Warner v. Frontier Insurance CV-02-451-JD 10/29/03 P UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Lynn Warner

v. Civil No. 02-451-JD Opinion No.

Frontier Insurance Co.

v.

Clarendon National Insurance Co.

O R D E R

Lynn Warner, who was injured when a Ryder rental truck

collided with her vehicle on a road in Hopkinton, New Hampshire,

seeks a declaratory judgment against Clarendon National Insurance

Co. ("Clarendon"), reinsurer to Ryder's now-insolvent insurance

carrier. Frontier Insurance Company ("Frontier"). Warner has

moved for summary judgment on her sole claim for a declaration

that Frontier's policy provides coverage in the amount of $2

million to both the driver of the truck, Scott Brown, and its

lessee, Jennifer Corlett, for Warner's injuries (document 10).

Clarendon objects (document 16).1

1Warner and Clarendon agree that Frontier is subject to an "Order of Rehabilitation" issued by the New York County Supreme Court which bars lawsuits against the company or its trustee. Warner does not seek summary judgment against Frontier, which has not appeared in or otherwise defended this action. Background

The facts of this case are not in dispute. On or about

September 8, 1999, Corlett leased a truck owned by Ryder TRS,

Inc. ("Ryder"). Just over a week later, on September 16, 1999,

the truck collided with a vehicle in which Warner was traveling.2

Brown was driving the truck at that time. Warner was injured as

a result of the collision.

At the time of the collision. Frontier was the insurer of

Ryder's automobiles under a commercial auto policy. Clarendon

was the reinsurer of Frontier's obligations under the policy. In

section II, Frontier's policy provides coverage for the liability

of an "insured" arising out of an accident with one of Ryder's

automobiles. The term "insured" was defined to include both

Ryder and "[a]nyone else while using with [its] permission a

covered 'auto,'" and thus encompasses both Corlett and Brown.

The parties agree that the policy has liability limits of $2

million. Warner, however, contends that the policy provides $2

million in liability coverage per insured per accident, while

Clarendon asserts that the limitation applies on a strictly per-

2It is unclear from the record, but also immaterial for purposes of this motion, whether Warner was the driver of or a passenger in the vehicle involved in the collision.

2 accident basis, i.e., without regard to the number of insureds.

The policy also contains a number of endorsements. One of

them, entitled "STAR-7," amends section II to include the

following: "The insurance coverage provided by this policy to a

'rentee' is subject to the terms, conditions, restrictions, and

limitations contained in the rental agreement between [Ryder] and

such ’ 'rentee.'" Upon renting the truck which later collided with

Warner's vehicle, Corlett signed a document manifesting her

assent to the "terms and conditions of the Rental Agreement."

Paragraph 10A of the "Terms and Conditions of Rental

Agreement," entitled "Liability Protection," provides that

Ryder TRS provides protection for bodily injury . . . resulting from use or operation of the Vehicle, limited as follows: . . . Ryder TRS' protection applies only to the extent it is needed to meet, on a cumulative basis with all such insurance and/or other protection available to the driver . . . the minimum financial responsibility limits and/or minimum no fault benefits reguired by applicable law.

Warner does not contest that New Hampshire law is "applicable

law" or that the minimum financial responsibility limit under New

Hampshire law is $25,000 for bodily injury to one person. See

Revised Statutes Annotated ("RSA") 264:20. Clarendon therefore

maintains that STAR-7 limits the coverage available to Corlett

and Brown under the Frontier policy to $25,000.

Warner argues, however, that the STAR-7 endorsement

3 contradicts the language of another endorsement, STAR-3. STAR-3

amends Section IV of the policy, entitled "Business Auto

Conditions," specifically paragraph B, entitled "General

Conditions." STAR-3 adds the following language as subparagraph

B.5, labeled "Other Insurance": "It is agreed that the coverage

provided under this policy is primary insurance with respect to

the 'rentee' or driver as an 'insured' under an 'auto' rental

contract."

In response to correspondence from Warner's counsel.

Frontier's claims administrator took the position that the policy

provided $25,000 in coverage for the truck rented by Corlett, and

offered to settle Warner's claim for that amount. On or about

August 26, 2002, Warner filed a petition against Frontier in

Strafford County Superior Court under the New Hampshire

declaratory judgment statute, RSA 491:22. The petition reguested

a declaration that the policy afforded $2 million in coverage to

each of Brown and Corlett for Warner's personal injury claims.

Frontier removed the action to this court on diversity grounds.3

Around the same time, Warner filed suit for her injuries

against Brown, Corlett, Ryder, and Idaho Car Rental, Inc., in

Strafford County Superior Court. That action was removed to this

3Warner later filed an amended petition in this court adding Clarendon as a defendant.

4 court on October 1 , 2002. An answer was submitted by each

defendant but Ryder, who filed a suggestion of bankruptcy. On

June 13, 2003, Warner filed an assented-to motion, which was

allowed, to stay that case based on the pendency of this action.

Discussion

Clarendon asserts that Warner lacks the "present legal or

eguitable right" to the coverage under the policy necessary to

maintain a declaratory judgment action because she has yet to

secure any determination of liability against Corlett or Brown.

In a related vein. Clarendon argues that Warner "is seeking an

adjudication of the rights of Corlett and Brown, non [sic]

parties to this action."

Some courts have allowed an injured party to bring a

declaratory judgment action against an insurer to determine the

applicability of its coverage, even in the absence of a

determination of the insured's liability to the injured party.

See, e.g., Md. C a s . Co. v. Pac. Coal & Oil Co . ,

(1941); Bankers Trust Co. v. Old Republic Ins. Co . ,

(7th Cir. 1992); Fed. Kemper Ins. Co. v. Rauscher,

(3rd Cir. 1986); but see Laguna Publ'g Co. v. Employers'

Reins. C o .,

(C.D. Cal. 1985); 12 James Wm.

5 Moore et a l ., Moore's Federal Practice § 57.82[3] (3d ed. 2003) .4

As the Seventh Circuit recognized in Bankers Trust, however,

there is no absolute rule either requiring or forbidding a court

to exercise jurisdiction over this sort of an action.

. Instead, the court enjoys a measure of equitable

discretion in deciding whether to hear the injured party's

declaratory judgment action. See i d . at 682; V t . M u t . Ins. Co.

v. Everette,

(E.D. Va. 1995).

In general, whether to entertain an action for declaratory

relief involves "considerations of practicality and wise judicial

administration." Wilton v. Seven Falls Co . ,

(1995); see also El Dia, Inc. v. Hernandez Colon,

(1st Cir. 1992) ("Although declaratory relief frequently

serves a valuable purpose and courts must remain reasonably

receptive to suitable requests for it, . . . there are limits to

that receptivity"). One of the considerations to be weighed in

exercising jurisdiction over a declaratory judgment action is the

extent to which the sought-after relief would serve as practical

guidance in putting the controversy to rest. See Rhode Island v.

Narranqanset Indian Tribe,

(1st Cir. 1994).

The parties here agree that declaring the amount of coverage

4Neither this court nor the First Circuit appears to have previously addressed this issue.

6 available under Frontier's insurance policy as compensation for

Warner's injury would resolve the controversy between her and

Frontier (and, by extension. Clarendon). They also acknowledge,

however, that the same issue would remain in dispute between the

insurers and Brown and Corlett, who are not parties to this

action and therefore cannot be bound by it. As a result, any

judgment here as to the amount of coverage would have limited

practical effect.

For example, if the court determines that the policy

provides for coverage in an amount which turns out to be less

than Warner's recovery against Corlett and Brown in the

underlying tort suit, they will likely bring an action of their

own against Frontier and Clarendon seeking the same relief which

Warner seeks here. Furthermore, depending on the outcome of the

tort action, Ryder might also seek to litigate the issue of

coverage limits under the policy. Under these circumstances,

prudential considerations weigh against the exercise of the

court's eguitable jurisdiction over Warner's claim. See Nat'1

Union Fire Ins. Co. of Pittsburgh, Pa. v. Mass. M u n . Wholesale

El e c . C o .,

(D. Mass. 1987) (refusing to

dismiss tort claimant as party to action between insurer and

insured, because "declaratory judgment would be of little use

. . . if [claimant] can relitigate the precise issue" in

7 subsequent suit); State Farm Fire & Cas. Co. v. Kessler,

, at *3 (E.D. Pa. May 4, 1993) (declining to hear insurer's

declaratory judgment action against insured in absence of co­

insurer and tort claimants).

Additionally, Corlett's absence is problematic as a

practical matter, given the nature of one of Warner's arguments

as to the amount of coverage. In her reply to Clarendon's

objection to her summary judgment motion, Warner argues at length

that STAR-7 does not reduce the coverage available to Corlett

under the policy because the agreement which she signed to limit

her insurance on the rental truck "does not comply with the

[asserted statutory] requirement that policy endorsements . . .

clearly explain what coverages . . . have been reduced or

eliminated." Corlett is the party best situated to make this

argument and to give her version of the underlying facts, which

do not appear in the summary judgment record. Issuing a

declaration as to the extent of Corlett's coverage without the

benefit of her position on the issue would be unwise.

Corlett's and Brown's absence from this case also creates

the risk of prejudicing their positions in the underlying

personal injury case, despite the fact that any decision the

court reached in this action would not bind them as a legal

matter. For example, a declaration that only $25,000 in coverage was available might pressure them to settle the claim for more

than the policy limit for fear of subjecting themselves to

liability for a yet-larger uninsured judgment. Such a result

would be unfair to Corlett and Brown as the outcome of litigation

in which they did not even participate.5 C f . Md. Casualty, 312

U.S. at (allowing insurer to maintain action against insured and

injured party); Fed. Kemper,

(allowing injured

parties to continue litigating coverage action in insured's

absence, where insurer had brought action against insured and

injured parties, but insured had been defaulted); V t . Mutual,

(same).

Warner argues that New Hampshire law allows her to bring a

declaratory judgment action against Frontier by virtue of her

status as "[t]he [p]laintiff in the underlying lawsuit which

gives rise to insurance coverage guestion . . . ." It is true

that the New Hampshire Supreme Court has exercised jurisdiction

over an injured party's petition for declaratory relief against

the tortfeasors' and his own insurance carriers. See Auclair v.

Allstate Ins. Co.,

(1978) . Although the court

in Auclair resolved the suit on the merits (by declaring that the

5Corlett and Brown are represented in Warner's personal injury case by the same counsel representing Clarendon here. It is unclear whether they have retained individual representation with respect to Warner's claim. insurer of one of the tortfeasors had to defend and indemnify him

against the plaintiff's claim ) , the opinion does not include any

analysis of whether hearing the action was an appropriate

exercise of jurisdiction.6 I d . at 631.

Both parties cite Portsmouth Hosp. v. Indem. Ins. Co . ,

(1968), to support reaching the merits of Warner's claim

despite the absence of Corlett and Brown from this proceeding.

In Portsmouth Hospital, the New Hampshire Supreme Court held that

a hospital could sue its malpractice insurer for a declaration

that instituting legal action to discharge an incapacitated

patient over the insurer's objection would not void its coverage,

without having to join the patient's guardians as parties.

. Although the guardians had a potential malpractice

claim against the hospital, this interest was not jeopardized by

the declaratory judgment action--if the court determined that

their ward's discharge would have voided the policy, the hospital

presumably would not have followed through on that course of

action, and because the court ruled to the contrary, the

6Warner relies on Smith v. Liberty Mut. Ins. Co . ,

(1987), as authority for her ability to bring an action against Frontier and Clarendon to determine their coverage to Corlett and Brown. The plaintiff who sought a declaratory judgment as to insurance coverage in Smith, however, was the insured himself, who had been sued by a third party, rather than the third party herself. I d . at 119.

10 guardians' interest in the coverage was protected. As an action

by the insured, rather than the injured party, Portsmouth

Hospital did not raise the concerns of multiplicitous litigation

and potential prejudice to non-parties which trouble this case.

Accordingly, the New Hampshire Supreme Court has never

expressly held that an injured party can maintain a declaratory

judgment action against a tortfeasor's insurance carrier in the

absence of the insured. In any event, even a clear state law

decision on the issue would not dictate that this court exercise

its discretion in favor of hearing Warner's declaratory judgment

claim. See Golden Eagle Ins. Co. v. Travelers Cos.,

(9th Cir. 1996) (state law does not control whether

federal court hears declaratory judgment action removed there on

diversity grounds), overruled on other grounds by Gov't Employees

Ins. Co. v. Dizol,

(9th Cir. 1998);

see also Fed. Kemper,

(declining to treat state

law as dispositive of federal jurisdiction over suit for

declaratory relief).

Likewise, this court cannot dictate whether a New Hampshire

court should exercise jurisdiction over this action. If the

parties are correct that a New Hampshire court would do so,

however, that fact militates in favor of declining to hear this

case and allowing the Strafford County Superior Court to make its

11 own jurisdictional determination. See El Dia,

(availability of relief in state court weighs against exercising

federal jurisdiction over declaratory judgment claim). At best.

New Hampshire law is unsettled as to the ability of an injured

party to seek declaratory relief against a tortfeasor's insurer

under the circumstances presented here. This fact also militates

against the exercise of this court's jurisdiction. See United

States Liab. Ins. Co. v. Wis e ,

(D. Mass.

1995) (refusing to hear declaratory action arising out of

coverage dispute in face of unsettled dispositive state law,

which made state court the most efficient forum).

For the foregoing reasons, the court declines to exercise

its discretion to hear Warner's declaratory judgment claim.

After refusing jurisdiction, a federal court has the authority to

remand a declaratory judgment action removed there on diversity

grounds back to the state court. See Golden Eagle,

; 12 Moore § 57.42[2][d]. Remand, rather than dismissal, is

the proper course here.

12 Conclusion

For the foregoing reasons, the plaintiff's motion for

summary judgment (document no. 10) is denied. The case is

remanded to the Strafford County Superior Court.

SO ORDERED.

Joseph A. DiClerico, Jr. U.S. District Judge

October 29, 2003

cc: Mark D. Wiseman, Esguire Doreen F. Connor, Esguire Edward J. Barshak, Esguire

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