Contractor, But Not Owners of Contractor, Protected Under Maine’s Insurance Guaranty Association Act

Belanger v. N. Am. Specialty Ins. Co., 504 F. 3d 147 (1st Cir. 2007)

In this case, North American Specialty Insurance Company, a surety, brought a suit against its principal contractor, Seacoast Crane Company and Seacoast’s owners (the “Belangers”) to recover monies paid out under a performance bond.  NAS had issued the performance bond on behalf of Seacoast to build a corporate headquarters project for DCC Development Corporation.  In the suit, initiated in the United States District Court for the District of Maine, NAS asserted claims for indemnification, breach of contract and specific performance based on a judgment that was entered against NAS and Seacoast, and against the Belangers for breach of contract in connection with the DCC project.

After the trial court granted summary for NAS against the Belangers, the Belangers appealed on the grounds that NAS’s admittedly otherwise valid claim for indemnification was barred by the Maine Insurance Guaranty Association Act (the “MIGA Act”), which provides for payment of covered claims against insolvent insurers.  Specifically, the Belangers argued that because the prior judgment was also against Seacoast’s subcontractor’s surety, which was insolvent, and because the Belangers were entitled to indemnity against that insolvent surety, they should be able to avail themselves of the protections of the MIGA Act.  In support of their argument, the Belangers noted that a different court, in a collateral order, had already effectively dismissed NAS’ claims against Seacoast pursuant to the MIGA Act. 

The First Circuit, however, upheld the trial court’s decision that the Belangers were not entitled to protection, because under the MIGA Act, only Seacoast, and not the Belangers, were “claimants” of a policy issued by the insolvent insurer, and therefore, no coverage (or protection) was afforded by the MIGA Act.

Leave a Reply

Copyright © 2019, K&L Gates LLP. All Rights Reserved.