Of the Tenth Circuit, sitting by designation. *

United States Court of Appeals

For the First Circuit

No. 08-2439

AMERICAN NATIONAL FIRE INSURANCE COMPANY,

Plaintiff, Appellant,

v.

YORK COUNTY,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. George Z. Singal, U.S. District Judge]

Before

 Howard, Selya and Ebel, Circuit Judges. *

David D. Dowd, with whom Curley & Curley, P.C., Jeffrey T.

Edwards, and Preti, Flaherty, Beliveau & Pachios, LLP were on

brief, for appellant.

Thomas C. Newman, with whom Nicole L. Bradick and Murray,

Plumb & Murray were on brief, for appellee. 

August 5, 2009
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SELYA, Circuit Judge. Class actions, by their very

nature, can alter the usual dynamics of litigation and bring to

bear on defendants and insurers alike intense pressure to settle.

See, e.g., Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 293

(1st Cir. 2000) (discussing situations in which "the grant of class

status raises the stakes of the litigation so substantially that

the defendant likely will feel irresistible pressure to settle").

Faced with such a situation, defendant-appellant American National

Fire Insurance Company (ANFIC) attempted to have its cake and eat

it too: it joined in an advantageous settlement of a potentially

costly class action and then attempted to recoup from its own

insured (York County, Maine) the lion's share of the payment that

it had made. 

The district court ruled that ANFIC was not entitled to

reimbursement. See Am. Nat'l Fire Ins. Co. v. York County (D. Ct.

Op.), 582 F. Supp. 2d 69, 81 (D. Me. 2008). Discerning no error,

we affirm.

I. BACKGROUND

We assume the reader's familiarity with the district

court's exegetic account of the underlying facts, see id. at 70-77.

Thus, we rehearse here only those particulars that are helpful to

place the appeal itself into a workable perspective. Because the

appealed decision follows a bench trial and there is no clear error

in the district court's factfinding, we state the facts as found
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and draw all reasonable inferences therefrom in the light most

favorable to the judgment. 

We bifurcate our survey, first discussing the class

action and then moving to the instant case.

A. The Class Action.

In October of 2002, three persons who had been stripsearched at the York County Jail following misdemeanor arrests

filed suit against the County. The suit was filed as a putative

class action on behalf of the named plaintiffs and others similarly

situated. See Nilsen v. York County, 219 F.R.D. 19, 20 (D. Me.

2003). It sought damages on account of an alleged pattern and

practice of illegally strip-searching arrestees.

During what would become the class period — October 14,

1996 through April 30, 2004 — York County had in force a series of

law enforcement liability (LEL) insurance policies underwritten by

Twin Cities Insurers Company, ANFIC, and Maine County Commissioners

Association Risk Pool, respectively.

Each insurer had covered York County for a portion of the

class period: Twin Cities covered the County for a span that

included the first sixteen days; ANFIC's coverage ran from November

1, 1996 through January 1, 1998; and the Risk Pool afforded

coverage from the expiration of ANFIC's policy to a date past the

end of the class period.
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When the putative class action was filed, the Risk Pool

was the insurer of record. Consequently, it assumed the defense on

York County's behalf and retained Peter Marchesi as defense counsel

for the County. It also retained Jim Poliquin as separate counsel

to represent its own interests. York County retained Gene Libby to

represent its (uninsured) interests.

The district court certified the class in 2003. On an

interlocutory appeal, we upheld the certification. Tardiff v. Knox

County, 365 F.3d 1, 7 (1st Cir. 2004). While that appeal was

pending, the County notified its other insurers, each of which

ultimately agreed to participate in a coordinated defense of the

now-certified class action.

As noted above, ANFIC's LEL coverage was in effect for a

fourteen-month interval (all of which fell within the class

period). As a member of the coordinated defense group, ANFIC

agreed to pay twenty-five percent of the collaborative defense

costs. 

The declarations page of ANFIC's policy made its coverage

subject to both a $5,000 per claim deductible and an aggregate peroccurrence limit of $1,000,000. Defense costs under the policy

were supplementary; they were, therefore, neither set off against

liability limits nor capped in any amount.

ANFIC commenced its participation in the joint defense

after issuing a reservation-of-rights letter on January 22, 2004.
Around the same time, the attorney for the class estimated 1

that the class had over 8,000 members. If the case were tried, the

attorney envisioned a damage award in the neighborhood of

$22,000,000, plus ancillary items (counsel fees, expenses, and

costs) totaling over $11,000,000. 

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In that letter, a company hierarch, William Curtin, unilaterally

declared that "the $5,000 deductible will apply to each claim

brought for illegal strip search within the coverage period."

ANFIC never explicitly withdrew this reservation of rights.

As a prelude to a planned mediation of the class action,

members of the defense group (including representatives from York

County, Twin Cities, ANFIC, and the Risk Pool) held a private

meeting. At this session, Marchesi stated the obvious: a

settlement was desirable from everyone's point of view because the

defense was faced with a sizable class, liability was a nearcertainty, and total damages would likely be sky-high. Marchesi

predicted that the award would far exceed the face value of all

available insurance and that, in the bargain, there would be "very

significant" litigation costs. Libby explained that, aside from 1

available insurance, York County had less than $100,000 to

contribute to any settlement fund.

The first mediation session took place on September 20,

2004. At that session, Marchesi acted as the principal negotiator

for the defense group, but all members of the group were

individually represented. Curtin restated ANFIC's position that

its coverage was subject to a $5,000 per claim deductible. He also
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maintained that ANFIC's contribution to any settlement should be

limited to no more than fifteen percent of the total fund. The

parties did not reach a settlement, but the defense group achieved

a consensus favoring settlement "within the existing insurance and

risk pool coverage." 

Following this mediation session, Libby wrote to Curtin,

acknowledging ANFIC's position vis-à-vis the policy deductible but

explaining that York County viewed the $5,000 deductible as

applying "to the entire class and not [to] individual class

members." Regardless of how the deductible operated, Libby warned,

it was likely that a verdict would exhaust the entire $1,000,000 in

coverage afforded by the ANFIC policy. On that basis, Libby asked

that the entire $1,000,000 be made available "to conclude

negotiations with plaintiffs." 

ANFIC, through Dowd, "respectfully but unequivocally

rejected" York County's interpretation of how the deductible

operated. It did not comment as to Libby's prediction about what

would happen if the case went to trial.

On September 29, 2004, the parties attended a second

mediation session. By the end of the session, each member of the

defense group had agreed to up the ante. Specifically, the Risk

Pool had authorized $1,850,000 toward a global settlement; Twin

Cities had authorized $10,000; York County had authorized $25,000
 These contributions were agreed to within the defense group 2

but not offered at that time to class counsel.

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in County funds; and ANFIC had authorized $650,000. When agreeing 2

to contribute $650,000 toward settlement, Curtin did not

communicate any restrictions on the contribution, nor did he

mention that ANFIC intended to seek recoupment based on the

policy's deductible provision.

In late October, Dowd sent another letter to Libby

admonishing that ANFIC would be liable only "for loss in excess of

$5,000 [on] each claim." In reply, Libby reiterated that ANFIC's

potential exposure exceeded $1,000,000 regardless of which

interpretation of the deductible provision prevailed. In a

separate letter, Marchesi made a similar observation and exhorted

ANFIC to loosen the purse strings and increase its proposed

contribution to the global settlement.

Following this exchange of correspondence, Libby

scheduled a conference call with Dowd and Marchesi. This call

lasted for almost an hour. The protagonists discussed at length

ANFIC's appropriate share of a global settlement. The policy

deductible was not mentioned.

Shortly thereafter, Curtin received approval from ANFIC's

claims committee to make a $750,000 contribution. The claims

committee neither imposed any conditions on that authority nor

stipulated that such an offer could be extended only if payment was
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made subject to the policy deductible. Dowd then called Marchesi

and hiked ANFIC's proposed contribution to $750,000, provided that

all other members of the defense group contributed the amounts

previously authorized.

With ANFIC's contribution in hand, Marchesi was able to

settle the class action by agreeing to establish a $3,300,000

settlement fund. The defense group funded the settlement as

follows: the Risk Pool contributed $2,400,000, Twin Cities

contributed $100,000, York County contributed $50,000, and ANFIC

contributed $750,000. The settlement extinguished all claims

(whether or not previously asserted) by arrestees who were

unlawfully strip-searched at the York County Jail during the class

period. An express condition of the settlement was that counsel

for York County "provide an affidavit and/or testimony regarding

the relative lack of assets available to fund a settlement that

[exceeded $3,300,000]." The parties secured court approval for the

settlement, releases were expected, a judgment was entered, and the

matter appeared to have been concluded.

Ultimately, the district court designated 1,410 claimants

to receive payments from the settlement fund. Each approved

claimant received a payment of $1,719.08. Of these claimants, 273

were strip-searched during the currency of ANFIC's policy. None of

these 273 claimants received more than $5,000.
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B. The Recoupment Action.

After the class action was put to bed, ANFIC invoked

diversity jurisdiction, 28 U.S.C. § 1332(a)(1), and sued York

County in Maine's federal district court. It sought to recover the

$750,000 it had contributed to the class settlement on the ground

that the funds represented deductibles owed to it by York County.

ANFIC posited that because each and every individual claim was

settled for less than the $5,000 deductible amount, its settlement

contribution was composed entirely of deductibles (advanced by it

on behalf of its insured (York County)). York County denied the

thrust of the complaint and asserted various affirmative defenses

(including equitable estoppel and accord and satisfaction), see

Fed. R. Civ. P. 8(c).

In due season, the parties cross-moved for partial

summary judgment concerning the meaning of the policy's "per claim"

deductible language. The district court accepted ANFIC's reading

of the provision. It ruled, in effect, that "per claim" means "per

claimant," not "per class." Am. Nat'l. Fire Ins. Co. v. York

County, No. 06-200, 2007 WL 4531720, at *1 (D. Me. Dec. 18, 2007).

That ruling has not been challenged on appeal.

The battleground then shifted to York County's

affirmative defenses. After a bench trial, the district court

found, in the alternative, that an accord and satisfaction had

occurred, D. Ct. Op., 582 F. Supp. 2d at 77; and that, in all
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events, ANFIC was equitably estopped from pursuing its claim for

reimbursement of deductibles, id. This timely appeal followed.

II. ANALYSIS

In this venue, ANFIC challenges each of the district

court's alternative holdings. Where, as here, a district court

makes alternative holdings, each independently sufficient to ground

its decision, a reviewing court must sustain the judgment as long

as either holding is viable. See United States v. Barletta, 652

F.2d 218, 220 (1st Cir. 1981). Because we agree with the district

court that equitable estoppel bans any recovery by ANFIC on the

claim asserted, we do not reach the question of whether the parties

achieved an accord and satisfaction.

We review a district court's legal determinations

following a bench trial de novo. United States v. 15 Bosworth St.,

236 F.3d 50, 53 (1st Cir. 2001). We regard a district court's

findings of fact more deferentially; we accept such findings unless

they are clearly erroneous. Fed. R. Civ. P. 52(a)(6); Wine &

Spirits Retailers, Inc. v. Rhode Island, 481 F.3d 1, 4 (1st Cir.

2007). Put another way, the trier's factual determinations will be

set aside only if, "after careful evaluation of the evidence, we

are left with an abiding conviction that those determinations and

findings are simply wrong." State Police Ass'n v. Comm'r, 125 F.3d

1, 5 (1st Cir. 1997). This respectful standard takes into account

that the trial court "sees and hears the witnesses at first hand
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and comes to appreciate the nuances of the litigation in a way

which appellate courts cannot hope to replicate." Cumpiano v.

Banco Santander P.R., 902 F.2d 148, 152 (1st Cir. 1990).

The standard of review is important here. At several

junctures, more than one plausible inference can be drawn from the

raw facts. In each instance here, we are duty-bound to honor the

trial judge's choice of which inference to draw. See Anderson v.

City of Bessemer City, 470 U.S. 564, 573 (1985); see also United

States v. Ladd, 885 F.2d 954, 957 (1st Cir. 1989) ("Where, as in

this case, a trier chooses among plausible (albeit competing)

inferences, appellate courts should not intrude.").

In this diversity case, the substantive law of Maine

controls. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).

Under Maine law, an insured who seeks to invoke equitable estoppel

against his insurer in a coverage dispute must prove (i)

unreasonable conduct that misleads the insured concerning the scope

of coverage; and (ii) justifiable and detrimental reliance by the

insured on that conduct. See County Forest Prods., Inc. v. Green

Mt. Agency, Inc., 758 A.2d 59, 66 (Me. 2000); Me. Mut. Fire Ins.

Co. v. Grant, 674 A.2d 503, 504 (Me. 1996). The reliance element

ordinarily requires that the insurer's unreasonable conduct incite

the insured "to do what resulted to his detriment and what he would

not otherwise have done." Roberts v. Me. Bonding & Cas. Co., 404

A.2d 238, 241 (Me. 1979). Because equitable estoppel is an
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affirmative defense, the insured bears the burden of proving both

the "misleading conduct" and the "detrimental reliance" elements.

Me. Mut. Fire Ins. Co., 674 A.2d at 504.

With this framework in place, we return to the case at

hand. The district court found that ANFIC's conduct in settling

the class action belied any intention to preserve its rights under

the deductible provision. See D. Ct. Op., 582 F. Supp. 2d at 80-

81. That conduct "misled the County" by inducing "a reasonable

belief that ANFIC was waiving its reserved rights to seek

reimbursement of any deductible when it contributed $750,000 to the

[global] settlement of the York County Jail class action." Id. at

77. The County acted on that belief, to its detriment. Id. at 81.

As we explain below, these findings are not clearly erroneous.

We start with the "conduct" question — whether ANFIC

acted unreasonably and thereby misled York County. There are two

ways to look at this question. ANFIC says that it always intended

to recoup the deductibles. Viewing ANFIC's conduct in that light,

the district court found that "what makes ANFIC's conduct

unreasonable is . . . its failure to disclose that [its $750,000

contribution to the global settlement] was not the contribution it

appeared to be." Id. at 80.

There is another way to look at ANFIC's conduct. The

district court found that ANFIC's decision to pursue its deductible

interest was a post hoc brain-storm, conceived only after the
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global settlement had been achieved. See id. at 81 ("ANFIC's

decision to seek deductible reimbursement from York County was a

strategy developed ex post facto.").

In the end, however, ANFIC's intent is not the issue. On

the one hand, if ANFIC intended all along to recoup the deductibles

yet failed to mention that fact at the appropriate time, it should

have known that York County would reasonably perceive its silence

as an abandonment of the "deductible" claim and consider ANFIC's

$750,000 as an unconditional contribution from ANFIC's own coffers

(not merely a pass-through payment). On the other hand, if ANFIC

made an about-face after the settlement and conceived the plan to

recoup the deductibles at that late date, the County's belief, at

the time of the settlement, that ANFIC had abandoned the

"deductible" claim would be equally reasonable. Either way, the

district court's finding of unreasonable conduct is inexpugnable.

ANFIC defends its position by arguing that it never

formally withdrew its reservation of rights. But actions sometimes

speak louder than words and this is such an instance.

ANFIC also argues that, whichever scenario might apply,

it never portrayed its contribution was anything other than a loss

payment. In its view, simply paying what it was obligated to pay

under the policy cannot plausibly be deemed unreasonable. This

platitude begs the question; that the payment was made with respect

to covered losses and obligated expenses sheds very little light on
 This is especially noteworthy because, in prior settlements 3

in which unresolved coverage disputes lingered, Curtin made a

practice of assuring that there was express agreement to table the

coverage dispute and resolve it after the settlement was completed.

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what York County reasonably perceived ANFIC's agreement to be when

it entered into the global settlement. 

If more were needed — and we doubt that it is — the

district court's conclusion that ANFIC's conduct was unreasonable

is reinforced by other facts touching upon the negotiations. For

example, there was no attempt during the settlement pavane to reach

an understanding between ANFIC and York County as to how parties'

contributions would interact. By the same token, ANFIC made no

effort to secure an agreement as to how its contribution would be

allocated. Moreover, when ANFIC transmitted its draft for 3

$750,000, it imposed no conditions or reservations on negotiation

of the draft. At no time prior to filing the instant action did

ANFIC attempt to characterize its contribution as an advance of

deductibles or suggest that the payment was anything other than an

outright contribution toward the global settlement. Last — but far

from least — ANFIC was well aware of both York County's financial

plight and the County's representation that the global settlement

would exhaust its available funds (and, hence, leave nothing to

fall back on if an effort was subsequently made to recoup

deductibles). 
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This brings us to the second element of the equitable

estoppel defense: justifiable detrimental reliance. The district

court found that, had the County known that ANFIC intended to seek

recoupment of its $750,000 contribution, the County would not have

agreed to the global settlement. See D. Ct. Op., 582 F. Supp. 2d

at 81. The district court also found that the County's reliance

was justifiable and detrimental. Id.

While ANFIC challenges the reasonableness of York

County's belief that the global settlement would extinguish the

County's liability to all concerned, the chain of events is

telling. ANFIC agreed to its contribution only after a long,

complicated negotiation among the members of the defense group. It

is transparently clear that each participant was striving to limit

its own exposure to potentially massive damages and substantial

litigation costs. 

ANFIC's $1,000,000 liability coverage was plainly at

risk; the dispute about the deductibles bore only marginally on

that risk. Indeed, in urging ANFIC to make a hefty contribution to

the settlement fund, the County specifically noted that even if

ANFIC was right about how the deductible provision operated,

awarded damages should exhaust its $1,000,000 policy limit and, in

the bargain, produce huge defense costs (of which ANFIC had agreed

to pay twenty-five percent). Under these circumstances, ANFIC's

agreement to make the $750,000 contribution without any
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contemporaneous mention of the policy deductible or any renewal of

its reservation of rights was unreasonably deceptive. That

conduct, in turn, led the County to believe, quite reasonably, that

any issue anent the deductible had been swallowed up in the global

settlement.

ANFIC also denigrates the finding that the County

suffered a detriment, asserting that even if a fully informed York

County might have acted differently, it suffered no detriment by

entering into the settlement agreement because the County's

alternative was worse. This is sophistic reasoning.

ANFIC's blithe assertion assumes that, had York County

not acquiesced in the global settlement and agreed to contribute

$50,000, the necessary alternative was a full-dress trial resulting

in a multi-million-dollar verdict against York County (far in

excess of its available insurance coverage). That is incorrect.

The County's non-acquiescence might well have prompted the other

members of the defense group to rethink the matter and, perhaps,

increase their contributions to the common fund (thus allowing the

settlement to be consummated); or the County's non-acquiescence

might have prompted the class representatives to lower their sights

and accept a lesser amount in settlement. Even if the settlement

cratered and the class action went to trial, the County might have

had a viable claim against ANFIC for a bad-faith refusal to settle.
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See, e.g., Me. Rev. Stat. Ann. tit. 24-A, § 2436-A; Wilson v. Aetna

Cas. & Sur. Co., 76 A.2d 111, 113 (Me. 1950).

The lesson is that where, as here, a party reasonably

believes that it is wrapping up its entire exposure and settling a

case for a sum certain, it suffers a detriment whenever it is

required to pay more to fund the settlement. That lesson applies

here: the County reasonably believed that its $50,000 contribution

to the settlement fund would absolve it of all liability but, on

ANFIC's recasting of the scenario, it will be expected to make

additional payments that might aggregate as much as $750,000.

Accordingly, we agree with the lower court that there was a

detriment: the County did something that substantially altered its

legal rights and that it would not otherwise have done. No more is

exigible. See Roberts, 404 A.2d at 241.

III. CONCLUSION

To recapitulate, the district court supportably found

that, under the circumstances, ANFIC's course of conduct was

unreasonable and misleading; that York County reasonably bought

into the impression that ANFIC had created; and that the County,

through that reliance, suffered a cognizable detriment.

Consequently, the finding of equitable estoppel is bulletproof.

We need go no further. For the reasons elucidated above,

we reject ANFIC's appeal.
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Affirmed.