A December 1998 fire destroyed part of F. T. Largay, Inc's. grocery store in Blue Hill, Maine. It started shortly after two stock boys, David Rankin and Joseph Weeks, were playing with matches in the store's bottle room. Both flicked lit matches across the room but Rankin claimed he checked boxes to be sure the matches were out before he left the room. Acadia Insurance Company (Acadia) insured the store at the time of the fire and Rankin was an insured under his mother's homeowner's policy with Vermont Mutual Insurance Company (Vermont). After a series of claims and cross-claims, the insurance companies entered into an agreement where they submitted three questions to the Superior Court:

• Whether Acadia had a duty to indemnify Rankin pursuant to the store's policy;
• Whether Vermont had a duty to indemnify Rankin pursuant to the homeowners policy; and
• If both companies had a duty to indemnify, which party provided primary coverage.

Acadia subsequently filed a complaint seeking a declaratory judgment as to these questions. Vermont and Acadia then filed cross-motions for summary judgment. The trial court answered the second question in the negative, concluding that a coverage exclusion in the homeowners policy applied because Rankin was at work when the event occurred. Acadia appealed.

The state Supreme Court reviewed the case to determine if a genuine issue of material fact existed and with the view that exclusions are construed strictly against the insurance company and liberally in favor of the insured. The Vermont homeowner's policy Coverage E–Personal Liability and Coverage F–Medical Payments to Others contained exclusions where these coverages did not apply to bodily injury or property damage arising out of or in connection with a business engaged in by an insured. The exclusion applied but was not limited to an act or omission, regardless of its nature or circumstance, involving a service or duty rendered, promised, owed or implied to be provided because of the nature of the business. The policy defined an insured's business to include a trade, profession or occupation. Similar exclusions in other policies have generated considerable controversy in the past but the court felt the language in the Vermont policy was very clear and it determined that this exclusionary language was not ambiguous. In addition, the exclusion contained the words "in connection with" a business, in addition to "arising out of," and those words gave even broader meaning and encompassed activities linked, associated with or related to employment. The court concluded that Rankin's conduct needed to satisfy only one of the two terms in order for the exclusion to apply.

There was no question that Rankin was at the store for the purpose of his employment and that the conduct leading to the fire occurred in the workplace. As a result, his losses arose out of, or were in connection with, his occupation. Vermont had no duty to indemnify Rankin and the judgment of the trial court was affirmed.

Editor's note: Two justices offered dissenting opinions. Each felt that the act of striking matches might have been for the amusement of the employees and this was not part of normal work activities. The question of whether a particular activity comes within the definition of business pursuits should necessarily be determined on a case-by-case basis. If reasonably intelligent people (i.e., state Supreme Court Justices) differ as to the meaning of a policy provision, ambiguity of the provision may be imputed to exist.

[1046] Acadia Insurance Company, Appellant, v. Vermont Mutual Insurance Company, Appellee. Maine Supreme Judicial Court. No. 2004 ME 121. September 23, 2004. Appeal from the Superior Court, Cumberland County. Affirmed. 2004 CCH Personal and Commercial Liability Cases. 1046.