Energynorth Natural Gas v. Associated Elec. & Gas.

• Decision Date: 30 September 1998
• Docket Number: No. C-95-591-B.,C-95-591-B.
• Citation: 21 F.Supp.2d 89
• Parties: ENERGYNORTH NATURAL GAS, INC. v. ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES, LTD., et al.
• Court: U.S. District Court — District of New Hampshire

21 F.Supp.2d 89

ENERGYNORTH NATURAL GAS, INC. v. ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES, LTD., et al.

No. C-95-591-B.

United States District Court, D. New Hampshire.

September 30, 1998.

Bruce W. Fleming, McLane, Graf, Raulerson & Middleton, Manchester, NH, EnergyNorth Nat. Gas, Inc.

Paul W. Hodes, Shaheen & Gordon, Concord, NH, John L. Rivkin, Rivkin, Radler & Kremer, Uniondale, NY, for AEGIS Ins. Services, Inc.

Robert J. Gallo, McNeill & Taylor, P.A., Dover, NH, Vincent S. Ziccolella, St. John & Wayne LLC, Newark, NJ, Donald L. Uttrich, Richard W. Bryan, Jackson & Campbell, PC, Washington, DC, for American Home Assur. Co., Lexington Ins. Co.

Emily G. Rice, Dean, Rice & Kane, PA, Manchester, NH, Paul A. Leodori, Ruggerio & Leodori, Cherry Hill, NJ, for CIGNA.

John L. Putnum, Stebbins, Bradley, Wood & Harvey, P.A., Hanover, NH, for Intern. Ins. Co.

Jeffrey B. Osburn, Wiggin & Nourie, Manchester, NH, John A. Guarascio, Mendes & Mount, New York City., for Lloyd's Underwriters.

Michael F. Aylward, Morrison, Mahoney & Miller, Boston, MA, for Columbia Cas. Co.

Emily G. Rice, Dean, Rice & Kane, PA, Manchester, NH, for Century Indem. Co.

MEMORANDUM AND ORDER

BARBADORO, Chief Judge.

EnergyNorth Natural Gas, Inc., is the successor-in-interest to companies that manufactured coal gas in Concord, New Hampshire, from 1852 to 1952. EnergyNorth brought this declaratory judgment action, pursuant to 28 U.S.C.A. § 2201 (West 1994) and N.H.Rev.Stat. Ann. § 491:22 (1997), against its predecessors' liability insurers. Plaintiff seeks to recover costs incurred in responding to directives from the New Hampshire Department of Environmental Services (NHDES) to investigate and restore a site in Concord that became contaminated with by-products from its predecessor's coal-gasification operations. In this order, I address EnergyNorth's contention that its coverage claims should be evaluated using the burden of proof specified by N.H.Rev.Stat. Ann. § 491:22-a (1997).

I. DISCUSSION

New Hampshire common law places the burden of proof on the party seeking coverage under an insurance policy to establish the "existence and validity of the policy." Town of Peterborough v. Hartford Fire Ins. Co., 824 F.Supp. 1102, 1110 (D.N.H.1993); Merchants Mut. Ins. Co. v. Transformer Serv., Inc., 112 N.H. 360, 364, 298 A.2d 112 (1972). Insurance coverage suits brought pursuant to New Hampshire's declaratory judgment act, N.H.Rev.Stat. Ann. § 491:22, however, are governed by N.H.Rev.Stat. Ann. § 491:22-a, which provides that "the burden of proof concerning coverage shall be upon the insurer whether he institutes the petition or whether the claimant asserting the coverage institutes the petition." Accordingly, if EnergyNorth has properly based its action for declaratory relief on section 491:22, the burden of proof will lie with the defendant insurers to disprove EnergyNorth's coverage claims.

The principal obstacle to EnergyNorth's contention that its claims are subject to section 491:22-a is N.H.Rev.Stat. Ann. § 491:22(III), which provides in pertinent part that: "[n]o petition shall be maintained under this section to determine coverage of an insurance policy unless it is filed within 6 months after the filing of the writ, complaint, or other pleading initiating the action which gives rise to the [coverage] question." Dictum in a recent First Circuit Court of Appeals opinion suggests that this section should be interpreted expansively to prevent an insured from basing a coverage claim on section 491:22 unless the claim arises from an underlying lawsuit in which the insured is named as a defendant. See New Hampshire Ball Bearings v. Aetna Cas. and Sur. Co., 43 F.3d 749, 752 (1st Cir.1995). If this dictum correctly interprets section 491:22(III), EnergyNorth could not base its coverage claim on section 491:22 as NHDES has not brought suit against it.

Defendants do not invoke the Ball Bearings court's dictum in challenging EnergyNorth's right to base its claim on section 491:22. Instead, they argue that the current action does not comply with section 491:22(III) because it was commenced well more than 6 months after NHDES issued a letter to EnergyNorth directing it to begin an investigation of possible contamination at the Concord site. In other words, defendants concede that an insured may base a declaratory judgment claim on section 491:22 even though it has not been named as a defendant in an underlying lawsuit, but argue that NHDES's directive to EnergyNorth qualifies as a "writ, complaint, or other pleading" triggering section 491:22's 6-month limitations period.

I begin by examining the First Circuit's dictum and then consider the merits of defendants' argument that the NHDES directive is a "writ, complaint, or other pleading" as that phrase is used in section 491:22(III).

A. Does Section 491:22(III) require an underlying lawsuit against the policyholder in order to base an insurance coverage claim on section 491:22?

The First Circuit appeared to endorse the most expansive possible reading of section 491:22(III) in its recent Ball Bearings decision. See 43 F.3d at 752. There, the court determined that a policyholder, knowing that its disposal of hazardous wastes was certain to result in injury to property, could not successfully claim a right to coverage under the defendant's liability insurance policies. See Id. In reaching this conclusion, the court observed in dictum that: "We note that the district court properly found that, because there is no underlying state court lawsuit in this case, the burden shifting framework of New Hampshire's declaratory judgment act ... does not apply...." Id. 43 F.3d at 752. The court did not explain its reasoning, but instead appeared to adopt the trial court's conclusion that this result was compelled by the New Hampshire Supreme Court's decisions in Jackson v. Federal Ins. Co., 127 N.H. 230, 498 A.2d 757 (1985), and Scully's Auto-Marine Upholstery, Inc. v. Peerless Ins. Co., Inc., 136 N.H. 65, 611 A.2d 635 (1992) ("Scully's"). See New Hampshire Ball Bearings v. Aetna Cas., 848 F.Supp. 1082, 1089-90 (D.N.H.1994). If, as the First Circuit's dictum suggests, the New Hampshire Supreme Court has determined that a policyholder may not base a claim on section 491:22 unless the insured has been named as a defendant in an underlying lawsuit, the matter is no longer open for debate and I cannot allow EnergyNorth to base its coverage claim on section 491:22. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). However, I am free to reach a contrary conclusion if the New Hampshire Supreme Court has not resolved the question and the relevant precedents suggest that the court would arrive at a different result. See Dedham Water Co., Inc. v. Cumberland Farms Dairy, Inc., 972 F.2d 453, 458-59 (1st Cir.1992) (court not obligated to follow unconsidered dictum). Thus, I first examine Jackson and Scully's to determine whether either decision is controlling.

1. Significance of Jackson and Scully's.

In both Jackson and Scully's, the New Hampshire Supreme Court examined the issue of whether a party may base an insurance coverage claim on section 491:22 when the lawsuit giving rise to the coverage dispute is brought in a foreign court. In Jackson, the court observed that the plain language of the statute as then amended spoke only in terms of underlying actions commenced by the filing of a "writ."¹ 127 N.H. at 232, 498 A.2d 757. The court concluded that because a federal action is commenced by filing a "complaint" and not a "writ," an action commenced in federal court did not constitute an underlying action for the purpose of satisfying section 491:22(III). Id. 127 N.H. at 232, 498 A.2d 757.

Relying on its decision in Jackson, the Scully's court concluded that an action commenced in a foreign state court also does not constitute an underlying action for the purpose of satisfying section 491:22(III). See 136 N.H. at 67, 611 A.2d 635. In so holding, the court reasoned that section 491:22(III) had originated as a "court cleaning bill." Id. (quoting Jackson, 127 N.H. at 233, 498 A.2d 757 (quoting, in turn, N.H. Senate Journal, at 627 (May 24, 1967) (stating that section 491:22(III) will "do away with the procedure of a few days before the trial [of an underlying dispute], a person filing a declaration petition,") thereby delaying resolution of the original matter and clogging courts' dockets)). Thus, because the New Hampshire legislature lacked the power to clean the dockets of a foreign state's courts, only actions brought in New Hampshire state courts could satisfy the legislative intent expressed in section 491:22(III). See id.

Neither Jackson nor Scully's expressly considered whether section 491:22(III) applies in cases where the insured has not yet been sued in an underlying action. See Robert J. Lynn, Declaratory Judgments in Insurance Cases: Recent Amendment Solves the "Where to Sue" Problem but Leaves the "When to Sue" Question Unresolved, 36 N.H.B.J. 58, 64 (1995) (concluding that the Ball Bearings court's reading of Jackson and Scully's is broader than is compelled by either decision). Although the New Hampshire Supreme Court conceivably could decide to extend its reasoning in both decisions to cases in which an underlying lawsuit has not yet been commenced against the insured, I am unwilling to assume this result without first examining the legislative history of section 491:22(III) and other Supreme Court decisions bearing on the subject.²

2. The legislative history of Section 491:22(III).

Section 491:22(III) was added to the declaratory judgment statute by a 1967 amendment. Proposed by the New Hampshire Superior Court, the amendment was designed "to curtail the practice, apparently widespread at the time, of litigants waiting until the eve of trial of an underlying lawsuit to file a declaratory judgment action to determine the availability of insurance coverage." Lynn,...