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Patrons Oxford v. Garcia
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Decision:		1998 ME 38 	
Docket:		And-97-317
Argued:		December 2, 1997
Decided :		February 26, 1998



	[¶1]  Patrons Oxford Mutual Insurance Company appeals from a
judgment entered in the Superior Court (Androscoggin County, Bradford, J.)
dismissing its complaint for declaratory judgment seeking a determination
that it had no duty to defend or indemnify its insured, Jesus Garcia, against
claims that might be brought by Garcia's lessee.  The sole issue presented by
this appeal is whether the court correctly concluded that the issue was not
yet ripe for judicial determination.  We affirm the judgment.    
	[¶2]  Patrons's complaint alleges the following facts.  In June of 1996,
Garcia leased a single-family residence in Turner to Theodore Collins{1} and
Carmen Baldwin for a one-year term.  In July of 1996, Collins sustained
injuries when he received an electrical shock while operating a pump in the
flooded basement of the residence.  At the time of the injury, the residence
was insured under a standard homeowner's policy issued to Garcia by
Patrons.   The policy excludes coverage for bodily injury "[a]rising out of the
rental or holding for rental of any part of the premises" by an insured.  The
policy also contains an exception to that exclusion for the occasional rental
of the insured premises as a residence. 
	[¶3]  Patrons's declaratory judgment action asserted that Patrons had
no obligation to defend or indemnify Garcia in connection with any claim
that Collins might assert as a result of the injuries sustained in July of 1996. 
Based on the coverage exclusion for injuries arising out of the rental of the
premises, Patrons asserted that coverage is precluded and that the
occasional basis exception to the exclusion does not apply because Garcia
had leased the residence to Collins for one year.  Garcia moved to dismiss
the complaint, contending that the action was not ripe because Collins had
not filed a complaint against Garcia.  Concluding that "the question of
coverage is not ripe for determination[,]" the court granted the motion.{2} 
This appeal followed.
	[¶4]  The Uniform Declaratory Judgments Act, 14 M.R.S.A.
§§ 5951-5963 (1980 & Supp. 1997), may be invoked only where there is a
genuine controversy.  See Wagner v. Secretary of State, 663 A.2d 564, 567
(Me. 1995).  A genuine controversy exists if a case is ripe for judicial
consideration and action.  Id.  An "[a]nalysis of the ripeness issue involves
two principal points of focus[:] the fitness of the issue for judicial decision,
and the hardship to the parties of withholding court consideration."  Maine
Pub. Serv. Co. v. Public Utils. Comm'n, 524 A.2d 1222, 1226 (Me. 1987). 
	[¶5]  We first address whether Patrons's duties to defend and
indemnify are fit for adjudication at this time.  Because an insurer's duty to
defend its insured against a suit is ordinarily determined by comparing the
facts alleged in the complaint with the terms of the policy, the insurer's
duties are not usually fit for adjudication until a complaint has been filed
against its insured.  See, e.g., State Mut. Ins. Co. v. Bragg, 589 A.2d 35, 36
(Me. 1991).  Generally, "[i]n determining the duty to defend . . . the court's
consideration is limited to the underlying complaint and the insurance
policy."  Northern Sec. Ins. Co. v. Dolley, 669 A.2d 1320, 1322-23 (Me.
1996) (citing American Policyholders' Ins. Co. v. Cumberland Cold Storage
Co., 373 A.2d 247, 249 (Me. 1977)).  
	[¶6]  Once the complaint has been filed, "[i]f the allegations in the
underlying tort action are within the risk insured against and there is any
potential basis for recovery, the insurer must defend the insured regardless
of the actual facts on which the insured's ultimate liability may be based." 
Gibson v. Farm Family Mut. Ins. Co., 673 A.2d 1350, 1352 (Me. 1996).  See
also Maine State Academy v. Commercial Union Ins. Co., 1997 ME 188, ¶ 5,
699 A.2d 1153, 1156.  Where there is any possible legal or factual basis for
payment under a policy, an insurer's duty to defend must be decided
summarily in favor of the insured.  Gibson, 673 A.2d at 1352.  In Travelers
Indem. Co. v. Dingwell, 414 A.2d 220 (Me. 1980), we explained the
justification for this general rule:
If we were to look beyond the complaint and engage in proof of
actual facts, then the separate declaratory judgment actions . . .
would become independent trials of the facts which the
[insured] would have to carry on at his expense. . . .  We see no
reason why the insured, whose insurer is obligated by contract
to defend him, should have to try the facts in a suit against his
insurer in order to obtain a defense.  

Id. at 227.  "Except in limited circumstances, an insurer cannot avoid its
duty to defend by establishing, before the underlying action has concluded,
that ultimately there will be no duty to indemnify." Northern Sec. Ins. Co. v.
Dolley, 669 A.2d at 1320 (footnote omitted).   
	[¶7]  We have identified several instances where the insurer is not
required to await the filing of the complaint in order to seek declaratory
relief.  A narrow exception exists where the insurer disputes its duties to
defend and indemnify based on issues such as "nonpayment of a premium,
cancellation of a policy, failure to cooperate or lack of timely notice[.]"
Cumberland Cold Storage Co., 373 A.2d at 250.  In these circumstances,
both obligations may be appropriately determined prior to the entry of
judgment in the underlying tort action.  Id.  The rationale for these
exceptions is that the coverage dispute depends entirely on the relationship
between the insurer and the insured, not on facts to be determined in the
underlying litigation.{3}  Additional exceptions exist where the insured, the
insurer, and the injured claimant stipulate to the facts material to the
insurer's duty to indemnify{4} or where the pertinent facts have been
determined in other proceedings.{5}  In either case, the concern about
requiring the insured to litigate the facts of a claim simply to obtain a
defense is not present.
	[¶8]  Patrons argues that its complaint falls within the exception
allowing adjudication of the insurer's declaratory judgment action where the
coverage determination is entirely separable from the merits of the injured
party's claims.  Patrons's assertion, however, that the coverage issues in this
matter are entirely separable from the underlying claim is not accurate.  The
coverage decision directly involves resolution of facts regarding the
relationship, not between the insurer and the insured, but between the
insured and the claimant.{6}  The nature of Collins's relationship with Garcia
and the reason for Collins's presence in the basement will be relevant both
on issues of coverage and Garcia's liability to Collins.
	[¶9]  Patrons next urges this court to create an additional exception
where the insurer asserts that there can be no reasonable dispute regarding
the applicability of a coverage exclusion.  Essentially, Patrons's declaratory
judgment action invites the court to resolve issues of fact regarding Collins's
injuries that have not been determined either through prior litigation or
through a stipulation.  Although the rental exclusion may ultimately be
determined to be applicable, its applicability cannot be determined without
factual inquiry by the court.  Such an inquiry into the relationship between
Collins and Garcia in this proceeding would draw the insured into litigation
of at least some aspects of the injured party's claim in order to obtain a
defense.  This is precisely the result we sought to avoid in Dingwell. 
	[¶10]  Finally, Patrons urges us to consider the hardship to the
insurer caused by the withholding of judicial consideration at this point. 
Patrons contends that requiring an insurer to await the filing of a complaint
against its insured will force insurers to defend claims that are unlikely to
result in a duty to indemnify.   We recognize the reality of Patrons's
concerns.{7}  We conclude, however, that the rationale supporting the
comparison test outweighs those concerns.  See Dingwell, 414 A.2d at 227. 
"We have always recognized that the application of the comparison test will
occasionally require an insurer to defend when there may be no ultimate
duty to indemnify.  This is true because the duty to defend is broader than
the duty to indemnify.  We are satisfied that the interests of justice and the
conservation of scarce judicial resources support the course we have
chosen."  Merrimack Mut. Fire Ins. Co. v. Brennan, 534 A.2d 353, 354 (Me.
1987) (citation omitted).  We therefore conclude that the hardship to the
insurer is outweighed by the competing interests of preventing duplicative
litigation and sparing insureds the costs of defending a collateral action
brought by the insurer to determine its obligations under the insurance
contract before the nature of the claim implicating coverage has been
identified through the filing of a complaint. 
	[¶11]  Accordingly, the court correctly determined that Patrons's
declaratory judgment action does not come within any exception that would
allow adjudication in advance of the filing of a complaint.
	The entry is:
Judgment affirmed. 

Attorney for plaintiff: James D. Poliquin, Esq., (orally) Norman, Hanson & DeTroy P O Box 4600 Portland, ME 04112-4600 Attorneys for defendant: Rebecca S. K. Webber, Esq., (orally) Douglas A. Grauel, Esq. Linnell, Choate & Webber LLP P O Box 190 Auburn, ME 04212-0190
FOOTNOTES******************************** {1} Although Collins was named as a party-in-interest in Patrons's complaint, we have deleted him from the caption of this opinion. He was never served with process, and therefore is not properly before the court in this action. See Horace Mann Ins. Co. v. Maine Teachers Ass'n, 449 A.2d 358, 358 n.1 (Me. 1982). {2} It is undisputed that Collins has not filed an action against Garcia. {3} See, e.g., Benning v. Allstate Ins. Co., 602 A.2d 233, 237 (Md. Ct. Spec. App. 1992) (holding that injured tort claimant properly brought action against insurer prior to filing action against insured tortfeasor, where coverage dispute did not depend "on any fact or circumstance pertaining to the accident or the injuries suffered by the [claimant]."). {4} See Dolley, 669 A.2d at 1322-23 (relying on parties' stipulation of fact to determine duties to defend and indemnify); cf. Bowen v. Hanover Ins. Co., 599 A.2d 1150 (Me. 1991) (holding that insurer had no duty to indemnify insured, in view of the parties' stipulation of fact). In Dolley, the insurer filed its declaratory judgment action before the injured claimant filed an action against the insured. Dolley, 669 A.2d at 1321. Rather than rejecting the action on ripeness grounds, we determined the insurer's duty to defend vel non on the basis of what the complaint might have alleged, in view of the parties' stipulation. Id. at 1323 {5} See State Mut. Ins. Co. v. Bragg, 589 A.2d at 38 (holding that insured's criminal convictions were "sufficient to preclude relitigation of the issue of [the insured's] subjective intent" for purposes of evaluating the insurer's duty to defend); Perreault v. Maine Bonding & Cas. Co., 568 A.2d 1100 (Me. 1990) (same); but cf. Horace Mann Ins. Co. v. Maine Teachers Ass'n, 449 A.2d at 360-61 (holding that facts established in underlying administrative adjudication could not be considered in determining whether there was initially a duty to defend). {6} Garcia suggests, but cannot at this point know, that Collins may claim to have been acting not as a renter but as a contractor at the time of his injury. {7} See, e.g., Baber, Judicial Interpretations of the Commercial General Liability Policy Under Maine Law, 12 Me. B. J. 368, 374 (1997) ("Accordingly, plaintiff's counsel will want to be intentionally vague in drafting a complaint . . . to preserve potential coverage."(emphasis added)).