss an action for failure to state a claim. Blackstone Realty LLC v. F.D.I.C., 244
F.3d 193, 197 (1st Cir. 2001) (collecting cases). However, “it is equally well settled
that, for dismissal to be allowed on the basis of an affirmative defense, the facts
establishing the defense must be clear ‘on the face of the plaintiff’s pleadings.’” Id.
(quoting Aldahonda–Rivera v. Parke Davis & Co., 882 F.2d 590, 592 (1st Cir. 1989));
see also Santana–Castro v. Toledo–Dávila, 579 F.3d 109, 113–14 (1st Cir. 2009). If
the movant introduces documents outside the pleadings to validate its defense, the
Court may only consider the extraneous material by converting the motion to dismiss
into a motion for summary judgment, and it may only do that if it gives the parties
“a reasonable opportunity to present all the material that is pertinent to the motion.”
Rivera v. Centro Médico de Turabo, Inc., 575 F.3d 10, 15 (1st Cir. 2009) (quoting FED.
R. CIV. P. 12(d)). At the same time, the First Circuit recognizes a narrow exception
“for documents the authenticity of which are not disputed by the parties; for official
public records; for documents central to plaintiffs’ claim; or for documents sufficiently
referred to in the complaint.” Alt. Energy, Inc. v. St. Paul Fire and Marine Ins. Co.,
267 F.3d 30, 33 (1st Cir. 2001); Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993).
The Settlement Agreement and Release meets the Alternative Energy tests.
Even though MMG does not explicitly refer to the Settlement Agreement and Release
in its Amended Complaint, nor does it attach the document to its Amended
Complaint, MMG implicitly refers to the agreement when it alleges that both insurers
participated in the mediation and agreed to make equal contributions to the
settlement amount, reserving the right to seek recovery from the other. See Am.
Compl. ¶¶ 8, 9. The Court infers from the allegations in the Amended Complaint
that the alleged agreement between MMG and PICA led to the ultimate Settlement
Agreement and Release signed in the underlying action. Id. ¶ 9 (“MMG and PICA
could not resolve the dispute between them with respect to the coverage issues, and
therefore agreed to settle the claims asserted in the Civil Action by making equal
contributions to the settlement, with each insurer reserving the right to seek recovery
from the other based on the various coverage defenses”). Moreover, PICA’s liability
in the present action depends on the circumstances surrounding the settlement in the
underlying action and the Settlement Agreement and Release appears central to the
resolution of these issues. Finally, although MMG disputes the relevance of the
Settlement Agreement and Release to its claims, it does not appear to dispute the
Therefore, the Court will consider the Settlement
Agreement and Release for purposes of this motion since it meets the Alternative
Energy tests of authenticity, centrality, and sufficient reference.
The Court will also consider the affidavit and correspondence submitted by
MMG concerning the mediation and alleged agreement to reserve the right to seek
recovery because these documents are central to MMG’s claims. See Decl. of James
D. Poliquin (ECF No. 19); id. Attach. 1 Letter from Mark D. Lefkow to James D.
Poliquin (June 6, 2016).
Turning back to PICA’s affirmative defense, the allegations and documents
considered “must ‘leave no doubt’ that the plaintiff’s action is barred by the asserted
defense.” Blackstone Realty LLC, 244 F.3d at 197. In the Court’s view, PICA has
failed to meet this standard. The Release in the underlying action states:
The Undersigned hereby releases, acquits, and forever discharges the
Released Parties from all claims and demands of whatever nature,
whether arising under tort or contract theories or any federal, state, or
local law, actions and causes of actions, damages, punitive damages,
costs, loss of service, attorneys’ fees, cost of litigation, humiliation,
embarrassment, physical and emotional pain and suffering, medical
expenses, mental anguish, injury to reputation, claims for wrongful
death, and money benefits or compensation of any kind on account of or
in any way growing out of personal injuries, property damage, and/or
death having already resulted or to result at any time in the future,
whether or not they arise following the execution of this Release, as a
result of and by reason of the Occurrence.
acknowledges that there may be more serious damages or injuries as a
result of the Occurrence than may now appear or than may now be
Settlement Agreement at 2. The Agreement defines the “Undersigned” to include
“John Dickson, as personal representative of the Estate of William Dickson, on behalf
of him, his heirs, assigns, agents, and anyone else acting on his behalf, and Yvonne
Dickson.” Id. at 1. It defines the “Released Parties” to include “Peter Ocampo,
D.P.M., and all corporate affiliates, parents, subsidiaries, officers, directors, servants,
agents (actual or apparent), employees, shareholders, attorneys, insurance carriers
(past, present and future and irrespective of type of insurance, including professional
liability, general liability, or otherwise), predecessors, successors and assigns, and
ALL OTHER PERSONS, FIRMS, ASSOCIATIONS, PARTNERSHIPS AND
CORPORATIONS, that are or might be claimed to be liable to the Undersigned as a
result of the Occurrence.” Id.
As MMG points out in its opposition, this Settlement Agreement and Release
concerns all claims as a result of the accident that may arise between the Estate of
Dickson on the one hand and Dr. Ocampo, and anyone else who might be liable for
the accident, on the other. In consideration for the payment by Dr. Ocampo (which
came from PICA and MMG as the insurers), the Estate of Dickson released Dr.
Ocampo and all others liable as a result of the accident.
carriers” are among the parties released by the Estate of Dickson, it does not follow
that the release extends to the claims between MMG and PICA arising out of the
The cases on which PICA relies in order to make its argument that MMG’s
action is barred by this release deal with different facts and call into play different
policy concerns. In Butters v. Kane, 347 A.2d 602 (Me. 1975), the Maine Supreme
Judicial Court addressed a lawsuit arising out of an accident, where two snowmobiles
struck each other. Id. at 602. Robert Butters operated one of the snowmobiles on
which Beverly Butters, his wife, was a passenger; Peter Kane operated the other
snowmobile. Id. Beverly Butters filed suit against Mr. Kane and Mr. Kane impleaded
Mr. Butters as third party defendant. Id. at 602–03. Ms. Butters settled her claim
against Mr. Kane and as part of the settlement, both Mr. and Ms. Butters executed a
release, absolving Mr. Kane “from any and all claims, demands, damages, actions,
causes of action or suits of any kind or nature whatsoever.” Id. at 603. After the
settlement, Mr. Kane continued to proceed against Mr. Butters for his proportional
responsibility for the settlement amount. Id. A jury attributed thirty-percent of the
liability for Ms. Butters’ damages to Mr. Butters. Id.
Mr. Butters appealed the jury verdict on the ground that the settlement barred
Mr. Kane’s claim for contribution from Mr. Butters. Id. The Maine Supreme Judicial
Court explained that in the state of Maine “the term ‘all causes of action’ used in the
usual form of general release is sufficiently broad to include the right of contribution
unless such right of action for contribution is expressly excepted from the terms of
the release.” Id. at 603 (citing Norton v. Benjamin, 220 A.2d 248, 251 (Me. 1966)).
The Butters Court acknowledged that Mr. Kane, who had pursued the contribution
action against Mr. Butters, had not signed the settlement release. Id. Nevertheless,
the Maine Law Court held that, absent an express reservation of rights, the making
of a settlement “constitutes complete accord and satisfaction of all claims of
immediate parties to the settlement arising out of the same accident.” Id. at 604.
In explaining its decision, the Butters Court quoted extensively from Lugena
v. Hanna, 420 S.W.2d 335 (Mo. 1967), a Supreme Court of Missouri case. Butters,
347 A.2d at 604. As the Maine Law Court noted, in Lugena, the Missouri Supreme
Court discussed the following overriding policy concern: that by settling a claim, a
party has made “an express or implied admission of negligence on his part.” Id.
(quoting Lugena, 420 S.W.2d at 341). The Missouri Supreme Court explained that
the law will not generally allow a party “to take a position in regard to a matter which
is directly contrary to, or inconsistent with, one previously assumed by him.” Lugena,
420 S.W.2d at 341. Thus, unless there is express language restricting the release, “it
must be concluded that the instrument was contemplated and intended to be a
complete settlement of all matters between the parties to the release” and that
“estoppel, in its purest form, . . . rests simply on a rule of law which forecloses one
from denying his own expressed or implied admission which had in good faith been
accepted and acted upon by another.” Id.
The rationale underlying the Butters rule applies, as the Butters Court was
careful to note, only to the “immediate parties to the settlement.” Butters, 347 A.2d
at 604. The Maine Law Court subsequently reiterated this limitation. In Brown v.
Manchester, 384 A.2d 449 (Me. 1978), the Maine Law Court wrote:
Butters v. Kane laid down a carefully circumscribed rule binding a
release only if he is an “immediate party” to the release. We see no
persuasive reason for expanding that rule to any named releasee. Such
expansion would go beyond any rationale for the rule.
Brown, 384 A.2d at 453.
In American National Fire Insurance Company v. York County, 582 F. Supp.
2d 69 (D. Me. 2008), aff’d 575 F.3d 112 (1st Cir. 2009), a United States District Judge
in Maine rejected an argument similar to the one PICA is pressing. The underlying
case in American National involved a class action arising out of strip searches
conducted without reasonable suspicion by York County of arrestees who had not
been convicted of a crime. 582 F. Supp. 2d at 72. The Maine County Commissioners
Association Risk Pool (the Risk Pool) was York County’s insurer and it defended the
underlying lawsuit under a reservation of rights. Id. While the underlying action
was pending, the Risk Pool identified two other insurance carriers who may have
provided coverage for York County, one of which was American National, and those
insurers participated in a coordinated defense of York County. Id. at 73. After a
series of mediations, the Risk Pool, American National, the third insurer, and York
County all agreed to contribute to a settlement of the class action lawsuit. Id. at 76.
The Court approved the class action settlement and a settlement agreement was
signed, releasing York County and American National as well as the other insurers.
Id. Following completion of the settlement, American National filed suit against York
County to collect proceeds that it contended were due under the American National
insurance policy. Id. 78–79.
Among other defenses, York County raised Butters v. Kane, arguing that the
settlement of the class action without an express reservation of rights constituted
complete accord and satisfaction of all claims. Id. at 80 n.6. The district court firmly
rejected York County’s argument, noting that the Maine Law Court had made it clear
that the Butters rule applied only to the immediate parties to the settlement
agreement. Id. The American National Court conceded that both York County and
American National were included as releasees but concluded that they were still not
immediate parties to the settlement, and that “[t]hese differences place this case
outside the Butters rule.” Id.
As Butters, Brown, and American National suggest, the Butters rule is
expressly limited to the parties to the settlement.
In addition, as this case
demonstrates, to hew to a narrow interpretation of Butters would be consistent with
the public policy concerns that underpin the Butters rule. Here, the resolution of the
coverage issue between MMG and PICA is wholly unrelated to the merits of the
underlying action, and therefore the Butters estoppel concern of the parties taking
inconsistent positions is not applicable. Furthermore, a public policy that allows
disputing insurers to make a separate peace with the claimant and to later resolve
their insurance dispute would facilitate, rather than discourage settlement. For
example, as in Butters, it hardly benefits the injured party to wait to resolve a claim
against a tortfeasor until the tortfeasors’ insurers formally resolve a coverage issue.
On the other side of the lawsuit is, of course, the insurers’ own insured, Dr. Ocampo,
and here the insurers apparently settled the lawsuit within Dr. Ocampo’s coverage
limits and avoided exposing his personal assets to a verdict in excess of coverage. To
deliberately infuse the coverage dispute into the settlement of the claim within
coverage would have been problematical. Nor is it practical to force the insurers to
insert their agreement to separately resolve the coverage dispute into the release that
the injured party executes to discharge the tortfeasor.
In short, the Court does not view Butters and its progeny as a bar to MMG’s
lawsuit against PICA.
Count I: Reapportionment/Contribution by Agreement
In Count I, MMG brings a claim for “Reapportionment/Contribution by
Agreement.” Am. Compl. at 3. PICA argues that this claim fails because MMG has
not alleged that MMG and PICA made an express agreement to litigate allocation or
indemnification outside of whatever rights might exist under common and/or
statutory law. Def.’s Reply at 1–2. The Court disagrees. In paragraph 13 of the
Amended Complaint, MMG explicitly states that “MMG and PICA contributed to the
settlement under the express agreement that each insurer was reserving its rights to
recover some or all of any amounts paid by it towards the settlement based on the
various coverage defenses asserted by each insurer.” Am. Compl. ¶ 13 (emphasis
supplied); id. ¶ 9 (“MMG and PICA could not resolve the dispute between them with
respect to the coverage issues, and therefore agreed to settle the claims asserted in
the Civil Action by making equal contributions to the settlement, with each insurer
reserving the right to seek recovery from the other based on the various coverage
PICA seems to be suggesting that because there is no allegation of a writing,
there can be no agreement. See Def.’s Reply at 2 n.1 (“In the instant case, there is no
writing of an express agreement to proceed with litigation outside of any rights that
are available at common or statutory law.
The only written document is the
Confidential Settlement Agreement and Release (previously filed with this Court)
which contains no language setting forth an agreement to litigate between MMG and
PICA would have a plausible argument if the Settlement Agreement and
Release were the only alleged agreement. At this stage, the Court does not need to
resolve whether MMG could successfully introduce evidence of an oral supplement to
the written agreement. See, e.g., Brown Dev. Corp. v. Hemond, 2008 ME 146, 956
A.2d 104; Burrowes Corp. v Read, 116 A.2d 127, 129–30 (Me. 1955). This is because
MMG’s Amended Complaint effectively alleges two separate agreements: (1) the
written Settlement and Release Agreement signed by the Estate of William Dickson
and Yvonne Dickson in favor of Dr. Ocampo and others, and (2) an oral side
agreement between MMG and PICA that the coverage issue would be resolved after
the Estate of Dickson settlement was finalized.
Whatever might be said in the future about the ultimate success of MMG’s
theories, they are not susceptible to dismissal because the Court must accept as true
the allegations in the Amended Complaint. Furthermore, at the motion to dismiss
stage, MMG need only state a plausible claim for relief. See Iqbal, 556 U.S. at 678.
It has done so by alleging that MMG and PICA made an express agreement to reserve
the right to seek recovery from each other based on coverage defenses. PICA’s motion
to dismiss Count I is denied.
Count II: Equitable Contribution
The doctrine of equitable contribution has long been recognized in the state of
Maine. Bragdon v. Worthley, 153 A.2d 627, 631 (Me. 1959). It requires that “when
parties assume a common obligation, those parties must share equally that obligation
and burden.” Daigle Commercial Grp., Inc. v. St. Laurent, 1999 ME 107, ¶ 26, 734
A.2d 667; see also Ins. Co. of Pennsylvania v. Great N. Ins. Co., 787 F.3d 632, 635 (1st
Cir. 2015). Maine has not definitively addressed whether equitable contribution is
available to support a claim for contribution by one insurer against another, but the
First Circuit has addressed the issue generally:
In the insurance context, the right to contribution arises when several
insurers are obligated to indemnify or defend the same loss or claim, and
one insurer has paid more than its share of the loss or defended the
action without any participation by the others . . . Equitable contribution
permits reimbursement to the insurer that paid on the loss for the excess
it paid over its proportionate share of the obligation, on the theory that
the debt it paid was equally and concurrently owed by the other
Lexington Ins. Co. v. Gen. Accident Ins. Co. of America, 338 F.3d 42, 49 (1st Cir.
2003); see also Ins. Co. of Pennsylvania, 787 F.3d at 635.
In MMG’s claim for equitable contribution it states that “[b]ecause the liability
of Dr. Ocampo for the injuries to William Dickson are within the coverage of the PICA
policy and excluded by the MMG policy, MMG is entitled to equitable contribution
against PICA in the amount of MMG’s contribution to the settlement with the Estate
of William Dickson.” Am. Compl. ¶ 20. Essentially, MMG argues that it was not
required to indemnify Dr. Ocampo under its policy and that PICA was the only
insurer with an obligation. The problem with this theory is that the doctrine of
equitable contribution applies when parties “assume a common obligation” and
requires those parties to “share equally that obligation and burden.” Daigle, 1999
ME 107, ¶ 26, 734 A.2d 667. The doctrine does not apply where one insurance
company is seeking to be relieved from the entire loss. See 15 COUCH ON INSURANCE
§ 217:5 (“Unlike contribution, subrogation and indemnity can relieve an insurer or
surety of the entire burden of the loss”) (emphasis supplied); id. § 218:3 (“[W]here
insurers cover separate and distinct risks there can be no contribution among them”).
Because MMG is claiming that it has no obligation at all and seeking complete
reimbursement for its payment to Dr. Ocampo, the doctrine of equitable contribution
is inapplicable. The motion to dismiss is granted with respect to Count II.
Count III: Equitable Subrogation
MMG’s claim for equitable subrogation stands on different footing. Maine
recognizes the doctrine of equitable subrogation and under the Maine rule, it may
arise by contract or by operation of law. Home Ins. Co. v. Bishop, 34 A.2d 22, 23 (Me.
1943). The Maine Supreme Judicial Court has stated that equitable subrogation is
“a device adopted by equity to compel the ultimate discharge of an obligation by him
who in good conscience ought to pay it.” Nappi v. Nappi Distribs., 1997 ME 54, ¶ 8,
691 A.2d 1198 (quoting United Carolina Bank v. Beesley, 663 A.2d 574, 576 (Me.
1995)). It is “the substitution of one person in place of another, whether as a creditor
or as the possessor of any other rightful claim, so that he who is substituted succeeds
to the rights of the other in relation to the debt or claim and its rights, remedies or
securities.” Associated Hosp. Serv. of Maine v. Me. Bonding & Cas. Co., 476 A.2d 189,
190 (Me. 1984). It is “a concept derived from principles of restitution and unjust
enrichment.” Nappi, 1997 ME 54, ¶ 8, 691 A.2d 1198 (citing North East Ins. Co. v.
Concord Gen. Mut. Ins. Co., 433 A.2d 715, 719 (Me. 1981)). The doctrine requires
that the equities of the parties be weighed and balanced. Beesley, 663 A.2d at 576.
“Subrogation, itself a creature of equity, must be enforced with due regard for the
rights, legal or equitable, of others. It should not be invoked so as to work injustice,
or defeat a legal right, or to overthrow a superior or perhaps equal equity, or to
displace an intervening right or title.” Id. (citing Fed. Land Bank of Springfield v.
Smith, 151 A. 420, 422 (Me. 1930)). Unlike a claim for contribution, subrogation can
relieve an insurer of the entire burden of the loss, which is what MMG seeks to do in
this case. See 15 COUCH ON INSURANCE § 217:5. However, PICA argues that MMG is
barred from making a claim for subrogation because of the voluntary payment
A party is not entitled to subrogation when “he voluntarily or officiously
satisfies another’s obligation, under no legal or moral obligation to do so or with no
interest of his own to protect.” Nappi, 1997 ME 54, ¶ 8, 691 A.2d 1198 (quoting North
East Ins. Co., 433 A.2d at 719). The Maine Law Court has stated that the term
“volunteer” should be “narrowly and strictly interpreted to allow liberal application
of the doctrine of subrogation, and that any doubt as to the applicability of the
exception should be resolved against the existence of volunteer status.”
Additionally, the Maine Law Court reasoned that “one is not a volunteer if he pays
‘under a mistaken belief that he had an obligation to pay or interest to protect.’” Id.
(quoting North East Ins. Co., 433 A.2d at 719); see also RESTATEMENT (FIRST)
RESTITUTION § 162 (1937). Also, one may not be a volunteer if he is protecting
economic interests or taking action under the threat of litigation. Nappi, 1997 ME
54, ¶¶ 11, 12. Here, MMG alleges that its payment “was not made as ‘volunteer’, but
rather as an insurer against whom claims were asserted.” Am. Compl. ¶ 19. It is
reasonable to infer from this allegation, and the allegation that MMG reserved its
right to seek recovery from PICA, that MMG made payment to the settlement amount
not as a volunteer but to avoid litigation on the underlying claim and to settle it at a
In its reply, PICA also argues that because Dr. Ocampo has been fully
indemnified by having MMG and PICA pay the settlement on his behalf and has
released all claims in the Confidential Settlement Agreement and Release, he has no
rights or claims against PICA to which MMG is subrogated. Def.’s Reply at 3–4. The
Court disagrees. It is true that subrogation is the “substitution of one party for
another” and that MMG, as subrogee, steps into the shoes of Dr. Ocampo. See Me.
Mun. Emps. Health Tr. v. Maloney, 2004 ME 51, ¶ 7, 846 A.2d 336. It is also true
that “[t]he party subrogated acquires no greater rights than those of the party for
whom he is substituted.” Leavitt v. Canadian Pac. Ry. Co., 37 A. 886, 888 (Me. 1897)
(quoting Jackson Co. v. Boylston Mut. Ins. Co., 2 N.E. 103 (Mass. 1885)).
However, as already discussed, the release in the agreement is between Dr.
Ocampo and the Estate of Dickson and does not extend to claims brought by Dr.
Ocampo against its insurers, neither of which was a signatory nor an immediate party
to the Settlement Agreement and Release. More importantly, MMG alleges that the
insurers reached an oral agreement to resolve the coverage issue and the concept of
equitable subrogation is likely broad enough to capture PICA’s refusal to
acknowledge its resolution agreement in view of the fact that MMG paid one-half of
the Dickson settlement on behalf of MMG and PICA’s mutual insured.
The point of equitable subrogation is to place responsibility on the entity
responsible and that right is not necessarily eliminated by payment or full
indemnification. In fact, the doctrine of equitable subrogation often applies after a
claim has been paid; the idea is that the claim has been paid wrongfully, as MMG
asserts here. See North East Ins. Co., 433 A.2d at 719–20 (holding that insurance
company stated a plausible claim for equitable subrogation when it asserted that it
discharged liability under a mistaken belief and that another insurance company was
primarily liable). The motion to dismiss Count III is denied.
The Court GRANTS in part and DENIES in part PICA’s Motion to Dismiss
(ECF No. 5). The Court GRANTS PICA’s motion as to Count II and DENIES PICA’s
motion as to Counts I and III.
/s/ John A. Woodcock, Jr.
JOHN A. WOODCOCK, JR.
UNITED STATES DISTRICT JUDGE
Dated this 18th day of April, 2017
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