Hersey v. Maryland Cas. Co.
| Decision Date | 19 July 1960 |
| Citation | 162 A.2d 160,102 N.H. 541 |
| Parties | Waldon B. HERSEY v. MARYLAND CASUALTY COMPANY. |
| Court | New Hampshire Supreme Court |
Wyman & Bean Manchester (Arthur E. Bean, Jr., Manchester), for plaintiff.
Sheehan, Phinney, Bass, Green & Bergevin and Richard A. Morse, Manchester (Richard A. Morse, Manchester), for defendant.
The principal question in this case is somewhat unique. Is a public liability insurer liable for damages to the insured for delay in making an investigation and for failure to make a timely disclaimer of insurance coverage when in the pretrial order it is agreed that the occurrence out of which the accident arose was not covered by the public liability policy issued by the defendant to the plaintiff?'
The plaintiff purchased from the defendant a Farmer's Comprehensive Liability Policy providing liability coverage for injuries on plaintiff's premises but excluding injury to farm employees unless specifically declared in the policy, which they were not. One Fiske was injured while working on the farm. The plaintiff notified his insurance agent by letter on September 14, 1955, that 'one of the men who is working for me at the farm' was injured and inquired 'do I have insurance which covers this situation, either for his lost time or for actual medical expenses * * *?' The agent telephoned this information to the selling agent of the defendant who notified the defendant's claims office in Bangor, Maine, giving the pertinent facts. This office in turn on October 7, 1955, wrote the defendant's claims manager in Boston Massachusetts, relaying the information given by the plaintiff stating that 'although there is some question as to whether coverage applies under the policy,' it was requested that the case be assigned to the defendant claims office nearest the plaintiff's farm in New Boston, New Hampshire. Despite telephone inquiries by the agent no investigation was made and the plaintiff received no reply for the next four months.
In March 1956, an investigation was made upon receipt of some information that Fiske, the injured party, might not have been an employee of the plaintiff. In March 1956, an adjuster for the defendant informed Fiske that the insurance company would pay hospital and medical bills. This was never done. In April 1956, the Boston claims office informed its selling agent of its conclusion that there was no coverage. In July 1956, Fiske sued the plaintiff who eventually settled the action for $2,000. On July 31, 1956, the defendant's agents visited the plaintiff and explained why there was no coverage. At no time did the plaintiff discuss the case with the injured party, Fiske.
Although the plaintiff was finally convinced on July 31, 1956, that he had no coverage, he had no conviction that his original inquiry in September 1955, had produced a prompt investigation or a timely answer. This case attests to the fact that settlement procedures in liability insurance can be improved. See Keeton, Liability Insurance and Responsibility for Settlement, 67 Harv.L.Rev. 1137, 1186 (1954). However our problem is one of legal liability and not an exercise in public relations or a consideration of 'changes in policy forms that would create a more practicable relationship between company and insured.' Keeton, supra.
It is settled law in this state that the liability insurers' obligation to defend suits, including groundless ones, is limited to suits 'upon only those claims for which it has assumed liability under the terms of its policy.' Lumbermen's Mut. Casualty Co. v. McCarthy, 90 N.H. 320, 321, 8 A.2d 750, 751, 126 A.L.R. 894. If there is no coverage, there is no duty to defend an action that is outside the coverage. Ocean Accident and Guarantee Corp. v. Peoples Wet Wash Laundry Co., 92 N.H. 260, 263, 29 A.2d 418; Desrochers v. New York Casualty Co., 99 N.H. 129, 106 A.2d 196. For a discussion of this matter see Des-Champs, The Obligation of the Insurer to Defend Under Casualty Insurance Policy Contracts, 26 Ins.Counsel J. 580 (1959); Reed, Collection of Judgments by Reaching the Insurance Policy: Main Features of Liability Insurance, 45 Mass.L.Q. 4 (1960).
In 8 Appleman, Insurance Law & Practice, s. 4686, pp. 12-13, the law is stated as follows: ...
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