Union Mut. Fire Ins. Co. v. Hatch

• Decision Date: 26 October 1993
• Docket Number: Civ. No. 92-53-SD.
• Citation: 835 F. Supp. 59
• Parties: UNION MUTUAL FIRE INSURANCE COMPANY v. Albert HATCH, d/b/a 202 Beanstalk; Robert McNichol v. Raymond TOWLE, d/b/a Stevens Insurance Agency.
• Court: U.S. District Court — District of New Hampshire

835 F. Supp. 59

UNION MUTUAL FIRE INSURANCE COMPANY v. Albert HATCH, d/b/a 202 Beanstalk; Robert McNichol v. Raymond TOWLE, d/b/a Stevens Insurance Agency.

Civ. No. 92-53-SD.

United States District Court, D. New Hampshire.

October 26, 1993.

Gregory A. Holmes, Manchester, NH, for plaintiff.

James E. Morris, Concord, NH, for Hatch.

David W. Hess, Manchester, NH, for McNichol.

Russell F. Hilliard, Concord, NH, for Towle.

ORDER

DEVINE, Senior District Judge.

In this declaratory judgment action, the court is asked to determine whether, pursuant to the terms of an insurance policy, plaintiff Union Mutual Fire Insurance Company is required to defend or indemnify defendant Albert Hatch in a pending state court proceeding.

Union Mutual filed its petition for declaratory judgment under the Declaratory Judgment Act, 28 U.S.C. § 2201 (Supp.1993). The court's jurisdiction is based upon a diversity of citizenship. 28 U.S.C. § 1332(a)(1) and (c)(1) (Supp.1993). Presently before the court are (1) plaintiff's motion for partial summary judgment and (2) defendant's motion for summary judgment.

1. Background

From 1963 to 1992, defendant Hatch owned certain property at the intersection of Horse Corner Road and Routes 4, 9, and 202 in Chichester, New Hampshire. Affidavit of Albert Hatch at ¶ 2. During the same time period, Hatch owned and operated Beanstalk, Inc., a retail gasoline service station and convenience store, on said property. Id. at ¶ 3. Hatch ceased operation of his gasoline station and convenience store business in January 1992, following an eminent domain taking by the State of New Hampshire. Id. at ¶ 23.

Between 1988 and 1991 Hatch purchased two consecutive business insurance policies for the Beanstalk gasoline station and convenience store from Union Mutual. These policies were purchased through Raymond Towle of the Stevens Insurance Agency in Epsom, New Hampshire. Id. at ¶ 6. The first of these two policies, identified as Policy No. SBP 116 089, was effective from June 9, 1989, to June 9, 1990. Policy No. SBP 116089 (attached to Union Mutual's motion for partial summary judgment as Exhibit E). The second policy, identified as Policy No. BO 0940725, was effective from June 9, 1990, to June 9, 1991. Policy No. BO 0940725 (attached to Union Mutual's motion for partial summary judgment as Exhibit F and to Hatch's motion for summary judgment as Exhibit D).

Hatch states that on or about October 15, 1990, after receiving complaints from his customers about having water in their automobile gasoline tanks, he discovered that one of his underground storage tanks was leaking. Deposition of Albert Hatch at 36.

In November 1990, defendant Robert McNichol allegedly discovered that the soil and groundwater on property he owned near the Hatch property was contaminated with various hazardous substances. Following that discovery, McNichol filed a writ of summons against Hatch in Merrimack County (New Hampshire) Superior Court seeking, inter alia, to recover damages for the soil and groundwater contamination on his property under theories of private nuisance, negligence, and strict liability. Writ of Summons in McNichol v. Hatch, et al, Merrimack County Superior Court No. 91-C-381, dated April 24, 1991 (attached to Union Mutual's motion for partial summary judgment as Exhibit D and to Hatch's motion for summary judgment as Exhibit A). In his writ, McNichol alleges that this contamination was caused by the discharge and migration of gasoline from the underground storage tanks on the Hatch property. Id. at ¶ 11.

After receiving notice of the McNichol suit, Hatch sought coverage from his insurer, Union Mutual, for the claims made against him. Hatch Affidavit at ¶ 16. In response, Union Mutual denied that the terms of the policies issued to Hatch provided coverage for the claims set forth in the McNichol suit. Union Mutual's Motion for Partial Summary Judgment at ¶¶ 2-4.

Subsequently, on January 23, 1992, Union Mutual filed the instant petition seeking a declaration that Union Mutual is not obligated to defend or indemnify Hatch under either of the policies it issued to him for the claims made by McNichol in the underlying state court action. In response to Union Mutual's petition, Hatch filed a counterclaim seeking, inter alia, a declaration that Union Mutual is obligated to defend and indemnify him as to the McNichol suit. Hatch also filed a third-party complaint against Raymond Towle, d/b/a Stevens Insurance Agency (Towle), alleging that if the Union Mutual policies do not provide coverage for the claims brought against him in the McNichol suit, then Towle is personally liable "for having misled Hatch into believing that such protection existed." Third-Party Complaint at ¶ 3.

The cross-motions for summary judgment filed by Union Mutual and Hatch present the narrow issue of whether the language of Policy No. BO 0940725 requires Union Mutual to defend or indemnify Hatch as to the McNichol suit.

2. Discussion

a. Standard for Summary Judgment

Under Rule 56(c), Fed.R.Civ.P., summary judgment is appropriate when the record shows that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."

The party moving for summary judgment has the burden of "`showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). In response to a properly supported motion for summary judgment, the nonmovant "must set forth specific facts showing that there is a genuine issue for trial." Rule 56(e), Fed.R.Civ.P.; Anderson v. Liberty Lobby Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986).

When a court considers a motion for summary judgment, "the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson, supra, 477 U.S. at 255, 106 S.Ct. at 2513. Nonetheless, Rule 56(c) mandates summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, supra, 477 U.S. at 322, 106 S.Ct. at 2552.

b. Interpretation of the Policy

The parties agree that New Hampshire law applies to the substantive issues raised in this action. See Moores v. Greenberg, 834 F.2d 1105, 1107 n. 2 (1st Cir.1987) (where parties agree as to what substantive law applies, a federal court sitting in diversity jurisdiction should comply).

Under New Hampshire law, the "final interpretation of the language in an insurance policy is a question of law." Limoges v. Horace Mann Ins. Co., 134 N.H. 474, 476, 596 A.2d 125, 126 (1991) (quoting Curtis v. Guaranty Trust Life Ins., 132 N.H. 337, 340, 566 A.2d 176, 178 (1989)).

New Hampshire recognizes "the right of an insurer to contractually limit the extent of its liability" provided the insurer does so "through clear and unambiguous policy language." Curtis v. Guaranty Trust Life Ins. Co., 132 N.H. 337, 340, 566 A.2d 176, 178 (1989) (citations omitted). Indeed, "if an insurance policy contains an exclusion purporting to limit a broad grant of coverage, the exclusion must be `in terms which would effectively convey it to a reasonable person in the position of the insured.'" Merchants Ins. Group v. Warchol, 132 N.H. 23, 27, 560 A.2d 1162, 1164 (1989) (quoting Royal Globe Ins. Co. v. Poirier, 120 N.H. 422, 427, 415 A.2d 882, 885 (1980)). In addition, "the insurer must clearly state the exclusion in conjunction with whatever sections it is intended to modify." MacMillin Co. v. Aetna Casualty & Surety Co., 135 N.H. 189, 192, 601 A.2d 169, 171 (1991) (quoting Commercial Union Assurance Cos. v. Gollan, 118 N.H. 744, 749, 394 A.2d 839, 843 (1978)).

When interpreting an insurance policy, New Hampshire courts construe the language of the policy "as would a reasonable person in the position of the insured based on a more than casual reading of the policy as a whole." Haley v. Allstate Ins. Co., 129 N.H. 512, 514, 529 A.2d 394, 396 (1987).

The method of interpretation employed by New Hampshire courts "is first to determine whether the language in question is ambiguous." M. Mooney Corp. v. U.S. Fidelity & Guar. Co., 136 N.H. 463, 470, 618 A.2d 793, 797 (1992). "An exclusionary clause is ambiguous if `reasonable disagreement between the contracting parties is possible.'" Id. (quoting Smith v. Liberty Mut. Ins., 130 N.H. 117, 122, 536 A.2d 164, 166 (1987)).

In determining whether policy language is ambiguous, the court will "not force an ambiguity where none is apparent merely to resolve coverage in favor of the insured." Concord Gen. Mut. Ins. Co. v. McCarty, 135 N.H. 316, 319, 604 A.2d 573, 575 (1992) (quoting Cutter v. Maine Bonding & Casualty Co., 133 N.H. 569, 576, 579 A.2d 804, 808 (1990)). Instead, the court 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." LaSorsa v. UNUM Life Ins. Co., 955 F.2d 140, 148 (1st Cir.1992) (quotations omitted). However, if the language of a policy is determined to be ambiguous, the court will apply New Hampshire's "rule of strict construction" and construe the policy "in favor of the insured and against the insurer." Id. at 147.

Further, when insurance coverage is disputed, New Hampshire law places the burden of proving that no coverage exists on the insurer. Laconia Rod & Gun Club v. Hartford Accident & Indem. Co., 123 N.H. 179, 182, 459 A.2d 249, 250 (1983).

c. Coverage Under the Policy

In moving for summary judgment, Union Mutual argues that the policy at issue does not cover the damage allegedly caused to McNichol's property by the discharge and migration of gasoline from an underground storage tank on Hatch's property because of...