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Harris v. Merchant

September 23, 2010


The opinion of the court was delivered by: Padova, J.


Plaintiffs, Penelope Harris, Morris Cheston and Regina Thomas, the trustees of the Marital Trust under Article Third, Paragraph A of the Will of Henry F. Harris ("the Trust"), bring this action against Defendants, seeking payment under a builder's risk insurance policy for damage to a home owned by the Trust. Presently before the Court is the Motion for Summary Judgment brought by Defendants Regional Excess Underwriters, LLC, a/k/a Acadia Excess Underwriters, a/k/a Berkley Excess Underwriters ("Regional") and Certain Underwriters at Lloyd's Subscribing to Policy No. B0750RNAFG0701840 ("Lloyd's"). For the following reasons, the Motion is granted..


In October 2006, Henry Harris asked Defendants Randy Merchant and Northeast Harbor Insurers, Inc. d/b/a Merchant Needham & Associates (collectively the "Merchant Defendants"), to obtain and maintain builder's risk insurance for a new home being built in Northeast Harbor, Maine, known as "Tides." (Moving Defs. Statement of Material Facts ¶ 2.)*fn1 The Merchant Defendants obtained a builder's risk policy for Tides from Hanover Insurance Company that was effective until October 15, 2007 (the "Hanover Policy"). (Id. ¶ 4.) Henry Harris died on December 22, 2006. (Id. ¶ 5.) Under the terms of Harris's will, ownership of Tides transferred to the Trust. (Id. ¶ 6.)

The Merchant Defendants obtained a one month extension on the Hanover Policy until November 14, 2007. (Id. ¶ 7.) The Merchant Defendants then obtained a new builder's risk policy for Tides. Regional acted as Lloyd's representative in connection with the issuance of the replacement builder's risk policy, which was issued by Lloyd's as Policy No. B0750RNAFG0701840 (the "Lloyd's Policy"). (Id. ¶ 8; Lloyd's Policy at PLFS 00030.) The period of insurance for the Lloyd's Policy was "from: 14TH NOVEMBER 2007 TO 14TH MAY 2008 both days at 12.01 am Local Standard Time." (Id. at PLFS 00023.) The Lloyd's Policy contains a Termination of Coverage section that states, in pertinent part, as follows: "The property referred to in Insuring Clauses a) and b) shall be covered by this Policy for the period stated in the Schedule and for such period or periods as may be mutually agreed between Underwriters and the Assured . . . ." (Id. at PLFS 00036.)

An Insurance Binder for the Lloyd's Policy was issued on November 27, 2007. (Moving Defs. Ex. C.) The Insurance Binder states that the Policy Period was November 14, 2007 to May 14, 2008. (Id. at REG 027.) The premium paid for this insurance was $7,500.00. (Id.) The Merchant Defendants billed Penelope P. Harris for the Lloyd's Policy on December 15, 2007. (Moving Defs. Ex. D.) The invoice provides the following description: "'Tides' Builders Risk Insurance 11/14/07 to 5/14/08." (Id.) The Trustees paid the invoice on December 20, 2007. (Moving Defs. Ex. E.)

Regional sent the original and one copy of the Lloyd's Policy to the Merchant Defendants on January 31, 2008. (Moving Defs. Ex. F.) The cover letter notes that the policy period for the Lloyd's Policy was November 14, 2007 to May 14, 2008. (Id.) The Merchant Defendants sent a copy of the Lloyd's Policy to Penelope Harris, in Maine, on February 15, 2008. (Moving Defs. Ex. G.) The cover letter states: "Enclosed is your builder's risk policy (TIDES) from Lloyds of London for 11/14/07-5/14/08." (Id.)

Heather Gwarjanski of Regional sent an e-mail to Randy Merchant on April 16, 2008 regarding the Lloyd's Policy. (Moving Defs Ex. H.) The e-mail states, in pertinent part, as follows:

Working away on some upcoming renewals and noticed this 6 month policy is coming up the middle of May. Curious to see if they think an extension will be needed?

If so, I'll have you let me know how long they think they'll need an[d] maybe what they have left to complete. Then I can take it to my Lloyds market to see where they will be. (Id.) Ms. Gwarjanski sent another memorandum to Randy Merchant on May 13, 2008 regarding the Lloyd's Policy, but misstated the expiration date of the policy as May 14, 2009. (Moving Defs. Ex. I.) The memorandum states: "Please be advised that we will be closing our files on the above referenced account since we have not heard from you regarding the renewal of the above policy. Please advise the insured that we are off risk effective 5/14/2009." (Id.) The Merchant Defendants received this memorandum by United States mail in May 2008. (Emery Dep. at 20.) Tabatha Emery, who was then a customer service representative for the Merchant Defendants, read the memorandum when it came in and showed it to Randy Merchant. (Id. at 5, 20-21.) Ms. Emery discussed the memorandum with Randy Merchant and pointed out the May 14, 2009 expiration date contained in the memorandum to him. (Id. at 21-22.) Ms. Emery did not send a copy of the memorandum to the Trust or do anything else with it. (Id. at 26.)

On July 25, 2008, an explosion occurred at Tides which damaged the property. (Compl. ¶ 26.) Randy Merchant learned about the explosion from Lamont Harris, who had been staying at Tides at the time of the explosion. (Merchant Dep. at 110-112.) Lamont Harris visited Randy Merchant at his office the Monday or Tuesday following the explosion to find out if there was insurance coverage. (Id. at 110-11.) Randy Merchant responded that he "did not believe there was any coverage, because the builder's risk policy had been -- had lapsed, had terminated." (Id.) After Lamont Harris left his office, Randy Merchant checked the Merchant Needham files to determine if Merchant Needham had procured homeowners insurance for Tides. (Id. at 117.) He also spoke with his staff and was given a copy of the May 13, 2008 memorandum from Regional. (Id.) Randy Merchant believes that it would have been inappropriate to extend the Lloyd's Policy because Tides had been substantially completed at the time that policy expired. (Id. at 140.) He is not aware of any request to extend the term of the Lloyd's Policy or any payment made to extend that policy. (Id. at 215.)

After the explosion, Lamont Harris contacted Judithann Sheehan, a paralegal with the law firm Ballard Spahr's Family Wealth Management Group, which did work for the Trust. (Sheehan Dep. at 10-12, 67.) Lamont Harris asked her whether Tides was insured. (Id. at 67.) Ms. Sheehan checked the file and told Lamont Harris that the insurance policy had expired. (Id. at 67-68.) Morris Cheston, who is an attorney with Ballard Spahr as well as a Trustee of the Trust, contacted Ms. Sheehan shortly thereafter and asked if Tides was insured. (Id. at 69.) Ms. Sheehan notified him that the policy had expired. (Id. at 69-70.) All of the paperwork received by Ballard Spahr relating to the Lloyd's Policy came through the Merchant Defendants; Ballard Spahr did not receive any paperwork from either Regional or from Lloyd's. (Id. at 112-13.) The Complaint alleges that Plaintiffs submitted a claim to Lloyd's for the damage to Tides, but the claim was denied because the Lloyd's Policy had expired prior to the explosion. (Compl. ¶ 28.)

Plaintiffs have asserted three claims against Regional and Lloyd's. The first claim, for breach of contract, is based on the premise that the Lloyd's Policy remained in effect at the time of the explosion at Tides. (Id. ¶¶ 42-45.) The second claim, for promissory estoppel, is based on the premise that Plaintiffs, through their agents the Merchant Defendants, did not renew or replace the Lloyd's Policy because they reasonably relied on the May 13, 2008 memorandum's statement that the Lloyd's Policy expired on May 14, 2009. (Id. ¶¶ 47-48.) The third claim, for negligence, is based on the ...

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