Opinion ID: 2756440
Heading Depth: 2
Heading Rank: 1

Heading: 2d 989, 993-94 (Me. 2003)).

Text: The insurance policy defines your product as goods or products . . . manufactured, sold, handled, distributed or disposed of by . . . [y]ou. The term [i]ncludes . . . [w]arranties or -14- representations made at any time with respect to the fitness, quality, durability, performance or use of 'your product.' [T]he words 'you' and 'your' refer to the Named Insured listed on the policy, and those Named Insureds are LMB, Cabot Lyman, and Heidi Lyman. Thus, the your product exclusion, by its plain terms, applies to the products of LMB, Cabot Lyman, or Heidi Lyman, and to damages arising out of warranties or representations made with respect to the fitness, quality, durability, performance or use of such products. Cf. Am. First Credit Union v. Kier Constr. Corp., 314 P.3d 1055, 1059 (Utah Ct. App. 2013) (holding that your product exclusion in CGL policy on which Broberg was the named insured was properly read to exclude[] coverage for '[p]roperty damage to [Broberg's] product arising out of it or any part of it' (second and third alterations in original) (internal quotation marks omitted)). The term your product includes the yacht (because it is LMB's product) and the allegedly fraudulent misrepresentations made by Cabot Lyman as president and officer of LMB (because they concerned the quality of the yacht). Northern Assurance argues that the your product exclusion is not insured-specific -- the operation of the exclusion does not depend on the identity of the insured against whom the suit is brought. It adds that this must at least be true here, where the other insured, as a corporate officer, has allegedly acted as an alter ego of the corporation that designed -15- the product, and the policy explicitly precludes coverage for representations made with respect to the quality of the corporate insured's products.6 The provision does not exclude property damage to the insured's product; it excludes property damage to your product, a term that, on these facts, includes the yacht even with respect to the suit against Cabot Lyman. Cabot Lyman and LMB cite no case or policy language that refutes that interpretation of the insurance contract on the facts here. Instead, they rely on the rule that ambiguities in insurance contracts should be resolved against the insurer. That rule is inapplicable. The your product exclusion is not ambiguous in its application here. Irwin's complaint alleged damages to the yacht; the policy excludes damages to your product; you is defined as, inter alia, LMB; the yacht is LMB's product; thus, the policy unambiguously excludes the allegations of the complaint. Accordingly, on these facts, we find that Northern Assurance had no duty to defend Cabot Lyman in the arbitration proceeding. To hold otherwise would undercut the well-recognized purpose of CGL insurance policies, as articulated by the Maine Law Court. CGL policies are designed to cover occurrence of harm 6 We need not address whether the your product exclusion would preclude coverage for a claim against an individual officer that is not explicitly included in the policy's definition of your product. -16- risks but not business risks. Peerless Ins. Co. v. Brennon, 564 A.2d 383, 386 (Me. 1989). As the Law Court explained, [a]n occurrence of harm risk is a risk that a person or property other than the product itself will be damaged through the fault of the [insured]. A business risk is a risk that the [insured] will not do his job competently, and thus will be obligated to replace or repair his faulty work. The distinction between the two risks is critical to understanding a CGL policy. A CGL policy covers an occurrence of harm risk but specifically excludes a business risk. Id. (quoting Note, Baybutt Construction Corp. v. Commercial Union Insurance Co.: A Question of Ambiguity in Comprehensive General Liability Insurance Policies, 36 Me. L. Rev. 179, 182 (1984)). The type of harm alleged in Irwin's complaint is, by contrast, a business risk that is excluded under the terms of the CGL policy Northern Assurance issued to LMB and Cabot Lyman. There is no principled reason why that result would change because Irwin named Cabot Lyman as a defendant on an alter ego theory and for representations he made as a director and president of LMB about a yacht manufactured by LMB. As was recognized in Cle Elum Bowl, Inc. v. N. Pac. Ins. Co., 981 P.2d 872 (Wash. Ct. App. 1999), an insured director and officer . . . is subject to the same exclusions that deny coverage to the corporation. Id. at 877. We note that a contrary holding would also create perverse incentives when plaintiffs sue a corporation for defective workmanship. If these plaintiffs could trigger a duty to defend on -17- the part of the corporation's CGL insurer not otherwise obligated to provide a defense by simply adding a corporate officer or employee as a defendant, they would often have the incentive to do so in order to add another pocket to the other side of the negotiating table. As a consequence, the your product exclusion, long a staple of CGL policies, would be rendered a dead letter. We decline to read the policy to allow such a result, absent any evidence, of which there is none, that this was the parties' intent.