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Maine Mut. Fire Ins. v. Gervais, revised 9-16-99
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MAINE SUPREME JUDICIAL COURT				Reporter of Decisions
Decision:		1999 ME 134
Docket:		Aro-98-610
Submitted
On Briefs:		May 24, 1999
Decided:		August 31, 1999

Panel:WATHEN, C.J., and CLIFFORD, RUDMAN, DANA, SAUFLEY, ALEXANDER, and
CALKINS, JJ.




MAINE MUTUAL FIRE INSURANCE CO. v. RAINALD A. GERVAIS SR.

CLIFFORD, J.

	[¶1]  Rainald Gervais appeals from the judgment entered in the
Superior Court (Aroostook County, Marden, J.) denying Gervais's request for
reimbursement of the attorney fees he incurred in defending a declaratory
judgment action brought by Maine Mutual Fire Insurance Co. to determine
whether Maine Mutual had a duty to defend Gervais against emotional
distress allegations in a suit filed by an injured employee of Gervais.  Gervais
contends that the trial court erred in denying his motion for attorney fees
because Maine Mutual's duty to defend Gervais against the emotional
distress allegations was clear based on the prevailing law at the time Gervais
requested a defense.  We agree and vacate the judgment.
	[¶2]  Aurel Lavoie, an employee working on the farm owned by
Gervais, sued Gervais for negligence after sustaining work-related injuries.{1} 
Pursuant to the liability insurance policy it issued to Gervais, Maine Mutual
provided Gervais with an attorney to defend the action.  A jury awarded
Lavoie $30,000 in damages.  Although initially intending to appeal, Maine
Mutual paid the entire amount of that judgment to Lavoie, including interest
and costs.  
	[¶3]  While the first action brought by Lavoie against Gervais was
pending, but prior to the commencement of the trial, Lavoie filed another
complaint against Gervais, and against Maine Mutual, and seven additional
defendants, alleging six counts "aris[ing] out of a coordinated pattern of
fraud, deceit and misrepresentation designed to deprive . . . Lavoie of his
legal rights and remedies in proceedings before both the Workers'
Compensation Commission and before [the Superior] Court in connection
with [a] . . . work-related injury."  After receiving the payment from Maine
Mutual in the first case, Lavoie dismissed Maine Mutual as a defendant in the
second action and also amended the complaint to remove the negligence
allegations against Gervais.{2}  Allegations of intentional infliction of emotional
distress against Gervais remained pending.{3}
	[¶4]  Maine Mutual filed this action seeking a declaration that it did
not have a duty to defend and indemnify Gervais against the intentional
infliction of emotional distress allegations filed by Lavoie in the second
complaint.{4}  The Superior Court entered a summary judgment in favor of
Gervais in Lavoie's second suit, but declined to rule in Maine Mutual's
declaratory judgment action, concluding that a justiciable controversy no
longer existed.  Following Lavoie's appeal of the summary judgment in favor
of Gervais,{5} however, Maine Mutual requested that the Superior Court
decide its declaratory judgment action.  The Superior Court did rule,
concluding that Maine Mutual did not have a duty to defend and indemnify
Gervais in Lavoie's second lawsuit against him, and entered judgment for
Maine Mutual.  Gervais appealed the decision.  We disagreed with the
Superior Court, vacated its judgment, and held that Maine Mutual did have a
duty to defend Gervais.   See Maine Mut. Fire Ins. Co. v. Gervais,
1998 ME 197, ¶ 13, 715 A.2d 938, 942 (Maine Mutual v. Gervais I).   
	[¶5]  Following the remand of the declaratory judgment action,
Gervais sought reimbursement for the attorney fees he incurred in
successfully defending the declaratory judgment action.  The Superior Court
denied the motion for attorney fees, concluding that Maine Mutual did not
have to pay Gervais's attorney fees arising from the declaratory judgment
action because its "duty to defend was less than well settled."  The court
denied Gervais's subsequent motion for a testimonial hearing and for
findings of fact.  This appeal by Gervais followed.
	[¶6]  When the issue involves whether the court is authorized to
award attorney fees, we review the trial court's decision de novo.  See
Gibson v. Farm Family Mut. Ins. Co., 673 A.2d 1350, 1354 (Me. 1996).  The
insured can recover attorney fees incurred to defend a declaratory judgment
action brought by the insurer only "[w]hen the duty to defend is clear from
the policy and the pleadings."  See id. at 1354 (quoting Union Mut. Fire Ins.
Co. v. Inhabitants of Town of Topsham, 441 A.2d 1012, 1019 (Me. 1982)). 
To determine whether a duty to defend is "clear" for purposes of awarding
attorney fees, a court must evaluate state law regarding an insurer's duty to
defend as it existed at the time the insurer initiated the declaratory
judgment action.  See id. at 1355.
	[¶7]  Following Lavoie's dismissal of his claim for negligence in the
second action brought by Lavoie against Gervais, the only claim remaining
was the allegation of intentional infliction of emotional distress.  See Maine
Mut. v. Gervais I, 1998 ME 197, ¶ 8, 715 A.2d at 940.  In Maine Mutual v.
Gervais I, we concluded that Maine Mutual had a duty to defend Gervais
against Lavoie's allegations of intentional infliction of emotional distress. 
Maine Mut. v. Gervais I, 1998 ME 197, ¶ 9, 715 A.2d at 940.  Having
previously decided that Maine Mutual had a duty to defend Gervais, the only
question to resolve on this appeal is whether that duty to defend was clear at
the time Maine Mutual filed its action for a declaratory judgment, in
December of 1994, to warrant an award of attorney fees to Gervais.  The
Superior Court concluded that the duty to defend was not clear.
	[¶8]  To determine the obligation of an insurance company to defend
an action brought by a third party against the insured, a court must compare
the insurance policy provisions with the allegations included within the
complaint.  See Mullen v. Daniels, 598 A.2d 451, 453 (Me. 1991) (quoting
Lavoie v. Dorchester Mut. Fire Ins. Co., 560 A.2d 570, 571 (Me. 1989)).  "If
there is any legal or factual basis that could be developed at trial, which
would obligate the insurer to pay under the policy, the insured is entitled to
a defense."  Id.   Therefore, a duty to defend exists if the liability insurance
company is potentially liable to cover the insured based on the third party's
allegations.  See id.   Any ambiguity in the insurance policy language is
resolved in favor of finding a duty to defend.  See Union Mut., 441 A.2d at
1015.  Accordingly, an award of attorney fees to the insured is appropriate
when it is clear from a comparison of the insurance policy and the
complaint that the insurance company is potentially liable to indemnify the
insured.  See Gibson, 673 A.2d at 1355; See also Mullen, 598 A.2d at 453. 
An award of attorney fees is not appropriate if the law is unsettled with
respect to a duty to defend a particular action or if the possibility that the
insurance policy requires coverage is "not something that [i]s obvious on the
face of the complaint."  See Union Mut. Fire Ins., 441 A.2d at 1019. 	
	[¶9]  The insurance policy issued by Maine Mutual provides, "If
a . . . suit is brought against any 'insured' for damages because of 'bodily
injury' or 'property damage' caused by an 'occurrence' to which this
coverage applies, we will . . . provide a defense at our expense by counsel of
our choice."  See Maine Mut. v. Gervais I, 1998 ME 197, ¶ 10, 715 A.2d at
940-41.  Maine Mutual sought a declaration that it did not have a duty to
defend because Gervais's conduct that gave rise to Lavoie's suit for
intentional infliction of emotional distress is not an "occurrence" covered by
the insurance policy, or that if it is an occurrence, the conduct falls within
the coverage exclusion for expected or intended bodily injury.   See Maine
Mut. v. Gervais I, 1998 ME 197, ¶ 8, 715 A.2d at 940.  An "occurrence" is
defined as an "accident . . . which results in . . . 'bodily injury' or 'property
damage.'" See Maine Mut. v. Gervais I, 1998 ME 197, ¶ 10, 715 A.2d at 941. 
Citing two 1996 opinions, we explained in Maine Mutual v. Gervais I that
"[t]he 'accidental' nature of an event for purposes of a standard liability
insurance contract . . . does not derive from the voluntariness of the act, but
rather from the unintentional nature of the consequence flowing from the
act."  Id.  (Citations omitted.)  We similarly explained, citing earlier
opinions, that the standard coverage exclusion for expected or intended
injury refers to injury that the insured subjectively wanted to occur or
subjectively foresaw as almost certain to occur.  See Maine Mut. v. Gervais I,
1998 ME 197, ¶ 11, 715 A.2d at 941.   After comparing the policy
provisions with the allegations, we held,
Because the general allegations in the Lavoies' complaint could
establish that the alleged emotional distress was an unintended
consequence of Gervais's conduct while still supporting each
element of the tort, the Lavoies' complaint was based on an
occurrence, as that term is used in the policy.  Similarly,
because Gervais may be found to have intentionally inflicted
emotional distress without subjectively intending or foreseeing
the alleged distress suffered by Lavoie, the exclusion for
intended or expected bodily injury is inapplicable.
Maine Mut. v. Gervais I, 1998 ME 197, ¶ 13, 715 A.2d at 942 (citations
omitted).
	[¶10]  In deciding that an intentional tort is not automatically
excluded from standard liability insurance coverage, we relied on Vigna v.
Allstate Ins. Co., 686 A.2d 598 (Me. 1996), and Gibson, 673 A.2d 1350.  See
Maine Mut. v. Gervais I, 1998 ME 197, ¶ 10, 715 A.2d at 940-41.  Both
opinions note that an intentional act on the part of the insured forming the
basis of an intentional tort action can still be an occurrence requiring
coverage, and thus a duty to defend, if the consequences of the intentional
act could be deemed unintentional under one set of facts.  See Vigna, 686
A.2d at 600; Gibson, 673 A.2d at 1353.  Although Vigna and Gibson were
decided in 1996, long after Maine Mutual filed its action for a declaratory
judgment, we concluded in Gibson that the duty to defend in such
circumstances was sufficiently clear in 1992 to warrant a similar award of
attorney fees.  Gibson, 673 A.2d at 1352, 1354-55.
	[¶11]  In explaining that the standard insurance coverage exclusion
for expected or intended injury refers only to injury the insured subjectively
wanted to occur, we again relied on law prevailing prior to 1993.  See Maine
Mut. v. Gervais I, 1998 ME 197, ¶¶ 11, 13, 715 A.2d at 941, 942; Maine
Bonding & Cas. Co. v. Douglas Dynamics, Inc., 594 A.2d 1079, 1081
(Me. 1991); Burns v. Middlesex Ins. Co., 558 A.2d 701, 702-03 (Me. 1989). 
Although noting that the exclusion is ambiguous, we held in both Maine
Bonding & Cas. and Burns that the exclusion should be interpreted to refer
"only to bodily injury that the insured in fact subjectively wanted
('intended') to be a result of his conduct or in fact subjectively foresaw as
practically certain ('expected') to be a result of his conduct."  Maine
Bonding & Cas., 594 A.2d at 1081 (quoting Burns, 558 A.2d at 702;
Patrons-Oxford Mut. Ins. Co. v. Dodge, 426 A.2d 888, 892 (Me. 1981)). 
	[¶12]  An award of attorney fees to Gervais is appropriate in this case
because, from a comparison of the standard liability insurance policy with
the Lavoie complaint, Maine Mutual's duty to defend Gervais against the
intentional infliction of emotional distress allegations was clear at the time
Maine Mutual filed its declaratory judgment action.  That is so because
Gervais could have shown that he did not intend the consequence of his
actions and did not subjectively want Lavoie to suffer from emotional
distress.  
	[¶13]  In concluding otherwise, the Superior Court explained that
attorney fees should not be awarded to Gervais because Maine Mutual did not
commence the declaratory judgment action in bad faith.  A showing of
subjective bad faith on the part of Maine Mutual in filing a declaratory
judgment action, however, is not required and was not required at that time. 
Although the legal standard for determining whether to award attorney fees
incurred to defend a declaratory judgment action originally included a
reference to bad faith, a showing of subjective bad faith on the part of the
insurer has never been an independent requirement for an award of attorney
fees.  In Union Mutual Fire Insurance, we explained that an insured can
recover attorney fees incurred to defend a declaratory judgment action
brought by the insurer only "[w]hen the duty to defend is clear from the
policy and the pleadings, so that the insurer's commencement of the
declaratory judgment action must be attributed to a refusal in bad faith to
honor its obligation under the policy."  Union Mut. Fire Ins., 441 A.2d at
1019.  Under this standard, if the duty to defend was clear, a legal
presumption that the declaratory judgment action was initiated in bad faith
was established.  See id.   An independent showing of subjective bad faith
was not required.  See id.   For instance, in Union Mutual Fire Insurance, in
declining to award attorney fees to the insured, we compared the insurance
policy to the allegations within the complaint and concluded that the law
gave little guidance to the insurer about its duty to defend.  Id.  Evidence of
the subjective motivations of the insurer in denying a defense played no role
in the analysis.  See id.   Because a showing of subjective bad faith is not a
prerequisite to an award of attorney fees, in Gibson, we eliminated the
language referring to "bad faith," "rely[ing] instead on direct evaluation of
the insurer's clear responsibility for coverage pursuant to prevailing Maine
law."  See Gibson, 673 A.2d at 1355 n.2.  The elimination of the reference to
"bad faith," and the legal fiction it represented, did not alter the substance
of the standard for determining when to award attorney fees.
	The entry is:

Judgment vacated.  Remanded to Superior
Court for proceedings consistent with this
opinion.

Attorney for plaintiff: John C. Walker, Esq. P O Box 1206 Windham, ME 04062 Attorney for defendant: William J. Smith, Esq. P O Box 7 Van Buren, ME 04785
FOOTNOTES******************************** {1} . Lavoie first sought to recover Workers' Compensation benefits pursuant to the Workers' Compensation Act. His petition was dismissed because Gervais was exempt pursuant to the Workers Compensation Act as an agricultural employer who carried liability insurance. {2} . In an opinion addressing a previous appeal in this case, we noted in a footnote, "Whether the amendment of the complaint was consideration for the payment from Maine Mutual is not clear." Maine Mut. Fire Ins. Co. v. Gervais, 1998 ME 197, ¶ 5 n.4, 715 A.2d 938, 940 n.4 (Maine Mutual v. Gervais I). {3} . Lavoie's wife also was a plaintiff in both suits seeking recovery for loss of consortium. {4} . Maine Mutual hired an attorney to defend Gervais against Lavoie's intentional infliction of emotional distress allegations, and then filed the within complaint seeking a declaration that Maine Mutual did not have a duty to continue to represent Gervais. Maine Mutual continued to defend Gervais against Lavoie's second suit while it sought a declaratory judgment. Thus, the only fees that are in dispute are the fees Gervais incurred in defending this declaratory judgment action brought by Maine Mutual. {5} . Lavoie appealed the Superior Court's summary judgment in favor of Gervais on the merits of the intentional infliction of emotional distress claim. We vacated the summary judgment on the grounds that the Superior Court lacked subject matter jurisdiction to hear an employee's complaint alleging fraudulent actions by the employer during a Workers' Compensation hearing. See Lavoie v. Gervais, 1998 ME 158, ¶ 11, 713 A.2d 335, 337-38.