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Pine Ridge Realty v. Mass. Bay Ins. Co.

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MAINE SUPREME JUDICIAL COURT					Reporter of Decisions
Decision:	2000 ME 100
Docket:	Yor-99-189
Argued:	March 7, 2000
Decided:	May 26, 2000



	[¶1]  Pine Ridge Realty, Inc., appeals from a judgment of the Superior
Court (York County, Fritzsche, J.), entered against it and in favor of
Massachusetts Bay Insurance Company, Anderson-Watkins Associates, Inc.,
and Stephen P. St. Angelo, concluding that Pine Ridge was not entitled to
insurance coverage for floodwater damage to its property, known as the
Dunegrass Golf Course.  Massachusetts Bay cross appeals from the court's
denial of its request for attorney fees.  We affirm the judgments.
	[¶2]  In October of 1996, Hurricane Lili roiled off the coast of New
England.  The Dunegrass Golf Course, which was in the process of being
developed and expanded, suffered substantial damage as a result of flooding
that followed torrential rains.{2}  Pine Ridge sought recovery for those
damages from its insurer, Massachusetts Bay Insurance Company.  After
investigation of the claim, Massachusetts Bay concluded that no insurance
against the perils of flood or groundwater had been sought by Pine Ridge or
provided under any of the current policies.  It declined to pay for the costs
of replacing the damaged areas of the golf course, thereby giving rise to this
	[¶3]  The golf course at issue is located in Old Orchard Beach.  In the
late eighties, Pine Ridge purchased the original nine-hole course along with
250 adjacent acres.  In 1996, Pine Ridge began construction of an eighteen-
hole "championship" golf course, anticipating the development of a
significant number of surrounding residential units.  Prospective lenders
required Pine Ridge to obtain certain insurance.  To comply with financing
requirements, Ronald Boutet, on behalf of Pine Ridge, contacted Stephen
St. Angelo of Anderson-Watkins Associates, an insurance agency.  St. Angelo
arranged for coverage through Massachusetts Bay during the course of
construction of new holes at the Dunegrass Golf Course.
	[¶4]  Several different types of coverage were originally discussed,
including tees and greens, general liability, builder's risk, and business
interruption coverage.  St. Angelo arranged to have a binder issued by
Massachusetts Bay and provided the binder to Boutet.  Boutet did not
question the coverage addressed in the binder or request further coverage.
	[¶5]  Just over a month after the binder was issued, and before the
new policy endorsements were issued, the flooding occurred, and Boutet
was told that the policies he had purchased did not include flood insurance. 
He and his corporation brought suit against Massachusetts Bay, as well as
St. Angelo and his firm, Anderson-Watkins Associates, Inc.
	[¶6]  Through an amended complaint, Pine Ridge presented a claim
for breach of contract and breach of the implied covenant of good faith and
fair dealing against Massachusetts Bay.  It also claimed that Massachusetts
Bay, St. Angelo, and Anderson-Watkins had knowingly misrepresented
"pertinent facts and policy provisions" in violation of 24-A M.R.S.A.
§ 2436-A(1)(A), (D) (1990), and that St. Angelo and Anderson-Watkins had
been negligent.  Anderson-Watkins crossclaimed, asserting that it was
entitled to indemnity from Massachusetts Bay to the extent Anderson-
Watkins was found liable on Pine Ridge's complaint. 
	[¶7]  Following a lengthy and somewhat contentious discovery period,{3}
Pine Ridge presented its case in a bench trial.  Over seven days, the court
heard testimony regarding the historical facts that led to the dispute.  In the
end it was faced with several questions central to the claims:  whether
Boutet requested flood insurance; whether Massachusetts Bay agreed to
provide flood insurance; and whether Massachusetts Bay failed to live up to
its commitment.{4} 
	[¶8]  In a detailed and thoughtful decision, the trial court concluded
that the answer to each question was "no."  The court found that no request
for flood insurance had been made by Boutet, notwithstanding St. Angelo's
efforts to acquire Boutet's attention on the subject; that Massachusetts Bay
had never agreed to provide flood insurance; and that neither Massachusetts
Bay nor St. Angelo or his firm had breached a contractual, statutory, or
common law duty to the developers.
	[¶9]  The evidence revealed that, except in federally designated flood
zones, flood insurance is not included in standard property insurance
policies.  In most policies, including those in question, it is explicitly
excluded from coverage.  Thus, in the absence of a specific request, flood
insurance would not be included in the policies sought by Boutet.  In its
opinion, the court credited St. Angelo's testimony, and declined to credit
much of Boutet's testimony or the testimony of his expert witness.{5}  It found
that Boutet was "a developer who gave his insurance needs little attention."{6} 
It further found that St. Angelo specifically informed Boutet that he did not
provide flood coverage, that Boutet failed to respond to many questions from
St. Angelo, and that Boutet signed a flood insurance checklist indicating that
the property was not in an identified flood hazard area and that National
Flood Insurance was not being sought.{7}  In essence, the court found that
Boutet did not request flood insurance despite the opportunity to do so, and
that others involved had no reason to believe such insurance was necessary. 
As the court stated succinctly:  "No one expected 19 inches of rain and no
one planned on damage to a well drained golf course built on a back sand
dune.  It was a freak occurrence." 
	[¶10]  Turning to the actions of the insurer and the agent, the court
found St. Angelo to be a "capable honest insurance agent."  It found,
however, that Massachusetts Bay had made a mistake when, after the
damage occurred, it issued a "named peril" tees and greens policy rather
than the "all-risk" policy it had promised in its binder.  This apparently
occurred because Massachusetts Bay did not ordinarily issue general "all-
risk" products for tees and greens coverage.  The court then concluded that
Massachusetts Bay had bound itself to provide "all-risk" coverage, but that
exclusions for flood and groundwater damage were applicable under either
type of policy.  Because the relevant exclusions were applicable to all policies
that Massachusetts Bay had bound itself to provide, whether or not
Massachusetts Bay ordinarily issued such policies, Massachusetts Bay's
denial of coverage was proper.  The court ultimately determined that "the
coverage that was requested would not have covered the losses suffered."  
	[¶11]  As to the remaining counts, the court found that "coverage
decisions were made with sufficient speed and that there were no knowing
misrepresentations," and accordingly found no unfair claims settlement
practice under 24-A M.R.S.A. § 2436-A.  The court also found no breach of
the implied covenant of good faith and fair dealing.  Finally, the court found
that, although Massachusetts Bay had prevailed, its conduct in mistakenly
issuing the wrong policy contributed to the need for a trial.  The court found
insufficient evidence of fraud, misrepresentation, or concealment on the
part of Boutet or Pine Ridge, and accordingly denied Massachusetts Bay's
request for attorney fees. This appeal followed.
	[¶12]  Pine Ridge presents multiple theories under which it argues
that the court's judgment must be vacated.  Because the agreement of the
parties is central to Pine Ridge's claims, we limit our discussion to
determining whether the court erred when it concluded that Pine Ridge
failed to meet its burden of proving that Massachusetts Bay breached its
contract.  In essence, Pine Ridge argues that the contracts at issue,
consisting of the binder and new policy endorsements, are ambiguous and
must be construed to include flood and groundwater coverage because
Boutet sought, and Massachusetts Bay agreed to provide, that coverage.
	[¶13]  Neither the standard policy language nor the binder explicitly
provided for flood or groundwater coverage.  The new policy endorsements,
as issued, as well as industry standard policies and Massachusetts Bay's
standard policies, specifically excluded that coverage.  Thus, Pine Ridge
cannot obtain coverage under the contract unless an ambiguity in the
contract is somehow read to include the coverage excluded by the policy
	[¶14]  Whether a contract is ambiguous is a question of law that we
review de novo.  See Devine v. Roche Biomedical Lab., 637 A.2d 441, 445
(Me. 1994).  "Contract language is ambiguous when it is reasonably
susceptible to different interpretations."  Kandlis v. Huotari, 678 A.2d 41,
43 (Me. 1996), quoted in Spottiswoode v. Levine, 1999 ME 79, ¶ 16, 730
A.2d 166, 172.  In the insurance context, when a loss occurs after a binder
has been issued, but before a policy is written, the insurer is bound to
provide coverage in line with its standard policies referenced in the binder,
see Auto-Owners Ins. Co. v. Jensen, 667 F.2d 714, 723 (8th Cir. 1981);
Matousek v. South Dakota Farm Bureau Mut. Ins. Co., 450 N.W.2d 236, 238
(N.D. 1990), or policies standard throughout the industry, see Hartford Fire
Ins. Co. v. Bonsera, 675 N.Y.S.2d 827, 829 (Sup. Ct. 1998); 2 Alan D. Windt,
Insurance Claims & Disputes § 6.36 n.348 (3d ed. 1995 & Supp. 1999).  In
those instances, when the terms of the binder conflict with the terms of the
standard policy, an ambiguity arises, and the binder and policy will be
construed together with the most liberal provision, in favor of the insured,
controlling.  Cf. Crouse West Holding Corp. v. Sphere Drake Ins. Co., PLC,
248 A.D.2d 932, 933 (N.Y. App. Div. 1998); see also Union Mut. Fire Ins. Co.
v. Commercial Union Ins. Co., 521 A.2d 308, 310 (Me. 1987) ("It has long
been the rule in Maine that insurance policies are to be liberally construed
in favor of the insured and strictly construed against the insurer that drafted
the policy.").
	[¶15]  Pine Ridge argues that the all-risk tees and greens
endorsement should be construed to have provided for flood coverage
because the binder and subsequent policy "did not match," and because the
terms of the binder did not explicitly mention flood and groundwater
damage as excluded from coverage.{8} 

A.  Construction of the Contract

	[¶16]  We must therefore determine whether the terms of the binder
and the policy are inconsistent.  We begin the analysis by accepting the
court's conclusion that Massachusetts Bay bound itself to provide all-risk
tees and greens coverage rather than the named peril coverage it issued. 
Once the pertinent language of the policy is identified, we compare the
language in the policy with the language of the binder.
	[¶17]  The court found that a standard all-risk tees and greens policy
would have excluded coverage for flood or groundwater damage.  We find no
error in that determination.  First, the record supports the conclusion that
if Massachusetts Bay had in fact issued an all-risk policy, the policy would
nevertheless be subject to a flood exclusion.  Second, the record supports
the conclusion that standard all-risk tees and greens policies used
throughout the industry would also exclude flood coverage.{9}  The court
credited the testimony of Paul Heywood, an adjuster employed by
Massachusetts Bay, that the standard policies issued by a significant portion
of the insurance industry excluded flood coverage.{10}
	[¶18]  Thus, we compare a standard all-risk policy, which would
explicitly exclude flood and water damage, with the binder at issue.  The
binder, necessarily general in its terms, clearly notified Pine Ridge that it
was subject to "limitations" not enumerated in the binder.  Those
limitations included exclusions for flood and groundwater coverage, as would
be contained in a standard all-risk policy.  Reading the binder and policy
together, no ambiguity is shown.  See Chadwick-BaRoss, Inc. v. T. Buck
Const, Inc., 627 A.2d 532, 535 (Me. 1993) (holding contract need not
negate every conceivable construction of its terms in order to be
unambiguous).  Accordingly, as the court concluded, although Pine Ridge is
entitled to the "all-risk" coverage promised under the binder rather than
"named peril" coverage provided in the policy that eventually issued, it is
not entitled to flood or groundwater coverage.
B.  Intent of the Parties

	[¶19]  Pine Ridge also argues that because the language of the binder
did not explicitly enumerate the exclusions, an ambiguity as to the original
agreement of the parties is created that requires the court to determine the
parties' intent.  Initially, we reject the argument that the binder must
contain an explicit enumeration of exclusions or limitations in order to be
binding on the insured.  An insurance binder is, of necessity, a much
abbreviated version of the anticipated policy.  See 3 Lee R. Russ & Thomas F.
Segalla, Couch on Insurance § 13:2 (1997).  "Generally, a binder
contemplates a subsequent and more formal agreement, and by its nature
incorporates the terms of the prospective policy whether those terms are
prescribed by law or are part of the customary policy issued by the insurer." 
Id. § 13:1.  Accordingly, the fact that the binder was issued in summary
fashion, with references to "limitations" rather than an elucidation of those
limitations, does not in itself create an ambiguity, when construed in light of
an agency or industry standard policy of the same type.
	[¶20]  Assuming, however, for purposes of argument, that an ambiguity
did exist, we are nonetheless unpersuaded that the court erred.  Although
we agree with Pine Ridge's assertion that when an insurance policy is
ambiguous, the terms of the policy will be construed against the insurer, see
Union Mut. Fire Ins. Co., 521 A.2d at 310, this maxim is insufficient to
achieve Pine Ridge's desired result because the parties neither intended nor
expected that flood or groundwater damage would be covered.  
	[¶21]  The touchstone of contract interpretation is the intent of the
parties.  See Whit Shaw Assoc. v. Wardwell, 494 A.2d 1385, 1387 (Me.
1985); City of Augusta v. Quirion, 436 A.2d 388, 391 (Me. 1981).  We will
not interpret an ambiguous insurance contract to provide coverage that was
never contemplated by the parties.  See, e.g., Bourque v. Dairyland Ins. Co.,
1999 ME 178, ¶¶ 9-10, 741 A.2d 50, 53.{11}  
	[¶22]  The court found that Boutet did not ask for or expect flood and
groundwater insurance, and that Massachusetts Bay did not offer to provide
it.  Because the property was not in a flood zone, the lenders didn't require
it.  Because no one anticipated this "billion year occurrence," no effort was
made by Boutet to obtain the coverage.  Because the parties did not intend
for the policies to include that coverage, no amount of ambiguity elsewhere
in the contract language will draw that coverage within its terms.  
	[¶23]  With the hindsight afforded him in the aftermath of an
extraordinary weather event, Boutet argues that any coverage he obtained
should have included coverage for the catastrophe.  The court, however,
does not have the authority to rewrite the contract.  See Apgar v.
Commercial Union Ins. Co., 683 A.2d 497, 500 (Me. 1996).  It was called
upon to determine the intent of the parties and it did so on the evidence
	[¶24]  The court's findings are amply supported by the record. 
St. Angelo's file, introduced at trial, indicates that Boutet requested
coverage tailored to meet his lenders' requirements.  The loan documents
establish that flood coverage was required only if the property was located
within a flood hazard area.  The golf course was not situated in the flood
zone.  Boutet never made a specific request for flood or groundwater
coverage, nor is it surprising that he did not; the evidence demonstrated
that the golf course sat on land that was not in a flood zone, was planted over
sand dunes, and was approximately 100 feet above sea level.  Additionally,
St. Angelo testified that he had advised Boutet that the policies Boutet's
lenders had requested generally excluded flood coverage.  He also faxed
Boutet a memo, admitted into evidence, noting, among other things:  "We
do not provide Workers' Compensation, Flood or Loss of Rents coverage
now.  Perhaps you have coverage elsewhere? All are needed by bank?" 
Boutet never responded to that fax. 
	[¶25]  Accordingly, notwithstanding the lack of specificity in the
binder's reference to "limitations," the court did not err in concluding that
Pine Ridge did not bargain for and is not entitled to flood or groundwater

C.  Pine Ridge's Alternative Arguments

	[¶26]  Finally, although Pine Ridge asserts that the court erred in
several other respects, we find no error.  The court did not err in
concluding that the losses suffered resulted from perils excluded from
coverage;{13} in concluding that Massachusetts Bay was not estopped from
denying flood coverage, see Roberts v. Maine Bonding & Cas. Co., 404 A.2d
238, 241 (Me. 1979); or in finding that Massachusetts Bay had not made any
knowing misrepresentations regarding "pertinent facts of policy provisions
relating to coverage at issue," see 24-A M.R.S.A. § 2436-A(1)(A).{14}
	[¶27]  Nor did the court err in granting St. Angelo's and Anderson-
Watkins's motion for judgment as a matter of law pursuant to M.R.
Civ. P. 50(d).  When reviewing a judgment entered pursuant to Rule 50(d),
we are "not required to view the evidence in the light most favorable to the
plaintiff.  Rather, we must accept the facts found by the court unless those
findings are clearly erroneous."  McCarthy v. U.S.I. Corp., 678 A.2d 48,
50-51 (Me. 1996) (citing Smith v. Welch, 645 A.2d 1130, 1132 (Me. 1994)).  
The trial court's factual and legal conclusions were fully supported by
competent evidence in the record.  See Paffhausen v. Balano, 1999 ME 169,
¶ 9, 740 A.2d 981, 983.  The other contentions of Pine Ridge do not merit

D.  Massachusetts Bay's Claim for Attorney Fees

	[¶28]  Finally, Massachusetts Bay argues that the trial court erred in
declining to award it attorney fees.  Title 24-A, section 2186 gives the court
the discretion to award fees when "it is proven that a person committed a
fraudulent insurance act."  24-A M.R.S.A. § 2186(7) (2000).{15} 
Massachusetts Bay argues that Boutet committed fraudulent acts when he
padded his damage claims, lied under oath regarding his damages and the
date he seeded the course, and tampered with evidence by re-creating a
construction log.
	[¶29]  We afford the trial court wide discretion in determining
whether or not to award attorney fees, see Mancini v. Scott, 2000 ME 19,
¶ 10, 744 A.2d 1057, 1061, and we review the trial court's factual
conclusions for clear error, see White v. Zela, 1997 ME 8, ¶ 3, 687 A.2d
645, 646.  The court noted that it was troubled by the actions of Boutet, but
concluded that fees were inappropriate because Massachusetts Bay's errors
"contributed in part to the need for the trial" and because the court did not
find "sufficiently clear evidence of wrongdoing by plaintiffs to constitute
misrepresentation, concealment, or fraud."  This decision was supported by
the record and was, therefore, neither an abuse of its discretion nor clear
	The entry is:
Judgment affirmed.

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