City of Manchester v. General Reinsurance Corp., 85-060

• Citation: 127 N.H. 806,508 A.2d 1063
• Decision Date: 11 April 1986
• Docket Number: No. 85-060,85-060
• Parties: CITY OF MANCHESTER v. GENERAL REINSURANCE CORPORATION et al.
• Court: Supreme Court of New Hampshire

Page 1063

508 A.2d 1063

127 N.H. 806

CITY OF MANCHESTER v. GENERAL REINSURANCE CORPORATION et al.

No. 85-060.

Supreme Court of New Hampshire.

April 11, 1986.

Elmer T. Bourque, City Solicitor (James M. Warren, attorney, on brief), by brief for the City of Manchester.

Michael B. O'Shaughnessy, and William P. Tocchi, Manchester, by brief for the Covenant Ins. Group.

SOUTER, Justice.

This appeal by the City of Manchester challenges a decree of the Superior Court (Pappagianis, J.) disposing of a petition for declaratory judgment to determine insurance coverage. The court ruled that a policy issued by the defendant Covenant Insurance Group would not cover the city's contractual obligation to indemnify a city employee against liability arising from a motor vehicle accident in the course of employment. We affirm.

On October 28, 1977, William C. Haley was acting within the scope of his duties as a city employee while driving a Manchester Highway Department truck. When the truck hit a pothole, another employee, Albert Pinard, fell from the rear platform and received fatal injuries. Mr. Pinard's administratrix has brought wrongful death actions against Mr. Haley and the city. In addition to possible direct and vicarious liability to the Pinard estate, the city faces a potential obligation to indemnify Mr. Haley if he is found liable. The city's obligation to Mr. Haley is said to arise under a resolution adopted by the Manchester Board of Mayor and Alderman in 1975, by which they voted to indemnify all city employees against liability arising from the discharge of their duties. See RSA 31:105 (Supp.1985). The parties here do not contest the enforceability of that resolution as a term of the contract between the city and Mr. Haley.

Four petitions for declaratory judgment under RSA 491:22 were filed to determine coverage claimed by the city or Mr. Haley under four insurance policies issued to the city and under which the city is an insured: an employer's liability policy issued by General Reinsurance Corporation; a comprehensive automobile liability policy issued by Home Insurance Company; a general liability policy issued by Covenant Insurance Group; and an umbrella policy issued by United States Liability Insurance Company. The superior court ruled, inter alia, that Covenant's general liability policy would not cover any contractual obligation of the city to indemnify Mr. Haley if he is found liable in the underlying death action brought against him. The city appeals this ruling.

In reaching its decision, the trial court relied upon several policy exclusions. Confining our analysis to the exclusions considered by the trial court, we believe that at least one of them is dispositive. Exclusion (b)(1) excludes coverage for "bodily injury ... arising out of the ... operation [or] use ... of ... any automobile ... owned ... by ... any insured." The policy defines "automobile" as a "land motor vehicle designed for travel on public roads," and "bodily injury" as including death resulting from such injury. Since the claim that underlies the city's potential liability as an indemnitor is a claim for death resulting from operation of a city-owned motor vehicle, the trial court found that the quoted language excludes coverage.

The city submits that this is error, resulting from a failure to recognize other policy terms that create ambiguity about coverage of the city's liability in question. The city argues that the applicability of these terms is apparent as soon as one recognizes the basic distinction between the nature of Mr. Haley's alleged liability and that of the city.

If Mr. Haley is found to be liable in the death action, his liability will be based in tort and will arise from the operation of a motor vehicle. But if the city is found to be liable to Mr. Haley, that liability will be based in contract and will arise from the resolution expressing an agreement to indemnify city employees. The city points out that the coverage claimed under the Covenant policy is not for Mr. Haley's tort liability but for the city's contractual liability as an indemnitor.

Based on this distinction, the city argues that it is entitled to coverage under certain basic policy terms, when read in combination with a significant provision contained in a "broadened coverage endorsement." Exclusion (a) of the basic policy provides that there is no insurance against "liability assumed by the insured under any contract or agreement except an incidental contract." Exclusion (j) provides that the policy does not apply to

"bodily injury to any employee of the insured arising out of or in the course of his employment by the insured or to any obligation of the insured to indemnify another because of damages arising out of such injury; but this exclusion does not apply to liability assumed by the insured under an incidental contract."

See Royal Globe Ins. Co. v. Poirier, 120 N.H. 422, 427, 415 A.2d 882, 885 (1980) (exclusion (j) inserted "to avoid duplication of coverage with respect to the subject matter covered by a standard 'Workmen's Compensation and Employer's Liability Policy.' ") In each instance, the city argues, the policy excepts coverage for liability assumed under an "incidental contract" from exclusions of coverage for contractual liability, thus suggesting that coverage exists for liability under an "incidental contract."

The city then points to the definition of "incidental contract" in the broadened coverage endorsement, as "any contract or agreement relating to the conduct of the named insured's business." Because this definition is broad enough to include the indemnity contract in question, the city submits that the exceptions to exclusions (a) and (j) and the broadened coverage endorsement's...