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Elliott v. Hanover Insurance Co.6/4/1998
Reporter of Decisions
Argued: December 3, 1997
The Hanover Insurance Company appeals from the summary judgment entered in the Superior Court (Cumberland County, Mills, J.) in Warren Elliott's favor and awarding him damages in the amount of $151,800. Hanover also challenges the court's order awarding Elliott pre- and post-judgment interest. Elliott cross-appeals, challenging the court's damage award. We affirm in part and vacate in part.
I.
Richard L. Castonguay is a self-employed woodsman who resides in East Livermore. He owns numerous pieces of logging equipment, such as a skidder, a bulldozer, and a pulp truck. He has a 20- by 40-foot garage adjacent to his residence in which he stores the tools and equipment he uses for logging. He maintains and repairs the equipment in the driveway next to his house.
Castonguay supplements his logging income by trading in scrap metal and by selling firewood. It was in his capacity as a scrap metal purchaser that he first met Warren Elliott. In May 1994 Elliott visited Castonguay's residence to sell him some scrap metal. Prior to Elliott's arrival, Castonguay had used a torch on the skidder to remove some chains. Elliott claims that as he was walking on Castonguay's driveway, he stepped on hot molten metal and injured his foot.
At the time of Elliott's injury, Castonguay was insured by a homeowners policy issued to him by Hanover. Hanover was notified that Elliott had been injured on Castonguay's property. In February 1995 Hanover notified Castonguay that his homeowners policy did not provide coverage for Elliott's injury. Elliott was subsequently informed of Hanover's decision to deny coverage. Elliott then sued Castonguay for negligence. In October 1995 Elliott and Castonguay agreed that Castonguay would not defend the lawsuit and would assign his rights under the policy to Elliott. Elliott in return agreed not to execute on a judgment in his favor. The court (Androscoggin County, Alexander, J.) thereafter awarded Elliott a default judgment in the amount of $326,340 in his negligence action against Castonguay.
In June 1996 Elliott filed a complaint to reach and apply the insurance proceeds pursuant to 24-A M.R.S.A. Section 2903 (1990) against Hanover for its failure to defend Castonguay in his lawsuit with Elliott. The court (Cumberland County, Mills, J.) subsequently granted Elliott leave to amend his complaint to include a count for a bad faith refusal to settle within the policy limits. In March 1997 the court granted a summary judgment in Elliott's favor, concluding that Hanover had breached its duty to defend Castonguay and that it was bound by the default judgment entered in the negligence action and estopped from asserting noncoverage as a defense in the case at bar. The court ordered a hearing to determine the damages that resulted from Hanover's failure to defend Castonguay and subsequently found Hanover liable to Elliott in the amount of $151,800. This appeal and cross-appeal followed.
II.
Hanover's first contention on appeal is that the court erred by failing to consider, in its determination that Hanover had breached its duty to defend, undisputed facts that showed that Elliott's injury was not covered by the policy. We disagree. Whether an insurer has an obligation to defend its insured against a complaint is a question of law. Northern Sec. Ins. Co. v. Dolley, 669 A.2d 1320, 1322 (Me. 1996). A determination whether there exists a duty to defend is resolved by comparing the complaint with the terms of the insurance contract. Id. "If the allegations in the underlying tort action are within the risk insured against and there is any p
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