Opinion ID: 2193379
Heading Depth: 2
Heading Rank: 4

Heading: Application of the Reach and Apply Statute

Text: [¶ 20] The court found the reach and apply statute, 24-A M.R.S. § 2904, to be applicable here because Patrons had notice and Harris, as it found, was an insured under the Ferguson automobile policy. The court further found that of the enumerated defenses applicable to such an action, fraud and collusion, fraud was inapplicable because Harris kept Patrons advised of the agreement, [8] and Harris's mere lack of cooperation with Patrons was not dispositive on the issue of collusion. [¶ 21] Patrons nonetheless argues that the Luce-Harris settlement was the product of collusion because Luce and Harris worked together to orchestrate a scheme whereby Luce induced Harris to breach the insurance policy. See 24-A M.R.S. § 2904(6). The only defenses to a reach and apply action are those contained in section 2904. See Michaud, 505 A.2d at 788-89. The mere lack of cooperation by the insured is not dispositive on the issue of fraud or collusion. Id. at 788 n. 1. Additionally, where the insured is being defended under a reservation of rights, the insured, who, as we have noted, is in control of his defense, may need to be in contact with the claimant, and may negotiate with the claimant and enter into a settlement that protects his interests. Although the insurer may be opposed to the insured entering into the settlement, such conduct on the part of the insured does not necessarily rise to the level of collusion. See BLACK'S LAW DICTIONARY 259 (7th ed.1999) (defining collusion as [a]n agreement to defraud another or to obtain something forbidden by law); see also Medico v. Employers Liab. Assurance Corp., 132 Me. 422, 427, 172 A. 1, 4 (1934) (noting that the defense of collusion may be found where the insured and the claimant attempt[ ] to defraud the [insurance] company by refusing to testify to the real facts of the accident or testify[ ] falsely concerning them). Here, Harris was entitled to settle with Luce when Patrons tendered its defense under a reservation of rights. Thus, Harris was entitled to negotiate with Luce and enter into a reasonable, nonfraudulent settlement with him. The court, after a hearing on the declaratory judgment, found no fraud, and we find no error in that conclusion. The issue of collusion, however, has not been finally determined by the court, and must be considered on remand.