Acadia Insurance v. Vermont Mutual Insurance

2004 ME 121, 860 A.2d 390, 2004 Me. LEXIS 140

• Court: Supreme Judicial Court of Maine
• Decided: September 23, 2004
• Status: Published

Opinions

DANA, J.

[¶ 1] Acadia Insurance Company appeals from a summary judgment entered in the Superior Court (Cumberland County, Cole, J.) in favor of Vermont Mutual Insurance Company. Acadia contends that the court erred in concluding that an exclusion in a homeowner’s insurance policy precluded coverage for property damage that the insured caused by playing with matches in the bottle room of his employer’s store. We agree with the Superior Court and affirm the judgment.

I. BACKGROUND

[¶ 2] In December of 1998 a fire destroyed part of F.T. Largay Inc.’s grocery store in Blue Hill. The fire started shortly after stock boys David Rankin and Joseph Weeks were playing with matches in the store’s bottle room. It appears that Weeks flicked several lit matches across the room, while Rankin may have lit a few matches by grinding them underfoot. Weeks flicked at least one match into a cardboard box, but Rankin claims that he checked that box to ensure the match had gone out before leaving the room.

[¶ 3] At the time of the fire, the store was insured by Acadia, and Rankin was an insured under his mother’s homeowner’s policy with Vermont Mutual. After a series of claims and cross-claims, the insurance companies entered into an agreement whereby they agreed to submit the following coverage questions to the Superior Court: (1) whether Acadia had a duty to indemnify Rankin pursuant to the store’s policy; (2) whether Vermont Mutual had a duty to indemnify Rankin pursuant to the homeowner’s policy; and (3) if both companies have a duty to indemnify, which party is obligated to provide primary coverage. Acadia subsequently filed a complaint seeking a declaratory judgment as to these questions. Vermont Mutual and Acadia then filed cross-motions for a summary judgment.

[¶ 4] The court answered the second question in the negative after it concluded that a coverage exclusion in the homeowner’s policy applied because Rankin was at work when the activity took place.¹

II. DISCUSSION

[¶ 5] We review a grant of a summary judgment for errors of law, and we independently examine the parties’ statements of facts to determine if a genuine issue of material fact exists. White v. McTeague, Higbee, Case, Cohen, Whitney & Toker, P.A., 2002 ME 160, ¶ 6, 809 A.2d 622, 623. A material fact is “one having the potential to affect the outcome of the suit.” Burdzel v. Sobus, 2000 ME 84, ¶ 6, 750 A.2d 573, 575. We resolve ambiguities in insurance contracts in favor of the insured, Merrick v. Northwestern Mut. Life Ins. Co., 2004 ME 66, ¶ 7, 850 A.2d 352, 354, and in particular, we construe policy exclusions “strictly against the insurer and liberally in favor of the insured.” Union Mut. Fire Ins. Co. v. Commercial Union Ins. Co., 521 A.2d 308, 311 (Me.1987).

[¶ 6] The Vermont Mutual homeowner’s policy contains the following exclusion:

1. Coverage E — Personal Liability and Coverage F — Medical Payments to Others do not apply to “bodily injury” or “property damage”:

b. Arising out of or in connection with a “business” engaged in by an “insured.” This exclusion applies but is not limited to an act or omission, regardless of its nature or circumstance, involving a service or duty rendered, promised, owed or implied to be provided because of the nature of the “business.”

The policy defines an insured’s “business” to include a “trade, profession or occupation.”

[¶ 7] Although similar exclusions in other policies have generated considerable controversy, the language in the Vermont Mutual policy is very clear.² A Massachusetts court recently concluded that the identical language in a homeowner’s policy precluded coverage for losses resulting from an insured’s prank in the workplace. Metro. Prop. & Cas. Ins. Co. v. Fitchburg Mut. Ins. Co., 58 Mass.App.Ct. 818, 798 N.E.2d 1252, 1255 (2003). In that case, the court rejected the appellant’s contention that the phrase “arising out of or in connection with” is ambiguous, stating “an ambiguity is not created simply because a controversy exists between parties .... ” Id. (quotation marks omitted). We agree that the exclusionary language is unambiguous.

[¶ 8] In another context, we have given the term “arising out of’ a broad interpretation, stating “[a]n injury arises out of employment when, in some proximate way, it has its origin, its source, or its cause in the employment.” Hawkes v. Commercial Union Ins. Co., 2001 ME 8, ¶ 12, 764 A.2d 258, 264 (quotation marks omitted). The First Circuit has given the phrase a similarly expansive reading when it appeared in an insurance contract, defining “arising out of’ to mean “originating from, growing out of, flowing from, incident to or having connection with.” Murdock v. Dinsmoor, 892 F.2d 7, 8 (1st Cir.1989) (quotation marks omitted). The term “in connection with” has an even broader meaning than “arising out of,” and encompasses activities linked, associated with, or related to employment. E.g., Nationwide Mut. Fire Ins. Co. v. Nunn, 114 N.C.App. 604, 442 S.E.2d 340, 343 (1994.) Because the Vermont Mutual exclusion is stated in the alternative, Rankin’s conduct need only satisfy one of the two terms for the exclusion to apply.

[¶ 9] It is undisputed that Rankin was present at the store for purposes of his employment, and that the conduct leading to the fire occurred in the workplace. Therefore, Rankin’s losses necessarily arose out of or were in connection with his occupation.

The entry is:

Judgment affirmed.

Dissenting: RUDMAN and ALEXANDER, JJ.

1 . The Superior Court’s order did not address the first and third questions submitted in the complaint. Although the parties ask us to address these questions on appeal, we decline to do so.

2 . Many courts have struggled to interpret the so-called "business pursuits" exclusion in homeowner's policies. See, e.g., David J. Marchitelli, Annotation, Construction and Application of "Business Pursuits" Exclusion Provision in General Liability Policy, 35 A.L.R. 5th 375 (1996). The typical "business pursuits" exclusion, however, reinstates coverage for "activities which are usual to non-business pursuits.” 9 Lee R. Russ & Thomas F. Segulla, Couch On Insurance § 128:12 (3d ed. 1997) (quotation marks omitted). Much of the difficulty interpreting the traditional exclusion has arisen as a result of this secondary language. See, e.g., Allstate Ins. Co. v. Robinson, 103 N.C.App. 794, 407 S.E.2d 294, 295-96 (1991); Economy Fire & Cas. Co. v. Second Natl Bank, 91 Ill.App.3d 406, 46 Ill.Dec. 712, 414 N.E.2d 765, 766-67 (1980). The exclusion at issue in this case does not contain the second clause, and it is therefore much more straightforward. See Metro. Prop. & Cas. Ins. Co. v. Fitchburg Mut. Ins. Co., 58 Mass.App.Ct. 818, 793 N.E.2d 1252 (2003).