838 F. Supp. 670 (1993) | Cited 0 times | D. Maine | November 30, 1993


This action arises from an October 1990 automobile chase in which Joseph Lucca pursued Michael Charton after an altercation between them. During this chase, Lucca's vehicle collided with Charton's vehicle twice. At the time of this incident, Lucca was insured by State Farm Mutual Automobile Insurance Company. State Farm brought the instant action seeking a declaratory judgment that it had no duty to defend or indemnify Lucca in an action brought by Charton.

In Counts I and II, State Farm asserts that it has no duty to defend or indemnify Lucca because Lucca breached his obligation to notify State Farm of the accident or of Charton's subsequent claim. State Farm now moves for summary judgment on Counts I and II "seeking a declaration that its contractual obligations to the Defendants in this case have been excused on account of Joseph Lucca's breach of the notice provisions of his . . . policy with State Farm." (Pl.'s Mot. Summ. J. at 1.) The Magistrate Judge considered this motion and recommended that this Court grant State Farm's motion as to Lucca and deny the motion as to Charton. (Rec. Dec. at 8.) The Magistrate Judge also recommended that this Court enter summary judgment sua sponte in favor of Charton unless State Farm presents evidence relating to Maine's reach-and-apply statute. Id. State Farm and Charton filed objections to the Recommended Decision. This Court adopts the Recommended Decision issued by the Magistrate Judge as modified. 1"

I. Duty to Defend and Indemnify Lucca

This Court "shall make a de novo determination of those portions of the . . . recommendations to which objection is made . . . ." 28 U.S.C. § 636(b)(1) (emphasis added). Charton objects to the Magistrate Judge's finding that Lucca breached the notice provisions of the policy 2" and that State Farm was thereby irreparably prejudiced as a matter of law. In particular, Charton challenges the Magistrate Judge's determination that "a defendant is obligated to counter a plaintiff's evidence of prejudice with competent evidence of his own." (Rec. Dec. at 5, citing Home Ins. v. Horace Mann Ins., 603 A.2d 860, 861 (Me. 1992).) Charton asserts that the Magistrate Judge misconstrued Charton's evidentiary burden. (Mem. Supp. Def.'s Objections at 2.) The Court disagrees. The Maine Supreme Court recently held that a non-moving party in a summary judgment action who fails to contradict, by sworn evidence, the insurer's sworn evidence of prejudice, has failed to establish any genuine issue of material fact on the prejudice issue. Home Ins., 603 A.2d at 861. Charton failed to provide any sworn evidence contradicting State Farm's evidence of prejudice. He failed therefore to generate an issue of material fact on the issue of prejudice.

Charton also contends that State Farm's evidence of prejudice, an affidavit of a State Farm investigator, is insufficient. First, Charton contends that statements Lucca made to the investigator that are contained in the affidavit are inadmissible hearsay. (Def.'s Mem. Supp. Objections at 3.) This contention is without merit. The statements, offered by State Farm against Lucca, are admissions by a party-opponent, and are therefore not hearsay. Fed. R. Evid. 801(d)(2). Charton also contends that the affidavit contains nothing but opinion and supposition. (Id.). The Court is satisfied that the affidavit adequately supports a finding that State Farm was prejudiced by the delay in notice as a matter of law. The affidavit states that, although the incident occurred in October 1990, State Farm received no notice of it until August 1992. The affidavit also states that this delay made it impossible for State Farm to investigate either of the vehicles involved in the collision; to interview witnesses while their memories were fresh; or to do a prompt, independent medical examination of Charton. State Farm's investigator finally asserted that, based on his experience, State Farm's inability to perform these routine investigative tasks was prejudicial. Charton offered no contradictory evidence.

The Court accepts the Magistrate Judge's finding that Lucca's notice to State Farm was in breach of his contractual obligations and that this breach was prejudicial to State Farm as a matter of law. This finding supports the Magistrate Judge's recommendation that this Court grant summary judgment to State Farm against Lucca and declare that, as to Lucca, State Farm may avoid its duty to defend or indemnify. See Ouellette v. Maine Bonding & Casualty Co., 495 A.2d 1232, 1235 (Me. 1985) ("To avoid either its duty to defend or its liability thereunder based on an insured's delay in giving notice, a liability insurer must show (a) that the notice provision was in fact breached, and (b) that the insurer was prejudiced by the insured's delay.").

II. Maine's Reach-and-Apply Statute

Lucca's breach of the policy's notice provisions and the resulting prejudice to State Farm, however, do not necessarily affect State Farm's liability to Charton under 24-A M.R.S.A. § 2904 (1990).

Section 2904 provides that:

Whenever any person . . . recovers a final judgment against any other person for any loss or damage specified in section 2903, 3" the judgment creditor shall be entitled to have the insurance money applied to the satisfaction of the judgment by bringing a civil action . . . against the insurer to reach and apply the insurance money, if when the right of action accrued, the judgment debtor was insured against such liability and if before the recovery of the judgment the insurer had had notice of such accident, injury or damage.

24-A M.R.S.A. § 2904 (1990) (emphasis added). Unlike State Farm's duty to defend or indemnify Lucca under Maine case law, State Farm's liability to an injured party under 24-A M.R.S.A. § 2904 is not automatically extinguished when the insured breaches the policy's notice provisions and the insurer is prejudiced as a result. See 24-A M.R.S.A. § 2904 (notice only required "before the recovery of the judgment"); see also Michaud v. Mutual Fire, Marine & Inland Ins., 505 A.2d 786, 790 (Me. 1986) (upholding judgment for an injured third party in a reach-and-apply action despite insured's failure to comply with policy's notice provisions).

In addition to § 2904's express requirement that notice must be supplied before the entry of a final judgment--which is easily satisfied in this case--the Maine Supreme Court has held that the notice provided to the insurer in a reach-and-apply action must also satisfy constitutional due process requirements. Jacques v. American Home Assurance Co., 609 A.2d 719, 721 (Me. 1992). Due process requires that notice be provided "at a meaningful time in the proceedings." Michaud, 505 A.2d at 790. The Court concludes that the notice provided to State Farm in the instant case was provided at a meaningful time in the case; no judgment has yet been entered against Lucca, and State Farm still has an opportunity to be involved in that action. See id. (holding that notice given to insurer "after the entry of default but prior to the hearing on damages and entry of default judgment constituted notice at a meaningful time"). Because State Farm could potentially be liable to Charton under § 2904 as Lucca's insurer, the Court declines to declare that State Farm's obligations to Charton have been excused on account of Lucca's breach of the notice provisions of his policy with State Farm.

III. Sua Sponte Summary Judgment in Favor of Charton

The Court agrees with State Farm that Charton is not entitled to summary judgment sua sponte. Although Lucca's breach of the policy's notice provisions does not preclude State Farm's liability under § 2904, State Farm is not automatically liable under that section. First, § 2904 provides a right of action only for a judgment creditor. 24-A M.R.S.A. § 2904. Charton has not yet received a final judgment against Lucca. Second, § 2904, together with § 2903, provides a right of action only to those who suffered loss or damage caused "accidental[ly]." 24-A M.R.S.A. §§ 2904 and 2903 (1990). There has been no determination that the damage caused in this incident was accidental. 4" Finally, § 2904 expressly excludes damage resulting "when [an] automobile . . . is being used in any race or speed contest" from coverage. 24-A M.R.S.A. § 2904. The parties' conduct may fall within this exclusion. For these reasons, the Court does not adopt the Magistrate Judge's recommendation that it grant, sua sponte, summary judgment in favor of Charton in this matter.

IV. Conclusion

The Court accordingly GRANTS State Farm's Motion for Summary Judgment on Counts I and II of its action for declaratory judgment as against Defendant Lucca for his failure to comply with the notice provisions of the policy and the resulting prejudice to State Farm. The Court declines, however, to declare that Lucca's late notice affects any right of action potentially available to Charton pursuant to 24-A M.R.S.A. § 2904 and, therefore, DENIES State Farm's Motion for Summary Judgment as against Defendant Charton.



United States District Judge

Dated at Bangor, Maine this 30th day of November 1993.

1. 28 U.S.C. § 636(b)(1) provides that this Court "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate."

2. Although Charton objects to the Magistrate Judge's finding that "Lucca failed to give reasonable notice to his insurance carrier," he provides no authority for this objection. (Def.'s Mem. Supp. Objections to Rec. Dec. at 1). Charton also failed to raise or dispute this issue prior to the issuance of the Recommended Decision. (Def.'s Mem. Supp. Objections to Pl.'s Mot. for Summ. J.) This Court accepts the Magistrate Judge's finding that Lucca's failure to provide notice until 22 months after the incident breached the policy's notice requirements.

3. Section 2903 provides in relevant part that: The liability of every insurer which insures any person against accidental loss or damage on account of personal injury . . . or on account of accidental damage to property shall become absolute whenever such loss or damage, for which the insured is responsible, occurs. 24-A M.R.S.A. § 2903 (1990) (emphasis added).

4. In fact, State Farm asserts, in Count III of its Complaint, that it has no duty to indemnify Lucca for the incident because the damage was caused intentionally and not by accident as required by the policy.

Back to top