927 F.3d 33
1st Cir.2019Background
- Electricity Maine, a private energy company, faced a 2015 putative class action by customers alleging deceptive billing and seeking about $35 million under state common law, RICO, and Maine UDTPA.
- The complaint named both intentional torts (including RICO) and claims pled as negligence and negligent misrepresentation; the negligence claims incorporated many of the same factual allegations as the intentional claims.
- Electricity Maine tendered defense; its insurer Zurich filed a diversity declaratory-judgment action seeking a ruling that Zurich had no duty to defend under the D&O policy.
- Zurich argued the Policy only covered damages for "bodily injury" caused by an "occurrence" (defined as an "accident") and that the underlying complaint alleged only intentional misconduct and no bodily injury.
- The District Court granted summary judgment for Electricity Maine; the First Circuit reviewed de novo and affirmed, holding the complaint potentially alleged accidental conduct and potential bodily-injury damages (including emotional distress) sufficient to trigger the duty to defend.
Issues
| Issue | Zurich's Argument | Electricity Maine's Argument | Held |
|---|---|---|---|
| Whether the complaint alleges an "occurrence" (an "accident") triggering duty to defend | Complaint alleges intentional RICO and fraud; facts show deliberate conduct so not an "accident" | Complaint also asserts negligence/negligent misrepresentation; those claims could be developed as unintentional conduct | Held: Duty to defend triggered because negligence allegations, pled alongside intentional claims and incorporating facts, could potentially show accidental conduct under Maine law |
| Whether "bodily injury" is alleged or potentially recoverable | Policy limits "mental injury" as only resulting from bodily injury; complaint does not allege bodily injury, so no coverage | Even without explicit bodily-injury allegations, emotional-distress damages could qualify as bodily injury and thus trigger duty to defend | Held: Duty to defend exists; Harlor and Maine law allow potential for emotional-distress bodily injury to trigger coverage; ambiguous policy language resolved for insured |
| Whether negligent misrepresentation claim can seek emotional-distress damages (thus bodily injury) | Veilleux limits emotional-distress recovery in negligent misrepresentation; thus that claim cannot supply bodily-injury potential | Complaint can be read to include negligent omissions (pure negligence) for failure to disclose renewals/fees, which can support emotional-distress damages | Held: Complaint plausibly alleges negligence by omission distinct from negligent misrepresentation, permitting potential emotional-distress damages and coverage |
| Whether post-Traveler cases defeat the duty to defend here | Allocca and Ben-Ami (post-Traveler) suggest limits on reading negligence where facts show intent | Those cases did not involve complaints that expressly pleaded negligence alongside intentional claims; Travelers/Lavoie remain controlling for such pleadings | Held: Allocca and Ben-Ami do not undermine duty here; precedent supports defending where negligence pleaded in alternative or alongside intent |
Key Cases Cited
- Travelers Indem. Co. v. Dingwell, 414 A.2d 220 (Me. 1980) (broad negligence allegations pled alongside intentional claims can trigger duty to defend)
- Lavoie v. Dorchester Mut. Fire Ins. Co., 560 A.2d 570 (Me. 1989) (complaint alleging negligence in alternative to intentional torts can require insurer to defend)
- Harlor v. Amica Mut. Ins. Co., 150 A.3d 793 (Me. 2016) (duty to defend where complaint could potentially support bodily harm from emotional distress)
- Kelley v. N.E. Ins. Co., 168 A.3d 779 (Me. 2017) (definition of "accident" as unexpected, undesigned event)
- Auto Europe, LLC v. Conn. Indem. Co., 321 F.3d 60 (1st Cir. 2003) (duty to defend where a modified factual development at trial could bring claims within coverage)
- Foremost Ins. Co. v. Levesque, 868 A.2d 244 (Me. 2005) (ambiguities in insurance policies construed against insurer)