Russell v. NGM Ins. Co., 2016–0540

Decision Date15 November 2017
Docket NumberNo. 2016–0540,2016–0540
Citation170 N.H. 424,176 A.3d 196
CourtNew Hampshire Supreme Court

Law Office of John S. Wessler, of Lawrence, Massachusetts (John S. Wessler on the brief and orally), for the plaintiffs.

Getman, Schulthess, Steere & Poulin, P.A., of Manchester (Elizabeth L. Hurley on the brief and orally), for the defendant.


The plaintiffs, Michelle and Robert Russell (homeowners), appeal an order of the Superior Court (Anderson, J.) denying their summary judgment motion and granting that of the defendant, NGM Insurance Company (insurer). On appeal, the homeowners contend that the trial court erred when it determined that their homeowners' insurance policy provided no coverage for the additional living expenses they incurred when they were unable to live in their home because of mold contamination. We affirm.

I. Facts

The following facts are derived either from the trial court's order or the record submitted on appeal. The insured residence is a custom home in Windham, built in 2007. In early 2015, the homeowners discovered mold and moisture in the home's attic, which were the result of faulty workmanship. As a result of the mold, they vacated the home in March 2015 so that the mold could be eradicated. They moved back into the home in May 2016.

In October 2015, the homeowners submitted a claim to the insurer for loss of use damages under Coverage D of their homeowners' policy. There is no evidence in the record that they also submitted a claim to the insurer for mold eradication. The insurer denied the loss of use claim in November 2015. The denial letter explained that, pursuant to the "Limited Fungi, Wet or Dry Rot, or Bacteria" endorsement to the homeowners' policy (Mold Endorsement), "[m]old is covered only if caused by a Peril Insured Against," and, here, because the mold was caused by faulty workmanship, which is an excluded peril, there is no coverage.

Thereafter, the homeowners brought a petition for declaratory judgment, seeking a declaration that they are entitled to loss of use damages under Coverage D. In their petition, they alleged that their loss of use damages were not subject to the faulty workmanship exclusion because mold constitutes an ensuing loss of the faulty workmanship that was not otherwise excluded under the policy.

Both the homeowners and the insurer moved for summary judgment. The trial court granted the summary judgment motion of the insurer and denied that of the homeowners. The homeowners unsuccessfully moved for reconsideration, and this appeal followed.

II. Discussion
A. Standards of Review

In reviewing a trial court's rulings on cross-motions for summary judgment, we consider the evidence in the light most favorable to each party in its capacity as the nonmoving party and, if no genuine issue of material fact exists, we determine whether the moving party is entitled to judgment as a matter of law. JMJ Properties, LLC v. Town of Auburn, 168 N.H. 127, 129, 122 A.3d 977 (2015). "If our review of that evidence discloses no genuine issue of material fact and if the moving party is entitled to judgment as a matter of law, then we will affirm the grant of summary judgment." Id. at 129–30, 122 A.3d 977 (quotation omitted). We review the trial court's application of the law to the facts de novo. Brown v. Concord Group Ins. Co., 163 N.H. 522, 524–25, 44 A.3d 586 (2012).

"In a declaratory judgment action to determine the coverage of an insurance policy, the burden of proof is always on the insurer, regardless of which party brings the petition." Cogswell Farm Condo. Ass'n v. Tower Group, Inc., 167 N.H. 245, 248, 110 A.3d 822 (2015) (quotation omitted). We interpret insurance policy language de novo. See id. "The fundamental goal of interpreting an insurance policy, as in all contracts, is to carry out the intent of the contracting parties." Bartlett v. Commerce Ins. Co., 167 N.H. 521, 530, 114 A.3d 724 (2015) (quotation omitted). To discern the parties' intent, we begin by examining the insurance policy language. Id. In interpreting policy language, we look to the plain and ordinary meaning of the policy's words in context. Id. We construe the terms of the policy as would a reasonable person in the position of the insured based upon more than a casual reading of the policy as a whole. Id. at 530–31, 114 A.3d 724. This is an objective standard. Great Am. Dining v. Philadelphia Indem. Ins. Co., 164 N.H. 612, 616, 62 A.3d 843 (2013).

Insurers are free to contractually limit the extent of their liability through use of a policy exclusion provided it violates no statutory provision. Progressive N. Ins. Co. v. Concord Gen. Mut. Ins. Co., 151 N.H. 649, 653, 864 A.2d 368 (2005). "Such language must be so clear, however, as to create no ambiguity that might affect the insured's reasonable expectations." Id. (quotation omitted). The insurer asserting an exclusion of coverage bears the burden of proving that the exclusion applies. Id.

"We need not examine the parties' reasonable expectations of coverage when a policy is clear and unambiguous; absent ambiguity, our search for the parties' intent is limited to the words of the policy." Bartlett, 167 N.H. at 531, 114 A.3d 724. "The fact that the parties may disagree on the interpretation of a term or clause in an insurance policy does not necessarily create an ambiguity." Id. "For an ambiguity to exist, the disagreement must be reasonable." Id.

"In determining whether an ambiguity exists, we will look to the claimed ambiguity, consider it in its appropriate context, and construe the words used according to their plain, ordinary, and popular definitions." Id. (quotation omitted). "If one of the reasonable meanings of the language favors the policyholder, the ambiguity will be construed against the insurer, in order to honor the insured's reasonable expectations." Id. (quotation and citation omitted). "However, when the policy language is clear, this court will not perform amazing feats of linguistic gymnastics to find a purported ambiguity simply to construe the policy against the insurer and create coverage where it is clear that none was intended." Id. (quotation omitted).

B. The Policy

The homeowners' insurance policy consists of a base policy modified by endorsements that include the Mold Endorsement and the "Platinum Homeowner Endorsement—New Hampshire" (New Hampshire Endorsement). (Bolding and capitalization omitted.) The policy is an "all risk" policy that insures "against risk of direct loss" to the homeowners' dwelling, other structures on the residence property, and personal property, if the loss "is a physical loss to property." See Michael C. Phillips & Lisa L. Coplen, Concurrent Causation Versus Efficient Proximate Cause in First–Party Property Insurance Coverage Analysis, 36 The Brief 32, 33 (Winter 2007) (explaining that "[t]he typical ‘all risks’ policy begins with a broad insuring provision that states that the policy covers ‘direct physical loss or damages to covered property’ " and "then specifies which risks [the insurer] will not assume by listing those causes of loss as policy exclusions"). "An ‘all risk’ policy typically covers any risk of direct physical loss or damage that is not specifically excluded or limited by the terms of the policy."

Caryn L. Daum, A Primer on New Hampshire First–Party Property Insurance, 52 N.H.B.J. 20, 21 (Autumn 2011). For the purposes of this appeal, there is no dispute that the loss for which the homeowners seek coverage constitutes a direct, physical loss to the property.

The policy is divided into two sections: "Section I," which pertains to property coverages, and "Section II," which pertains to liability coverages. (Bolding and capitalization omitted.) The instant case concerns only Section I.

Section I of the broad form policy has four components: "Property Coverages," "Perils Insured Against," "Exclusions," and "Conditions." (Bolding and capitalization omitted.) As relevant to this appeal, the New Hampshire Endorsement modifies within Section I "Perils Insured Against" and "Exclusions." (Bolding and capitalization omitted.)

"Property Coverages" specifies that coverage is available for: (1) the homeowners' dwelling on the "residence premises," structures attached to the dwelling, and materials and supplies located on or next to the "residence premises" used to construct, alter or repair the dwelling or other structures on the "residence premises" (Coverage A); (2) certain additional structures on the "residence premises" (Coverage B); (3) personal property (Coverage C); (4) loss of use (Coverage D); and (5) certain enumerated "Additional Coverages," such as coverage for "Debris Removal" and "Reasonable Repairs." (Bolding, quotations, and capitalization omitted.) The policy defines the "[r]esidence premises" as the building in which the insured resides, whether that building is a one-family dwelling or a two-family dwelling or some other structure or building. (Quotation omitted.) The homeowners concede that Coverages B and C are not at issue.

The homeowners' claim is under Coverage D for loss of use. Coverage D provides, in pertinent part, that "[i]f a loss covered under this Section makes that part of the ‘residence premises’ where you reside not fit to live in, we cover ... Additional Living Expense, meaning any necessary increase in living expenses incurred by you so that your household can maintain its normal standard of living." (Bolding omitted.) For the purposes of this appeal, there is no dispute that the expenses submitted by the homeowners constitute Additional Living Expenses under the policy.

In referring to "a loss covered under this Section," Coverage D incorporates, by reference, the requirements for Coverages A, B, C, and Additional Coverages. See Mellin v. N. Sec. Ins. Co., 167 N.H. 544, 556–57, 115 A.3d 799 (2015) (interpreting similar insurance policy language). In other words,...

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