General Linen v . Charter Oak Fire CV-94-398-JD 06/20/95 P UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

General Linen Service C o . , Inc.

v. Civil N o . 94-398-JD

Charter Oak Fire Ins. C o . , et a l .

O R D E R

The plaintiff, General Linen Service Company ("General"),

has brought this declaratory judgment and breach of contract

action to determine the scope of and receive coverage under

various insurance policies issued by the defendant insurance

companies. Before the court is the motion of defendant American

Employers Insurance Company ("American") to dismiss (document n o .

25). Defendant Royal Insurance Company of America ("Royal"),

defendant Charter Oak Fire Insurance Company ("Charter"), and

defendant Travelers Insurance Company ("Travelers") have joined

in American's motion (document nos. 2 7 , 3 2 ) .

Background1

General disposed of waste materials at a landfill located in

Somersworth, New Hampshire, from the early 1960s until 1980. The

landfill ceased to accept industrial and municipal waste in 1981

1 The court's recitation of the facts relevant to the instant motion are drawn from the plaintiff's amended complaint. when the city of Somersworth limited its use pursuant to a

landfill closure plan implemented in conjunction with state waste

management officials. The site was voluntarily closed the

following year.

Following closure in 1982, the Environmental Protection

Agency ("EPA") announced the discovery of groundwater, soil and

air contamination at and around the landfill and, in turn, placed

the site on its National Priorities List ("NPL"). The EPA has

alleged that the contamination resulted, in part, from the

disposal of General's waste.

The EPA and the New Hampshire Department of Environmental

Services undertook a remedial investigation and feasibility study

and, in or about 1988, the EPA notified General that it may be a

potentially responsible party ("PRP") for the alleged

contamination. Since that time General has negotiated with the

EPA and at some point consented to an administrative order

requiring it to subsidize the cost of the remedial investigation

and feasibility study. General was officially named as a PRP in

December 1993, at which time the EPA estimated the total cost of

site remediation to be in excess of twenty million dollars.

From 1974 until 1989 General purchased various general

liability and umbrella policies from the defendants, each with

liability limits of between $300,000 and seven million dollars.

2 General has identified at least ten such policies issued by

American, two of which provided coverage beginning on April 4 ,

1983. In addition, General has

claimed coverage under previous or other policies issued by American Employers Insurance Company and/or Commercial Union Insurance Company prior to 4/1/83 and/or after 4/1/89, the policy numbers and dates of which are currently unavailable.

Amended Complaint, Exhibit A .

In April 1988, General first notified the defendants of its

potential environmental liability and requested coverage. Each

defendant denied coverage, refused to defend and indemnify, or

otherwise reserved its rights to do so in the future. In early

1994, General notified the defendants of its status as an

official PRP and again demanded coverage. To date the defendants

have refused each such request.

Discussion

American asserts that General may not proceed against any

defendant under the state declaratory judgment act, N.H. Rev.

Stat. Ann. ("RSA") § 491:22, because "there has been no 'writ'

filed in an underlying action in a New Hampshire state court."

Motion to Dismiss at ¶ 1 . In the alternative, American asserts

that it alone should be dismissed from this action because

General has failed to allege the manifestation of property damage

3 during the time period it was insured under an American policy.

Id. at ¶ 2 .

A motion to dismiss under Fed. R. Civ. P. 12(b)(6) is one of

limited inquiry, focusing not on "whether a plaintiff will

ultimately prevail but whether the claimant is entitled to offer

evidence to support the claims." Scheuer v . Rhodes,

(1974). Accordingly, the court must take the factual

averments contained in the complaint as true, "indulging every

reasonable inference helpful to the plaintiff's cause." Garita

Hotel Ltd. Partnership v . Ponce Fed. Bank,

5 , 17 (1st

Cir. 1992); see also Dartmouth Review v . Dartmouth College,

3 , 16 (1st Cir. 1989). In the end, the court may grant a

motion to dismiss under Rule 12(b)(6) "`only if it clearly

appears, according to the facts alleged, that the plaintiff

cannot recover on any viable theory.'" Garita, 958 F.2d at 17

(quoting Correa-Martinez v . Arrillaga-Belendez,

9 , 52

(1st Cir. 1990)).

I. Application of RSA § 491:22

Under Erie v . Tompkins and its progeny, the court may apply

state-law remedies to federal diversity actions. Titan Holdings

Syndicate, Inc. v . City of Keene, N.H.,

(1st

Cir. 1990) (citing Erie Railroad C o . v . Tompkins,

4 (1938)); Plaza 28 Associates v . Vermont Mutual Ins. Co., N o . 89-

494-JD, slip o p . at 3 (D.N.H. Feb. 2 8 , 1995); Johnson v . Watts

Regulator Co., N o . 92-508, slip o p . at 12 (D.N.H. Oct. 2 6 , 1994).

New Hampshire law provides for a declaratory judgment remedy.

See RSA § 491:22 (1983 & Supp. 1994).

Policyholders regularly file declaratory judgment petitions

to determine whether an insurance policy covers a given loss.

Johnson v . Watts, slip o p . at 1 3 ; Andrews v . Nationwide Mut. Ins.

Co.,

4 8 , 150-51,

5 4 , 256-57 (1983) (citing

Grimes v . Concord Gen'l Mut. Ins. C o ,

1 8 ,

(1980); Shea v . United Services Auto Ass'n,

,

(1980)). The statute, by its express terms,

anticipates that declaratory judgments may be filed "to determine

coverage of an insurance policy . . . ." RSA § 491:22. The

phrase "to determine coverage" includes a "determination either

of the existence of an insurance contract or that an existing

insurance contract covers the particular incident in question, or

both." Johnson v . Watts, slip o p . at 13 (quoting Hodge v .

Allstate Ins. Co.,

, 7 4 7 ,

(1988) (interpreting identical language in the context of RSA §

491:22-b)). Moreover, because a declaratory judgment action is a

"broad remedy which should be liberally construed" it is con-

sidered a "proper means for determining first-party insurance

5 coverage claims." Andrews, 124 N.H at 151-52,

(quoting Beaudoin v . State,

, 5 6 2 ,

1 0 , 313

(1973)); see Plaza 28 Associates, slip o p . at 5 (RSA § 491:22

appropriate where the "disputed question is whether the

defendants are under any obligation to pay (i.e. is there

coverage under the facts of this case).") (emphasis in original);

Johnson v . Watts, slip o p . at 1 4 , n.6 (same).

The defendant argues that General may not invoke the

declaratory judgment provisions of RSA § 491:22 because this

action is not predicated on a writ filed in an underlying action

in New Hampshire state court.

The argument is unavailing as it rests on an incomplete

reading of the cited authority and New Hampshire law. The

defendant is correct that, where there is an underlying lawsuit,

RSA § 491:22, as it existed prior to amendment effective January

1995, would not apply "unless the underlying liability suit is

brought in New Hampshire state court." Town of Allenstown v .

National Casualty Co.,

(1st Cir. 1994); Plaza 28

Associates, slip o p . at n.3.2 Significantly, Allenstown and

2 The New Hampshire state legislature recently amended RSA § 491:22, with the amendment effective January 1 , 1995. Act of April 2 6 , 1994, 1994 N.H. Laws ch. 37 (LEXIS) (to be codified at RSA § 491:22). The amendment permits litigants to maintain an action under section 491:22 where the underlying action, if any, is brought in a court other than a New Hampshire state court, such as any state or federal court. See id. The court need not determine whether the revised statute should apply retroactively

6 other cases cited by American on the issue involved a declaratory

judgment based on an underlying lawsuit filed in a forum other

than a New Hampshire state court, such as federal court or

another state court. See, e.g., Allenstown,

; Town

of Peterborough v . Hartford Fire Ins. Co.,

(D.N.H. 1993); Scully's Auto-Marine Upholstery v . Peerless

Ins. Co.,

5 , 66-67,

(1992). These

cases do not bar the plaintiff from maintaining a first-party

action under RSA § 491:22 in federal court. See Plaza 28

Associates, slip o p . at n . 3 (plaintiff who filed first-party

section 491:22 action in state court could maintain action in

federal court following removal by defendant); Johnson v . Watts,

slip o p . at 13-15 (same) see also Allenstown,

;

Peterborough,

. Compare New Hampshire Ball

Bearings v . Aetna Casualty,

(D.N.H.

1994), rev'd on other grounds,

, 752 (1st Cir. 1995)

(court of appeals noted, in dicta and without explanation, that

district court correctly read Allenstown to bar a RSA § 491:22

declaratory judgment not based on an underlying action filed in

New Hampshire state court). Thus, the absence of a writ in an

to the present litigation because the amendment has no relevance to those declaratory judgment actions not based on an underlying lawsuit. See id.

7 underlying New Hampshire state court lawsuit o r , for that matter,

the absence of an underlying lawsuit in any court, does not

impair a litigant's ability to maintain a first-party action

under RSA § 491:22.

The plaintiff has filed a first-party action seeking a

determination of whether the defendants' policies cover losses

related to the Somersworth site. The defendants deny they are

obligated to insure General for the claimed losses. This case

presents a classic application of the declaratory judgment remedy

and the plaintiff may proceed under RSA § 491:22 et seq.

accordingly.

II. Property Damage Within Policy Period

American next asserts that, as matter of law, its policies

do not provide coverage for the plaintiff's claims because the

claims manifested themselves no later than 1982 and,

"[c]onsequently, there is no possibility that there was any

'occurrence' in or subsequent to April, 1983, which is the

earliest date that General Linen alleges American issued any

policy to General Linen." Defendants' Consolidated Memorandum in

8 Support of Motion to Dismiss ("Defendants' Consolidated

Memorandum") at 13. 3

American is correct that the only insurance policies the

plaintiff specifically claims to have purchased from American

took effect in April 1983, or later. However, the plaintiff also

claims to have been covered under "other policies issued by

American Employers Insurance Company and/or Commercial Union

Insurance Company prior to 4/1/83 . . . ." Amended Complaint,

Exhibit A (emphasis supplied). Thus, the amended complaint

plainly alleges coverage under an American policy for an

unspecified period prior to 1983. Indulging the plaintiff every

reasonable inference, the court construes the amended complaint

to allege that this unspecified period began to run prior to the

relevant trigger or manifestation date and, thus, within the time

period American insured the property. This construction is

particularly reasonable given that General has made specific

3 General asserts without case authority that the court may not dismiss the claims against American because the magistrate judge already has considered and rejected American's manifestation argument when granting the motion to amend the complaint. Plaintiff's Consolidated Objection to Defendants' Motion to Dismiss at ¶ 1 2 . This argument, which the court understands to be advanced under a law of the case theory, is not a proper basis upon which to deny the instant motion to dismiss because the court applies an even more lenient standard when ruling on a motion to amend under Rule 15 than that governing the instant motion under Rule 12(b)(6).

9 factual allegations concerning a policy that took effect in 1983

and that American, although disputing the less specific claim

that it insured the property before 1983, concedes the trigger

date could have been as late as 1982. Accordingly, the plaintiff

has alleged sufficient facts to state a viable claim against

American to survive dismissal under Rule 12(b)(6).

Conclusion

The motions to dismiss (document nos. 2 5 , 2 7 , 32) are

denied.

SO ORDERED.

Joseph A . DiClerico, J r . Chief Judge June 2 0 , 1995

cc: R. Timothy Phoenix, Esquire E . Tupper Kinder, Esquire John A . Nadas, Esquire Daniel J. Harkinson, Esquire Dianne Bresee Mayberger, Esquire Cindy Robertson, Esquire Robert J. Kelly, Esquire Kevin C . Devine, Esquire Peter C . Kober, Esquire

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