Duty to Defend Specific Exceptions
The insured property was a condominium Unit. The condo Declaration specifically referred to a view easement that had burdened the parcel upon which the Unit stood since 1966. An Agreement releasing the easement was executed and recorded in March, 1998. In April of 1998, Cox, the insured, purchased the Unit along with title insurance. The policy description, following the description of the Unit proper, states that the Unit is “conveyed ‘together with’ and ‘SUBJECT TO’ all easements ‘described’ or ‘referred to’ in the Declaration and ‘all matters’ in [the Agreement.]” In addition, there were three specific exceptions in Schedule B, one excepting any easement appearing in the description, another excepting the Declaration and condo plans (including recording info) and the last excepting the Agreement (also including recording info). The current owner of the formerly benefited parcel sued to enforce the view easement and Cox tendered the defense to Commonwealth, who denied coverage based on the three exceptions. The majority held that the very language of the exceptions created an ambiguity that had to be resolved in favor of the insured. Because the exceptions referred to the Declaration, and the Declaration recognized the then-extant easement, the Court concluded that it was possible that Commonwealth was merely recognizing the existence of the easement, thereby creating an ambiguity! The Court found that Commonwealth had the obligation to “specifically exclude coverage for any claim surrounding the view easement.” In support of this position, the Court points out an additional exception relating to a pathway easement (unrelated to the view easement), but fails to indicate whether this pathway easement is mentioned in the Declaration.
The dissent reasons that the since the policy specifically excepts matters arising under the Declaration, and the Declaration clearly refers to the view easement, there is no duty to defend. Stating that “although the references by incorporation may be cumbersome, they are not ambiguous,” the dissent points out that the release of the easement is of no moment in a policy coverage analysis. Even if the easement were still viable, the exception should have been adequate to relieve the insurer of any duty to defend claims arising out of the easement.
For insurers, the message is clear: belt, suspenders and explicit incorporation by reference may not be enough. Carrying the rationale of this decision ad absurdum, insurers in Maine would be wise to craft a specific exception for every possible claim that might arise under a condo declaration!