Peerless Indemnity Insurance C v. Frost , 723 F.3d 12 ( 2013 )

United States Court of Appeals
For the First Circuit
No. 12-2370
PEERLESS INDEMNITY INSURANCE COMPANY;
PEERLESS INSURANCE COMPANY,
Plaintiffs, Appellees,
v.
ROBBIN W. FROST,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. George Z. Singal, U.S. District Judge]
Before
Lynch, Chief Judge,
Lipez and Thompson, Circuit Judges.
Robert H. Furbish, with whom Steven D. Silin and Berman &
Simmons, P.A. were on brief, for appellant.
Carol I. Eisenberg, with whom John S. Whitman and Richardson,
Whitman, Large, & Badger were on brief, for appellees.
July 10, 2013
LIPEZ, Circuit Judge. Dr. Robbin Frost, a licensed
podiatrist, was driving alone in her husband's Pontiac Bonneville
when she was severely injured in a collision caused by an
underinsured motorist. So far, she has collected $250,000 in
insurance proceeds; she seeks further payment from Peerless
Indemnity Insurance Co. and Peerless Insurance Co. (together,
"Peerless"), who issued business owner's and excess/umbrella
policies to Frost's podiatric practice, Lake Region Family Foot and
Ankle Center, P.A. ("Lake Region"). Peerless sued in federal
district court for a declaratory judgment that it had no duty to
pay for any of Frost's injuries or damages. The district court
granted summary judgment in favor of Peerless. Frost appeals.
We affirm the district court's decision on the ground
that Maine's uninsured/underinsured motorist statute, Me. Rev.
Stat. tit. 24-A, § 2902, does not apply to the Peerless policies
issued to Lake Region.
I.
On appeal from the district court's summary judgment
order, we review the relevant facts in the light most favorable to
the party against whom judgment was granted (here, Frost) and draw
all reasonable inferences in her favor. Kelley v. Corr. Med.
Servs., Inc., 707 F.3d 108, 110 (1st Cir. 2013). The facts here
are drawn from the pleadings and statements submitted by Frost to
the district court, as well as the undisputed documentary evidence.
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A. The Accident
Frost is the sole stockholder and executive officer of
Lake Region, a Maine professional association with a surgical
practice office in Windham, Maine. On May 25, 2007, Frost set out
from Lake Region's office in Windham to the Mercy Hospital in
Portland, where she was scheduled to perform several podiatric
surgical procedures. The car she was driving, a Pontiac
Bonneville, was titled to her husband, but Frost was the primary
user of the automobile and the vehicle registration showed both
Frost and her husband as co-registrants.
While traveling east along Route 202, Frost brought the
Pontiac to a stop at a traffic light in the town of Gray, Maine.
The driver of a second vehicle stopped behind her. As Frost and
the second driver waited at the traffic light, the driver of a
third vehicle came from behind at an unsafe speed and failed to
bring his vehicle to a halt, colliding with the second car and
pushing it violently into the rear of the Pontiac Bonneville.
Frost suffered severe injuries as a result of the
collision, including permanent disfigurement and near-total loss of
her eyesight. The injuries have forced Frost to discontinue her
podiatric practice. Frost has stated in her pleadings that her
injuries and damages as a result of the collision are "well in
excess" of $2.25 million. Peerless concedes that Frost's injuries
and damages are at least in excess of $1.25 million.
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B. The Insurance Policies
Frost and the driver of the second vehicle both sought to
recover damages from the driver of the third vehicle, whose
negligence appears to have been the sole proximate cause of the
collision. The driver of the third vehicle was covered under an
automobile insurance policy issued by AIU Insurance Co. ("AIU").
That policy provided coverage for bodily injury and property damage
of up to a maximum of $125,000 per accident. Frost herself was
covered under an automobile insurance policy issued by Progressive
Northwestern Insurance Co. ("Progressive"), which provided
uninsured/underinsured motorist coverage of up to a maximum of
$250,000 per person.
AIU agreed to pay $99,745.98 to Frost in connection with
the accident; this sum represented the full amount of coverage
remaining under the negligent driver's liability policy after the
second driver was compensated for his injuries. Meanwhile,
Progressive agreed to pay Frost $150,254.02, which represented the
maximum underinsured motorist coverage under the policy minus the
amount Frost already had received from AIU.
Frost's podiatric practice, Lake Region, also had two
insurance policies in effect at the time of the accident: a
business owner's policy issued by Peerless Indemnity Insurance Co.
and a commercial umbrella policy issued by Peerless Insurance Co.
The business owner's policy provided coverage to Lake Region for
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liability and medical expenses of up to $1 million per occurrence;
the umbrella policy provided additional coverage for up to $1
million.
1. Business Owner's Policy. The business owner's policy
explicitly excluded liability coverage for "'bodily injury' or
'property damage' arising out of the ownership, maintenance, use or
entrustment to others of any . . . 'auto' . . . owned or operated
by or rented or loaned to any insured." (An exception to that
exclusion, however, effectively provided liability coverage for
bodily injury or property damage arising out of valet parking on
the business premises.)
Despite this explicit exclusion of automobile liability
coverage, the business owner's policy was subject to an endorsement
for "Hired Auto and Non-Owned Auto Liability," which applied to
bodily injury and property damage arising out of the use of a
"hired auto" or "non-owned auto" by an employee of Lake Region in
the course of business. The endorsement explicitly deleted the
exclusion of automobile liability coverage "[f]or insurance
provided by this endorsement only."
The endorsement included a section entitled "Who Is An
Insured," which read, in relevant part:
Each of the following is an insured under this
endorsement to the extent set forth below:
a. You;
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b. Any other person using a "hired auto"
with your permission;
c. For a "non-owned auto", any partner or
"executive officer" of yours, but only
while such "non-owned auto" is being
used in your business . . . .
None of the following is an insured:
. . .
(2) Any partner or "executive officer" for
any "auto" owned by such partner or
officer or a member of his or her
household . . . .
The terms "hired auto" and "non-owned auto" were defined
by the policy as follows:
"Hired Auto" means any "auto" you lease, hire,
or borrow. This does not include any "auto"
you lease, hire, or borrow from any of your
"employees" or members of their households, or
from any partners or "executive officers" of
yours.
"Non-Owned Auto" means any "auto" you do not
own, lease, hire, or borrow which is used in
connection with your business. . . .
2. Umbrella Policy. The umbrella policy likewise
addressed automobile coverage. According to the policy terms:
[W]ith respect to the "auto hazard":
a. You are an insured;
b. Anyone else while using with your
permission an "auto" you own, hire or
borrow is also an insured except:
(1) The owner or anyone else from whom
you hire or borrow an
"auto". . . .
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(2) Your "employee" if the "auto" is
owned by that "employee" or a
member of his or her
household . . . .
The umbrella policy defined "auto hazard" to mean "liability
arising out of the ownership, maintenance, use or 'loading or
unloading' of any auto." The policy also stated that:
This insurance does not apply to:
. . .
f. Motor Vehicle Laws and Coverages
Motor vehicle no-fault law, first party
physical damage coverage, personal
injury protection coverage, uninsured
motorists or underinsured motorists
law; or other laws or coverages similar
to any of the foregoing.
When Frost demanded payment from Peerless under the
business owner's and umbrella policies for injuries and damages
that resulted from the May 25, 2007 collision, Peerless refused on
the ground that it had no obligation under either policy to pay
uninsured/underinsured motorist benefits to Frost with respect to
the accident. Peerless then filed a declaratory judgment complaint
in federal district court in Maine, invoking the court's diversity
jurisdiction under 28 U.S.C. § 1332(a) (2006).1 Frost
counterclaimed for judgment in the amount of $1 million against
1
Peerless Indemnity Insurance Co. is organized under the laws
of Illinois, and Peerless Insurance Co. is organized under the laws
of New Hampshire. Both corporations have their principal place of
business in Boston, Massachusetts.
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Peerless Indemnity Insurance Co. pursuant to the business owner's
policy and another $1 million against Peerless Insurance Co.
pursuant to the umbrella policy. After Peerless and Frost filed
cross-motions for summary judgment, the district court concluded
that the "unambiguous" language of both Peerless policies excluded
coverage for Frost's injuries and damages in the collision. The
court entered judgment in favor of Peerless on all claims, and this
timely appeal followed.
II.
We review the grant of a motion for summary judgment de
novo. Cruz v. Bristol-Myers Squibb Co., 699 F.3d 563, 570 (1st
Cir. 2012). Peerless argues that the terms of Lake Region's
business owner's and umbrella policies explicitly exclude coverage
for automobiles owned by Frost's family members. Frost concedes
that the business owner's and umbrella policies exclude liability
coverage with respect to automobiles owned by her family members,
but she argues that under Maine law the Peerless policies must be
deemed to provide uninsured/underinsured motorist coverage to
Frost. Frost's argument is based on a Maine statute, Me. Rev.
Stat. tit. 24-A, § 2902, and the Maine case law construing that
statute.
A. Maine's Uninsured/Underinsured Motorist Statute
In 1967, the Maine Legislature first enacted a statute
requiring automobile liability insurers to provide coverage in
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their policies for injuries caused by uninsured tortfeasors. See
Connolly v. Royal Globe Ins. Co., 455 A.2d 932, 935 (Me. 1983)
(citing Pub. L. No. 1967, ch. 93, § 1 (effective Jan. 1, 1968)).
In 1975, the Legislature extended the mandatory coverage provision
so that it would apply to victims injured by underinsured as well
as uninsured drivers. See id. Since then, the Legislature has
amended the statute several more times, most recently in 2005. In
its present form, the statute provides that:
A policy insuring against liability arising
out of the ownership, maintenance or use of
any motor vehicle may not be delivered or
issued for delivery in this State with respect
to any such vehicle registered or principally
garaged in this State, unless coverage is
provided in the policy or supplemental to the
policy for the protection of persons insured
under the policy who are legally entitled to
recover damages from owners or operators of
uninsured, underinsured or hit-and-run motor
vehicles, for bodily injury, sickness or
disease, including death, sustained by an
insured person resulting from the ownership,
maintenance or use of such uninsured,
underinsured or hit-and-run motor vehicle.
Me. Rev. Stat. tit. 24-A, § 2902(1) (2013).
The statute reflects "a strong public policy in favor of
the just compensation of accident victims." Beal v. Allstate Ins.
Co., 989 A.2d 733, 743 (Me. 2010) (quoting Wescott v. Allstate
Ins., 397 A.2d 156, 167 (Me. 1979)) (internal quotation marks
omitted). The "obvious design" of the statute is "to protect a
responsible insured motorist against the hazards presented by the
operation of motor vehicles where injuries are inflicted in an
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accident with an irresponsible operator who is . . . financially
unable to furnish adequate compensation for the injuries caused in
the accident." Wescott, 397 A.2d at 166; see also Beal, 989 A.2d
at 743 ("[T]he legislative purpose of section 2902 was to allow 'an
injured insured the same recovery which would have been available
. . . had the tortfeasor been insured to the same extent as the
injured party.'" (second alteration in original) (emphasis omitted)
(quoting Jipson v. Liberty Mut. Fire Ins. Co., 942 A.2d 1213, 1216
(Me. 2008))).
Under the statute, every automobile insurance policy in
Maine must provide uninsured/underinsured motorist coverage of at
least $50,000 for injury to or death of one person and $100,000 per
accident for injury to or death of more than one person. See Me.
Rev. Stat. tit. 24-A, § 2902(2); id. tit. 29-A, § 1605(1)(C); see
also Dairyland Ins. Co. v. Christensen, 740 A.2d 43, 44 n.1 (Me.
1999). Stricter rules apply to automobile insurance policies
"insuring a single individual or one or more related individuals
resident in the same household, as named insured." Me. Rev. Stat.
tit. 24-A, § 2912(1). These individual and household policies
generally must provide uninsured/underinsured motorist coverage at
least equal to "the amount of coverage for liability for bodily
injury or death." Id. § 2902(2).2 A purchaser of an individual or
2
For example, if an individual or household automobile
insurance policy provides liability coverage of up to $1.5 million
for bodily injury or death, then under Maine law it must also
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household automobile insurance policy with liability coverage
limits above the statutory minimum may choose to carry
uninsured/underinsured motorist coverage with lower limits--but
only if she signs a statutorily prescribed form and only if her
resulting uninsured/underinsured motorist coverage is still at
least $50,000 for injury or death of one person and $100,000 for
injury or death of multiple persons. See id.3
Maine's courts "construe the protections of section 2902
liberally in favor of insureds and strictly against insurers."
Beal, 989 A.2d at 743. The provisions of the
uninsured/underinsured motorist statute control "even when not
included in the insurance contract, and, to the extent that policy
terms are repugnant to the express or implied requirements of the
statute, they are void and unenforceable." Wescott, 397 A.2d at
166. Moreover, when an insured victim settles with an underinsured
provide uninsured/underinsured motorist coverage of up to $1.5
million for bodily injury or death--unless the purchaser has signed
the statutorily prescribed form to elect lower levels of coverage.
See Outram v. Onebeacon Ins. Grp. LLC, No. CV-06-319, 2007 Me.
Super. LEXIS 206, at *7-8 (Me. Super. Ct. Oct. 5, 2007).
3
Here, the business owner's and umbrella policies issued to
Lake Region each provided liability coverage of up to $1 million,
and Lake Region has not elected a lower level of
uninsured/underinsured motorist coverage. Thus, Frost argues,
Peerless must provide $1 million of uninsured/underinsured motorist
coverage. Peerless counters that the business owner's and umbrella
policies are not "individual" or "household" policies, so only the
statutory minimums ($50,000 per person) apply. We do not reach
this issue because, as we explain below, we find that the
uninsured/underinsured motorist statute does not apply to the
Peerless policies.
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tortfeasor for the limits of the tortfeasor's liability insurance,
the victim may still claim underinsured motorist benefits under her
own insurance policy if her damages exceed the tortfeasor's policy
limits, provided that (1) her insurance carrier has consented to
the settlement or (2) there is "no prejudice" to her carrier
resulting from its lack of consent. Beal, 989 A.2d at 743-44.
Here, Peerless consented to Frost's settlement with AIU and her
settlement with Progressive.
B. Application to the Peerless Policies
At issue in this case is whether Lake Region's Peerless
policies count as "polic[ies] insuring against liability arising
out of the ownership, maintenance or use of any motor vehicle . .
. with respect to any such vehicle registered or principally
garaged in this State" for the purposes of Maine's
uninsured/underinsured motorist statute. Me. Rev. Stat. tit. 24-A,
§ 2902(1). Since the umbrella policy is parasitic on the
underlying business owner's policy, whether the umbrella policy is
covered by the statute depends on whether the business owner's
policy is. For the following reasons, we conclude that the business
owner's policy is not covered by the statute.4
4
At the summary judgment stage, the district court "assum[ed]
(without deciding)" that Maine's section 2902 would in some
circumstances apply to "policies that do not insure or reference
any particular motor vehicle registered or principally garaged in
Maine." Peerless Indem. Ins. Co. v. Frost, No. 2:12-cv-43-GZS,
2012 U.S. Dist. LEXIS 148518, at *16 (Oct. 16, 2012). The district
court nevertheless ruled in Peerless's favor. Id. at *17. We
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The issue in this case is one of Maine law. The Maine
Law Court has never definitively ruled on whether Maine's
uninsured/underinsured motorist statute applies to policies such as
those Peerless issued to Lake Region. When a state's highest court
has yet to rule definitively on a question of state law, our task
is to predict how that court likely would decide the issue.
Rosciti v. Ins. Co. of Pa., 659 F.3d 92, 98 (1st Cir. 2011).
"In carrying out that task, our first step is to consult
pertinent statutory language . . . ." González Figueroa v. J.C.
Penney P.R., Inc., 568 F.3d 313, 318 (1st Cir. 2009). On its face,
Maine's uninsured/underinsured motorist statute applies to
"polic[ies] insuring against liability arising out of the
ownership, maintenance or use of any motor vehicle . . . with
respect to any such vehicle registered or principally garaged in
this State." Me. Rev. Stat. tit. 24-A, § 2902(1). Given that the
business owner's policy includes the Hired Auto and Non-Owned Auto
Liability endorsement, that policy might theoretically be read as
"[a] policy insuring against liability arising out of the
ownership, maintenance or use of any motor vehicle." But the
statute goes on to limit its applicability to policies issued "with
respect to any such vehicle registered or principally garaged in
affirm the district court's ultimate ruling, but do so by
foreclosing that threshold assumption: We hold that Maine's
section 2902 does not apply to the Peerless policies issued to Lake
Region.
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this State." Id. The statute, in other words, applies to
insurance policies issued for specific motor vehicles. The
business owner's policy, however, was not issued "with respect to"
any vehicle whatsoever--it was issued with respect to the business
of Lake Region.
Frost argues that the phrase "with respect to any such
vehicle registered or principally garaged in this State" is
intended simply to describe the limits of state authority to
regulate insurance policies--not to confine the reach of the
statute to particular types of policies. Frost offers no support
for that assertion, but even if she is correct, her reading does
not alter the meaning of the limiting phrase. The statute is
worded as a conditional prohibition on the delivery and issuance of
insurance policies. Me. Rev. Stat. tit. 24-A, § 2902(1) ("A policy
. . . may not be delivered or issued . . . , unless [certain
conditions are met] . . . ."). The phrase "with respect to"
circumscribes that conditional prohibition, limiting it to "[a]
policy insuring against liability arising out of the ownership,
maintenance or use of any motor vehicle . . . registered or
principally garaged in this State." Id. Whatever the purpose of
the "with respect to" language (and it seems likely that it is
intended, in part, to delimit the state's authority), that language
still describes an insurance policy issued for specific vehicles.
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That the uninsured/underinsured motorist statute applies
to insurance policies issued for specific motor vehicles is further
supported by the next subsection of the statute, which establishes
the amount of uninsured/underinsured motorist coverage that must be
provided. See id. § 2902(2). In setting out the requirements,
this section divides the universe of policies covered by the
uninsured/underinsured motorist statute between "motor vehicle
insurance policies subject to [other sections of the Maine
Insurance Code]" and "motor vehicle insurance policies not subject
to [those other sections]." Id. (emphases added). In other words,
the statute itself contemplates that it will apply only to "motor
vehicle insurance policies." Even if the business owner's policy
might theoretically be characterized as "[a] policy insuring
against liability arising out of the ownership, maintenance or use
of any motor vehicle," it is difficult to characterize the business
owner's policy as a "motor vehicle insurance policy."
In predicting how the Maine Law Court would decide this
issue, we also look to analogous decisions of that court. See
Barton v. Clancy, 632 F.3d 9, 17 (1st Cir. 2011). Though the Law
Court has never explicitly deemed the uninsured/underinsured
motorist statute inapplicable outside the context of motor vehicle
insurance policies, the court has repeatedly employed language to
that effect. E.g., Molleur v. Dairyland Ins. Co., 942 A.2d 1197,
1200 (Me. 2008) ("The Legislature requires that any motor vehicle
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policy written in Maine provide UM/UIM coverage." (emphasis
added)); Connolly, 455 A.2d at 935 ("In 1967, the Legislature
originally enacted the uninsured vehicle coverage to require
automobile liability insurers to provide uninsured vehicle coverage
in the policies." (emphasis added)); Dufour v. Metro. Prop. & Liab.
Ins. Co., 438 A.2d 1290, 1291-92 (Me. 1982) ("24-A M.R.S.A. § 2902
(1980) . . . provides that any automobile liability insurance
policy delivered in Maine and covering an automobile registered or
principally garaged in Maine must include uninsured motorist
coverage . . . ." (emphasis added)); Langley v. Home Indem. Co.,
272 A.2d 740, 744 (Me. 1971) (stating that UM statute applies to
"automobile liability insurance contract[s]").
Furthermore, we may consult decisions of the state's
lower courts, even those that express "considered dicta." Rosciti,
659 F.3d at 98; see also DiBella v. Hopkins, 403 F.3d 102, 113 (2d
Cir. 2005) (statements by state's lower courts, even if dicta, can
be "helpful indicators of state law"). A Maine trial court has
suggested in dicta that an "umbrella policy would not constitute a
policy 'with respect to [a] vehicle registered or principally
[garaged] in this State' within the meaning of [section] 2902(1)."
Outram v. Onebeacon Ins. Grp. LLC, No. CV-06-319, 2007 Me. Super.
LEXIS 206, at *6 n.3 (Me. Super. Ct. Oct. 5, 2007) (first
alteration in original).
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Moreover, we "may consider . . . any other reliable data
tending convincingly to show how the highest court in the state
would decide the issue at hand." Michelin Tires (Can.) Ltd. v.
First Nat. Bank of Bos., 666 F.2d 673, 682 (1st Cir. 1981)
(citations and internal quotation marks omitted). Several pieces
of legislative history reinforce the understanding that the statute
applies only to motor vehicle policies. See, e.g., Letter from
Alessandro A. Iuppa, Superintendent, State of Me. Dep't of Prof'l
& Fin. Reg., Bureau of Ins., to Sen. Lloyd LaFountain, Rep. Jane
Saxl & Joint Standing Comm. on Banking & Ins. 1 (Apr. 12, 1999)
("Current law . . . requires every motor vehicle policy issued in
this state to include uninsured and underinsured motor vehicle
coverage." (emphasis added)); H.R. 122-L.D. 2021, 2d Sess., at H-
1354 (Me. 2006) (statement of Rep. Lisa Marraché) ("The intent of
the [uninsured/underinsured motorist] law when it was first passed
was for car insurance for the person who was driving or those who
were in the car and not necessarily other people to make claims
against their own car insurance . . . ." (emphasis added)).
Additionally, we consider how other state courts have
resolved the question. See Rosciti, 659 F.3d at 98. Courts in
other states have held that uninsured/underinsured motorist
statutes with language similar to Maine's do not apply to
commercial general liability policies such as those at issue here.
See, e.g., Trinity Universal Ins. Co. v. Metzger, 360 So. 2d 960,
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962 (Ala. 1978) (similarly worded Alabama statute applies only to
policies that "insure against the risk of loss through the
operation of specific automobiles"). One useful example is Hodge
v. Raab, 65 P.3d 679 (Wash. Ct. App. 2003). Hodge, an employee at
an auto garage, was working on a customer's truck when, through the
customer's fault, the truck lurched forward, injuring Hodge. Id.
at 680. The customer had no liability insurance. Id. Hodge's
employer maintained a commercial general liability policy for
injury caused by garage operations, incidentally including injury
caused by unspecified customer vehicles. Id. at 680, 682. Hodge
argued that this liability coverage for customers' cars brought the
policy within the ambit of Washington's uninsured/underinsured
motorist statute. Id. at 681. The court rejected that argument,
explaining:
The liability section in the policy . . . was
not issued "with respect to" a vehicle known
to be registered or garaged in Washington.
Rather, it was issued with respect to garage
operations. It provided liability coverage
for garage accidents, specifically excluding
those caused by autos.
The policy does incidentally cover an
accident caused by any customer vehicle,
wherever registered or garaged, that was left
at the garage for service or repair. But at
the time the policy was issued, neither the
service station owner nor the insurance
company had any information about the vehicles
that potentially would be covered. There is
no reference in the liability coverage to
covered autos. There is no schedule of
covered autos and no premium attributable to
the limited liability coverage for customers'
cars. The absence of such features reinforces
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the conclusion that the policy was not issued
with respect to a vehicle.
Because the policy was not issued with
respect to a vehicle registered or principally
garaged in Washington, the statutory mandate
for underinsured motorist coverage does not
apply. . . . And it makes no difference that
the particular vehicle that caused this
particular accident was, in fact, registered
and principally garaged in Washington.
. . . .
While the UIM statute is to be read
broadly, it does not mandate UIM coverage in
connection with every type of liability policy
that will, under limited circumstances, cover
damage resulting from the use of automobiles.
Id. at 681-82.
Frost attempts to distinguish Hodge. She argues that the
policy in Hodge--which "provided liability coverage for garage
accidents, specifically excluding those caused by autos," subject
to an exception for accidents caused by "any customer vehicle," id.
at 682--"obviously provides significantly narrower coverage for
autos than the [business owner's policy] with the Hired Auto and
Non-Owned Auto Liability endorsement." It is far from obvious to
us, however, that the sliver of auto insurance in Hodge was
narrower than the sliver of auto insurance in the business owner's
policy here. Indeed, Frost overstates the amount of auto insurance
bound up in Lake Region's business owner's policy. She argues,
erroneously, that the policy's initial explicit exclusion of auto
liability coverage "is completely removed and replaced by the
'Hired Auto and Non-Owned Auto Liability' endorsement." In fact,
by its own terms, as already noted, the endorsement deletes that
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exclusion "[f]or insurance provided by this endorsement only"
(emphasis added). Outside of the narrow context of hired and non-
owned autos, the exclusion of auto liability coverage retains full
force, reinforcing the notion that the business owner's policy is
not the type of auto policy to which the Maine statute applies.
There are cases from other states, however, in which
commercial general liability policies similar to the business
owner's policy, containing similar auto liability endorsements,
were held subject to those states' uninsured/underinsured motorist
statutes. For instance, Illinois's intermediate appellate court
has held that the state's uninsured/underinsured motorist
statute--which is worded similarly to Maine's--applies to
commercial general liability policies that, like the business
owner's policy issued to Lake Region, include hired and non-owned
auto liability endorsements. Harrington v. Am. Family Mut. Ins.
Co., 773 N.E.2d 98, 100 (Ill. App. Ct. 2002) (sole proprietor of
landscaping business who was injured by underinsured motorist while
riding his bicycle can claim underinsured motorist benefits from
his commercial general liability insurer); see also W. Bend Mut. v.
Keaton, 755 N.E.2d 652, 654 (Ind. Ct. App. 2001); Selander v. Erie
Ins. Grp., 709 N.E.2d 1161 (Ohio 1999).5
5
Frost also cites St. Paul Fire & Marine Insurance Co. v.
Gilmore, 812 P.2d 977 (Ariz. 1991). This case is distinguishable,
however, because there the insurer conceded that the relevant
policy provided "automobile liability insurance." Id. at 981.
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The courts that decided these cases were willing to
interpret broadly language similar to "[a] policy insuring against
liability arising out of the ownership, maintenance or use of any
motor vehicle . . . with respect to any such vehicle registered or
principally garaged in this State." But in our opinion, such
interpretations do violence to the plain meaning of the text. And
we find it notable that, after the Ohio Supreme Court decided
Selander, the Ohio Legislature amended its uninsured/underinsured
motorist statute to preclude its application to commercial general
liability policies such as those at issue in Selander and here.
See Bowling v. St. Paul Fire & Marine Ins. Co., 776 N.E.2d 1175,
1177, 1179 (Ohio Ct. App. 2002) (stating that Selander was
superseded by statute). This amendment suggests that the Ohio
Legislature appreciated the negative policy consequences of
interpreting an uninsured/underinsured motorist statute unduly
broadly. Indeed, "'[i]t should be recognized that the generosity
of the courts confers no favor upon the insuring public. Such
decisions result either in such coverage being withdrawn from
potential insureds or in premium rates being raised so
substantially that they will become priced out of the range of most
buyers.'" Hodge, 65 P.3d at 682 (quoting 8C J. Appleman, Insurance
Law and Practice § 5071.65, at 108 (1981)).
Frost argues that not applying the uninsured/underinsured
motorist statute to the Peerless policies is at odds with Maine's
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clearly articulated public policy of providing broad
uninsured/underinsured motorist coverage. See, e.g., Greenvall v.
Me. Mut. Fire Ins. Co., 715 A.2d 949, 952 (Me. 1998) ("To
effectuate [its] intent, we construe section 2902 liberally in
favor of the insured victim and strictly against the insurer. Any
ambiguity in the phrase 'legally entitled to recover' must be
construed in favor of the insured." (citations and internal
quotation marks omitted)). Indeed, Maine adheres to the rule that
"[u]ninsured and underinsured insurance . . . is personal and
portable, following the insured, rather than the vehicle." 16
Williston on Contracts § 49:35 (4th ed. 2013); see also Pease v.
State Farm Mut. Auto. Ins. Co., 931 A.2d 1072, 1077 (Me. 2007)
(Silver, J., concurring) ("UM coverage inures to the person, not
the vehicle. . . . Maine precedent has ensured that UM coverage
extends to pedestrians, bicyclists, and other insured who are
injured while not in their owned-insured vehicle. Construing the
UM statute broadly to prohibit . . . exclusions follows the
legislative intent to close coverage gaps rather than endorse
patchwork policies that leave responsible, insured consumers
without the protection they have paid for." (citations and
internal quotation marks omitted)); Skidgell v. Universal
Underwriters Ins. Co., 697 A.2d 831, 834 (Me. 1997) (allowing
passenger on another's motorcycle to claim benefits under
uninsured/underinsured motorist coverage of passenger's own
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automobile policy, and reasoning that limitations on scope of
uninsured motorist coverage in insurance policy were "contrary to
the public policy embodied in [section] 2902").
Frost is correct to note that the Maine Law Court has
expressed a general unwillingness to allow insurers to circumscribe
uninsured/underinsured motorist coverage. But Frost overlooks the
fact that the decisions reflecting this unwillingness involve
automobile liability policies that either explicitly provide
uninsured/underinsured motorist coverage or are subject to the
uninsured/underinsured motorist statute. See, e.g., Pease, 931
A.2d at 1074 ("State Farm's UM coverage policy loosely tracks the
language of the uninsured motorist statute . . . ."); Greenvall,
715 A.2d at 951 ("At the time of accident, Madore was insured under
an automobile liability policy issued by Maine Mutual which
provided Madore with $300,000 of uninsured motorist coverage.");
Skidgell, 697 A.2d at 832 ("Skidgell carried personal automobile
insurance . . . providing underinsured motorist coverage up to
$20,000."). Those decisions do not bear on the threshold question
of whether the uninsured/underinsured motorist statute applies in
the first place to commercial general liability policies containing
a sliver of automobile liability coverage.
In addition, Frost also overlooks the fact that the
rationale underlying the well-established owned-but-not-insured
exception to the broad, portable nature of uninsured/underinsured
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motorist coverage confirms that the uninsured/underinsured motorist
statute should not apply in this case. Under the owned-but-not-
ensured exception, a person who owns multiple vehicles but only
purchases automobile liability insurance on some of those vehicles
cannot rely on section 2902 to confer uninsured/underinsured
motorist coverage with respect to injuries sustained while riding
in the owned-but-not-insured vehicles. See Hare v. Lumbermens Mut.
Cas. Co., 471 A.2d 1041, 1043 (Me. 1984) ("[U]ninsured motorist
coverage on one of a number of vehicles owned by an insured does
not extend the benefits of such coverage, for no premium, to all
other vehicles owned by that insured."); see also Gross v. Green
Mountain Ins. Co., 506 A.2d 1139, 1142 (Me. 1986); Brackett v.
Middlesex Ins. Co., 486 A.2d 1188, 1191 (Me. 1985). As courts
elsewhere have noted, the owned-but-not-insured exception avoids
"'the inequity of allowing a person who insures one vehicle with an
insurance carrier to obtain a "free ride" by thereby obtaining
coverage by that same carrier on one, two, or a fleet of vehicles
upon which he has paid no premium to the carrier.'" Nationwide
Mut. Ins. Co. v. Hampton, 935 F.2d 578, 586-87 (3d Cir. 1991)
(quoting Dullenty v. Rocky Mountain Fire & Cas. Co., 721 P.2d 198,
204 (Idaho 1986), abrogated by Colonial Penn Franklin Ins. Co. v.
Welch, 811 P.2d 838 (Idaho 1991)). Moreover, if the
uninsured/underinsured motorist statute provided coverage for
persons injured while riding in cars that they owned but that they
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excluded from their insurance policies, then "multi-car owners
would be acquiring insurance at rates subsidized by single-car
owners," a result that some courts have found to be "neither
desirable nor compatible with public policy." Clampit v. State
Farm Mut. Auto. Ins. Co., 828 S.W.2d 593, 597 (Ark. 1992); see also
Lefler v. General Cas. Co. of Wis., 260 F.3d 942, 945 (8th Cir.
2001) ("'If an insurer is required to insure against a risk of an
undesignated but owned vehicle, or a different and more dangerous
type of vehicle of which it has no knowledge, it is thereby
required to insure against risks of which it is unaware, unable to
underwrite, and unable to charge a premium therefor.'" (quoting
Dessel v. Farm & City Ins. Co., 494 N.W.2d 662, 664 (Iowa 1993))).
The rationale underlying the owned-but-not-insured
exception--that it would be unfair for a person insured with
respect to one or more vehicles to claim uninsured/underinsured
motorist coverage for a vehicle he owns that is not identified and
for which no premium has been paid--applies with full force to this
case. Through Lake Region (an entity that Frost wholly owns and
completely controls), she purchased liability coverage for borrowed
automobiles but not for automobiles owned by herself and her family
members. As noted, Frost concedes that the business owner's policy
is limited in that way. Now, she seeks to claim
uninsured/underinsured motorist benefits with respect to her
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husband's Pontiac Bonneville despite the fact that no premium has
been paid for the coverage of that vehicle.
In summary, given the legislative text, structure,
history, and policy, as well as relevant case law from both within
and without Maine, we predict that the Maine Law Court would hold
that section 2902 does not apply to the Peerless policies at issue
in this case.
III.
For the reasons stated, the Maine uninsured/underinsured
motorist statute does not apply to the business owner's and
umbrella policies issued by Peerless to Lake Region, precluding
Frost's recovery from Peerless. Therefore, the district court
properly issued a declaratory judgment that Peerless had no duty
under either policy to pay Frost for the injuries and damages that
she suffered in the May 25, 2007 accident.
Affirmed.
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