United States Court of Appeals

For the First Circuit

No. 99-1909

THE HOME INSURANCE COMPANY,

Plaintiff, Appellant,

v.

ST. PAUL FIRE & MARINE INSURANCE COMPANY, ET AL.,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. Gene Carter, U.S. District Judge]

Before

Boudin, Circuit Judge

Bownes, Senior Circuit Judge

and Lynch, Circuit Judge.

David A. Grossbaum, with whom Maura K. McKelvey and Cetrulo

& Capone were on brief, for appellant.

Richard L. Suter, with whom Suter & Associates was on brief,

for appellee.
October 11, 2000
1 At the time when the events underlying this case began,

S&E was known as Smith, Elliott, Smith & Garmey. For the sake

of simplicity, we use the firm's current name throughout this

opinion.

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LYNCH, Circuit Judge. In 1995, the Maine law firm of Smith

& Elliott (S&E) was sued for malpractice.1 S&E held lawyers'

professional liability insurance from both The Home Insurance

Company and St. Paul Marine & Fire Insurance Company. The Home

defended the firm in the 1995 suit and eventually settled. In

the meantime, The Home brought this suit, seeking a declaration

that St. Paul was obligated to share the costs of defending and

indemnifying S&E. The magistrate judge recommended granting

summary judgment to St. Paul. The district court affirmed the

magistrate's recommended decision. We reverse and remand with

instructions.

I.

In 1989, S&E represented a number of investors in the

purchase and rehabilitation of a hotel in Kennebunk, Maine,

called the Shawmut Inn. The project fell through, and in 1995

the investors sued S&E for malpractice. Investors Bernard F.

Shadrawy, Jr. and Joseph D'Jamoos brought suit in early 1995. 

Other investors Ralph Bruno, Port Resort Realty Corporation,

and Harbor Lights Realty Trust brought a separate suit around

November of the same year. The costs of defending and
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settling the Bruno suit are the subject of the controversy in

this case.

Initially, the Bruno suit was concerned solely with acts

S&E committed in 1989, while representing the plaintiffs in

the Shawmut Inn project. The Bruno plaintiffs charged that

S&E failed to obtain a written loan commitment from the Bank

of New England, and that consequently the Bank declined to

honor its oral agreement to lend the plaintiffs $4 million in

construction funds, causing the project's collapse. However,

in February of 1996, in response to a motion to dismiss based

on the statute of limitations, the Bruno plaintiffs amended

their complaint, adding charges that in 1995 S&E breached

various ethical duties owed to the Bruno plaintiffs. 

Specifically, the amended Bruno complaint alleged that in

1995, while S&E was defending itself in the two malpractice

suits, S&E (1) disclosed the Bruno plaintiffs' files to

Shadrawy and D'Jamoos without proper authorization; (2)

wrongfully obtained a statement from Bruno for use in the

Shadrawy suit; (3) contacted other prior counsel of the Bruno

plaintiffs in an effort to obtain confidential information;

and (4) refused to turn over the Bruno plaintiffs' files at

their request. 

The Home and St. Paul disagreed from the start over which
2 The suit was threatened by the Bank of New England.

From the record, it appears that the Bank's threat never

materialized.

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company was responsible for defending and indemnifying S&E in

the Bruno suit. Both companies' policies were applicable,

though for different reasons. The Home had issued S&E a

lawyers' professional liability policy for the period of April

6, 1991 to April 6, 1992. St. Paul had issued S&E a similar

policy for the period of April 6, 1995 to April 6, 1996. Each

policy was a "claims made" policy as opposed to an

"occurrence" policy: that is, each extended coverage to any

claims made within the policy period, even if the acts on

which those claims were based occurred prior to the policy

period (though with important conditions, as will be seen). 

Thus, both policies potentially applied to claims that S&E

committed malpractice in 1989, if such claims were made within

the policies' respective periods. The Bruno claim clearly was

made within St. Paul's 1995-1996 policy period: the suit was

brought in or about November 1995. However, The Home had to

treat the Bruno claim as if it had been made during The Home's

1991-1992 policy period as well. S&E was first threatened

with a lawsuit in connection with the Shawmut Inn project in

September of 1991, during The Home's policy period.2 S&E

reported the claim to The Home at the time. Thus, when the
3 The relevant clause of The Home's policy reads:

"Related acts, errors or omissions shall be treated as a single

claim. All such claims, whenever made, shall be considered

first made during the policy period . . . in which the earliest

claim arising out of such act, error or omission was first made

. . . ." 

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Bruno claim was brought in 1995, The Home considered the claim

to be related to the 1991 claim and so, under a provision in

The Home's policy requiring The Home to treat related claims

as the same claim, it had to treat the Bruno claim as if it

had been made in 1991, during its policy period.3

The Home agreed to defend the Bruno suit, while fully

reserving its rights. As for St. Paul, even though the Bruno

suit was a claim made during its policy period, St. Paul

initially disclaimed any obligation to defend or indemnify

S&E; eventually, it agreed to provide coverage on an excess

basis only, in the event that The Home's coverage was

exhausted. For justification, St. Paul cited the "prior acts"

provision of its policy, which stated that St. Paul would

cover claims based on acts committed prior to the policy

period only if "[a]ny other insurance covering the claim has

been used up." In response, The Home pointed St. Paul to the

"other insurance" provision in The Home's policy, which stated

that, in general, if "other insurance" was available to pay

for a claim covered by The Home's policy, The Home would cover
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the claim on an excess basis only. Thus, each insurer

concluded its policy was excess to the other. Seeking to

split the difference, The Home sought to persuade St. Paul

that The Home's "other insurance" clause and St. Paul's "prior

acts" clause were mutually repugnant -- that is, the two

cancelled each other out; therefore, under Maine law, the two

insurers were obligated to split the costs of defending and

indemnifying S&E on a pro rata basis. St. Paul disagreed and

continued to deny concurrent coverage.

After the Bruno complaint was amended to include the

allegations of ethical misconduct occurring in 1995, a further

disagreement arose between the two insurers. The Home argued

that these new claims and the acts upon which they were based

both fell within St. Paul's policy period, and hence St. Paul

was responsible for covering them. St. Paul disclaimed

responsibility on the grounds that S&E was no longer

representing the Bruno plaintiffs at the time the acts

occurred, so the acts were not "committed in the performance

of legal services" and thus did not fall under the literal

terms of its policy. 

Its attempts to persuade St. Paul through correspondence

having failed, The Home filed the instant action on June 22,

1998. The Home sought a declaration that St. Paul provided
4 These expenses did not exceed The Home's $3 million

policy limit, so it has never been claimed that St. Paul's

obligations as an excess insurer were triggered by the Bruno

suit.

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coverage as to the Bruno suit concurrently with The Home and

was obligated to share costs accordingly. Six months later,

The Home settled the Bruno suit. By this point, it had

expended nearly $500,000 in defense and settlement of the

case.4

After settling, The Home moved to amend its complaint to

include the allegation that, because St. Paul breached its

duty to defend S&E, St. Paul now bears the burden of proving

how the Bruno settlement is to be apportioned as between S&E's

1989 acts and its 1995 acts; in particular, St. Paul must show

that the settlement was not paid entirely to compensate for

S&E's 1995 acts, for which The Home alleges St. Paul is

exclusively responsible. Because this is an impossible burden

to meet, the allegation continues, St. Paul must pay for the

entire Bruno settlement.

The Home and St. Paul both moved for summary judgment. 

The magistrate recommended granting summary judgment to St.

Paul. The magistrate ruled, first, that the St. Paul policy

does not cover the 1995 acts alleged in the amended Bruno

complaint because the acts were not "committed in the
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performance of legal services." Second, the magistrate ruled

that The Home's "other insurance" clause and St. Paul's "prior

acts" clause are not mutually repugnant, as contended by The

Home; rather, The Home policy provides primary coverage while

the St. Paul policy provides excess coverage. Third, having

found that St. Paul had no duty to defend S&E, the magistrate

denied The Home's motion to amend its complaint on the grounds

that the amendment would be futile. The district court

affirmed the magistrate's recommended decision in a paragraph

order. The effect was to leave The Home with all of the costs

of defending and indemnifying S&E in the Bruno suit. The Home

now appeals.

II.

We address the issues raised in the case in the following

order: first, whether The Home's "other insurance" clause and

St. Paul's "prior acts" clause are mutually repugnant, making

the two insurers jointly responsible for defending and

indemnifying S&E as to the 1989 acts alleged in the Bruno

complaint; second, whether either insurer had a duty to defend

or indemnify S&E as to the 1995 acts alleged in the Bruno

complaint; and third, whether The Home should be granted leave

to amend its complaint to demand that St. Paul pay the entire

Bruno settlement. Our review is de novo. See Thomas v.
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Eastman Kodak Co., 183 F.3d 38, 47 (1st Cir. 1999) (review of

district court's decision on summary judgment is de novo),

cert. denied, ___ U.S. ___, 120 S.Ct. 1174 (2000). Maine law

governs.

A. Coverage of 1989 Acts

Although this case presents an apparently rare clash

between an "other insurance" clause from one policy and a

"prior acts" clause from another, it is in the end just a

slight variation on the standard mutual repugnancy case in

which two "other insurance" clauses conflict with one another. 

Accordingly, we begin our analysis by discussing the doctrine

that applies to the standard case, and then we consider

whether the variation presented here requires any deviation

from this norm.

"Other insurance" clauses limit an insurer's

responsibility for a claim if "other insurance" is available

to cover it. Originally, the clauses appeared in property

insurance policies and were intended to eliminate the problem

of fraudulent claims induced by over-insuring. See Carriers

Ins. Co. v. American Policyholders' Ins. Co., 404 A.2d 216,

218 (Me. 1979). In a context such as the one here, the

clauses function not so much as to deter fraudulent claims as

simply to limit an insurer's exposure where the insured
5 For example, if insurer A's policy limit is $1 million

and insurer B's policy limit is $3 million, a pro rata clause in

A's policy would require A to pay one-fourth of any claim

covered by both A and B (up to $1 million).

6 For example, if insurer A and B both cover a claim, and

B's policy limit is $3 million, an excess clause in A's policy

would require A to pay out on the claim only to the extent that

the claim exceeded $3 million (up to A's policy limit).

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happens to hold multiple insurance policies covering the same

loss. Cf. id.; see also R. J. Robertson, Jr., "Other

Insurance" Clauses in Illinois, 20 S. Ill. U. L.J. 403, 405

(1996).

"Other insurance" clauses come in three types. The

first, an "escape" clause, is the most basic: it simply denies

any coverage for a claim if other insurance is available. The

second, a "pro rata" clause, extends coverage to a portion of

the total loss claimed, usually based on the limits of the

applicable policies.5 The third, an "excess" clause, is the

type at issue in this case; it extends coverage only to the

extent that other available insurance is insufficient to cover

the claim.6 See Carriers, 404 A.2d at 218.

"Other insurance" clauses are not necessarily

problematic. For example, if a claim is covered by two

policies each with pro rata clauses, then the insurers each

pay a pro rata share of the claim. Or if one policy contains

no "other insurance" clause at all while the second contains
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an excess clause, then the first policy covers the claim and,

if the first is insufficient, the second covers the excess. 

In these scenarios, both policies interact harmoniously and

the claim goes wholly insured. But frequently, policies

contain "other insurance" clauses that are incompatible in the

sense that, if each is given full effect, claims covered by

both policies will go under-insured. In particular, where two

policies each contain excess "other insurance" clauses, giving

effect to both will leave a claim completely uninsured. For

the first policy provides coverage only in excess of the

second, but the second provides coverage only in excess of the

first; the result is a standoff, in which each insurer refuses

to cover the claim before the other.

In order to break the tie in such situations, courts

early on experimented with various rules for declaring one

insurer the "primary" insurer and the other the "excess"

insurer. One such rule was to consider the primary insurer to

be the one "first in time"; a second rule considered the

primary insurer to be the one whose "other insurance" clause

was more general in scope; a third rule considered the primary

insurer to be the one whose policy more specifically covered

the claim at issue. See Carriers, 404 A.2d at 219 (collecting

cases). 
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In time, however, most courts came to reject such rules,

favoring instead the doctrine of mutual repugnancy, under

which two insurers' excess clauses are thought to cancel each

other out, and both insurers are made, in Solomonic fashion,

to split the costs of coverage between them pro rata. See 69

A.L.R. 2d 1122, 1124 (1960). The Maine Supreme Judicial Court

adopted this approach in Carriers, supra. Finding the earlier

rules "arbitrary," "mechanical," and tending toward "semantic

microscopy," the court chose to "abandon[] the search for the

mythical 'primary' insurer and insist[] instead that both

insurers share in the loss." Id. at 219-20. Such an

approach, the court explained, not only best carries out the

intent of both insurers to limit their exposure, but also

discourages insurers from engaging in draftsmanship battles

and wasteful litigation in order to avoid providing primary

coverage. See id.

The essential difference between Carriers and this case

is that here, the clash of clauses is not between two "other

insurance" clauses, but rather is between an "other insurance"

clause and a "prior acts" clause containing "other insurance"

language. Toward the end of The Home policy, in a section

labeled "Conditions," which comes after a section labeled

"Coverage," The Home's policy contains an "other insurance"
7 By "specific excess insurance" is meant insurance

providing coverage only in excess of some other specifically

identified policy -- which here would be The Home policy. See

Wright v. Newman, 598 F. Supp. 1178, 1196 (W.D. Mo. 1984),

aff'd, 767 F.2d 460 (8th Cir. 1985). St. Paul's policy is not

of this sort; there is no dispute that, if The Home policy did

not exist, St. Paul's policy would provide coverage as to S&E's

1989 acts.

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clause, which provides in pertinent part:

II. Other Insurance: . . . [T]his insurance shall be in

excess of . . . any other valid and collectible insurance

available to the Insured whether such other insurance is

stated to be primary, pro rata, contributory, excess,

contingent or otherwise, unless such other insurance is

written only as a specific excess insurance over the

limits of liability provided in the policy.7

In contrast, near the middle of St. Paul's policy, under a

section labeled "When This Agreement Covers," is St. Paul's

"prior acts" clause, specifying under what conditions St. Paul

will cover claims based on acts committed prior to the policy

period. It provides as follows:

Prior acts. We'll cover claims based on wrongful acts

that occurred before the effective date of this

agreement, but only if all the following conditions are

met: . . .

• Any other insurance covering the claim has been used

up.

There is no question that if the "other insurance" language of

St. Paul's "prior acts" clause had instead appeared in a

catchall "other insurance" clause such as the one in The Home

policy, the two insurers would be required to share coverage
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under Carriers. The question, then, is whether it makes any

difference that the language appears in the "prior acts"

clause. 

The magistrate judge held that it does, and that Maine's

usual mutual repugnance rule therefore does not apply. The

magistrate found only four cases -- none of them from Maine --

bearing precisely on the question, and of these four, three

found no mutual repugnance. See Evanston Ins. Co. v.

Affiliated FM Ins. Co., 556 F. Supp. 135, 138 (D. Conn. 1983)

(finding no mutual repugnance); Smith v. Neumann, 682 N.E.2d

1245, 1251-52 (Ill. App. Ct. 1997) (same); Chamberlin v.

Smith, 72 Cal. App. 3d 835, 850-51 (Cal. Ct. App. 1977)

(same); Fremont Indem. Co. v. New England Reinsurance Co., 815

P.2d 403, 407-08 (Ariz. 1991) (finding mutual repugnance). 

Following the guidance of this "meagre but distinct majority,"

the magistrate judge reasoned as follows: The Home's "other

insurance" clause appears after the coverage section of its

policy, whereas the "other insurance" language in St.Paul's

"prior acts" clause appears within the coverage section of its

policy; consequently, under The Home's policy, coverage for

S&E's 1989 acts is initially triggered in the coverage section

and only rescinded if the "other insurance" clause later kicks

in, while under St. Paul's policy, coverage is never triggered
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in the first place; so, because St. Paul's coverage is never

triggered, The Home's "other insurance" clause never kicks in,

its coverage is never rescinded, and The Home is left as the

primary insurer. Put succinctly, the magistrate found that

St. Paul's "prior acts" clause effects "not a post hac escape

clause, but rather an explicit, initial exclusion from

coverage," Evanston, 556 F. Supp. at 138, and, for that

reason, it trumps The Home's "other insurance" clause.

We think such reasoning turns too much on the sort of

"semantic microscopy" that the Maine Supreme Judicial Court

disfavored in Carriers; to accept it would encourage the very

draftsmanship battles and wasteful litigation that the

Carriers Court sought to prevent. Simply because The Home's

"other insurance" clause appears outside a section expressly

labeled "Coverage" does not mean that coverage is not limited

by the provision, or that the provision should be given any

less weight than if it appeared inside such a section. Nor is

it correct to conceive of St. Paul's policy as "initially"

excluding coverage, or The Home's policy as initially

extending it and only later attempting taking it away, as if

one section of an insurance policy were metaphysically prior

to another. Under Maine law the coverage provided by an

insurance policy is determined by the policy as a whole. "All
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parts and clauses, including exceptions and conditions, must

be considered together . . . ." Baybutt Constr. Corp. v.

Commercial Union Ins. Co., 455 A.2d 914, 921 (Me. 1983),

overruled on other grounds by Peerless Ins. Co. v. Brennon,

564 A.2d 383 (Me. 1989). Read as a whole, The Home's policy

covers claims only on an excess basis if other insurance is

available; St. Paul's policy does the same where the claims

are based on prior acts. Thus, each policy purports to

provide only excess coverage for S&E's 1989 acts if the other

policy is available. In such a situation, Carriers demands

proration. We do not think Carriers countenances different

outcomes depending on whether St. Paul's language was in an

"other insurance" clause relating to prior acts or in a "prior

acts" clause relating to other insurance. Such an approach

would tend to encourage insurers to jockey for best position

in choosing where to locate "other insurance" language,

needlessly complicating the drafting of policies, inducing

wasteful litigation among insurers, and delaying settlements -

- all ultimately to the detriment of the insurance-buying

public. See Fremont, 815 P.2d at 407; cf. Carriers, 404 A.2d

at 220. 

The magistrate judge thought that the Maine Supreme

Judicial Court "would not be so quick to collapse the
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distinction between the coverage portions of a policy and a

catchall 'other insurance' clause." For support, it cited the

Maine Supreme Judicial Court's decision in Royal Globe

Insurance Co. v. Hartford Accident & Indemnity Co., 485 A.2d

242 (Me. 1984). There, the Court found no mutual repugnance

where one policy contained a catchall "other insurance" clause

and the other contained a clause making coverage for the

insured's employees (but not for the insured itself) available

on an excess basis only. Royal Globe, 485 A.2d at 243-44. 

The magistrate judge drew an analogy with the instant case:

"Just as the . . . insurer in Royal Globe extended coverage in

a specific instance (involving employees) only upon exhaustion

of other available insurance, St. Paul extends coverage in a

specific instance (involving prior acts) only upon such

exhaustion."

There are several problems with this analogy. As an

initial matter, the analogy does not support the posited

thesis -- that St. Paul's "prior acts" clause trumps The

Home's "other insurance" clause because of its location in the

coverage portions of St. Paul's policy. Indeed, Royal Globe

does not mention the location of the clauses at issue there. 

Rather, what the analogy seems to suggest is that St. Paul's

"prior acts" clause trumps The Home's "other insurance" clause
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because it applies more specifically to the claim at issue

here -- i.e., it applies specifically to claims based on prior

acts, whereas The Home's "other insurance" clause applies to

claims generally. 

The difficulty is that such a conclusion is flatly at

odds with Carriers, which explicitly rejected the rule that,

as between two "other insurance" clauses, the specific trumps

the general. Carriers, 404 A.2d at 219. There is no reason

to think that Royal Globe revives this rule. Indeed, Royal

Globe is distinguishable from both Carriers and this case in

that it involved a conflict not between two excess "other

insurance" clauses, but rather between an excess clause and a

pro rata clause. Courts treat conflicts between two excess

clauses differently from conflicts between an excess clause

and a pro rata clause: while the majority rule for the former

is to apply the doctrine of mutual repugnance, the majority

rule for the latter is that the excess clause trumps the pro

rata clause. Compare 69 A.L.R.2d 1122, 1124 (1960)

(describing majority rule for excess vs. excess cases) with 12

A.L.R.4th 993, 997 (1982) (describing majority rule for excess

vs. pro rata cases); see also Robertson, supra, at 414, 418. 

Thus, the more straightforward reading of Royal Globe -- and

the reading more compatible with Carriers -- is simply that it
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adopts the majority rule for conflicts between excess clauses

and pro rata clauses. See Royal Globe, 485 A.2d at 244-45

(finding pro rata clause not a clear indicator of whether

policy is primary or excess, so, by default, policy with pro

rata clause is to be considered primary). 

Finally, St. Paul asks us to consider expert testimony

regarding how conflicts between successive insurers, such as

the conflict in this case, are settled within the industry. 

Perhaps in some other setting it might be appropriate to

consider such evidence, but we do not think it would be

appropriate here. The relevant policy language is unambiguous

and the dispute presented can be resolved through ordinary

judicial methods of contractual interpretation. See Hanover

Ins. Co. v. Crocker, 688 A.2d 928, 930 (Me. 1997) ("In cases

involving the construction of the language of an insurance

contract, the meaning of unambiguous language is a question of

law."). Moreover, the expert testimony presented by St. Paul

is ultimately irrelevant. The testimony was that within the

insurance industry, if one insurer was on risk at the time an

act occurred, and the other was on risk at the time a claim

based on the act was made, the former insurer is expected to

cover the claim on a primary basis. However, The Home was not

on risk at the time the 1989 acts alleged in the Bruno
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complaint occurred. The only reason The Home's policy covers

the Bruno claim is that The Home was on risk in 1991, when the

first claim against S&E based on the 1989 acts was reported;

because the Bruno claim relates back to this claim, The Home's

policy provides coverage. 

In conclusion, seeing no reason to consider St. Paul's

"prior acts" clause to trump The Home's "other insurance"

clause, we find the two clauses mutually repugnant. 

Accordingly, St. Paul is responsible for a pro rata share of

the costs of defending and indemnifying S&E as to the 1989

acts alleged in the Bruno complaint.

B. Coverage of 1995 Acts

We next consider whether St. Paul had a duty to defend

and indemnify S&E as to the 1995 acts -- the breaches of

ethical duties -- alleged in the amended Bruno complaint. The

Home contends that these allegations constitute a separate

claim from the allegations based on S&E's 1989 acts, and that

The Home is not responsible for this claim because it is based

on acts that occurred neither prior to nor during its policy

period. Rather, The Home argues, the 1995 acts occurred and

the claim based upon them was made during St. Paul's policy

period, so St. Paul is exclusively responsible for providing

coverage. St. Paul responds, first, that its policy does not
8 The magistrate judge agreed with St. Paul that the 1995

acts were not "committed in the performance of legal . . .

services." Rather, he found, the acts were committed in the

course of S&E's conduct as a defendant in a malpractice case.

The magistrate judge made no finding as to whether The Home's

policy covered the 1995 acts.

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cover the 1995 acts because none qualify as "a negligent act,

error, or omission committed in the performance of legal . . .

services," and second, that The Home's policy does cover the

1995 acts because they sufficiently relate to the 1989 acts,

for which The Home concedes coverage.8

There are two questions to be decided: first, whether

either insurer had a duty to defend as to the 1995 acts, and

second, whether either insurer had a duty to indemnify. See

Lewiston Daily Sun v. Hanover Ins. Co., 407 A.2d 288, 291-92

(Me. 1979) (comparing duty to defend with duty to indemnify);

American Policyholders' Ins. Co. v. Cumberland Cold Storage

Co., 373 A.2d 247, 250-51 (Me. 1977) (same).

1. Duty to Defend

Under Maine law, "[t]he scope of a duty to defend is

determined by 'comparing the provisions of the insurance

contract with the allegations in the underlying complaint. If

there is any legal or factual basis that could be developed at

trial, which would obligate the insurer to pay under the

policy, the insured is entitled to a defense.'" Burns v.
9 The policy states in pertinent part: "We'll pay amounts

you . . . are legally required to pay to compensate others for

loss that results from a negligent act, error, or omission

committed in the performance of legal or notary services." 

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Middlesex Ins. Co., 558 A.2d 701, 702 (Me. 1989) (quoting

J.A.J., Inc. v. Aetna Cas. & Sur. Co., 529 A.2d 806, 808 (Me.

1987)) (emphasis in original); see also United Bank v. Chicago

Title Ins. Co., 168 F.3d 37, 39 (1st Cir. 1999). Maine law

favors an expansive view of an insurer's duty to defend; any

ambiguity in policy language is to be construed in favor of

the insured. See Union Mut. Fire Ins. Co. v. Inhabitants of

Topsham, 441 A.2d 1012, 1015 (Me. 1982). 

Given that Maine has so placed its thumb on the scales,

we think that St. Paul most likely had a duty to defend S&E as

to the 1995 acts. St. Paul's primary argument is that the

acts occurred after S&E had ceased representing the Bruno

plaintiffs, and so the acts cannot be said to have been

"committed in the performance of . . . legal services," as its

policy requires.9 We think it at least arguable, however,

that a lawyer's honoring of his continuing ethical duties,

arising as they do out of the attorney-client relationship, is

itself a "legal service" the lawyer provides to his clients,

see Regas v. Continental Cas. Co., 487 N.E.2d 105, 109 (Ill.

App. Ct. 1985) (construing "services" in legal malpractice
10 St. Paul objects that the Bruno plaintiffs could never

have proven the 1995 acts to constitute error because Maine Bar

Rule 3.6(h)(3) permits a lawyer to disclose a client's

confidential information if necessary to defend himself in a

malpractice suit. We note first that this provision would

excuse only one of the 1995 acts -- S&E's disclosure of the

Bruno's files to others. Second, it was possible that the Bruno

plaintiffs could have proven at trial that this disclosure was

not reasonably necessary to S&E's malpractice defense and so was

wrongful notwithstanding Rule 3.6(h)(3). St. Paul further

objects that the 1995 acts were all intentional in nature, and

so do not fall under the scope of its coverage, which is for

loss resulting from a "negligent act, error, or omission." But,

given Maine's policy of resolving ambiguities in favor of the

insured, we do not think this language should be read so

narrowly. See USM Corp. v. First State Ins. Co., 652 N.E.2d

613, 614-15 (Mass. 1995) (collecting cases for reading

"negligent" to modify only the term "act," not "error" or

"omission"). 

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policy to encompass "any sort of service . . . [that] requires

the use of any degree of legal knowledge or skill") (citations

omitted), and that the 1995 acts could, under some legal

theory or factual showing, each be proven a "negligent act,

error, or omission" committed in the performance of such

service, see Travelers Indem. Co. v. Dingwell, 414 A.2d 220,

226 (Me. 1980) ("The correct test is whether a potential for

liability within the coverage appears from whatever

allegations are made.") (emphasis in original).10

In the end, though, we need not resolve the question. We

have already concluded that St. Paul had a duty to defend S&E

as to the 1989 acts alleged in the Bruno complaint. And under

Maine law, if an insurer has a duty to defend against one
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count of a complaint, it has a derivative duty to defend

against other counts if they are sufficiently related that

apportioning defense costs as between the two is not

practicable. See Gibson v. Farm Family Mut. Ins. Co., 673

A.2d 1350, 1353 (Me. 1996). This is the majority rule. See

Titan Holdings Syndicate, Inc. v. Keene, 898 F.2d 265, 269

(1st Cir. 1990) (citing 41 A.L.R.2d 434, 436-38 (1980 Supp.)

(collecting cases)). In this case, the allegations of the

1995 acts are sufficiently intertwined with the allegations of

the 1989 acts so that The Home's defense costs cannot readily

be retrospectively apportioned as between the two. The 1995

acts arose out of the same attorney-client relationship and

ultimately relate back to the same botched real estate

transaction as the 1989 acts; defending against allegations of

the former required knowledge of the latter. Cf. Gibson, 673

A.2d at 1354. Moreover, as discussed below, S&E's defense as

to the 1995 acts was merely incidental to its defense as to

the 1989 acts. The great bulk of the Bruno suit concerned the

1989 acts; the allegations of the 1995 acts were defended

against merely in order to prevent the Bruno plaintiffs from

escaping a statute of limitations problem affecting the

allegations of the 1989 acts. Given these circumstances, St.

Paul had a duty to defend as to the 1995 acts as well as the
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1989 acts, regardless of whether the 1995 acts independently

fall within its coverage.

For its part, The Home appears to concede that, under

Gibson, supra, it was obliged to defend as to the 1995 acts as

well as the 1989 acts. Only with respect to the duty to

indemnify as to the 1995 acts does The Home claim that such

duty was St. Paul's alone. Thus, given that The Home and St.

Paul were both obliged to defend against the 1989 allegations,

we hold that both insurers had a derivative duty to defend

against the 1995 allegations. St. Paul therefore must share

with The Home the costs of defending the entire Bruno suit,

not merely the costs of defending against the allegations of

the 1989 acts.

2. Duty to Indemnify

In contrast to the duty to defend, the duty to indemnify

is narrower: while the duty to defend depends only on the

allegations made against the insured, the duty to indemnify

depends upon the facts established at trial and the theory

under which judgment is actually entered in the case. 

Cumberland Cold Storage, 373 A.2d at 250. However, the Bruno

suit was settled prior to trial, so no facts were ever

established nor judgment ever entered in the case. In such a

situation, this court has held, the duty to indemnify is
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determined by the basis for the settlement. See Travelers

Ins. Co. v. Waltham Indus. Labs. Corp., 883 F.2d 1092, 1099

(1st Cir. 1989). Accordingly, whether St. Paul or The Home

had a duty to indemnify S&E as to the 1995 acts turns on

whether any portion of the settlement was made in compensation

for the 1995 acts, and, if so, whether the 1995 acts fall

under either insurer's coverage.

We again avoid answering the latter question, for we

think it is clear from the record that the Bruno settlement

was made entirely in compensation for the 1989 acts; no

significant portion was directed to the 1995 acts. The Bruno

complaint, as originally filed, alleged only the 1989 acts;

those acts were the raison d'etre for the suit. The complaint

was amended to include the 1995 allegations only after S&E

moved to dismiss the original complaint on statute of

limitations grounds. In its motion to strike the amended

Bruno complaint and its subsequent motion for summary judgment

in the case, S&E made clear that it considered the added

allegations frivolous, in violation of Rule 11, and intended

solely as an end run around the statute of limitations. From

a correspondence file kept on the case, it appears that the

1995 acts were not even considered by S&E's defense team in

analyzing the case's settlement value. Likewise, the Bruno
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plaintiffs did not consider the allegations of the 1995 acts

to carry any significant value relative to the allegations of

the 1989 acts. In assessing their damages in a motion for

attachment filed in the case, the plaintiffs focused entirely

on the damages caused by the 1989 acts; they did not so much

as mention the 1995 acts. The same is true of Ralph Bruno's

enumeration of his losses in an affidavit he submitted in the

case. The only evidence in the record that plaintiff Bruno

considered the 1995 acts to have caused any damages appears in

his answers to an interrogatory directly posing the question. 

Bruno stated vaguely that the files that S&E disclosed to

others contained embarrassing material and that S&E's failure

to turn the files over to him made it harder for his lawyers

to conduct the Bruno case, increasing his legal fees. By

comparison, the Bruno plaintiffs described in comprehensive

detail various tangible losses they suffered as a result of

the 1989 acts. According to the plaintiffs, those losses

totaled approximately $29 million. The settlement, plus The

Home's attorney's fees, totaled about $500,000.

We thus find no genuine issue of material fact concerning

the apportionment of the Bruno settlement. Compared to a

failed real estate transaction in which the Bruno plaintiffs

lost millions, S&E's alleged acts of mischief in the resulting
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malpractice actions -- the improper handling of a file, the

improper taking of a statement, and the improper contacting of

a former attorney -- appear entirely inconsequential. It

simply cannot be seriously contended -- especially given the

circumstances under which the acts were alleged -- that

anything more than a de minimis portion of the Bruno

settlement could have been intended to compensate for the 1995

acts. Accordingly, we hold that neither The Home nor St. Paul

had a duty to indemnify S&E as to the 1995 acts, so St. Paul

owes The Home nothing for indemnifying as to the 1995 acts. 

Nonetheless, St. Paul still owes The Home for all of its

indemnification costs, because the whole of the Bruno

settlement, and so all of The Home's indemnification costs,

related to the 1989 acts.

C. Motion to Amend

Finally, we address The Home's motion to amend its

complaint. The Home moved to amend its complaint after

settling the Bruno action, seeking to raise a new theory of

liability based on St. Paul's refusal to participate in the

settlement. The theory is as follows. Under Maine law -- or

so The Home argues -- if an insurer breaches its duty to

defend a suit, and the suit settles, then the insurer bears

the burden of allocating the settlement and proving that at
11 The Home cites Elliott v. Hanover Ins. Co., 711 A.2d

1310, 1313-1314 (Me. 1998) (citing Polaroid Corp. v. Travelers

Indem. Co., 610 N.E.2d 912, 922 (Mass. 1993)), as the relevant

authority. St. Paul argues that the citation does not support

The Home's argument. Because we do not take up The Home's

argument, we do not weigh in on this dispute.

12 We reject it, however, for different reasons. As noted

earlier, the magistrate judge held that St. Paul had no duty to

indemnify as to the 1995 acts because the acts did not fall

within the scope of St. Paul's coverage.

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least some of the settlement was paid for claims that its

policy does not cover.11 Yet, the argument continues, because

the settlement agreement in the Bruno case does not specify

how the settlement was intended to be allocated, St. Paul's

burden of allocating the settlement is impossible to carry. 

Consequently, St. Paul cannot prove that the settlement was

not paid entirely for the 1995 acts, as to which The Home

alleges St. Paul alone had a duty to indemnify. Therefore,

supposing The Home is correct that St. Paul alone had a duty

to indemnify as to the 1995 acts, it must be assumed that the

settlement was paid entirely for those acts, in effect

rendering St. Paul responsible for the whole settlement.

The magistrate dismissed The Home's motion to amend on

futility grounds, because it rejected the premise of The

Home's theory that St. Paul had an exclusive duty to indemnify

S&E as to the 1995 acts. We similarly reject that premise.12

Obviously, given our holding in the previous section, we
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disagree with The Home that, merely because the Bruno

settlement agreement does not itself describe how the

settlement was allocated as between the 1989 acts and 1995

acts, there is no way to prove that the settlement was not

paid entirely for the 1995 acts. To the contrary, we think

that evidence extrinsic to the settlement agreement shows

conclusively that the settlement was paid entirely for the

1989 acts. Accordingly, we reject The Home's proposed theory

and do not disturb the magistrate's dismissal of The Home's

motion to amend. See Demars v. General Dynamics Corp., 779

F.2d 95, 99 (1st Cir. 1985).

III.

We briefly summarize our holding. First, we find The

Home's "other insurance" clause and St. Paul's "prior acts"

clause to be mutually repugnant; consequently, both insurers

had a duty to defend and indemnify S&E as to the 1989 acts. 

Second, we find that both insurers had a derivative duty to

defend S&E as to the 1995 acts; by contrast, we find that

neither insurer had a duty to indemnify as to the 1995 acts,

but only because no portion of the Bruno settlement was

allocated to those acts. The effect is that St. Paul is

obligated to reimburse The Home for a pro rata share of all of

its defense and indemnification costs. To that extent,
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summary judgment should be granted to The Home. We reverse

and remand for proceedings consistent with this opinion.