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Penney v. Capitol City v. First American
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Decision:1998 ME 44
Argued:January 6, 1998
Decided:	March 4, 1998




	[¶1]  Third party plaintiff Capitol City Transfer, Inc. appeals from a
summary judgment entered in its third-party action against its title insurer,
First American Title Ins. Co.  The Superior Court (Kennebec County,
Marden, J.) ruled that First American had no duty to defend an action
brought against it by a third party.  Because the court erred in considering
evidence beyond the pleadings, we vacate the judgment.
	[¶2]  The facts as developed for purposes of the summary judgment
may be summarized as follows:  Albert and Linda Penney, plaintiffs in the
underlying action, acquired certain real estate on the Bog Road in Augusta by
deed of J. Betit Sani-Van Service, Inc. dated March 15, 1972, and recorded
in the Kennebec County Registry of Deeds.  Capitol City acquired real estate
on the Bog Road by deed of Edmund J. Betit dated April 15, 1994.  Capitol
City obtained an owners policy of title insurance from First American.  On its
face, the description in the commitment for title insurance includes the
land allegedly owned by the Penneys and makes no exception for their deed.
	[¶3]  In 1995 the Penneys filed a damage claim and a request for
injunctive relief against Capitol City for trespass, nuisance, and injury to
lands and trees.  Capitol City filed a third-party complaint against First
American alleging breach of contract for failure to defend, bad faith, unlawful
claims practice, and intentional infliction of emotional distress.{3}  On cross-
motions for summary judgment, the Superior Court granted First American's
motion for summary judgment and ruled that it had no duty to defend the
Penney action.    Capitol City now appeals.{4}
	[¶4]  "Whether an insurer has a duty to defend in a particular case is a
question of law."  Vigna v. Allstate Ins. Co., 686 A.2d 598, 599 (Me.
1996)(citing Commercial Union Ins. Co. v. Royal Ins. Co., 658 A.2d 1081,
1082 (Me. 1995)).  "We determine the duty to defend by comparing the
allegations in the underlying complaint with the provisions of the insurance
policy." Id. (citation omitted).  "If a complaint reveals a 'potential . . . that the
facts ultimately proved may come within the coverage,' a duty to defend
exists." Id. (quoting Travelers Indem. Co. v. Dingwell, 414 A.2d 220, 226
(Me. 1980)).  
	[¶5]  Capitol City argues that the court erred when it looked beyond
the pleadings, and considered evidence extrinsic to the complaint.  We
agree. "Except in limited circumstances, we have held that 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., Inc. v. Dolley, 669 A.2d 1320, 1322 (Me. 1996)(footnote
omitted); see also Worcester Ins. Co. v. Dairyland Ins. Co., 555 A. 2d 1050
(Me. 1989).  To secure the just, speedy and inexpensive determination of an
action involving a duty to defend and a duty to indemnify and avoid a
duplication of trials requires that courts proceed in the following order: the
determination of a duty to defend, then the determination of liability in the
underlying action, and finally the determination of the duty to indemnify.
See Travelers Indem. Co. v. Dingwell, 414 A.2d 220, 227 (Me. 1980)("[w]e
see no reason why the insured, whose insurer is obligated by contract to
defend [it], should have to try the facts in a suit against its insurer in order
to obtain a defense."). "The duty to defend is broader than the duty to
indemnify, and an insurer may have to defend before it is clear whether
there is a duty to indemnify."  Commercial Union Ins. Co. v. Royal Ins. Co.,
658 A.2d 1081, 1083 (Me. 1995) (citation omitted).  
	[¶6] The present case offers no reason for deviating from the pleading
comparison test that has long been the rule in Maine. The underlying
complaint alleges that defendant Capitol City repeatedly entered plaintiffs'
land and conducted itself in a manner giving rise to claims for trespass,
nuisance, and injury to lands and trees.  First American argues, through the
use of extrinsic evidence, that the description in the commitment form
mistakenly includes the Penney parcel, and that fact was known by Capitol
City.  It argues that the true nature of the underlying claim is a boundary
dispute, and it seeks to avoid the duty to defend on the basis of a survey
exception expressly stated in the policy.
	[¶7] Confining our review to an examination of the complaint and the
title insurance policy, we conclude that there is a potential that the facts
ultimately proved may come within coverage.  The complaint is framed in
part as a trespass case.  The property on which Capitol City is alleged to have
trespassed is described in the policy as the property of Capitol City.  Even
though evidence beyond the pleadings may later establish the absence of a
duty to indemnify, that evidence is not properly considered in determining
the duty to defend.  Northern Sec. Ins. Co., Inc. v. Dolley, 669 A.2d 1320,
1323 (Me. 1996).
	The entry is:
Judgment vacated.  Remanded to the
Superior Court for further proceedings
consistent with the opinion herein.

Attorney for appellant: Raymond C. Hurley, Esq., (orally) Hurley & Mina 12 City Center Portland, ME 04101 Attorney for appellee: John B. Emory, Esq., (orally) Drummond & Drummond, LLP One Monument Way Portland, ME 04101
FOOTNOTES******************************** {1} The other third-party plaintiffs are Russell G. Stull, sole shareholder and a director of Capitol City, and Melinda C. Turner, president of Capitol City. {2} Other third-party defendants and related claims were dismissed from the action. {3} The propriety of the third-party has not been challenged. Silence, however, should not be interpreted as approval. See Maine Nat'l Bank v. Anderschat, 462 A.2d 482, 483 n.1 (Me. 1983). {4} The Superior Court directed the entry of final judgment pursuant to M.R. Civ. P. 54(b).