Maine Insurance Guaranty Association v. North American Insurance Company
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SUPERIOR COURT CIVIL ACTION DOCKET NO. CV-05-097 STATE OF MAINE YORK, ss. Pv$hINEINSTJPANCE GUAIUNTY ASSOCIATION, Plaintiff ORDER AND DECISION NORTH AMERICAN SPECIALTY INSURANCE COMPANY and SEACOAST CRANE CO., INC., Defendants The ivfaine Insurance Guaranty Association has filed a complaint for declaratory judgment against North American Specialty Insurance Company and Seacoast Crane Co., Inc, of Alfred, Maine, concerning a commercial construction contract involving the furnishing and erecting of a metal building in Seabrook, New Hampshire, for a company known as DCC Development Corporation. Seacoast has filed its own counterclaim for declaratory judgment and a cross-claim for declaratory judgment. The Guaranty Association has filed a motioil for summary judgment and Seacoast has filed a cross-motion for summary judgment on its counterclaim. DCC Development Corporation cmtered into a contract with Seacoast for the furnishing and erecting of a metal bililding in Seabrook, New Hampshire. As part of that contract a performance bond and a payment bond were obtained from the defendant North American acting as a surety. Seacoast entered into a subcontract agreement with a company called 1-1. L. Smith, Inc. of North Hampton, New I<ampshire, lor specified site work. 'That conkact was stlbject to a subcontract performance and payment bond with Amwest Surety Insurance Company of Woodland Hills, California, along with a general indemnity agreement. Problems arose and DCC brought suit in the Roclungham County, New Hampshire Superior Court against North American and Seacoast. Seacoast filed a separate suit against Smith and Amwest. The cases were consolidated and the court found that Seacoast was liable and that Smiti~ required to indemnify it for problems was with the parlung lot at the DCC project. Norinally the parties clrould look to Amwest as a surety. However, Amwest is insolvent pursuant to a Nebraska court order and, according to counsel, will remain so. The Guaranty Association believes that it has no duty to assume the obligations of Amwest as North American has paid under its bond. There are two closely related questions in this suit. Is the Guaranty Association obligated to make a payment? Is Seacoast obligated to repay North American? The answers are both no. The Maine Insurance Guaranty Association is governed by Maine statutes found at 24-A M.R.S.A. 55 4431-et seq. which are based on a national model act created "...to provide a mechanism for the payment of covered claims under certain insurance policies to avoid excessive delay in payment and to avoid financial loss to claimants or policyholders because of the il~solvencyof an insurer .. ." 24-A M.R.S.A. 54432. The Maine Insurance Guaranty Associaticn Act applies to "surety insurance." 24-A IL4.R.S.A.§4433(1)(B). "Covered claim" is defined as "an unpaid claim ... arising under and within the coverage and applicabie limits of a policy of a kind of insurance referred to in section 4433.. . 'Covcrcd clzim' does nat indude 2i;j: a x s u n t due aiij; inslirer . . . as subrogation recoveries or otherwise . . ." 24-A M.R.S.A. §4435(4). "Insurer" for Guaranty Association purposes has the same meaning as the general Maine Insurance Code definition, see 24-A b1.R.S.A. §4435(8), which is defined at 24-A M.R.S.A. 54 as including "every persoi-l engaged as principal and as indemnitor, surety or contractor in the business of entering into contracts of insurance." "Insurance" is further defined to include surety contracts, 24-A W1.R.S.A. 53. . . Under Maine law the Guaranty Association has an obligation to pay "covered claims" subject to specified procedurcs and limitations. 24-A M.R.S.A. 54438. The Guaranty Association's duty is limited to paying only "covered claims." The Guaranty Association is correct when it asserts that it is not obligated to pay. It has no obligation to DCC as DCC has been paid by North American. See 24-A M.R.S.A. §4443(1). It has no obligation to North American as any cla~mby North American against the Guaranty Association, because of the insolvency of Amwest, would not be a "covered claim" as "covered claims" exclude any amount due an insurer, including a surety such as North Amcr~can.It has no obligabon to Seacoast as North American has paid the claim. North American, which cannot recover from the Guaranty Assoc~ahondirectly, cannot recover from Seacoast because of the insolvency of Amwest. See 24-A M.1I.S.A. §§ 4435(4) and 4443(1) which states, "Any person having a claim against any insurer under any provision in an ins~~rance pvlicy, other than that of an insolvent insurer, which is also a covered claim, shall be required to exhaust first the person's right under the policy. Any amount otherwise payable on a covered claim under this subchapter shall be reduced by the anlount of any recovery under the insurance policy." Also see Pitzk-iinni 0. ~M~~i.j,il:, A.2d 622 99,95 (?VIP. 1993). Had Amwest been solvent ~t should have paid the claim for the poor site work by Smith. The Maine Insurance Guaranty Association Act was designed to protect DCC * 3 as the damaged party, protect Seacoast !u~cause Iost the benefits of the Amwest bonds, it ~~ that and to protect the Guaranty A s s o c i a t ~ o2nd the 1)~1l)lic tlltilnately pq7spremiurns to fund the Guaranty Association wlie~:otl~er insura~ice available. If Seacoast had to is pap North American the holding in Pi711,1*,7111 ~ obe Iviolated and the carefully crafted ~ ~ I ~ c ~ be purposes of the Act w o ~ i l d frustrated. i t is unfortunate that North Anierican must pay and lint be able to be ri-iml~irrseci l?c.c~iuse Smith did poiii- quality m'ork and Anlwest became insolvent. However, as a solveL7 lnsllrer it has a responslbil~ for thcsc claims t ty that cannot be passed on to anyone elsc Ally attempt by North America12 L argue that it has separate common law or o contractual rights that can be used to clefeat the Act's requirements fail. It cannot escape the Act's extensive reach and i t cannot successfully argue that, as it is seeking funds from Seacoast and not the Guaran!~: Association, the Act does not apply The cntries are: The plaintiff's motion for summarv jirdgrnent is granted. Defer-tdant Seacoast's cross-motio~~ for summary judgment on its cot~nterclaim denied. is Defendant Seacoast's cross-clairn against North American is dismissed as moot. Neither the Maine Insurance C l,rrCln Association nor Seacoast Crane i ty Co., 111c. are obligated to pa77 "Jorth American Specialty insurance Company because of the judgrne::! in cases 00 C-868and 01-C-100 from the Rockingharn County, New 1 Icl~:~psh~re or Court Super1 David Ray, Esq. - PL; J o s e p h C . T a n s k i , Esq. - PL ( P r o Hac Vice) 13a ted : kla rcFi J + 20M L . F r a n c i s X. Quinn, J r . , Esq. - Def ~ e a c o a s t / 5 2 - & Co. Tnc Cyrus F. K i l e e , 111, Esq. - ( P r o Hac ice)/" f i ,,?~;,d i / - ? " - - # John P. G i f f u n e , Esq. - Def. North Paul -4 Psi trsche American S p e c i a l t y I n s u r a n c e Company D a n i e l R o s e n t h a l , Esq. - Def. North I ~lstice, superior Court American S p e c i a l t y I n s u r a n c e Company B r a d f o r d R. C a r v e r , E s q . - ( P r o Hac V i c e ) - Def. North American S p e c i a l t y I n s . Co. E r i c H. L o e f f l e r , Esq. - (Pro Hac Vice) - Def. North American S p e c i a l t y I n s . Co. 4, -
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