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Weinhold v. Travelers Indemnity Co.

United States District Court, D. New Hampshire

October 18, 2018

Karen M. Weinhold, et al.
v.
The Phoenix Insurance Company, et al.

          John P. Graceffa, Esq., Brian A. Suslak, Esq., Scott H. Harris, Esq., Ashley B. Campbell, Esq., Mary Elizabeth Tenn, Esq., Vincent A. Wenners, Jr., Esq., Dianne H. Martin, Esq.

          MEMORANDUM AND ORDER

          PAUL BARBADORO UNITED STATES DISTRICT JUDGE.

         This declaratory judgment action stems from a refusal by The Phoenix Insurance Company, Travelers Property Casualty Company of America, and The Travelers Indemnity Company (collectively, “Travelers”) to indemnify the State of New Hampshire (“State”) under two commercial liability insurance policies. Travelers removed the case to federal court but now argues in a motion to dismiss that this court lacks subject matter jurisdiction because the plaintiffs' claim for coverage is not ripe. For the reasons set forth below, I deny the motion.

         I. BACKGROUND

         A. Underlying Action

         In October 2014, Karen and Charles Weinhold filed a lawsuit in New Hampshire Superior Court against the State, Audley Construction, Inc. (“Audley”), and Remi Gross-Santos for the injuries they suffered when Gross-Santos struck Mrs. Weinhold with his car. At the time of the accident, Mrs. Weinhold was walking on an unprotected shoulder on the west side of Ocean Boulevard in Hampton, New Hampshire. Audley, a contractor hired by the State to repair the seawall that runs along Ocean Boulevard, had closed the protected sidewalk on the east side of the boulevard, diverting Mrs. Weinhold and other pedestrians to the unprotected shoulder on the west side.

         The case was tried before a jury in January 2018. The Weinholds offered evidence at trial showing both that Audley was negligent in choosing to divert the public onto the unprotected west-side shoulder where Mrs. Weinhold was injured and that the State had approved Audley's plan. The jury awarded the Weinholds $9 million in damages and apportioned liability among the three defendants, finding the State 40% at fault and Audley and Gross-Santos each 30% at fault. The State's share of the verdict thus totaled $3.6 million, exclusive of interest.

         After the trial court denied the State's post-trial motions challenging the validity of the verdict and the State decided not to appeal, it sought a ruling that the verdict against it is subject to a statutory cap that limits the State's tort liability to the greater of $475, 000 or the amount of available insurance coverage. See N.H. Rev. Stat. Ann. § 541-B:14, I. The Weinholds did not dispute the applicability of the statutory cap. Instead, they argued that the cap did not limit their right to recover against the State because the State was covered as an additional insured on several insurance policies purchased from Travelers by Audley. Because Travelers denied that the State was covered under two of the three policies, the Weinholds informed the state court that they intended to file a declaratory judgment action to resolve the coverage dispute and asked the court to stay any action on the State's motion. The court agreed that “a declaratory judgment action is the best means of resolving this issue” and granted the request for a stay. Doc. No. 20-6 at 2 n.2.

         The Weinholds and the State jointly filed this declaratory judgment action in New Hampshire Superior Court, seeking a determination that Travelers is obliged to indemnify the State for its portion of the jury verdict. Travelers responded by removing the action to federal court based on diversity of citizenship.[1]

         Following removal, the court in the underlying action was asked to decide the Weinholds' motion for prejudgment interest. By order dated June 15, 2018, the state court determined that the dispute concerning the extent of insurance coverage available to the State precluded a calculation of prejudgment interest. The court reasoned that Section 541-B of the New Hampshire Revised Statutes limits the State's liability for prejudgment interest to “any award authorized under this chapter.” Doc. No. 16-3 at 4 (quoting N.H. Rev. Stat. Ann. § 541-B:14, III). Because the amount “authorized under” the statute is dependent on the amount of available insurance coverage, the court concluded that it could not calculate the prejudgment interest award. Id. (citing N.H. Rev. Stat. Ann. § 541-B:14, I). Accordingly, the court stayed the Weinholds' request for prejudgment interest on the 40% of damages attributable to the State “pending resolution of the relevant declaratory judgment action.” Id. at 5.

         B. Insurance Policies

         Audley's contract with the State for the seawall repair project required Audley to secure various types of insurance coverage, including owner's protective liability coverage for the benefit of the State, a commercial general liability policy that names the State as an additional insured, and a commercial umbrella policy. Audley procured three different policies from Travelers: an owner's protective liability policy with $2 million in coverage per occurrence and $3 million in aggregate (“Owner's Policy”), a commercial general liability policy with $1 million in coverage per occurrence and $2 million in aggregate (“CGL Policy”), and a commercial excess liability policy with $10 million in coverage (“Umbrella Policy”). A certificate of liability insurance that Audley submitted to the State recorded the three policies and noted that the State “is included as an additional insured under general liability coverage for ongoing operations when required by written contract.”

         After the jury verdict in the underlying action, Travelers took the position that the CGL Policy and the Umbrella Policy do not cover the State's liability.[2] Travelers pointed to an endorsement to the CGL Policy that it claims limits the State's coverage to vicarious liability arising out of Audley's actions.[3]According to Travelers, the State's liability is not vicarious but is instead based on the State's independent breach of a duty to the Weinholds that is unrelated to Audley's actions. Because coverage under the Umbrella Policy is subject to the limitations contained in the underlying CGL Policy, Travelers determined that no coverage is available to the State under either policy.

         In this lawsuit, the Weinholds and the State seek a determination that the CGL Policy and the Umbrella Policy cover the State's liability. They maintain that the policy endorsement at issue is not applicable to the State, and even if it were, that the endorsement's conditions have been ...


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