Continental Western Insurance Co. v. Beam

STATE OF MAINE SUPERIOR COURT
CUMBERLAND, ss. CIVIL ACTION
Docket No. CV-2018-530

CONTINENTAL WESTERN )
INSURANCE CO., )
) ORDER ON PLAINTIFF'S
Plaintiff, ) MOTION FOR SUMMARY
) JUDGMENT REGARDING
V. ) INDEMNITY OBLIGATIONS OF
) FEDERAL INSURANCE
GEORGE BEAM, FEDERAL ) COMPANY AND
INSURANCE CO., and ) FRANKENMUTH MUTUAL
FRANKENMUTH MUTUAL ) INSURANCE COMPANY
INSURANCE CO., )
)
Defendants. )

Before the Court is Plaintiff Continental Western Insurance Company's

("Continental") Motion for Summary Judgment Regarding Indemnity Obligations of

Federal Insurance Company ("Federal") and Frankenmuth Mutual Insurance Company

("Frankenmuth"). For the following reasons, the Court denies Continental's motion.

I. Background

This action arises out of a personal injury action brought by George Beam against

Auburn Plaza, Inc. ("Auburn") in the Maine Superior Court in Androscoggin County,

captioned Beam v. Auburn Plaza, Inc., Docket No. CV-18-67 (the "Underlying Action").

(Continental's Supp'g S.M.F. 'JI 1.) In the Underlying Action, Mr. Beam alleged that he

was injured when he fell through a skylight on the roof of the Auburn Mall (the

"Accident") while working for his employer, Atlantic Comfort Systems, Inc. (" Atlantic").

(Continental' s Supp' g S.M.F. 'l['l[ 10-12.) Mr. Beam had entered the roof to repair an HVAC

system that serviced General Nutrition Corporation ("GNC"), a tenant at the mall.

(Continental's Supp'g S.M.F. 'JI 11.) Mr. Beam had completed his work on GNC's HV AC

Page 1 of 18 LERKS OFC
APR 3 ·'23 Pw:'.'.!:22
unit before the Accident and was not near GNC's HVAC unit when the Accident

occurred. 1 (Federal's S.M.F. 'l['l[ 21, 23-24.)2

Continental initiated this action to determine coverage obligations owed to

Auburn by Federal and Frankenmuth. (Continental's Supp' g S.M.F. 'l[ 2.) The Underlying

Action has since settled for $1,200,000. (Continental' s Supp' g S.M.F. 'l[ 9.) Continental and

Federal each contributed $400,000 to the settlement of the Underlying Action, reserving

their rights to seek reimbursement from each other and Frankenmuth. (Continental's

Supp'g S.M.F. 'l[ 62.)

There are three insurance policies at issue in this action that were in effect at the

time of the Accident: (1) a commercial general liability policy issued by Continental,

under which Auburn was insured (the "Continental Policy"); (2) a commercial general

liability policy issued by Federal, under which GNC was insured (the "Federal Policy");

and (3) a commercial general liability policy issued by Frankenmuth, under which

Atlantic was insured (the "Frankenmuth Policy"). (Continental's Supp'g S.M.F. 'l['l[ 46, 48,

54.)

Continental has moved for summary judgment on the issue of Federal and

Frankenmuth's duties to indemnify Auburn, on the theory that Auburn was an

additional insured under the Frankenmuth Policy and the Federal Policy. Continental

argues that Frankenmuth is obligated to reimburse Continental for the costs Continental

incurred to defend Auburn in the Underlying Action and is responsible for the remaining

1
Federal cites portions of the deposition testimony of Mark Tuller, President and CEO of Atlantic, in which
Mr. Tuller explains his theories on Mr. Beam's path of travel and intentions after completing work on
GNC' s HVAC unit. See Federal' s S.M.F. '['[ 21-23, 25. In that testimony, however, Mr. Tuller admits that he
was speculating and that he does not have personal knowledge of either issue. The Court will not consider
those portions of the record on summary judgment.
2
Federal incorporated its Statement of Material Facts supporting Federal' s Motion for Summary Judgment
as its Additional Statement of Material Facts opposing Continental' s Motion for Summary Judgment.
Citations to Federal' s Statement of Material Facts herein refer to Federal' s Statement of Material Facts
supporting Federal' s Motion for Summary Judgment.

Page2 of 18
settlement payment owed to Mr. Beam. In the alternative, Continental argues that Federal

is responsible for those same amounts.

A. The Frankenmuth Policy

The Frankenmuth Policy, issued to Atlantic, contains an additional insured

endorsement that provides:

Section II-Who Is An Insured is amended to include as an additional
insured any person or organization for whom you are performing
operations when you and such person or organization have agreed in
writing in a contract or agreement that such person or organization be
added as an additional insured on your policy. Such person or organization
is an additional insured only with respect to liability for "bodily injury",
"property damage" or "personal and advertising injury" caused, in whole
or in part, by:

1. Your acts or omissions; or

2. The acts or omissions of those acting on your behalf;

in the performance of your ongoing operations for the additional insured.

(Continental's Supp'g S.M.F. 'l[ 49.)

Atlantic had entered into a general service agreement with Facility Source (the

"Service Agreement"). (Continental's Supp'g S.M.F. 'l[ 34.) On January 1, 2015, Facility

Source hired Atlantic to perform work on GNC's HV AC unit at the Auburn Mall.

(Continental's Supp'g S.M.F. 'l[ 36.) The January 1, 2015 work order (the "Work Order")

required Atlantic to be insured. 3 (Continental's Supp'g S.M.F. 'l[ 37; Frankenmuth's Resp.

to Continental's Supp'g S.M.F. 'l[ 37.)

Before Atlantic could perform work for GNC, it was required to produce a

Certificate of Insurance for both Facility Source and Auburn. (Continental's Supp'g

S.M.F. 'l['l[ 34-35; 67.) Atlantic provided Auburn with a Certificate of Insurance in 2015.

3
Frankenmuth properly controverted Continental' s statement to the extent that Continental asserted that
the Work Order required Atlantic to add Auburn as an additional insured.

Page 3 of 18
(Continental's Supp'g S.M.F. 'I[ 44.) Atlantic had previously provided Certificates of

Insurance to Auburn, indicating that Auburn was an additional insured. (Continental's

Supp'g S.M.F. 'I[ 38; Federal's Resp. to Continental's Supp'g S.M.F. 'I[ 38.) If Atlantic had

not provided Auburn with a Certificate of Insurance identifying Auburn as an additional

insured, Auburn would not have allowed Mr. Beam onto the roof. (Continental's Supp'g

S.M.F. 'I[ 45.) Frankenmuth and Continental dispute whether Atlantic specifically agreed

to add Auburn as an additional insured to the Frankenmuth Policy. (Continental' s Supp' g

S.M.F. 'I[ 43; Frankenmuth's Resp. to Continental's Supp'g S.M.F. 'I[ 43.)

B. The Federal Policy

The Federal Policy, issued to GNC, contains an additional insured provision that

provides, in relevant part:

Persons or organizations from whom you lease premises are insureds, but
they are insureds only with respect to the ownership, maintenance or use
of that particular part of such premises leased to you and only if you are
contractually obligated to provide them with such insurance as is afforded
by this contract.

However, no such person or organization is an insured with respect to any:

• Damages arising out of their sole negligence;

• Occurrence that occurs, or offense that is committed, after you cease to be
a tenant in the premises; or

• Structural alteration, new construction or demolition performed by or on
behalf of them.

(Continental's Supp'g S.M.F. 'I[ 47.)

GNC leased its premises at the Auburn Mall from Auburn. (Continental's Supp'g

S.M.F. 'I[ 31.) Section 10.2(B) of GNC's Lease Agreement (the "Lease") provides, in

relevant part:

[GNC's] obligations shall include, without limitation, repa1rmg,
maintaining, and making replacement to items such as the following
located within or serving the Leased Premises: ... heating, ventilating and

Page 4 of 18
air-conditioning equipment and systems (whether such heating, ventilating
and air-conditioning equipment and systems are located inside the Leased
Premises or on the roof of the Shopping Center) which are installed by
[GNC] or which exclusively serve the Leased Premises.

(Continental's Supp' g S.M.F. 'l[ 32; Continental's Ex. 6 at 40.)

Section 8.3 of the Lease requires GNC to maintain commercial general liability

insurance applicable to the Lease Premises and its appurtenances. (Continental's Supp'g

S.M.F. 'l[ 33; Continental's Ex. 6 at 37.) Section 8.4 of the Lease provides, in relevant part,

"Tenant shall carry and maintain, at its expense, or Tenant shall require any contractor

performing work on the Leased Premises to carry and maintain, at no expense to

Landlord ... Commercial General Liability Insurance .... " (Continental's Supp'g S.M.F.

'l[ 33; Continental's Ex. 6 at 37.) Section 8.5 of the Lease states: "All policies evidencing

Tenant's insurance shall specify Tenant, Landlord (and any designees of Landlord as the

interest of such designees shall appear) as additional insureds." (Continental's Supp'g

S.M.F. 'l[ 33; Continental's Ex. 6 at 37.)

The Federal Policy included a self-insured retention of $250,000 (the "SIR").

(Federal's S.M.F. 'l[ 12.) The SIR provided that the named insured, GNC was solely liable

for satisfying the retention. (Federal's S.M.F. 'l[ 13.) On or about June 23, 2020, GNC and

GNC Holdings, Inc. filed for bankruptcy. (Federal's S.M.F. 'l[ 28.) The SIR has not been

satisfied with respect to the Accident. (Federal's S.M.F. 'l[ 29.) The Federal Policy also

contains the following language: "Bankruptcy or insolvency of the insured or of the

insured' s estate will not relieve us of our obligations under this insurance." (Federal' s

S.M.F. 'l[ 34.)

II. Legal Standard

A party is entitled to summary judgment when review of the parties' statements

of material facts and the record to which the statements refer demonstrates that there is

Page5 of 18
no genuine issue as to any material fact in dispute, and that the moving party is entitled

to judgment as a matter of law. M.R. Civ. P. 56(c); Dyer v. Dep't of Transp., 2008 ME 106, '1[

14, 951 A.2d 821. A contested fact is "material" if it could affect the outcome of the case.

Dyer, 2008 ME 106, '1[ 14, 951 A.2d 821. A "genuine issue" of material fact exists if a

factfinder must "choose between competing versions of the truth." Id. (quoting

Farrington's Owners' Ass'n v. Conway Lake Resorts, Inc., 2005 ME 93, '1[ 9,878 A.2d 504).

The court considers the record in the light most favorable to the party objecting to

the grant of summary judgment. F.R. Carroll, Inc. v. TD Bank, N.A., 2010 ME 115, '1[ 8, 8

A.3d 646; Blue Star Corp. v. CKF Props., LLC, 2009 ME 101, '1[ 23, 980 A.2d 1270. "Facts

contained in a supporting or opposing statement of material facts, if supported by record

citations as required by this rule, shall be deemed admitted unless properly

controverted." M.R. Civ. P. 56(h)(4). To controvert an opposing party's statement of fact,

a party must "support each denial or qualification by a record citation." M.R. Civ. P.

56(h)(2). The evidence offered in support of a genuine issue of material fact "need not be

persuasive at that stage, but the evidence must be sufficient to allow a fact-finder to make

a factual determination without speculating." Est. of Smith v. Cumberland County, 2013 ME

13, '1[ 19, 60 A.3d 759.

III. Discussion

"If the language of an insurance policy is unambiguous, we interpret it in

accordance with its plain meaning, but we construe ambiguous policy language strictly

against the insurance company and liberally in favor of the policyholder." Concord Gen.

Mut. Ins. Co. v. Est. of Boure, 2021 ME 57, '1[ 15,263 A.3d 167 (quoting Haskell v. State Farm

Fire & Cas. Co., 2020 ME 88, '1[ 15, 236 A.3d 458). "An insurance contract is ambiguous if it

is reasonably susceptible of different interpretations from the perspective of an average

person untrained in either the law or the insurance field in light of what a more than

Page 6 of 18
casual reading of the policy would reveal to an ordinarily intelligent insured." Bibeau v.

Concord Gen. Mut. Ins. Co., 2021 ME 4, 'I[ 12,244 A.3d 712 (citations and quotation marks

omitted).

The Court will address Continental's motion with regards to each of the

defendants separately, beginning with Frankenmuth.

A. Frankenmuth

As described above, the Frankenmuth Policy covers as an additional insured:

"[A]ny person or organization for whom you are performing operations when you and

such person or organization have agreed in writing in a contract or agreement that such

person or organization be added as an additional insured." Frankenmuth argues that

neither of the conditions of the additional insured endorsement-first, the "performing

operations" condition and, second, the "agreed in writing" condition-are met with

respect to Auburn.

Regarding the first condition, the language requires that the named insured,

Atlantic, be performing operations for Auburn. The undisputed facts demonstrate that

Mr. Beam, on behalf of Atlantic, was performing operations pursuant to the Work Order

issued by Facility Source for GNC at the time of the Accident. There is no evidence in the

record of a service agreement between Auburn and Facility Source. However, the Lease

requires GNC to maintain the HVAC unit. The language of the endorsement does not

necessarily exclude operations that indirectly benefit the named insured. Construing the

facts in the light most favorable to Frankenmuth-but construing the language of the

endorsement strictly against Frankenmuth-the first condition is arguably met.

The second condition presents a greater hurdle for Continental. There is no Maine

law interpreting this language, and other jurisdictions that have addressed it are split.

Page 7 of 18
Frankenmuth and Continental focus much of their arguments on Pro Con, Inc. v. Interstate

Fire and Casualty Co., 794 F. Supp. 2d 242 (D. Me. 2011). 4

Pro Con, Inc. ("Pro Con") was the general contractor for a construction project. Id.

at 245. Pro Con hired a subcontractor, Canatal Industries, Inc. ("Canatal") who in turn

hired a subcontractor, CCS Constructors, LLC ("CCS"). Id. at 245-46. The Canatal-CCS

subcontract provided: "[Canatal], the General Contractor [Pro Con] and the Owner and

other entities as may be reasonably requested are to be included as additional insured

under the Commercial General Liability insurance policies as well as under Umbrella

Excess Liability." Id. at 246 (alterations in original). Analyzing an additional insured

provision identical to the provision in the Frankenmuth Policy, the United States District

Court for the District of Maine held that the "agreed in writing" condition was satisfied

by the Canatal-CCS subcontract, rendering Pro Con an additional insured under an

insurance policy issued to CCS, even though Pro Con was not a party to the Canatal-CCS

subcontract. Id. at 250-53.

The Court finds Pro Con unpersuasive for two reasons: (1) the Court disagrees with

the Maine District Court's interpretation of the additional insured provision, and (2) even

if the Court did agree with Pro Con, the facts of this case are distinguishable.

First, the Maine District Court focused its analysis on the language "in writing in

a contract or agreement," and concluded that the purported additional insured need not

be a party to the writing. To require a written agreement between the named insured and

4
Continental also cites cases analyzing language such as "written contract, agreement or pemrit." See, e.g.,
Superior Ice Rink, Inc. v. Nescon Contracting Corp., 861 N.Y.S.2d 362, 365 (N.Y. App. Div. 2008). The Court
agrees that this language is ambiguous because it is unclear whether "written" modifies agreement and
permit in addition to contract. These cases are not helpful to deciding the matter at hand, however, because
the provision in the Frankenmuth policy unambiguously requires a writing.

Page 8 of 18
the additional insured, the Maine District Court reasoned, the policy should have read

" ... agreed in writing in a contract or agreement with you." Id. at 251.

That interpretation overlooks the context of that language, which reads "any

person or organization ... when you and such person or organization have agreed in writing

in a contract or agreement that such person or organization be added as an additional insured."

This Court interprets the additional insured provision of the Frankenmuth Policy as

unambiguously requiring a written agreement between Atlantic and Auburn to add

Auburn as an additional insured. See State Auto Prop. & Cas. Ins. Co. v. Kin, Inc., 588 F.

Supp. 3d 870, 875 (N.D. Ill. 2022) (concluding that the language "when you and such

person or organization have agreed in a written contract or written agreement" required

direct privity of contract between named insured and additional insured); Westfield Ins.

Co. v. FCL Builders, Inc., 948 N.E.2d 115, 118 (Ill. App. Ct. 2011) ("The plain and ordinary

meaning of the term 'such person or organization' in this provision is that it refers back

to the same person or organization for whom [the named insured] is performing

operations, which was mentioned earlier in the same provision, and it does not

encompass any other entity."). No such writing exists.

Second, even if the Court agreed that the endorsement does not require direct

privity between the named and additional insured, there is no written agreement in this

record between any parties to add Auburn as an additional insured. In Pro Con, the CCS-

Canatal subcontract specifically required CCS to add the general contractor, Pro Con, to

its policy. The facts of this case would be analogous to those of Pro Con if the Service

Agreement or the Work Order between Atlantic and Facility Source specifically required

Atlantic to add Auburn as an additional insured to the Frankenmuth Policy. Neither

document requires Atlantic to add Auburn to the Frankenmuth Policy.

Page 9 of 18
Nor does the Certificate of Insurance listing Auburn as an additional insured

satisfy the writing requirement, as Continental argues. The Certificate of Insurance

specifically states that it is not a contract and that it does not confer any rights on the

certificate holder or amend the Frankenmuth Policy. (Continental's Ex. 10.) It cannot,

therefore, constitute an agreement in writing that such person or organization be added

as an additional insured. See FCL Builders, Inc., 948 N.E.2d at 120-21 (a party cannot rely

on a certificate of insurance to establish that it is an additional insured); cf Combined

Mgmt., Inc. v. Reliance Nat'/ Ins. Co., No. CV-96-101, 1996 Me. Super. LEXIS 393, at *15

(Dec. 9, 1996) (" A general rule of insurance law states that 'a certificate of insurance is not

a contract of insurance but is merely the evidence that a contract has been issued,' and

that the validity of any certificate actually provided therefore 'is conditioned upon the

issuance and existence of a policy."' (quoting Am. Hardware Mut. Ins. Co. v. BIM, Inc., 885

F.2d 132, 139 (4th Cir. 1989))); 10 Ellicott Square Ct. Corp. v. Mt. Valley Indem. Co., 634 F.3d

112, 122 (2d Cir. 2010) (New York law provides that a certificate of insurance is not a

contract to insure).

Continental has failed to demonstrate that it is entitled to judgment as a matter of

law on the issue of whether Auburn is an additional insured under the Frankenmuth

Policy.

B. Federal

Continental argues that Auburn is an additional insured under the Federal Policy

and that the Continental Policy is excess over the Federal Policy. Federal argues: (1) that

Auburn is not an additional insured; (2) that even if Auburn is an additional insured, the

Federal Policy and the Continental Policy both provide primary coverage; and (3) that

coverage was never triggered because the SIR was not satisfied or, in the alternative, that

Federal has already paid the amount of the loss exceeding the SIR.

Page 10 of 18
i. Additional Insured

The additional insured provision of the Federal Policy reads, in relevant part:

The undisputed facts establish that GNC leased premises from Auburn and that

the Lease required GNC to add Auburn as an additional insured to its commercial

general liability policy for the Leased Premises. The dispute centers on whether the

language "with respect to the ownership, maintenance or use" of the Leased Premises

encompasses damages related to the Accident. 5 Continental argues that Auburn is an

additional insured because Mr. Beam was injured while on the roof to repair the HV AC

unit that served the Leased Premises, which GNC was obligated to maintain under the

Lease.

This specific language has not been interpreted by the Law Court in the context of

a landlord's claim under a tenant's insurance policy, nor extensively discussed elsewhere.

In American Policyholders' Insurance Company v. Kyes, 483 A.2d 337, 340-41 (Me. 1984), the

Law Court interpreted an insurance policy that provided coverage for the individual

business owner "but only with respect to conduct of a business." Id. at 340. The Law Court

interpreted the language as covering accidents that are "business-related." Id. at 341.

Similarly, the plain meaning of the phrase "with respect to the ownership,

maintenance or use," suggests that the damages must be related to the ownership,

5
Continental also addresses the immediately following portion of the additional insured provision, which
reads: "However, no such person or organization is an insured with respect to any: Damages arising out of
their sole negligence ...." Continental argues that the Accident was caused at least in part by Atlantic's or
Mr. Beam's negligence, in addition to Auburn's negligence. Ordinarily, a dispute on this point would
prevent the Court from granting summary judgment. Federal, however, apparently concedes this issue,
having failed to address this language in their opposition to Continental' s motion or in Federal' s own
motion for summary judgment.

Page 11 of 18
maintenance, or use of the Leased Premises. 6 See id. It does not, as Federal argues, limit

coverage to damages that are solely and directly caused by GNC's ownership,

maintenance, or use of the Leased Premises. See Hartford Cas. Ins. Co. v. Travelers Indem.

Co., 2 Cal. Rptr. 3d 18, 25 (Cal. Ct. App. 2003) ("[N]othing in the meaning of 'only with

respect to' hints at a requirement of direct causation. Looking at the plain meaning of the

questioned phrase, we find definitions indicating that 'only with respect to' merely

indicates some relationship.").

Nor does the additional insured provision limit coverage to damages that occurred

inside the physical bounds of the Leased Premises. The fact that the Accident occurred

outside of the Leased Premises is not dispositive. 7 If Federal intended such a narrow

construction, it should have used narrower language.

Next, Federal argues that coverage does not exist because Mr. Beam had

completed the repairs to GNC' s HV AC unit before the Accident occurred. "[W]ith respect

to ... maintenance" encompasses more than active performance of maintenance work.

Navigating the roof after completing repairs to an HVAC unit is reasonably related in

time and purpose to the maintenance work that Mr. Beam entered the roof to perform on

GNC's behalf.

Finally, Federal argues that Mr. Beam was not on the roof for the sole purpose of

repairing GNC' s HVAC unit. Although Federal speculates about other HV AC units that

Mr. Beam may have thought he had to repair, there is no competent evidence in this

record to support this theory. It is undisputed that Mr. Beam had been invited to the

6 Federal and Continental seem to view the language "with respect to" as interchangeable with "with
respect to liability arising from." In the Court's view, the two are similar, but not identical in plain meaning.
7 Federal relies on Greater N. Y. Mut. Ins. Co v. Liberty Mut. Ins. Co., No. 01-cv-10632 GKF), 2003 U.S. Dist.

LEXIS 16332, at *11-15 (S.D.N.Y. Sept. 17, 2003), in which that court concluded that a landlord was not
covered as an additional insured because the accident did not occur within the leased premises, as defined
in the lease. The Court does not find this case, which rests on that court's interpretation of New York law,
persuasive.

Page 12 of 18
Auburn Mall on GNC' s behalf to repair its HVAC unit on the roof and that he did, in fact,

repair GNC' s HVAC unit. The record demonstrates an adequate causal connection

between the maintenance of GNC's HVAC unit and the Accident. Once again, the

language of the additional insured provision is not as narrow as Federal argues.

ii. Priority of Coverage

Having determined that Auburn is an additional insured under the Federal Policy

with respect to the Accident, the Court must now determine the priority of coverage. The

Federal Policy's "Other Insurance" provision states:

Primary Insurance

This insurance is primary except where the Excess Insurance provision
described below applies.

If this insurance is primary, our obligations are not affected unless any of
the other insurance is also primary. Then, we will share with all that other
insurance by the method described in the Method of Sharing provision
described below.

Excess Insurance

This insurance is excess over any other insurance, whether primary, excess,
contingent, or on any other basis:

A. That is Fire, Extended Coverage, Builder's Risk, Installation Risk or
similar insurance for your work;

B. That is insurance that applies to property damage to premises rented to
you or temporarily occupied by you with permission of the owners;

C. If the loss arises out of aircraft, autos or watercraft (to the extent not
subject to the Aircraft, Autos or Watercraft exclusion);

D. That is insurance:

1. Provided to you by any person or organization working under
contract or agreement with you; or

2. Under which you are included as an insured; or

E. That is insurance under any Property section of this policy.

Page 13 of 18
(Continental Supp' g S.M.F. 'l[ 52.)

As excerpted above, the Other Insurance provision of the Federal Policy

enumerates several scenarios in which it provides excess coverage. None of the

enumerated scenarios in the Other Insurance provision of the Federal Policy apply.' The

Federal Policy, therefore, provides primary coverage.

The Continental Policy provides that its coverage is primary, except that it is excess

over "[a]ny other primary, excess or contingent insurance available to you covering

liability for damages arising out of the premises or operations, or the products and

completed operations, for which you have been added as an additional insured by

attachment of an endorsement." (Continental Supp'g S.M.F. 'l[ 55.) Federal argues that

this provision is not applicable because Auburn is an insured by operation of the

definition of "Who Is An Insured" within the Federal Policy, not by attachment of an

endorsement.

The Court agrees that the plain and unambiguous language of the Continental

Policy's Excess Insurance provision is limited to policies that add additional insureds

specifically by means of an endorsement. See Graphic Arts Mut. Ins. Co. v. Essex Ins. Co.,

465 F. Supp. 2d 1290, 1294-95 (N.D. Ga. 2006) (holding that plain language of

substantively identical provision required adding an additional insured by means of an

endorsement); Wright-Ryan Constr., Inc. v. AIG Ins. Co., 647 F.3d 411, 416 (1st Cir. 2011)

(interpreting a materially identical provision as requiring the policy at issue to be treated

as excess over other insurance for which the named insured had been added as an

additional insured by means of an endorsement). Accordingly, the Continental Policy

also provides primary coverage.

8 Federal does not dispute this.

Page 14 of 18
iii. The SIR

Federal argues that coverage has not been triggered because the SIR has not been

and will not be satisfied.9 Other courts have compared a self-insured retention to primary

insurance and the coverage available after a self-insured retention is satisfied to excess

insurance. See Forecast Homes, Inc. v. Steadfast Ins. Co., 105 Cal. Rptr. 3d 200, 206 (Cal. Ct.

App. 2010). Generally, a self-insured retention must be satisfied before coverage is

triggered. See id. Self-insured retentions, as distinguished from deductibles, apply to

defense costs and settlements, rather than only damages. Id.

Continental argues that the self-insured retention applies only to the named

insured because the language regarding the SIR refers to "you," which is defined as the

named insured. Continental neglects other language in the SIR provision, which also

states that "[t]his insurance applies to amounts in excess of Self-Insured Retentions" and

that "[w]e have no obligation or liability unless and until the Self-Insured Retentions are

exhausted by payments you make .... " (Federal's Ex. 1 at 2.) Although liability for the

SIR is limited to the named insured, the applicability of the Self-Insured Retention is not

limited to claims brought by the named insured.

The Court is not aware of any jurisdiction that would require an insurer to

indemnify an additional insured for the full amount of the loss, including the amount of

an unpaid self-insured retention, as Continental proposes. Some courts, however, have

held that when the named insured is insolvent, the additional insured is still entitled to

coverage to the extent that the loss exceeds the amount of the SIR. See, e.g., Rosciti v. Ins.

Co. of Pa., 659 F.3d 92, 98-99 (1st Cir. 2011). Those courts have rested their decisions on

the presence in the policy of what is commonly referred to as a bankruptcy clause, state

9In the alternative, Federal argues that it has already satisfied its coverage obligations in excess of the SIR,
as will be discussed below.

Page 15 of 18
statute, public policy, or a combination of the foregoing. 10 See id. (public policy of Rhode

Island); Admiral Ins. Co. v. Grace Indus., Inc., 409 B.R. 275, 281-82 (Bankr. E.D.N.Y. 2009)

(bankruptcy clause mandated by New York statute); Home Ins. Co. v. Hooper, 691 N.E.2d

65, 69-70 (Ill. App. Ct. 1998) (bankruptcy clause mandated by Illinois statute).

Maine law does not mandate inclusion of a bankruptcy clause. Nevertheless, the

Federal Policy contains a standard bankruptcy clause, which reads: "Bankruptcy or

insolvency of the insured or of the insured's estate will not relieve us of our obligations

under this insurance."

The language of the bankruptcy clause seemingly conflicts with the language of

the SIR. This conflict creates an ambiguity. Reading the two clauses together, an

ordinarily intelligent insured could reasonably understand either (1) that Federal was

obligated to provide coverage to an additional insured even if the named insured is

insolvent and unable to satisfy the SIR, or (2) that Federal' s coverage obligations are

triggered only by exhaustion of the SIR, regardless of whether the named insured is

insolvent (as Federal argues).

Maine law would resolve this ambiguity to further the purpose of indemnification.

See Est. of Boure, 2021 ME 57, 'l[ 15, 263 A.3d 167. The Court concludes that Federal is

obligated to indemnify Auburn to the extent that its loss exceeds the SIR, even though

GNC has not and will not be able to exhaust the SIR. See Pinnacle Pines Cmty. Ass'n v.

Everest Nat'/ Ins. Co., No. CV-12-08202-PCT-DGC, 2014 U.S. Dist. LEXIS 65011, at *12-15

(D. Ariz. May 9, 2014) (holding that, even in the absence of clear public policy, a standard

bankruptcy clause obligated insurer to indemnify despite insured's inability to pay the

10A bankruptcy clause provides that an insured's insolvency does not relieve the insurer of its obligations
under the policy. Some states have mandated inclusion of a bankruptcy clause by statute. It is now standard
practice among insurers nationwide to include a bankruptcy clause. Rosciti, 659 F.3d at 98.

Page 16 of 18
SIR); In re Fed. Press Co., 104 B.R. 56, 62 (Bankr. N.D. Ind. 1989) (concluding that a

conflicting self-insured retention clause and a bankruptcy clause created ambiguity,

which the court resolved in favor of finding an obligation to indemnify); Sturgill v. Beach

at Mason Ltd. P'ship, No. 1:14cv0784 (WOB), 2015 U.S. Dist. LEXIS 142490, at *10 (S.D.

Ohio Oct. 20, 2015) (holding that presence of bankruptcy clause, even though not required

by state statute, obligated insurer to provide coverage regardless of satisfaction of the SIR

by insolvent insured).

iv. Apportionment

Finally, having determined that Auburn is an additional insured under the Federal

Policy, that the Federal Policy and the Continental Policy provide co-primary coverage,

and that Federal is obligated to indemnify for loss exceeding the $250,000 SIR, the Court

must apportion the remaining loss. $400,000 of the settlement remains to be apportioned.

The Continental Policy provides for the following method of sharing:

If all of the other insurance permits contribution by equal shares, we will
follow this method also. Under this approach, each insurer contributes
equal amounts until it has paid its applicable limits of insurance or none of
the loss remains, whichever comes first.

If any of the other insurance does not permit contribution by equal shares,
we will contribute by limits. Under this method, each insurer's share is
based on the ratio of its applicable limits of insurance to the total applicable
limits of insurance of all insurers.

(Continental's Supp'g S.M.F. 'I[ 57.) The Federal Policy contains a substantively identical

provision regarding the method of sharing. (Continental's Supp'g S.M.F. '['I[ 51, 53.)

The Federal Policy and the Continental Policy each have a per occurrence limit of

$1,000,000. (Continental's Supp'g S.M.F. '['I[ 58, 59.) Federal and Continental have already

contributed $400,000 each to the settlement of the Underlying Action. Continental and

Federal would each be required to contribute $200,000 in addition to the amounts they've

already contributed, subject to the SIR of the Federal Policy.

Page 17 of 18
As discussed above, Federal is only obligated to indemnify Auburn for amounts

exceeding $250,000, which is more than the remaining amount that Federal would

otherwise be required to contribute. Federal has therefore already met and exceeded its

obligation.

Because Federal is not obligated to contribute any additional amount towards the

underlying settlement, Continental's motion for summary judgment as to Federal must

be denied.

IV. Conclusion

For the foregoing reasons, the Court denies Continental's motion.

The entry is:

Plaintiff Continental Western Insurance Company's Motion for Summary
Judgment Regarding Indemnity Obligations of Federal Insurance Company
and Frankenmuth Mutual Insurance Company is DENIED.

The Clerk is directed to incorporate this Order into the docket by reference

pursuant to Maine Rule of Civil Procedure 79(a).

Dated: qau:J/i; dOJ,3

Page 18 of 18
STATE OF MAINE SUPERIOR COURT
CUMBERLAND, ss. CIVIL ACTION
Docket No. CV-2018-530

CONTINENTAL WESTERN )
INSURANCE CO., )
)
Plaintiff, )
) ORDER ON DEFENDANT
V. ) FEDERAL INSURANCE
) COMPANY'S MOTION FOR
GEORGE BEAM, FEDERAL ) SUMMARY JUDGMENT
INSURANCE CO., and )
FRANKENMUTH MUTUAL )
INSURANCE CO., )
)
Defendants. )

Before the Court is Defendant Federal Insurance Company's Motion for Summary

Judgment. For the following reasons, the Court grants Federal's motion in part.

I. Background

On February 18, 2015, Mr. Beam, an employee of Atlantic Comfort Services

(" Atlantic"), was injured when he fell through a skylight on the roof of the Auburn Mall

(the "Accident"). (Federal's Supp'g S.M.F. 'l[ 17.) Mr. Beam has no memory of the

Accident. (Federal's Supp'g S.M.F. 'l[ 26.) Mr. Beam sued Auburn Plaza, Inc.(" Auburn")

for damages arising from the Accident (the "Underlying Action"). (Federal's Supp'g

S.M.F. 'l[ 27.) At the time, Auburn was the named insured on a policy issued by

Continental (the "Continental Policy"). (Federal's Supp'g S.M.F. 'l[ 14.)

On the day of the Accident, Mr. Beam was at the Auburn Mall to perform services

on tenants' HVAC units, including GNC' s HVAC unit on the roof. (Federal' s Supp' g

S.M.F. 'l[ 18.) GNC leased premises from Auburn at all relevant times. (Federal's Supp'g

S.M.F. 'l['l[ 1, 2.) GNC's lease (the "Lease") defined the space leased to GNC as follows:

)
Page 1 of 13
[T]he "cross-hatched" space indicated on the lease plan attached as Exhibit
A, having a front footage of approximately twenty (20) linear feet and six
(6) inches, a depth of approximately ninety (90) linear feet and containing a
total floor space of approximately one thousand eight hundred forty-five
(1,845) square feet.

(Federal's Supp'g S.M.F. '1[ 3.)

Under Section 4.6B of the Lease,

If the Leased Premises are located immediately under the roof of the
Shopping Center, then Tenant is hereby given a non-exclusive right to use
that part of the roof of the building in which the Leased Premises are located
within the lines formed by projecting the perimeter wall lines of the Leased
Premises vertically, such use being solely for the installation and
maintenance of Tenant's heating, ventilating and air conditioning system,
if any ...

(Federal's Supp'g S.M.F. '1[ 4.) Pursuant to the Lease, GNC was responsible for:

"repairing, maintaining and making replacements to items such as the
following located within or serving the Leased Premises: . . . heating,
ventilating and air conditioning equipment and systems (whether such
heating, ventilating and air conditioning equipment and systems are
located inside the Leased Premises or on the roof of the Shopping Center)
which are installed by Tenant or which exclusively serve the Leased
Premises . . ."

(Federal's Supp'g S.M.F. '1[ 5.)

GNC' s HVAC unit was located directly above GNC' s store. (Federal' s Supp' g

S.M.F. '1[ 20.) Mr. Beam had completed his work on GNC's HVAC unit before the

Accident. (Federal's Supp'g S.M.F. '1[ 21.) Mr. Beam was neither above GNC nor near

GNC's HVAC unit when the Accident occurred.' (Federal's Supp'g S.M.F. '1['1[ 23-24.)

The Lease required GNC to obtain commercial general liability insurance

"applicable to the Leased Premises and its appurtenances .... " that covered Auburn as

Page 2 of 13
an additional insured. (Federal's Supp'g S.M.F. 'l['I[ 6-7.) Pursuant to the commercial

general liability policy issued by Federal to GNC (the "Federal Policy"), "Lessors of

Premises" are insureds under the Federal Policy, as follows:

However, no such person or organization is an insured with respect to any:

• Damages arising out of their sole negligence;

• Occurrence that occurs, or offense that is committed, after you cease to be
a tenant in the premises; or

• Structural alteration, new construction or demolition performed by or on
behalf of them.

(Federal's Supp'g S.M.F. 'II 8.) The Federal Policy defines the term "you" as GNC.

(Continental's Add'l S.M.F. 'I[ 33.) The Federal Policy did not have any endorsement

which added Auburn to the Federal Policy as an additional insured. (Federal's Supp'g

S.M.F. 'II 9.)

Federal and Continental entered into a settlement agreement with Mr. Beam in the

Underlying Action for $1,200,000. (Federal's Supp' g S.M.F. 'II 30.) Continental and Federal

each contributed $400,000 towards the settlement and retained their rights to seek

reimbursement of the settlement amount from each other and Defendant Frankenmuth

Mutual Insurance Company. (Federal's Supp'g S.M.F. 'I[ 32.)

On or about June 23, 2020, GNC and GNC Holdings, Inc. filed for bankruptcy.

(Federal' s Supp' g S.M.F. 'II 28.) The Federal Policy contains the following language:

"Bankruptcy or insolvency of the insured or of the insured's estate will not relieve us of

our obligations under this insurance." (Federal's Supp'g S.M.F. 'I[ 34.) The Federal Policy

included a self-insured retention of $250,000 ("the SIR"). (Federal's Supp'g S.M.F. 'II 12.)

Page3 of 13
The SIR provided that the named insured, GNC, was solely liable for satisfying the

retention. (Federal's Supp'g S.M.F. 'l[ 13.) The SIR has not been satisfied with respect to

the Accident. (Federal's Supp' g S.M.F. 'l[ 29.)

Federal requests that the Court enter summary judgment in its favor and against

Continental on the issue of Federal's indemnity obligations and order Continental to

reimburse Federal for sums it expended towards defense and settlement of the

Underlying Action.

II. Legal Standard

A party is entitled to summary judgment when review of the parties' statements

of material facts and the record to which the statements refer demonstrates that there is

no genuine issue as to any material fact in dispute, and that the moving party is entitled

to judgment as a matter of law. M.R. Civ. P. 56(c); Dyer v. Dep't of Transp., 2008 ME 106, 'l[

14, 951 A.2d 821. A contested fact is "material" if it could affect the outcome of the case.

Dyer, 2008 ME 106, 'l[ 14, 951 A.2d 821. A "genuine issue" of material fact exists if a

factfinder must "choose between competing versions of the truth." Id. (quoting

Farrington's Owners' Ass'n v. Conway Lake Resorts, Inc., 2005 ME 93, 'I[ 9,878 A.2d 504).

The court considers the record in the light most favorable to the party objecting to

the grant of summary judgment. F.R. Carroll, Inc. v. TD Bank, N.A., 2010 ME 115, 'I[ 8, 8

A.3d 646; Blue Star Corp. v. CKF Props., LLC, 2009 ME 101, 'l[ 23, 980 A.2d 1270. "Facts

contained in a supporting or opposing statement of material facts, if supported by record

citations as required by this rule, shall be deemed admitted unless properly

controverted." M.R. Civ. P. 56(h)(4). To controvert an opposing party's statement of fact,

a party must "support each denial or qualification by a record citation." M.R. Civ. P.

56(h)(2). The evidence offered in support of a genuine issue of material fact "need not be

persuasive at that stage, but the evidence must be sufficient to allow a fact-finder to make

Page4 of 13
a factual determination without speculating." Est. of Smith v. Cumberland County, 2013 ME

13, 'l[ 19, 60 A.3d 759.

III. Discussion

"If the language of an insurance policy is unambiguous, we interpret it in

accordance with its plain meaning, but we construe ambiguous policy language strictly

against the insurance company and liberally in favor of the policyholder." Concord Gen.

Mut. Ins. Co. v. Est. of Boure, 2021 ME 57, 'l[ 15, 263 A.3d 167 (quoting Haskell v. State Farm

Fire & Cas. Co., 2020 ME 88, 'l[ 15, 236 A.3d 458). "An insurance contract is ambiguous if it

is reasonably susceptible of different interpretations from the perspective of an average

person untrained in either the law or the insurance field in light of what a more than

casual reading of the policy would reveal to an ordinarily intelligent insured." Bibeau v.

Concord Gen. Mut. Ins. Co., 2021 ME 4, 'l[ 12, 244 A.3d 712 (citations and quotation marks

omitted).

Federal argues: (1) that Auburn is not an additional insured; (2) that even if

Auburn is an additional insured, the Federal Policy and the Continental Policy both

provide primary coverage; and (3) that coverage was never triggered because the SIR was

not satisfied or, in the alternative, that Federal has already paid the amount of the loss

exceeding the SIR. In essence, Federal argues that it either is not obligated to indemnify

Auburn or has already satisfied its obligation.

A. Additional Insured

The additional insured provision of the Federal Policy reads, in relevant part:

Pages of 13
The undisputed facts establish that GNC leased premises from Auburn and that

the Lease required GNC to add Auburn as an additional insured to its commercial

general liability policy for the Leased Premises. The dispute centers on whether the

language "they are insureds only with respect to the ownership, maintenance or use of

that particular part of such premises leased to you" encompasses damages related to the

Accident. 2 Continental argues that Auburn is an additional insured because Mr. Beam

was injured while on the roof to repair the HVAC unit that served the Leased Premises,

which GNC was obligated to maintain under the Lease.