EXETER HOSPITAL, INC.
STEADFAST INSURANCE COMPANY
Argued: October 19, 2016
Sheehan Phinney Bass & Green, PA, of Manchester (James Q.
Shirley and Jason D. Gregoire on the brief, and Mr. Shirley
orally), for the petitioner.
Middleton, Professional Association, of Manchester (Jeremy T.
Walker and Nicholas F. Casolaro on the brief), and Chadbourne
& Parke LLP, of Washington, D.C. (Joy L. Langford and
Samantha Miller on the brief, and Ms. Langford orally), for
declaratory judgment proceeding, the petitioner, Exeter
Hospital, Inc. (Exeter), appeals an order of the Superior
Court (Anderson, J.) denying its motion for partial
summary judgment as to the amount at which coverage is
triggered under an umbrella policy (the policy) issued to
Exeter by the respondent, Steadfast Insurance Company
(Steadfast). We reverse and remand.
summary judgment record reflects the following pertinent
facts. In the spring of 2011, Exeter hired a cardiovascular
technician (technician) to work in its Cardiac
Catheterization Laboratory (Lab). In October 2011, the
technician became a full-time employee. In the spring of
2012, an outbreak of Hepatitis C infections among patients
serviced by the Lab led investigators to discover that the
technician had spread the virus to patients "through a
clandestine drug diversion scheme." The technician
allegedly injected certain drugs into his body by way of
intravenous needles. He then used the same needles on
patients thereby infecting them with the Hepatitis C virus.
The technician's actions resulted in numerous lawsuits
against Exeter by affected patients.
the relevant time period, Exeter was primarily insured
through a Self-Insurance Trust Agreement (SIT), which
provided professional liability coverage in the amount of $1
million per medical incident, with a $4 million annual
aggregate cap. Exeter also maintained the policy with
Steadfast, which provided excess health care professional
liability coverage. The policy set the following limits on
coverage: a specific loss limit of $20 million, a health care
professional liability aggregate limit of $20 million, and a
"Retained Limit" of $100, 000.
I.A.1 of the policy, titled "Coverage A - Health Care
Professional Liability Insurance" (Coverage A),
provides, in pertinent part, that Steadfast "will pay on
behalf of the insured those sums that the insured becomes
legally obligated to pay as damages because of injury caused
by a medical incident to which this insurance applies."
(Bolding omitted.) It further provides that Steadfast
"will pay only such damages that are in excess of the
Retained Limit specified in Item 4. of the Declarations or
that are in excess of the applicable underlying limit,
whichever is greater." (Bolding omitted.) The term
"Retained Limit" is not specifically defined in the
policy; however, the policy's declarations list the
"Retained Limit" as $100, 000. "Applicable
underlying limit" is defined as "the total of all
available limits of insurance for the underlying insurance
plus any alternative insurance." (Bolding omitted.)
"Underlying insurance means the policy or policies of
insurance listed in the Schedule of Underlying Insurance,
forming a part of this policy." (Bolding omitted.)
"Alternative insurance means any type of self-insurance
or other mechanisms by which an insured arranges for funding
of legal liabilities and is listed in the Schedule of
Underlying Self-Insurance." (Bolding omitted.) It is
undisputed that Exeter maintained only alternative insurance
- the SIT.
August 2013, after Exeter had paid approximately $3 million
in claims through the SIT, Steadfast accepted Exeter's
tender of the defense of the remaining claims. In doing so,
Steadfast informed Exeter that "each claimant
constitutes a separate medical incident." Steadfast
further stated that, once Exeter's $4 million aggregate
limit was exhausted, it would "pay only such damages
that are in excess of the Retained Limit of $100, 000. The
Retained Limit is the minimum amount for which Exeter is
liable for each and every claim, following exhaustion."
When Exeter paid out its $4 million annual aggregate under
the SIT, Steadfast notified Exeter that:
As Exeter has now exhausted its self-insurance aggregate
limit of $4, 000, 000.00 there no longer exists an applicable
underlying limit (because the underlying self-insurance is
exhausted) to be compared to the Retained Limit for purposes
of determining "whichever is greater." Thus, for
purposes of determining what portion of damages Steadfast is
obligated to reimburse in connection with damages for a
medical incident that are incurred post-exhaustion of the
self-insured aggregate, the Retained Limit is necessarily the
trigger as exhaustion of the underlying self-insurance means
there is no longer an applicable underlying limit to compare
to the Retained Limit.
(Bolding omitted.) Thus, Steadfast maintained that it would
pay damages only in excess of the $100, 000 retained limit
for each medical incident.
2014, Exeter filed this declaratory judgment proceeding,
seeking a declaration that it is not required to pay the
"$100, 000 retained limit per claim for those claims
that settle or that are reduced to judgment after August 1,
2013." Exeter also asserted a breach of contract claim
against Steadfast, arguing that it is entitled to recovery of
excess payments from Steadfast "because the writs
brought against Exeter assert claims that constitute a single
'medical incident'" and, therefore, Exeter
should only have "been required to satisfy the single
$1.0 million limit of its self[-]insurance in order to
trigger Steadfast's obligations of defense and
indemnification." Subsequently, Exeter moved for partial
summary judgment on its request for a declaratory judgment,
arguing that, pursuant to the policy, once it paid its $4
million annual aggregate, it did not have to pay the retained
limit amount of $100, 000 for each remaining claim. Steadfast
a hearing, the trial court denied Exeter's motion. The
court identified "[t]he crux of the dispute between the
parties" as being the interpretation of the clause in
Coverage A limiting Steadfast's liability to the
"excess over the greater of the retained limit [or] the
applicable underlying limit." The court then interpreted
the term "applicable underlying limit" as being a
variable amount "dependent on the actual coverage
remaining under [the] other [limits of] insurance, "
here, the limits of the SIT. Because Exeter had paid out the
limits of the SIT, the court found that the "applicable
underlying limit" was zero, thereby rendering the $100,
000 retained limit greater than the "applicable
underlying limit." Thus, the court determined that,
pursuant to Coverage A, Steadfast is required "to pay
damages in excess of $100, 000 for each medical
incident." Exeter sought reconsideration of the
court's order, which the court denied.
September 2015, the court approved the parties'
stipulation for entry of final order regarding all remaining
issues, thereby dismissing Exeter's claim that it is
entitled to recovery because the actions against it
constituted a single medical incident requiring it to satisfy
only its $1 million self-insured obligation rather than its
$4 million annual aggregate obligation. This appeal followed.
reviewing a trial court's summary judgment ruling, we
consider the affidavits and other evidence, and all
inferences properly drawn from them, in the light most
favorable to the non-moving party. Rivera v. Liberty Mut.
Fire Ins. Co., 163 N.H. 603, 606 (2012). "If our
review of the evidence does not reveal a genuine issue of
material fact, and if the moving party is entitled to
judgment as a matter of law, we will affirm the trial
court's decision." Amica Mut. Ins. Co. v.
Mutrie, 167 N.H. 108, 111 (2014) (quotation omitted). We
review the trial court's application of law to the facts
de novo. Rivera, 163 N.H. at 606.
a declaratory judgment action to determine the coverage of an
insurance policy, the burden of proof is always on the
insurer, regardless of which party brings the petition."
Cogswell Farm Condo. Ass'n v. Tower Group,
Inc., 167 N.H. 245, 248 (2015) (quotation omitted).
The interpretation of insurance policy language is a question
of law for this court to decide. Bartlett v. Commerce
Ins. Co., 167 N.H. 521, 530 (2015). "The
fundamental goal of interpreting an insurance policy, as in
all contracts, is to carry out the intent of the contracting
parties." Id. (quotation omitted). To discern
the parties' intent, we begin with an examination of the
insurance policy language. Id. In interpreting
policy language, we look to the plain and ordinary meaning of
the policy's words in context. Id. We construe
the terms of the policy as would a reasonable person in the
position of the insured based upon more than a casual reading
of the policy as a whole. Id. at 530-31. This is an
objective standard. Great Am. Dining v. Philadelphia
Indem. Ins. Co., 164 N.H. 612, 616 (2013). Where an
insurance policy's language is reasonably susceptible of
more than one interpretation, however, and one reasonable
interpretation favors coverage, we construe the ambiguity
against the insurer and in favor of coverage in order to
honor the reasonable expectation of the policyholder.
State Farm Mut. Ins. Co. v. Pitman, 148 N.H. 499,
501 (2002). "The doctrine that ambiguities in an
insurance policy must be construed against the insurer is
rooted in the fact that insurers have superior understanding
of the terms they employ." Id. (quotation
argues that the trial court erred by finding that, after it
has satisfied the $4 million aggregate limit of its
self-insurance, it is required to pay the retained limit of
$100, 000 for each claim before Steadfast will provide
coverage. It contends that Coverage A "requires Exeter
to pay either the amount of its alternative
insurance (the limit of the SIT) or the retained
limit, [but] not both." (Bolding omitted.) Because the
$4 million aggregate limit of the SIT is greater than the
$100, 000 retained limit, ...