MARTIN v. NATIONAL GENERAL INSURANCE COMPANY

UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

ROBERT MARTIN, )

)

Plaintiff, )

)

v. ) Docket no. 2:21-cv-00102-GZS

)

NATIONAL GENERAL INSURANCE )

COMPANY and INTEGON NATIONAL )

INSURANCE COMPANY, )

)

Defendants. )

ORDER ON MOTION FOR SUMMARY JUDGMENT

Before the Court is a Motion for Summary Judgment by Defendants National General

Insurance Company and Integon National Insurance Company (ECF No. 19). In the Motion,

Defendants argue that a Maine statute of limitations applicable to foreign insurers violates the

Dormant Commerce and Equal Protection Clauses of the U.S. Constitution. Having reviewed the

Motion and the subsequent briefing filed by the parties (ECF Nos. 21, 23, 27, 34 & 35), the Court

DENIES the Motion.

I. LEGAL STANDARD

Generally, a party is entitled to summary judgment if, on the record before the Court, it

appears “that there is no genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a). The party moving for summary judgment

must demonstrate an absence of evidence to support the nonmoving party’s case. Celotex Corp.

v. Catrett, 477 U.S. 317, 325 (1986). In determining whether this burden is met, the Court must

view the record in the light most favorable to the nonmoving party and draw all reasonable

inferences in its favor. See Santoni v. Potter, 369 F.3d 594, 598 (1st Cir. 2004). “[S]ummary

judgment is improper when the record is sufficiently open-ended to permit a rational factfinder to

resolve a material factual dispute in favor of either side.” Morales-Melecio v. United States (Dep’t

of Health and Hum. Servs.), 890 F.3d 361, 368 (1st Cir. 2018) (internal quotation marks omitted).

Here, Defendants move for summary judgment on purely legal grounds prior to the

commencement of discovery. The parties have provided the Court a Joint Statement of Material

Facts (“JSMF”) (ECF No. 17) as well as a Joint Stipulated Record (“JSR”) (ECF Nos. 18–18-8),

which the Court uses to construct the factual narrative that follows.1

II. BACKGROUND

Defendant National General Insurance Company (“NGIC”) provided a homeowner’s

insurance policy (“Policy”), underwritten by Defendant Integon National Insurance Company, to

Plaintiff Robert Martin.2 (See JSMF, PageID # 128.) The Policy’s coverage extended from

January 6, 2017, through January 6, 2018. (Id.) A condition of the Policy specifies that “[n]o

action can be brought against [NGIC] unless there has been full compliance with all the terms

under Section I of th[e] [P]olicy and the action is started within two years after the date of loss.”

(JSR, PageID # 153.)

On March 4, 2017, a water pipe froze and burst in Martin’s home, causing damage to the

home and its contents. (JSR, PageID # 184.) That same day, Martin filed a coverage claim with

NGIC. (JSMF, PageID # 128.) NGIC’s claims adjuster ultimately prepared for Martin two proofs

of loss: an April 21, 2017 proof of loss for the damaged contents of Martin’s home, and a May

1 In compliance with Local Rule 56, the State filed a Supplemental Statement of Material Facts, which

draws from the JSR. See State Supplemental SMF (ECF No. 22). In their response to the Supplemental

SMF, NGIC and Integon admitted each of the facts listed. See Resp. to State Supplemental SMF (ECF No.

26). The Court’s factual recitation includes these admitted facts to the extent that they are material to the

resolution of Defendants’ Motion.

2 For purposes of this Order, the Court generally refers to both NGIC and Integon collectively as “NGIC.”

18, 2017 proof of loss for damage to Martin’s home itself. (See JSR, PageID #s 187–88 & 189–

90.) The proofs of loss specified that NGIC would compensate Martin $13,070.97 for contents

damage and $225,840.01 for home damage, sums that reflected the “Actual Cash Value” of

Martin’s losses. (See id., PageID #s 187 & 189.) NGIC paid these amounts on April 25, 2017,

and May 23, 2017. (See id., PageID # 206.) Pursuant to the Policy, Martin would be entitled to

claim a further $8,099.82 for contents and $36,393.02 for the home as “Recoverable Depreciation”

upon furnishing proof that he had replaced the contents and completed repairs to the property.

(See id., PageID #s 152, 187 & 189.) A subsequent letter from Martin’s attorney, described below,

acknowledges receipt of $5,000 from NGIC (not reflected in either proof of loss) for mold damage.

(See id., PageID #192.) This amount represents the Policy’s coverage limit for mold damage. (See

id., PageID #133.)

The next interaction between NGIC and Martin took place on March 1, 2019, when

Martin’s attorney sent a Supplemental Demand for Coverage to NGIC. (See id., PageID #s 192–

99.) The Supplemental Demand requested an additional $153,255.37 from NGIC: the

Recoverable Depreciation amounts described above, plus an additional $42,512.40 for contents

damage, $10,717.41 for home damage, and $55,532.72 for mold damage. NGIC responded on

March 4, 2019, confirming receipt and informing Martin’s attorney that it would review the

Supplemental Demand within thirty days. (See id., PageID #201.)

Ten days later, on March 14, 2019, NGIC responded to the substance of Martin’s

Supplemental Demand. (See id., PageID # 200.) NGIC expressed concern about Martin’s delay

in communicating his additional loss amounts. NGIC then denied Martin’s additional claim for

mold damage, but agreed to consider certain contents damage claims. A final loss summary shows

that NGIC made one additional payment in response to Martin’s Supplemental Demand. The

additional payment, for $40,712.92, consisted of $36,393.02 in Recoverable Depreciation for the

home damage and $4,319.90 for Martin’s pinball machine and pool table. (See id., PageID # 206.)

Martin filed suit in Cumberland County Superior Court on March 4, 2021, alleging claims

of breach of contract, negligence, and unfair claims settlement practices under Maine law. NGIC

then removed the action to this Court. Thereafter, the Maine Attorney General and Maine

Superintendent of Insurance (collectively, the “State”) jointly exercised their statutory right to

intervene under 28 U.S.C. § 2403(b). In April 2021, NGIC notified the Court that it wished to

move immediately for summary judgment on a singular issue: “whether 24-A M.R.S.A. § 2433

violated the dormant Commerce Clause given its disparate treatment of foreign insurers such as

Defendant.” (Def. Pre-Conference Mem. (ECF No. 11), PageID # 112.) Both Martin and the State

opposed NGIC’s suggestion that this case be resolved at this early stage of the litigation.

III. DISCUSSION

In this case, Plaintiff asserts that a state statute overrides and prevents Defendants from

enforcing the Policy’s suit-limitation provision, which requires the insured to commence any

action “within two years after the date of loss.” (JSR, PageID # 153.) The state statute in question

provides,

No conditions, stipulations or agreements in a contract of insurance shall deprive

the courts of this State of jurisdiction of actions against foreign insurers, or limit

the time for commencing actions against such insurers to a period of less than 2

years from the time when the cause of action accrues.

24-A M.R.S.A. § 2433. The parties agree that NGIC and Integon are “foreign insurers” within the

statute’s meaning. (See JSMF, PageID # 128.) Defendants assert that while this statutory language

appears to make Plaintiff’s suit timely, the Policy’s suit-limitation provision would bar Plaintiff’s

breach-of-contract claim and associated negligence and unfair practices claims.3 Thus, Defendants

ask this Court to declare that section 2433 is unconstitutional, invoking both the Dormant

Commerce Clause and the Equal Protection Clause. The Court first turns its attention to the

anticipated Dormant Commerce Clause argument.

a. Dormant Commerce Clause

Defendants argue that Maine’s statute of limitations for foreign insurers unconstitutionally

discriminates between domestic and foreign insurers in violation of the Dormant Commerce

Clause.

The Constitution grants the Congress the power to “regulate Commerce . . . among the

several States.” U.S. Const., art. I, § 8. “The Supreme Court has interpreted this affirmative grant

of authority to Congress as also establishing what has come to be called the Dormant Commerce

Clause—a self-executing limitation on state authority to enact laws imposing substantial burdens

on interstate commerce even in the absence of Congressional action.” United Egg Producers v.

Department of Agric. of P.R., 77 F.3d 567, 569–70 (1st Cir. 1996) (quoting South-Central Timber

Dev., Inc. v. Wunnicke, 467 U.S. 82, 87 (1984)). However, “Dormant Commerce Clause

restrictions apply only when Congress has not exercised its Commerce Clause power to regulate

the matter at issue[.]” Tennessee Wine & Spirits Retailers Ass’n v. Thomas, 139 S. Ct. 2449, 2465

3 It is not clear whether partial summary judgment in Defendants’ favor on the constitutionality of Maine’s

law would affect Martin’s negligence claim, even if it might bar his claim for breach of contract and unfair

trade practices. See Pendleton Yacht Yard, Inc. v. Smith, No. Civ. A. CV-01-047, 2003 WL 21714927

(Me. Sup. Ct. Mar. 24, 2003) (“[W]hile normally a mere breach of contract is not actionable as a tort, the

circumstances surrounding the contract may give rise to an independent duty to exercise due care or similar

duty in tort, in which case a breach may be actionable under both tort and contract theory.” (internal

quotation marks omitted)); Chapman v. Standard Fire Ins. Co., No. 1:11–cv–459–DBH, 2012 WL 3644778,

at *3 (D. Me. Aug. 23, 2012) (interpreting Maine Law Court precedent to hold that the unfair claims

settlement statute merely provides alternative remedies for a breach of contract). In any event, it is

unnecessary to adjudicate the relationship among Plaintiff’s claims here because the Court denies

Defendants’ Motion.

(2019). In exercising its regulatory power over interstate commerce, Congress may “redefine the

distribution of power over interstate commerce by permitting the states to regulate the commerce

in a manner which would otherwise not be permissible.” United Egg Producers, 77 F.3d at 570

(1st Cir. 1996) (quoting Wunnicke, 467 U.S. at 88).

The McCarran-Ferguson Act (“Act”), which removes Dormant Commerce Clause

limitations on the states’ regulatory power over the “business of insurance,” is an example of

Congress permitting otherwise impermissible state regulation. See 15 U.S.C. § 1012(a); U.S.

Dep’t of Treasury v. Fabe, 508 U.S. 491, 500 (1993) (The McCarran-Ferguson Act “remov[es]

obstructions which might be thought to flow from Congress’ own power, whether dormant or

exercised, except as otherwise expressly provided in the Act itself or in future legislation.”

(internal alteration omitted) (citing Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 429–30

(1946))). The relevant provision of the Act states, “The business of insurance, and every person

engaged therein, shall be subject to the laws of the several States which relate to the regulation or

taxation of such business.” 15 U.S.C. § 1012(a).

At least three criteria are relevant in determining whether a practice regulated by state

law—here, the inclusion of suit-limitation provisions in insurance contracts—is part of the

“business of insurance”: “first, whether the practice has the effect of transferring or spreading a

policyholder’s risk; second, whether the practice is an integral part of the policy relationship

between the insurer and the insured; and third, whether the practice is limited to entities within the

insurance industry.” Union Lab. Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982) (internal

emphasis omitted) (citing factors first announced in Group Life & Health Ins. Co. v. Royal Drug

Co., 440 U.S. 205 (1979)).4 A state law need not satisfy all three factors to qualify for McCarran-

Ferguson protection. UNUM Life Ins. Co. of America v. Ward, 526 U.S. 358, 373 (1999). At

their core, the factors aim to identify whether the practice at issue closely relates to the

“relationship between the insurance company and its policyholders,” which is the Act’s primary

focus. See Fabe, 508 U.S. at 501. “The relationship between insurer and insured, the type of

policy which could be issued, its reliability, interpretation, and enforcement—these [are] the core

of the ‘business of insurance.’” SEC v. National Secs., Inc., 393 U.S. 453, 460 (1969).

In light of these precedents and the Pireno/Royal Drug factors, the Court finds that Maine’s

statute of limitations for foreign insurers falls within the scope of the McCarran-Ferguson Act and

thus is immune from challenge on Dormant Commerce Clause grounds. The first factor adds little

to the analysis in this case. “The transfer of risk from insured to insurer is effected by means of

the contract between the parties—the insurance policy—and that transfer is complete at the time

that contract is entered.” Pireno, 458 U.S. at 130. Because the statute of limitations becomes

relevant only after an insurance contract is formed, Maine’s statute of limitations for foreign

insurers cannot be said to affect the transfer of risk directly.

The second and third factors, however, strongly support the conclusion that the McCarran-

Ferguson Act shields Maine’s longer statute of limitations for foreign insurers from Dormant

Commerce Clause attack. The length of time in which an insured may bring suit against an insurer

to claim benefits is an “integral part” of the enforcement of the contract between the parties, and

4 Precedent interpreting the term “business of insurance” within the McCarran-Ferguson Act does so in the

context of the Act’s second provision, which is not relevant to this case. Nevertheless, following the First

Circuit’s lead, this Court treats the precedential gloss on 15 U.S.C. § 1012(b) as directly applicable to

section 1012(a). See United States v. Rhode Island Insurers’ Insolvency Fund, 80 F.3d 616, 622 n. 4 (1st

Cir. 1996) (applying the statutory interpretation canon that the “same word or phrase used repeatedly in [a]

statute is presumed to have [the] same meaning” to the McCarran-Ferguson Act’s two-time use of the

phrase “business of insurance”).

insurance policy enforcement lies at the heart of the Act’s protective ambit. See Pireno, 458 U.S.

at 129; National Secs., 393 U.S. at 460. Furthermore, in Fabe, the Supreme Court held that state

laws guaranteeing claim priority to insureds in liquidation proceedings against their insurers were

“close enough to enforcement of the original contract to qualify for McCarran-Ferguson

protection.” Ruthardt v. United States, 303 F.3d 375, 382 (1st Cir. 2002). It follows, a fortiori,

that Maine’s law, which is designed to give insureds additional time in which to sue for the benefits

of their own insurance policies, is likewise entitled to McCarran-Ferguson protection because it

directly regulates enforcement of the insurance contract.

As to the third factor, Maine’s foreign-insurer statute of limitations is explicitly confined

to entities within the insurance industry. Section 2433 appears in a chapter of the Maine Insurance

Code that “applies as to all insurance contracts and annuity contracts, other than [reinsurance, out-

of-state contracts, and marine insurance].” 24-A M.R.S.A. § 2401. Application of the second and

third Pireno factors confirms that Maine’s law regulates the “core” of the “business of insurance”:

the enforcement of an insurance contract between insured and insurer. See National Secs., 393

U.S. at 460.

To qualify for McCarran-Ferguson Act protection, a state law must “relate to” the

regulation of the business of insurance. “Relate to” is a term with a “broad common-sense

meaning,” denoting a “connection” or “reference to” something else. Barnett Bank of Marion

Cnty., N.A. v. Nelson, 517 U.S. 25, 39 (1996) (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S.

41, 47 (1987)). A statute of limitations applicable to foreign insurers straightforwardly connects

or refers to the business of insurance, as defined above. “Statutes aimed at protecting or regulating

th[e] relationship [between insurer and insured] are laws regulating the ‘business of insurance.’”

National Secs., 393 U.S. at 460. Thus, the Court concludes that Maine’s foreign-insurer statute of

limitations falls within the ambit of the McCarran-Ferguson Act’s protection, and so Defendants’

challenge to it as a violation of the Dormant Commerce Clause fails.5

b. Equal Protection Clause

In addition to claiming unconstitutionality under the Dormant Commerce Clause,

Defendants argue that Maine’s foreign-insurer statute of limitations violates the Equal Protection

Clause. Defendants first raised this argument in their Reply (ECF No. 27), as they themselves

acknowledge. (See Defs. Reply (ECF No. 27), PageID # 289 n.5.) On distinct grounds, Plaintiff

and the State urge the Court not to consider the argument: because it violates a District of Maine

Local Rule and because the doctrine of constitutional avoidance requires the result. See D. Me.

Loc. R. 7(c) (“[T]he moving party may file a reply memorandum . . . which shall be strictly

confined to replying to new matter raised in the objection or opposing memorandum.”); (State’s

Sur-Reply (ECF No. 35), PageID # 323.).

In the Court’s view, resolution of Defendant’s Equal Protection challenge would be

premature at the current stage of the litigation. See Matal v. Tam, 137 S. Ct. 1744, 1755 (2017)

(“[I]t is important to avoid the premature adjudication of constitutional questions, . . . and [courts]

ought not to pass on questions of constitutionality unless such adjudication is unavoidable[.]”

(internal quotation marks and alterations omitted)). Plaintiff has raised issues of waiver and

estoppel that may render adjudication of the constitutionality of Maine’s law moot. (See Pl. Resp.

(ECF No. 21), PageID # 242.) Even Defendants appear to acknowledge that further discovery

5 The State urges the Court to decline to address Defendants’ Dormant Commerce Clause challenge because

the case might be resolved on alternative grounds. See State’s Resp. (ECF No. 23), PageID #s 262–71;

Ashwander v. Tennessee Valley Auth., 297 U.S. 288, 347 (1936) (Brandeis, J., concurring) (“The Court

will not pass upon a constitutional question although properly presented by the record, if there is also present

some other ground upon which the case may be disposed of.”). As Defendants’ Dormant Commerce Clause

claim is resolved through statutory interpretation, the Court concludes that constitutional avoidance is not

implicated in its analysis.

would assist them in fleshing out their Equal Protection claim. (See Defs’ Reply, PageID # 293 n.

5.) Because resolution of factual issues may yet be dispositive of Plaintiff’s claims, adjudication

of the constitutional Equal Protection issue is not unavoidable at this point in time. Accordingly,

under the constitutional avoidance principles announced by the Supreme Court, Defendants are

not entitled to judgment as a matter of law. See Tam, 137 S. Ct. at 1755. The Court thus concludes

that Defendants’ Equal Protection Clause argument is best reserved for resolution on a more

developed factual record.

IV. CONCLUSION

For the foregoing reasons, the Court DENIES Defendants’ Motion for Summary Judgment

(ECF No. 19). This denial is with prejudice as to Defendants’ Dormant Commerce Clause

argument, and without prejudice as to Defendants’ Equal Protection Clause argument. By

November 30, 2021, the parties shall submit to the Court a proposed Amended Scheduling Order.

SO ORDERED.

/s/ George Z. Singal

United States District Judge

Dated this 9th day of November, 2021.