Centennial Insurance Company v. Patterson

United States Court of Appeals
For the First Circuit
No. 08-1521
CENTENNIAL INSURANCE COMPANY,
Plaintiff, Appellant,
v.
ROBERT PATTERSON,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. D. Brock Hornby, U.S. District Judge]
[Hon. David M. Cohen, U.S. Magistrate Judge]
Before
Lynch, Chief Judge,
Torruella and Stahl, Circuit Judges.
Jeffrey T. Edwards and Preti, Flaherty, Beliveau & Pachios,
LLP, on brief for appellant.
David M. Sanders, on brief for appellee.
April 23, 2009
TORRUELLA, Circuit Judge. In this insurance coverage
dispute, appellant-insurer Centennial Insurance Company
("Centennial") seeks review of the district court's grant of
summary judgment to appellee-insured veterinarian Dr. Robert
Patterson. The district court declared that Centennial was
obligated under an insurance policy to legally defend Patterson in
a lawsuit instituted against him by Carol Murphy. After careful
consideration, we affirm the grant of summary judgment in favor of
Patterson.
I. Background
For the purposes of summary judgment the facts are as
follows. Centennial is a New York insurance company authorized to
do business in Maine. Dr. Patterson is a doctor of veterinary
medicine who practices in Maine. Centennial provided insurance
coverage to Patterson pursuant to a Veterinarian's Professional
Liability Policy in effect between the parties during the period
January 1, 2003 through January 1, 2005 ("the Policy").
The Policy states, in relevant part:
II. Defense, Settlement, Supplementary
Payments
With respect to such insurance as is afforded
by this certificate:
A. The Company shall have the right and duty
to investigate any Claim or defend any Suit
brought against the Insured alleging a
Veterinary Incident and seeking damages on
account thereof, to which this insurance
applies, even if such Claim or Suit is
groundless, false, or fraudulent. . . .
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Common Certificate Definitions Form
D. Claim means any of the following: . . .
2. A Suit, arbitration or other
proceeding served on an Insured for damages
resulting from a Veterinary Incident.
. . .
M. Veterinary Incident means any malpractice,
negligent act or omission, utterance or
publication of a libel or slander, or other
defamatory or disparaging material:
1. in the furnishing of professional
veterinary services, . . . by the Named
Insured or by any person for whom the Named
Insured is legally responsible.
. . .
Relevant to this dispute, the Policy also contains the following
exclusions:
III. Exclusions
This certificate does not apply to Claim or
Suit based upon, arising out of, or related
to: . . .
H. any actual or alleged;
1. dishonest, fraudulent, criminal, malicious
act, or malicious omission by any Insured;
2. willful violation of any law, statute,
ordinance, rule or regulation by any Insured.
In September 2006, Murphy initiated a pro se civil action
in federal court against the State of Maine and eighty or more
defendants, including Dr. Patterson, alleging various claims
arising from proceedings brought against Murphy by the State of
Maine for animal cruelty. Murphy had been charged by the State
with animal cruelty for not providing proper food, water, or
shelter to approximately sixty animals on her farm. She sought
"compensatory and punitive damages" and injunctive relief, namely,
the "return of all [her] property."
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The claims against Dr. Patterson arose from his alleged
testimony against Murphy at an Animal Possession Hearing, which was
held on March 19, 2004 (the "Hearing"), and also, Dr. Patterson's
alleged examination of her animals in connection with those
proceedings.1
1
Murphy's complaint, a 60-page document labeled "Second Amended
Judicial Brief," included the following claims:
1. This action is brought by the Plaintiff . . . to remedy
[various violations] by State Officials and others . . . that
deprived CAROL MURPHY . . . of rights, privileges or immunities
secured or legally protected by the United States Constitution and
Amendments, Civil Rights and Human Rights and the laws of the
United States.
2. These specifically include but are not limited to those rights,
privileges and immunities found in and secured and/or protected by
the Constitution [and various provisions therein]. . . also the
Constitutional right to be protected from . . . perjury and
subornation of perjury, libel, slander, malfeasance, misfeasance,
nonfeasance . . . etc. . . .
129. . . . DR. PATTERSON D.V.M. . . . of CLEARWATER VETERINARY
HOSPITAL . . . testified [at the Animal Possession Hearing] that
Ms. Murphy's animals were in horrible condition, no veterinary
care, no food, no water, were filthy, that the house had six inches
of feces on the floors and that the animals had received no food or
water for months. This is again racketeering, perjury, collusion,
color of law crimes, conspiracy to deprive Ms. Murphy of her legal
property, conspiracy to deprive Ms. Murphy of the full enjoyment of
her 30 acre farm, tampering with evidence in a criminal trial,
tampering with the outcome of the trial by falsifying evidence and
more. These acts were committed willfully, knowingly with intent
and malice aforethought for personal gain and for the gain of State
of Maine allowing domestic terrorists free reign.
. . .
184. . . . Patterson of Clearwater testified that two calves that
died expired because they had no food and water. In fact those
animals had been purchased at auction and were dying when
purchased. . . . Patterson had never asked the condition of the
animals when purchased from auction, and he did not know how long
they had been in Ms. Murphy's care. Additionally under the law Ms.
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Dr. Patterson submitted a copy of Murphy's complaint to
Centennial and requested that Centennial tender a defense on his
behalf, pursuant to the Policy. Centennial denied Dr. Patterson's
request on the ground that it did not have a duty to defend or
indemnify Dr. Patterson with respect to the Murphy suit because the
suit fell outside the Policy's coverage. Centennial then brought
the instant declaratory judgment action in the federal district
court for the District of Maine, seeking a declaration that it did
not have an obligation to defend and indemnify Dr. Patterson
against the claims asserted by Murphy. Meanwhile, Dr. Patterson
hired an attorney and provided for his own defense in the Murphy
suit. On June 25, 2007, while Centennial's action was pending
before the district court, Murphy's complaint was dismissed with
Murphy as the legal owner of the animals did not give permission
for Patterson to do anything to her animals whether they were alive
or dead. Patterson was working in collusion with . . . others in
the domestic terrorist racketeering scheme against Ms. Murphy.
. . . Patterson perjured himself on the witness stand. . . .
Patterson is guilty of treating stolen animals without getting
permission from the legal owner. He is guilty of collusion,
racketeering, tampering with evidence in a criminal trial,
tampering with the jury, tampering with the disposition of a
criminal case and violating Ms. Murphy's right to an impartial
trial. He failed to report the theft of her animals and the
racketeering scheme to the proper authorities for investigation.
All are criminal acts.
. . .
185. . . . Patterson is guilty of perjury, theft of animals,
transporting stolen animals, receipt of stolen animals, tampering
with the jury, falsifying photographic evidence in a criminal
trial, tampering with the outcome of a criminal trial,
racketeering, domestic terrorism, violating Ms. Murphy's U.S.
Constitutional rights and more.
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prejudice. Centennial's subsequent motion to dismiss this action
as moot, based on the dismissal of the underlying suit, was denied
on grounds that a factual dispute remained over "whether [Dr.
Patterson] had incurred attorneys fees and costs and, if so, a
legal dispute over whether they are recoverable from the plaintiff
under a duty to defend." The parties then each filed motions for
summary judgment. A magistrate judge recommended that Dr.
Patterson's motion for summary judgment be granted, and
Centennial's be denied, finding that Centennial had a duty under
the Policy to defend Dr. Patterson in the Murphy action. On
March 26, 2006 the district court entered an order adopting that
recommendation. At that point in time, Dr. Patterson had incurred
$121.00 in attorney's fees defending himself in the underlying
Murphy action, and $3,036 in connection with establishing
Centennial's duty to defend in the instant suit. Centennial now
appeals.
II. Discussion
A. Standard of Review
This case comes before us under our diversity
jurisdiction and the parties agree that we must apply Maine law to
the resolution of the issues in dispute. See Douglas v. York
County, 433 F.3d 143, 149 (1st Cir. 2005).
We apply de novo review to the district court's decision
because the issues were "resolved on summary judgment and because
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under Maine law '[w]hether an insurer has an obligation to defend
its insured against a complaint is a question of law.'" Bucci v.
Essex Ins. Co., 393 F.3d 285, 290 (1st Cir. 2005) (quoting Elliot
v. Hanover Ins. Co., 711 A.2d 1310, 1312 (Me. 1998)) (alteration in
original).
B. Applicable Law
Both Centennial and Dr. Patterson agree that Maine law
employs the "comparison test" to determine whether an insurer has
a duty to defend an insured. See Barrett Paving Materials, Inc. v.
Cont'l Ins. Co., 488 F.3d 59, 63 (1st Cir. 2007) (citing Travelers
Indem. Co. v. Dingwell, 414 A.2d 220, 224 (Me. 1980)). "The
reviewing court is required to '[lay] the underlying damage
complaint[ ] alongside the insurance policy and then determine[ ]
[whether] the pleadings [are] adequate to encompass an occurrence
within the coverage of the policy.'" Id. (quoting Dingwell, 414
A.2d at 224) (modifications in original). "Under this comparison
test, the insurer has a duty to defend if the underlying complaint
discloses a 'potential or a possibility' for liability within the
policy's coverage." Bucci, 393 F.3d at 290 (quoting Elliott, 711
A.2d at 1312) (emphasis in original). In other words, "'[g]iven
the possible existence of any legal or factual basis for payment
under a policy, an insurer's duty to defend should be decided
summarily in favor of the insured.'" Id. at 292 (quoting Gibson v.
Farm Family Mut. Ins. Co., 673 A.2d 1350, 1352 (Me. 1996))
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(emphasis in original); see also NE Props., Inc. v. Chi. Title Ins.
Co., 660 A.2d 926, 927 (Me. 1995) ("The insured is entitled to a
defense if there exists any legal or factual basis which could be
developed at trial which would obligate the insurers to pay under
the policy." (internal quotation marks omitted)). "Significantly,
'[t]he 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.'" Bucci, 393 F.3d at 292 (quoting Commercial
Union Ins. Co. v. Royal Ins. Co., 658 A.2d 1081, 1083 (Me. 1995)).
"Maine law is very clear that the inquiry [under the
comparison test] 'is based exclusively on the facts as alleged
rather than on the facts as they actually are.'" Barrett Paving,
488 F.3d at 63 (quoting Dingwell, 414 A.2d at 224). Moreover, we
note that under Maine law, at least in some circumstances, "the
duty of an insurance company to defend one count in a lawsuit
imposes a duty to defend all counts." Gibson, 673 A.2d at 1354.
Finally, as a general rule, "a standard policy of insurance" under
Maine law must be interpreted "most strongly against the insurer."
Id. at 1353 (internal quotation marks omitted).
C. Potential for Coverage within Scope of Policy
Centennial argues that it had no duty to defend Dr.
Patterson in the Murphy action because the Murphy complaint did not
allege a "veterinary incident," as the term is defined in the
Policy. As noted above, the Policy defines "veterinary incident"
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as "any malpractice, negligent act or omission, utterance or
publication of a libel or slander, or other defamatory or
disparaging material . . . [i]n the furnishing of professional
veterinary services." In support of its position that no
"veterinary incident" was alleged, Centennial argues that (a) the
Murphy complaint makes no claims of malpractice or negligence in
the "furnishing of professional veterinary services" and that (b)
the Murphy complaint makes no claims of libel, slander or
defamation against Dr. Patterson - but only against certain media
outlets. We disagree.
As to Centennial's first argument, it is true that the
Murphy complaint does not explicitly assert that Dr. Patterson was
negligent or committed malpractice in the furnishing of
professional veterinary services. However, the complaint does
contain several allegations of wrongful conduct by Dr. Patterson
that could "potentially" be so construed.
As a threshold matter, we reject Centennial's contention
that the claims asserted against Dr. Patterson related "exclusively
to Dr. Patterson's testimony at the Animal Possession Hearing."
Rather, Murphy's statement, at paragraph 184 of the complaint, that
Dr. Patterson "testified that two calves that died expired because
they had no food and water" implies that Dr. Patterson examined the
deceased calves in order to reach a professional conclusion
regarding their cause of death, and that Murphy's claims arise, in
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part, from that examination. This inference, that Dr. Patterson
examined the animals, is further supported by Murphy's statement
that she "did not give permission to Patterson to do anything to
her animals whether they were alive or dead." Furthermore,
Murphy's allegation that "Patterson is guilty of treating stolen
animals without getting permission from the legal owner," is a
claim against Dr. Patterson which does not arise solely from his
testimony against Murphy but also from actions taken by Dr.
Patterson toward Murphy's animals, either when they were living, or
after they had died.
Taken together, Murphy's allegations suggest that Dr.
Patterson not only testified against Murphy, but performed some
type of professional veterinary service on Murphy's animals, which
Murphy regarded as wrongful in being carried out without her
authorization, wrongful in approach (because Dr. Patterson did not
ask her about the calves' origin and prior condition), and wrongful
in result (because Dr. Patterson erroneously faulted Murphy for
their death). As such, Murphy's complaint can be construed as
including claims arising out of veterinary malpractice or
negligence; claims which, if proven, potentially fall within the
Policy's coverage. We reiterate that a "potential" of a "claim
within the policy" is all that is required, under Maine law, to
trigger Centennial's duty to defend. See J.A.J., Inc. v. Aetna
Cas. & Sur. Co., 529 A.2d 806, 808 (Me. 1987) (stating that "[i]t
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is not essential that the complaint specifically and unequivocally
make out a claim within the policy" but only that it raise "a
potential . . . that the facts ultimately proved may come within
the coverage").
We hold that the allegations of the complaint contain
sufficient facts to state a claim of negligence or malpractice
potentially covered by the Policy. We need not go any further, as
this conclusion is sufficient to activate Centennial's duty to
defend Dr. Patterson in the underlying suit. Nevertheless, we also
hold, contrary to Centennial's assertions, that the duty to defend
is independently triggered by our view that Murphy potentially
alleged that Dr. Patterson, among other defendants, committed libel
and slander against her.
The Policy language clearly includes within the scope of
coverage claims against the insured alleging the "utterance or
publication of a libel or slander, or other defamatory or
disparaging material . . . in the furnishing of professional
veterinary services." Centennial disputes the applicability of
this provision by arguing that Murphy's allegations of libel,
slander and defamation were directed at defendants in the complaint
other than Dr. Patterson, namely, certain media outlets that
published newspaper accounts of the proceedings against Murphy.
This is certainly one plausible interpretation of the complaint, in
that the specific claims of libel and slander enumerated in the
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complaint were directed towards various media outlets.2
Nevertheless, there is another plausible interpretation. In
paragraph 2 of her complaint, Murphy makes general claims of libel
and slander which, at paragraph 1, she directs towards "State
Officials and others." Based on these broadly worded provisions,
the complaint may be reasonably construed as potentially stating a
defamation claim against any of the defendants, including Dr.
Patterson. See Dingwell, 414 A.2d at 227 (noting that with "the
great latitude with which pleadings are construed today, and the
great latitude of amendment, an insured's right to a defense should
not be foreclosed unless such a result is inescapably necessary"
(quoting Donnelly v. Transp. Ins. Co., 589 F.2d 761, 765 (4th Cir.
1978)). Moreover, this construction of paragraph 2's libel and
slander claim as potentially applicable to Dr. Patterson, is
bolstered by the language of the complaint at paragraph 129, where
Murphy alleges that Dr. Patterson provided untruthful and damaging
testimony against her at the animal repossession hearing. Reading
these portions of the complaint together, we can reasonably infer
that Murphy may have intended to state a claim against Dr.
Patterson for defamation -- a claim that, if proven, would
2
For example, at paragraph 151 of the Complaint Murphy alleges
that the Morning Sentinel newspaper committed "libel and slander"
by "print[ing] the story without checking their facts." At para.
157 of the Complaint Murphy makes similar claims against the
Kennebec Journal, alleging that this publication was also "guilty
of libel and slander" in printing a story about the conditions on
Murphy's farm.
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potentially trigger coverage under the Policy. See Me. State Acad.
of Hair Design, Inc. v. Commercial Union Ins. Co., 699 A.2d 1153,
1156 (Me. 1997) ("'Even a complaint which is legally insufficient
to withstand a motion to dismiss gives rise to a duty to defend if
it shows an intent to state a claim within the insurance
coverage.'" (quoting Dingwell, 414 A.2d at 226) (emphasis added)).
Finally, that Murphy had such intent is supported by the overall
nature of the complaint, which evidences a general intent on the
part of the pro se plaintiff to state the broadest array of claims
against the greatest number of potential defendants, in hopes of
maximizing the potential for recovery.
Centennial further disputes the applicability of the
"libel and slander" provision on grounds that any libel or slander
alleged to have been committed by Dr. Patterson took place during
his testimony at the Hearing, and thus, was not delivered "in the
furnishing of professional veterinary services," as required to
trigger coverage under the Policy. Centennial suggests that the
furnishing of "professional veterinary services" must necessarily
involve some form of malpractice or negligence in the treatment of
an animal. However, we hold that the Policy definition, which
specifically includes within the scope of coverage the "utterance
or publication of a libel or slander," an event which, as noted by
the district court is "unlikely to occur while a veterinarian is
physically treating an animal," suggests that the provision has
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broader applicability. In any event, courts interpreting the term
"professional services" in the context of determining coverage
under an insurance policy have generally defined the term broadly,
so as to embrace all activities for which the specialized training
of the particular profession is required. See, e.g., Med. Records
Assoc., Inc. v. Am. Empire Surplus Lines Ins., 142 F.3d 512, 515
(1st Cir. 1998) (defining "professional services" under
Massachusetts law as "embrac[ing] those activities that distinguish
a particular occupation from other occupations -- as evidenced by
the need for specialized learning or training -- and from the
ordinary activities of life and business"); W. World Ins. Co. v.
Am. & Foreign Ins. Co., 180 F. Supp. 2d 224, 231 (D. Me. 2002)
(defining "'professional' act or service" under Maine law as "one
arising out of a vocation, calling, occupation, or employment
involving specialized knowledge, labor, or skill" (quoting Marx v.
Hartford Accident & Indem. Co., 157 N.W.2d 870, 871-72 (Neb.
1968)). Thus, we agree with the district court that "[Patterson]
could only have been testifying in that proceeding as a
veterinarian," that "[t]estifying as a professional veterinarian,
as an expert witness, must logically be included in the scope of
'professional veterinary services' [absent an applicable
exclusion]," and therefore, Dr. Patterson's "act of testifying
constituted 'the furnishing of professional veterinary services'
within the meaning of that term as used in the policy." We thus
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find that at least some of the claims against Dr. Patterson
contained in the Murphy complaint arise out of a "veterinary
incident," and as a result, potentially fall within the scope of
coverage.
D. Effect of Policy Exclusions
Alternatively, Centennial argues that it had no duty to
defend Dr. Patterson because it was relieved of any such duty by
Exclusion H in the Policy, a provision which excludes from coverage
any suit arising out of or related to "[a]ny actual or alleged
. . . dishonest, fraudulent, criminal, malicious act, or malicious
omission" or any "willfull violation" by the insured. Centennial
contends that, even if the allegations in the Murphy complaint do
arise out of an otherwise covered veterinary incident, "[a]ll of
the allegations against Patterson describe dishonest, fraudulent or
criminal conduct on his part," and thus, fall within the scope of
Exclusion H. According to Centennial, "there is no potential that
Patterson's alleged conduct did not involve a dishonest,
fraudulent, criminal, malicious act, or malicious omission."
Centennial acknowledges that a full trial might have ultimately
disclosed that Dr. Patterson's actions were not, in fact,
dishonest, fraudulent, or criminal, but argues that such
considerations are irrelevant under the comparison test, which
hinges the duty to defend "exclusively on the facts as alleged
rather than on the facts as they actually are." Barrett Paving,
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488 F.3d at 63 (emphasis added & internal quotation marks omitted).
The "triggering of Exclusion H," according to Centennial,
"eliminates any potential for coverage under the [Policy]."
We disagree with the premise upon which Centennial's
argument rests -- that there was "no potential" that the
allegations against Patterson involved a claim not barred under
Exclusion H. It is true that many of Murphy's claims, albeit in a
conclusory manner, allege that Patterson committed various crimes,
such as racketeering and perjury. If proven, these would clearly
fall within the exclusion and therefore, outside the scope of
coverage. Nevertheless, it is not essential, under Maine law, that
all claims against the insured in the underlying complaint raise
the possibility of coverage for the insurer's duty to defend to be
triggered, at least where the claims arise from common issues of
fact. See Gibson, 673 A.2d at 1354.
As explained above, we find that Murphy's complaint can
be construed to also state claims against Dr. Patterson for
slander, libel, negligence and malpractice -- claims which, if
proven, would fall outside the scope of Exclusion H, and at least
potentially, within the scope of coverage. The fact that Murphy
also alleged that Dr. Patterson committed various uncovered crimes
in the course of the single factual scenario at issue, does not,
under Gibson, relieve Centennial of the duty to defend. Id.Moreover, the fact that Murphy, a pro se plaintiff bringing a civil
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action and seeking damages, characterizes all of Dr. Patterson's
actions as "criminal acts" (paragraph 184 of the complaint), and
uses words such as "guilty" rather than "liable" to describe
Patterson's culpability, does not mean that Murphy, has, in fact,
alleged criminal conduct. See Dingwell, 414 A.2d at 226 ("Whether
[the insured] can obtain a defense from his insurer must depend not
on the caprice of the plaintiff's draftsmanship, nor the limits of
his knowledge, but on a potential shown in the complaint that the
facts ultimately proved may come within the coverage.").
Regardless of how Murphy chooses to classify Dr. Patterson's
allegedly wrongful conduct, "the facts ultimately proved" could
have potentially shown, for example, that Patterson was negligent
in concluding that Murphy had caused the death of her calves, or
that Patterson's statements regarding Murphy's treatment of her
animals were defamatory, both non-criminal wrongs which could
potentially "come within [the Policy's] coverage." See J.A.J.,
Inc., 529 A.2d at 808 (quoting Dingwell, 414 A.2d at 226).
Ultimately, Maine law "place[s] the burden of uncertainty
as to the policy's coverage on the insurer." Dingwell, 414 A.2d at
227 (citation omitted). Because we find that Exclusion H does not
necessarily foreclose coverage under the Policy, we hold that Dr.
Patterson's right to a defense remains intact.
Based on the allegations in the Murphy complaint, we hold
that the Centennial Policy potentially covered Murphy's claims
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against Dr. Patterson, and therefore, Centennial had a duty to
defend its insured. Because we conclude that Centennial had a duty
to defend, we further conclude that the district court correctly
granted summary judgment for Dr. Patterson.
E. Attorney's Fees
Dr. Patterson contends that if he prevails in defending
against the instant declaratory judgment action, he is entitled to
recover not only the costs of his defense in the Murphy suit, but
also the costs of establishing Centennial's duty to defend in this
action.
Maine law provides by statute that "when there is a
declaratory judgment action 'to determine an insurer's contractual
duty to defend an insured under an insurance policy, if the insured
prevails in such action, the insurer shall pay court costs and
reasonable attorney's fees.'" Foremost Ins. Co. v. Levesque, 926
A.2d 1185, 1188 (Me. 2007) (quoting 24-A M.R.S. § 2436-B(2)).
However, we find, as did the district court, that Dr. Patterson's
request for attorney's fees remains premature. See D. Me. R. 54.2
(providing that application for attorney's fees "shall be filed
within 30 days of the filing of the appellate mandate providing for
the final disposition of any appeal to the Court of Appeals").
Thus, we leave it to the district court to resolve this issue at
the appropriate time.
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III. Conclusion
For the foregoing reasons, the summary judgment entered
in favor of Patterson and against Centennial is affirmed.
Affirmed.
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