Storms v. U.S. Fidelity & Guaranty Co.

• Decision Date: 19 June 1978
• Docket Number: No. 7812,7812
• Citation: 388 A.2d 578,118 N.H. 427
• Parties: Charles A. STORMS v. UNITED STATES FIDELITY AND GUARANTY COMPANY.
• Court: New Hampshire Supreme Court

Page 578

388 A.2d 578

118 N.H. 427

Charles A. STORMS v. UNITED STATES FIDELITY AND GUARANTY COMPANY.

No. 7812.

Supreme Court of New Hampshire.

June 19, 1978.

Faulkner, Plaut, Hanna, Zimmerman & Freund, Keene (N. Michael Plaut, Keene, orally), for plaintiff.

Bell & Falk, Keene (Ernest L. Bell, III, Keene, orally), for defendant.

CANN, Justice. (By special assignment pursuant to RSA 490:3).

This is a petition for declaratory judgment and an equitable proceeding to determine whether the defendant's Owners', Landlords' and Tenants' policy requires the defendant to defend the plaintiff in a pending liability action and satisfy any adverse judgment. The trial court ruled that the defendant's liability policy afforded no coverage after its voluntary cancellation by the plaintiff, that a reasonable person in the position of the insured would not expect the policy to provide coverage after cancellation, and that there was no mutual mistake that would give cause to reinstate the policy. Consequently, the defendant would not be obligated to defend the plaintiff in the pending liability action. The plaintiff's exceptions to these adverse rulings were reserved and transferred by Bois, J. We affirm.

On March 23, 1970, the plaintiff and his former wife bought property in North Swanzey, New Hampshire, which included twelve rental cabins. After the closing, the plaintiff contacted Paul Trask, the defendant's agent. Plaintiff informed Mr. Trask that previously he had not owned any real estate and requested Trask's advice on the kind of insurance he should carry. After viewing the premises, Trask procured for the plaintiff certain fire insurance policies and the defendant's policy against bodily injury and property damage liability. While the latter policy was in force, the plaintiff made repairs to the gas heating system in one of the cabins.

In March 1971, the plaintiff received an invoice for the renewal premium. Since he planned to sell the property, he put the bill aside. Later he informed Mr. Trask that the property would be sold and asked how much of a payment would be required to keep the property insured until the sale went through in May. Mr. Trask asked for, and received, a check for $100. After the closing on May 12, the plaintiff delivered to the company a signed release. Mr. Trask did not advise the plaintiff that he might need the insurance after the property had been sold. He also did not believe that the plaintiff retained such an insurable interest in the property after sale that the policy could have been continued.

Several months after the property had been transferred to the new owners, two men were asphyxiated in the cabin with the repaired heating system. The administratrices of the estates of the decedents brought wrongful death actions against the plaintiff, alleging negligence in installing and maintaining the system. The present owners of the property also sued the plaintiff for indemnification. The defendant carrier denied coverage and the obligation to defend these actions. The plaintiff tendered the refunded premium for reinstatement of the defendant's policy, but that tender was declined.

The defendant argues that the reasonable expectations rule of Atwood v. Hartford Accident & Indem. Co., 116 N.H. 636, 365 A.2d 744 (1976), has no application in this case. This argument overlooks the whole thrust of that rule; it applies to all insurance contracts in this State. As Chief Justice Doe recognized over one hundred years ago, insurance policies are weighted with such a prolixity of complex verbiage that

they would not be understood by men in general, even if (the policies were) subjected to a careful and laborious study: by men in general, they were sure not to be studied at all. The study of them was rendered particularly unattractive, by a profuse intermixture of discourses on subjects in which the premium payer would have no interest. The compound, if read by him, would, unless he were an extraordinary man, be an inexplicable riddle, a mere flood of darkness and confusion. Some of the most material stipulations were concealed in a mass of rubbish on the back side of the policy and the following page . . . where scarcely any one would think of looking for information so important. . . . As if it were feared that, notwithstanding these discouraging circumstances, some extremely eccentric person might attempt to examine and understand the meaning of the involved and intricate net in which he was to be entangled, it was printed in such small type, and in lines so long and crowded, that the perusal of it was made physically difficult, painful, and injurious.

DeLancy v. Insurance Co., 52 N.H. 581, 587-88 (1873). From this Chief Justice Doe concluded that the art of typography had "(s)eldom . . . been so successfully diverted from the diffusion of knowledge to the suppression of it." In his view such a policy constituted a fraud. Id. at 588.

Although insurers have had over one hundred years to hone their policies into forms that would not ferry the unwary reader on a trip through Wonderland, they regrettably have not seen fit to do so. Insurance policies today often fully merit the criticism that Chief Justice Doe levelled at their predecessors. Moreover, as we have recognized, these policies usually are imposed on the consumer on a take-it-or-leave-it basis. Magulas v. Travelers Ins. Co., 114 N.H. 704, 706, 327 A.2d 608, 609 (1974). The pretense that the parties had bargained for the resulting contract of insurance is an absurdity. For these reasons, we have held that "the provisions of a policy should be interpreted as would a reasonable person in the position of the insured." Id. citing Peerless Ins. Co. v. Clough, 105 N.H. 76, 78, 84, 193 A.2d 444, 446, 449-50 (1963); Accord, Atwood v. Hartford Accident & Indem. Co., 116 N.H. at 637, 365 A.2d at 745-46.

The defendant argues, and we agree, that in this case the policy definition is clear. The insured is protected against "occurrences," which is defined as accidents "which (result) During the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the Insured . . .," (emphasis added). Our cases hold that insurance policies "are interpreted from the standpoint of the average layman 'in light of what a more than casual reading of the policy would reveal to an ordinarily intelligent insured.' " Brown v. Laconia, 118 N.H. ---, 386 A.2d 1276 (1978); Citing Aetna Ins. Co. v. State Motors, Inc., 109 N.H. 120, 125, 244 A.2d 64, 67 (1968); Accord, Berkshire Mut. Ins. Co. v. LaChance, 115 N.H. 487, 488, 343 A.2d...