Opinion ID: 2276887
Heading Depth: 1
Heading Rank: 2

Heading: summary of findings and proceedings

Text: [¶ 6] County Forest sets forth two claims in its complaint against the insurers, Sphere Drake and Terra Nova. In count I it seeks reformation of the insurance contract, and in count II it claims that the insurers breached the insurance contract and the covenant of good faith and fair dealing. In count III County Forest claims that Green Mountain assumed a duty of obtaining an increase in the policy limits and breached that duty. In counts IV through VI the complaint alleges that Peabody breached its fiduciary duty as agent of County Forest; breached its contract with County Forest to procure insurance; and was negligent. The court allowed County Forest to add count VII, an unfair claims practice count, pursuant to 24-A M.R.S.A. § 2436 (1990), amended by P.L.1999, ch. 256, § I-1, against all defendants. In response, the insurers counterclaimed alleging that the appraisal award should be vacated because the appraisal process was invalid. Peabody filed a cross-claim against Green Mountain and the insurers alleging that Green Mountain was negligent or breached a contract in failing to procure increased insurance coverage, and that the insurers, as principals, were liable for Green Mountain's negligence and breach of contract. [¶ 7] The matter was tried to the court without a jury. As is set forth below, County Forest settled with Peabody before trial, but Peabody remained in the case to pursue its cross-claim against the insurers and Green Mountain. The court disposed of the appraisal award issue on a summary judgment motion immediately before trial. [¶ 8] The court filed a thorough decision with detailed findings. The findings begin with a statement that County Forest proved that both the insurers and Green Mountain were guilty of delay, incompetence, obfuscation, gross negligence, more delay and deliberate deception. The findings end with the inescapable conclusion that the conduct of the insurers and [Green Mountain] was egregious and their obfuscation and delay were, in the end, self-defeating. [¶ 9] The facts, as found by the court, which led to the lawsuit are as follows. Peabody arranged with Green Mountain for fire insurance for County Forest's sawmill in Crystal. Green Mountain provided fire insurance coverage for County Forest for calendar year 1995 through two insurers, Sphere Drake and Terra Nova. In February 1995, soon after the insurance policy had been issued, County Forest requested Peabody to obtain an increase in the liability limits of the policy. The request was to raise the limit on the sawmill building from $300,000 to $510,000, and to increase the limit on the contents of the sawmill building from $320,000 to $720,000. Stephen Austin of Peabody requested the increased coverage to Green Mountain through both a telephone call and a faxed document, dated February 14, 1995. Austin spoke with Thomas Palumbo, who told Austin that there should be no problem, should be fine. [¶ 10] On June 21, 1995, the sawmill was damaged by a fire. Green Mountain was promptly notified of the fire loss. It denied that the insurance limits had been increased. The court found that after the fire, Green Mountain began to work backwards. Thomas Palumbo testified that he had told Austin during the February telephone conversation that he did not have the authority to handle the increased limits and that only Joseph Palumbo, the president of Green Mountain, had that authority. Joseph Palumbo testified that he denied coverage and wrote notes to that effect on the February 14 fax from Austin. Other testimony indicated that such notes were not on the fax at the time that Green Mountain was notified of the fire. In spite of the testimony of Joseph Palumbo that the coverage was denied, Thomas Palumbo testified that he intended to pursue the request for increased limits, but he needed more information from Peabody and that he attempted to obtain it. The court found that Green Mountain never sent a notice to Peabody or County Forest refusing or declining the requested increase in the policy limits, nor did it contact Peabody for additional information, or communicate in any way with Peabody about the request. During the February telephone conversation, Austin and Thomas Palumbo discussed other changes to the policy that are not at issue in this case. Green Mountain made those other changes to the policy. [¶ 11] The trial court concluded that the testimony of the Palumbos was not credible and that Green Mountain either waited until after the fire to deny the increased coverage, or it was grossly negligent in not pursuing coverage or issuing a written notice of denial of the increased coverage. The court determined that Green Mountain breached its duty to procure the requested increase in the policy limits and was estopped from denying the increased coverage. [¶ 12] The trial court found that Green Mountain was an agent of the insurers, Sphere Drake and Terra Nova, with the apparent authority to bind the insurers. It held that Sphere Drake and Terra Nova are bound by the actions of Green Mountain and that the insurers are estopped from denying the increased coverage. [¶ 13] After the fire, Green Mountain contracted with Claims Services of America to adjust County Forest's fire loss claim, and Claims Services, in turn, hired Northern Maine Adjusters, Inc. Northern Maine Adjusters was paid by Sphere Drake and Terra Nova for its service in adjusting the fire loss claim. Michael Henderson is a claims adjuster employed by Northern Maine Adjusters, who performed the adjustment work for Green Mountain and the insurers. He submitted low figures which came within the lower coverage limits of the initial insurance policy. [¶ 14] County Forest hired the Alex N. Sill Adjustment Company to adjust its fire loss claim. George Hoffman was the Sill Company employee who adjusted the claim on behalf of County Forest. Hoffman calculated significantly higher amounts than those submitted by Henderson. [¶ 15] The court found that Henderson began the adjustment process with the goal of an adjustment of loss within the original limits of the policy. The court further found that whether Henderson was acting at specific directionwhich is clearly supported in the recordor whether [he] was acting under his own understanding of his obligation as an adjuster, his adjustment process was grossly substandard and not conducted in a fair and good faith manner. [¶ 16] As a result of the figures provided by Henderson, the insurers paid $428,825.52 to County Forest for the loss. The insurers also demanded utilization of the appraisal process provided in the insurance policy to settle disputes between the insured and insurers. The insurers named an appraiser, Dennis Cricones; County Forest named Hoffman; and these two appraisers agreed upon another independent appraiser, John Kidder, as the umpire. At the conclusion of the appraisal process Kidder issued an appraisal award of $452,367.57 for damages to the building and an amount in excess of $720,000, the increased insurance limit, for the building contents. [¶ 17] Through their counterclaim, the insurers contested the appraisal award on the grounds that Hoffman was not disinterested. The court disposed of this issue on summary judgment concluding that the insurers waived their objection to the selection of Hoffman as County Forest's named appraiser. [¶ 18] Following the bench trial and the submission of memoranda and proposed findings by the parties, the court granted judgment to County Forest on count I of the complaint and reformed the insurance policy to provide the higher limits. The court granted judgment to County Forest against Green Mountain, Sphere Drake, and Terra Nova on counts II and III but, following a post-judgment motion, it clarified this portion of the judgment. The court further found that County Forest was entitled to damages of $743,542.05, which is the amount of the appraisal award on the building ($266,553.57), plus the replacement cost of the plant electrical system ($185,814), [1] plus the policy limits on the contents ($720,000), less the sum already paid by the insurers ($428,825.52). In addition, the court found that County Forest was entitled to consequential damages in the amount of $250,000 resulting from County Forest's forced sale of undamaged sawmill and planer equipment which the court found was a foreseeable loss. The court awarded additional consequential damages to County Forest in the amount of $124,025 plus per diem interest payments, representing the mortgage debt owed by County Forest to Katahdin Trust Company. The court also ordered the insurers and Green Mountain to pay County Forest accruing per diem interest and attorney fees owed by County Forest to a judgment creditor. The court declined to award County Forest any damages for lost business opportunity on the grounds that it was unable to determine any such loss without speculation. On the statutory unfair claims practice count, the court awarded County Forest attorney fees. [¶ 19] Peabody settled County Forest's claim against it for $170,000 prior to the trial. Peabody remained in the case for purposes of its cross-claim against Green Mountain and the insurers. The court granted Green Mountain's motion to amend its answer to the cross-claim to add the defense of comparative negligence. The court found that Peabody was 15% at fault, and the court reduced Peabody's damages by $50,000 for its fault. The court noted that although Peabody was negligent it was not tainted with deception, bad faith and delay .... The court granted judgment to Peabody against Green Mountain and the insurers in the amount of $120,000. [¶ 20] After trial, Green Mountain moved to amend the judgment and requested the court to reduce the judgment for County Forest in the amount of the settlement between County Forest and Peabody of $170,000, and by striking any damages owed by Green Mountain for the increased policy limits. The court denied the request to reduce the judgment by the settlement amount, finding that the injury caused to County Forest by Peabody was different from the injury caused to County Forest by Green Mountain and the insurers. The court amended its judgment and ordered Green Mountain only secondarily liable on the $743,542.05, representing the insurance proceeds, but it found Green Mountain jointly and severally liable with the insurers for the consequential damages. The court clarified that the judgment on counts I (reformation) and II (breach of contract and covenant of good faith) were against the insurers only, and the judgment on count III (Green Mountain's breach of duty to procure increased limits) was as to Green Mountain only. The court also set the amount of attorney fees to be paid by the insurers to County Forest.