Diamond Intern. Corp. v. Allstate Ins. Co.

• Decision Date: 25 July 1983
• Docket Number: No. 83-1061,83-1061
• Citation: 712 F.2d 1498
• Parties: DIAMOND INTERNATIONAL CORPORATION, Plaintiff, Appellant, v. ALLSTATE INSURANCE COMPANY, et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 1498

712 F.2d 1498

DIAMOND INTERNATIONAL CORPORATION, Plaintiff, Appellant, v. ALLSTATE INSURANCE COMPANY, et al., Defendants, Appellees.

No. 83-1061.

United States Court of Appeals First Circuit.

Argued May 2, 1983.

Decided July 25, 1983.

Wayne C. Beyer, Manchester, N.H., with whom John A. Graf, Bradford W. Kuster, and McLane, Graf, Raulerson & Middleton Professional Ass'n, Manchester, N.H., were on brief, for plaintiff, appellant.

William S. Orcutt, Manchester, N.H., with whom Wiggin & Nourie, Manchester, N.H., was on brief, for defendants, appellees.

Before COFFIN and BREYER, Circuit Judges, and RE, ^* Judge.

COFFIN, Circuit Judge.

Diamond International Corporation (Diamond) seeks a declaratory judgment in this diversity action that certain management personnel of a wholly owned subsidiary, Groveton Papers Company (Groveton), are covered by a comprehensive general liability policy, issued by Allstate Insurance Company (Allstate), in connection with an industrial accident involving another Groveton employee. The district court for the District of New Hampshire denied coverage.

I. Background

The accident underlying this action took place on March 7, 1978, when Groveton employee Brandon Morehouse suffered serious injuries to his right arm and hand while operating a paper rewinding machine in the company's Groveton, N.H., plant. Claiming breach of duty to maintain a safe workplace ¹, Morehouse sued a number of Groveton executives and co-employees and was joined in each suit by his wife, who seeks compensation for loss of consortium. ² Among these defendants are the two management personnel whose coverage is denied by Allstate here: Clarke Harding, assistant paper machine superintendent at the time of Morehouse's accident, and Walter MacDonald, then vice president in charge of manufacturing. ³

Two basic questions are presented: whether Harding and MacDonald are covered for bodily injury to Morehouse, and whether they are covered against Cathy Morehouse for loss of consortium. We address each issue in turn, but first examine the district court's choice of law.

II. Choice of Law

Allstate argues that New York law governs the construction of its policy because the policy was issued in New York to Diamond's New York headquarters, and was signed by Allstate's New York registered agent. Diamond contends that the policy is to be construed according to the law of New Hampshire as the state which is the principal location of the insured risk--i.e., the site of the Groveton plant where Morehouse was injured. The policy itself is silent on choice of law. Since suit in this diversity case was brought in New Hampshire, New Hampshire choice-of-law rules control. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1940).

The district court issued two opinions on the question. In its first opinion, the court relied on two New Hampshire cases applying the traditional lex loci contractu rule to conclude that "the rights and obligations of parties under a liability insurance policy issued in a foreign jurisdiction are governed by the law of that jurisdiction." See Maryland Casualty Co. v. Coman, 106 N.H. 364, 212 A.2d 703 (1965); Cohen v. John Hancock Mutual Life Insurance Co., 98 N.H. 341, 101 A.2d 270 (1953). Since the policy was issued by "Allstate, by one of its New York registered agents, ... in New York State ... to Diamond, a New York headquartered corporation", the court concluded that New York law governed the construction of the policy.

On reconsideration, the court softened its reliance somewhat on the lex loci contractu rule, but again concluded that New York law governed, on the theories that the policy "was not ... written with the intention that New Hampshire law should control", that "the circumstances of the application, the issuance and the execution of th[e] policy ... reflected an intention that New York law apply", and that even under more recent choice-of-law tests, New York law should apply because "New York has the most substantial interest in contracts executed there".

We begin our review by noting that the precedents are not wholly clear. Older New Hampshire cases follow the lex loci contractu rule and apply the law of the place of making in interpreting contracts. Then, in the mid-1960's, the New Hampshire Supreme Court began to question the old choice-of-law rules. See Clark v. Clark, 107 N.H. 351, 222 A.2d 205 (1966); Thompson v. Thompson, 105 N.H. 86, 193 A.2d 439 (1963). In 1968, in Consolidated Mutual Insurance Co. v. Radio Foods, Corp., 108 N.H. 494, 496-97, 240 A.2d 47, 48-49 (1968), the New Hampshire court abandoned the lex loci contractu rule and adopted the approach of the Restatement (Second) of Conflicts, under which contracts are governed both as to validity and performance by the law of the state with the most significant relationship to the matter in issue. Id. at 496, 240 A.2d at 49, citing Restatement (Second), Conflict of Laws §§ 332, 332a, 332b (Tent. Draft No. 6) (1960).

The most significant relationship in insurance cases--" 'the contact that is given the greatest weight' ", id. at 497, 240 A.2d at 49, citing Restatement (Second) § 346i comment a (Tent. Draft No. 6)--is " '[t]he principal location of the insured risk' ". ⁴ Id. With respect to multiple risk policies, such as the one in issue here, the court held that "the New Hampshire risk insured is to be treated as though it were insured by a separate policy and the validity of and rights under the multiple risk policy as to this risk are to be governed by the laws of this State." Id., citing Restatement (Second) § 346i comment f (Tent. Draft No. 6).

Despite Radio Foods, the place of contracting has not been abandoned altogether and it remains a relevant, though subsidiary, consideration in insurance cases even under the Restatement (Second). See Restatement (Second), Conflict of Laws § 188(2) (1971) (final version). More importantly here, the New Hampshire Supreme Court itself continues to cite old cases relying on the lex loci contractu rule. In Vigneault v. Travelers Insurance Co., 118 N.H. 75, 78, 382 A.2d 910, 912-13 (1978), the court relied on Maryland Casualty Co. v. Coman, supra, a 1965 lex loci contractu case, to hold that Massachusetts law governed an automobile insurance policy issued in Massachusetts to a Massachusetts driver. In Greemore v. American Home Assurance Co., 113 N.H. 250, 252, 305 A.2d 681, 682 (1973), the court relied on Coman to apply Massachusetts law to an insurance policy bought in Massachusetts by a Massachusetts corporation. In both cases, the underlying accidents took place not in Massachusetts, but in New Hampshire. Other cases are to similar effect. See also Travelers Indemnity Co. v. Stearns, 116 N.H. 285, 286, 358 A.2d 402, 403 (1976) (policy issued in Massachusetts to Massachusetts resident; accident in New Hampshire; Massachusetts law applied to construction of policy); Allstate Insurance Co. v. O'Shaughnessy, 118 N.H. 66, 69, 384 A.2d 486, 487 (1978) (policy issued in Maine; accident in New Hampshire; Maine law applied to policy).

We do not, however, read these cases as a retreat from the Restatement (Second) or as a silent repudiation of Radio Foods. The law of the place of contracting in these cases was also the law of the state which was the principal location of the insured risk during the policy term. That the accidents took place in New Hampshire was irrelevant, because New Hampshire was not the principal location of the insured risk. The principal risk was elsewhere--in Vigneault, Stearns and O'Shaughnessy, Massachusetts or Maine, where the insured automobiles were garaged and/or registered; in Greemore, Massachusetts, where the flight service was located and where the flight in question originated. ⁵

At most, these post-Radio Foods decisions indicate that traditional and modern choice-of-law rules will often generate the same result, and that either may be used in such a case. The New Hampshire court itself recognized the likelihood of such an overlap in Clark v. Clark, supra, when it observed that "[m]ost of the choice of law rules and results that have been reached in the past were supported by good sense and sound practical analysis, and will not be affected by reexamination in terms of the relevant choice-influencing considerations." 107 N.H. at 357, 222 A.2d at 210 (emphasis added). Where the traditional and modern rules do not generate the same result, however, we are persuaded that the New Hampshire courts would apply the modern approach. We therefore conclude that the district court erred in applying the lex loci contractu rule, and in concluding that the state of issuance has the most significant relationship to an insurance policy under modern choice-of-law tests.

We are also persuaded that the district court placed undue emphasis on the place of contracting when it concluded that the parties "intended" New York law to apply. We are of course bound by the district court's findings of fact unless they are clearly erroneous. Thus, we do not question its findings on the circumstances surrounding the application, issuance and execution of the policy (i.e., that the policy was issued in New York, that Diamond is headquartered in New York, that the policy was signed by Allstate's New York registered agent). The interpretation of those circumstances, however, as they bear on the intent expressed in the policy is a question of law for our independent review. See Murphy v. Doll-Mar, Inc., 120 N.H. 610, 611, 419 A.2d 1106, 1108 (1980) (interpretation of a written instrument is as a general rule an issue of law for the reviewing court to determine). ⁶

Whatever the parties' unexpressed intention, we cannot say on the facts found by the district court that they expressed any choice of law in the insurance policy, either explicitly or by implication. The policy contains no choice-of-law provision, and no...