Cadell v. XL Specialty 11-CV-394-JD 06/20/12 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Sherry Cadell

v. Civil No. ll-cv-394-JD Opinion No.

XL Specialty Insurance Company

O R D E R

Following the death of Anderson Cadell, Jr., his wife,

Sherry Cadell, brought suit in state court against XL Specialty Insurance Company ("XL") seeking coverage under an automotive

insurance policy issued to Anderson Cadell's employer. XL

removed the action to this court and filed a counter-claim

seeking a declaratory judgment that it owed no coverage under the

insurance policy. The parties have cross-moved for summary

judgment on the issue of whether Sherry Cadell is entitled to

coverage under the insurance policy.

Background Anderson Cadell, Jr. ("Anderson") was an employee of United

Oil Recovery ("UOR") .1 On December 1, 2009, in the course of his

employment with UOR, Anderson drove a UOR truck to a job site in

Chelmsford, Massachusetts, and stopped in the breakdown lane of

Route 3 North. The truck was registered and garaged in New

1To distinguish between Anderson and Sherry Cadell, when necessary, Anderson will be referred to by his first name and Sherry will be referred to as "Cadell." Hampshire. The job entailed collecting containers of hazardous

waste materials and hauling them away from the site in the truck. While Anderson was standing behind the truck preparing to

remove the containers, a passenger car, driven by Juanita

McKenzie, drove off the road and crashed into him. Anderson was

pinned against the back of the truck and died instantly. Another

worker, Salvatore Pintone, was also injured in the accident.

McKenzie's vehicle was insured by Travelers Insurance.

Sherry Cadell, on behalf of Anderson's estate, settled with

Travelers for $10,000.

UOR had an automotive liability policy (the "Policy")

through XL, which covered approximately two hundred UOR vehicles,

including the truck Anderson drove to the job site. Cadell

claimed underinsured motorist ("UIM") coverage under the Policy.

XL denied coverage, and Cadell brought this action.

Standard of Review

"The court shall grant summary judgment if the movant shows

that there is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law." Fed. R. Civ.

P. 56(a). The court considers the undisputed facts and all

reasonable inferences from those facts in the light most

favorable to the nonmoving party. Estate of Hevia v. Portrio

Corp..

(1st Cir. 2010). When parties file cross­

motions for summary judgment, the court must consider the motions

separately to determine whether the Rule 56 standard has been

2 satisfied by either party. Hartford Fire Ins. Co. v. CNA Ins.

Co. (Europe) Ltd.,

(1st Cir. 2011); Pac. Ins.

Co., Ltd. v. Eaton Vance Mgmt.,

(1st Cir. 2004) .

Discussion

Cadell argues that New Hampshire law governs the

interpretation of the Policy because the UOR truck involved in

the accident was registered and garaged in New Hampshire. She

further contends that, under New Hampshire law, she is entitled

to UIM coverage under the Policy and can recover more than the

$50,000 limit for bodily injury in the Policy's New Hampshire UIM

Endorsement (the "New Hampshire Endorsement"). XL argues that

Connecticut law applies because UOR and the majority of its

vehicles are based in Connecticut. XL also contends that Cadell

is not entitled to UIM coverage under either New Hampshire or

Connecticut law. XL further argues that if Cadell is entitled to

coverage, her recovery is limited to either the $40,000 limit in

the Connecticut UIM Endorsement (the "Connecticut Endorsement")

or the $50,000 limit in the New Hampshire Endorsement.2

2In response to Cadell's objection to XL's motion for summary judgment, XL filed a reply. Cadell moved for leave to file a surreply. XL objects to the motion, arguing that there are no extraordinary circumstances warranting a surreply and that, even if such circumstances existed, the format of the proposed surreply does not comply with the local rules. See LR 7.1(e)(3) & 5.1(a). The surreply responds to issues raised in the reply but does not change the outcome. Cadell's motion for leave to file the surreply is allowed.

3 A. Choice-of-Law

The parties agree, appropriately, that New Hampshire choice-

of-law rules apply. See Klaxon Co. v. Stentor Elec. Mfg. Co.,

(1947). "[I]n the absence of an express choice

of law validly made by the parties, the contract is to be

governed, both as to validity and performance, by the law of the

state with which the contract has its most significant

relationship." Cecere v. Aetna Ins. Co.,

(2001) (quoting Mathena v. Granite State Ins. Co.,

(1987)). "Particularly in the context of insurance

contracts, we have found that the State which is the principal

location of the insured risk bears the most significant

relationship to the contract . . . ." Glowski v. Allstate Ins.

Co.,

(1991) (internal quotation marks and

citation omitted); see also Consol. Mut. Ins. Co. v. Radio Foods Coro..

(1968).

Where a policy covers risks in more than one state, it is

considered a multiple risk policy, and the principal location of

the insured risk may be in more than one state. See Cecere,

. Thus, "where a policy covers risks in multiple

States, the risk of each individual state is 'to be treated as

though it were insured by a separate policy and the validity of

and rights under the multiple risk policy as to this risk are to

be governed by the laws of [that] state.'"

(quoting Ellis v.

Roval Ins. Co.,

(1987)); see also Restatement

(Second) of Conflict of Laws § 193, comment f (1971) .

4 XL does not dispute that the truck involved in the accident

was registered and garaged in New Hampshire. It argues, however,

that the principal location of the insured risk is Connecticut

because UOR and the majority of its vehicles are based in that

state. Therefore, XL contends that the Policy cannot be

considered a multiple risk policy and cites Cecere in support of

its argument.

In Cecere, the New Hampshire Supreme Court held that

Massachusetts law applied to an insurance dispute involving a

vehicle that, although registered in Massachusetts, was garaged

in New Hampshire.

. The court reasoned that

the policy, which was a garage policy "designed primarily to

afford protection against liability which might arise out of the

operation of a . . . garage," had been issued to a Massachusetts

dealership, and therefore the principal location of the insured

risk was Massachusetts.

(internal quotation marks and

citation omitted). In holding that Massachusetts law applied,

however, the court noted that the dealership conducted operations

only in Massachusetts and that "its insurance policy is designed

to insure bodily injury or property damage resulting from

activities located primarily upon the garage site."

.

The court further noted that its "conclusion in this case rests

substantially, if not entirely, on the unique nature of garage

insurance policies."

.

Here, in contrast to Cecere, UOR had various locations,

including one in New Hampshire. The Policy was an automotive

5 insurance policy, not a garage policy, and it covered vehicles

registered and garaged in other states. Therefore, unlike in

Cecere, the principal location of the insured risk was in

multiple states, including at least Connecticut and New

Hampshire. See Ellis, 12 9 N.H. at 332 (where a company's

"business and insurance coverage extend to a number of States,

including New Hampshire," and an accident involves a covered

vehicle registered and garaged in New Hampshire, New Hampshire

law governs); see also Diamond Int'l Corp. v. Allstate Ins. Co.,

712 F .2d 1498, 1501 (1st Cir. 1983).

Accordingly, because the Policy was an automotive insurance

policy covering vehicles located in different states, and because

the truck involved in the accident was registered and garaged in

New Hampshire, the primary location of the insured risk in this

case was New Hampshire. Therefore, the court will interpret the

Policy under New Hampshire law.

B. Cadell's Coverage

XL argues that Cadell is not entitled to coverage under the

Policy for three reasons: (1) Anderson did not meet the

definition of an "insured" under the Policy, (2) Cadell received

workers' compensation benefits which bar coverage under the terms

of the Policy, and (3) the Policy does not cover bodily injury to

an employee injured in the course of his employment. Cadell

disputes each argument.

6 Interpretation of the language of an insurance policy is a

question of law. See Peerless Ins, v. V t . Mut. Ins. Co.,

(2004). The court "construe[s] the language of an

insurance policy as would a reasonable person in the position of

the insured based on more than a casual reading of the policy as

a whole." Wilson v. Progressive N. Ins. Co.,

(2005). "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."

Rivera v. Liberty Mut. Fire Ins. Co., -- A.3d -- ,

, at *2 (N.H. May 11, 2012) (citing Carter v. Concord Gen.

Mut. Ins. Co..

(2007)); see also Miller v. Arnica Mut. Ins. Co..

(2007). Thus, "[t]he insurer asserting an exclusion of coverage bears the burden of

proving that the exclusion applies." Rivera,

, at *2 .

1. Applicable endorsement

XL argues that the Connecticut Endorsement, and not the New

Hampshire Endorsement, applies to Cadell's claim because the

insured risk is located in Connecticut. As discussed above,

however, the Policy is a multiple risk policy, and the primary

location of the insured risk for the UOR truck involved in the

accident is New Hampshire. Moreover, by its plain language, the

Connecticut Endorsement applies only to "a covered 'auto'

licensed or principally garaged, or 'garage operations' conducted

7 in, Connecticut . . . XL does not dispute that the truck

involved in the accident was registered and garaged in New

Hampshire. Therefore, the New Hampshire Endorsement, not the

Connecticut Endorsement, is applicable to Cadell's claim.3

2. Definition of "insured"

Section B.2.a of the New Hampshire Endorsement defines an

insured as follows: "Anyone occupying an insured motor vehicle or

a temporary substitute for an insured motor vehicle. The insured

motor vehicle must be out of service because of its breakdown, repair, servicing, loss or destruction."4 (internal quotation

marks omitted). XL argues that Anderson does not meet the

definition of an insured for two reasons: (1) he was not

"occupying" the truck at the time of the accident, and (2) even

if he were deemed to be occupying the truck, he cannot be

considered an insured because the truck was not out of service at

the time of the accident. Cadell contends that although Anderson

was not in physical contact with the truck at the time of the

accident, he was still connected to the truck so as to be

occupying it as the term is interpreted under New Hampshire law.

3The New Hampshire Endorsement uses only the term "uninsured" and not "underinsured." Under New Hampshire law, the term "uninsured" includes underinsured. See Revised Statutes Annotated ("RSA") 25 9:117.

4The Endorsement defines occupying as "in, upon, getting in, on, out or off."

8 Cadell further argues that the definition of an insured is not

limited to those occupying out-of-service vehicles.

a. Meaning of "occupying"

In interpreting the term "occupying" under an automotive

insurance policy, New Hampshire courts apply the "vehicle

orientation test." State Farm Mut. Auto Ins. Co. v. Cookinham,

(1992). "The vehicle orientation test requires

that a claimant be engaged in an activity 'essential to the use

of the vehicle' when the accident occurs."

"[A] claimant

need not have physical contact with the vehicle in order to be

'occupying' it." D'Amour v. Arnica Mut. Ins. Co.,

(2006). "[U]nder the vehicle orientation test, 'occupying'

may include the process of moving away from the vehicle to a

'place of safety.'"

However, where "a claimant has severed

his or her connection to the vehicle then he or she is nolonger

occupying the vehicle." Miller,

.

Here, the police report states that Anderson "was outside

his truck at the rear of the vehicle talking to Salvatore

Pintone" at the time of the accident. The truck "was parked

inside a detail site on Rt 3 Northbound in the breakdown lane." The Occupational Safety and Health Administration ("OSHA")

Fatality/Catastrophe Report states that at the time of the

accident, "[elmployees were preparing to remove waste containers

(2-30 yard, 2-15 yard dumpsters) from public access highway."

9 The OSHA report further stated that the truck "was there to

remove containers of contaminated soil."

For purposes of Cadell's motion, viewing these facts in the

light most favorable to XL, Anderson was "occupying" the vehicle

at the time of the accident. The record evidence shows that

Anderson drove to and parked the vehicle at the work site. He

was standing directly behind the truck preparing to load

containers of waste into the truck when he was struck by

McKenzie's vehicle. His purpose for being at the site and the

work he was preparing to do was connected to the truck.

Therefore, Anderson was engaged in activity essential to the use

of the truck and had not severed his connection to the truck at

the time of the accident.

b. Out-of-service vehicles

To reiterate, section B.2.a. of the New Hampshire

Endorsement defines an insured as "[a]nyone occupying an insured motor vehicle or a temporary substitute for an insured motor

vehicle. The insured motor vehicle must be out of service because of its breakdown, repair, servicing, loss or

destruction." XL asserts that even if Anderson were deemed to be

occupying the truck at the time of the accident, the second

sentence of the definition limits coverage to anyone occupying

vehicles that are out of service at the time of the accident.

XL's interpretation of clause B.2.a is both illogical and

unreasonable. XL's construction of the definition of an insured

10 would significantly reduce coverage by limiting it solely to

accidents in which an individual is occupying an insured out-of-

service vehicle. " [T]o accept such an interpretation would make

the UIM coverage procured by the [plaintiff] virtually illusory."

Chandler v. Am. Guarantee and Liab. Ins. Co.,

, at *6 (E.D. Ky. Sep. 15, 2005) ("Under Defendant's interpretation,

one occupying an otherwise covered auto that was in working order

would never receive the benefit of underinsured coverage. That

interpretation is illogical.") . The court will not adopt an

interpretation that is inconsistent with the Policy when viewed

as a whole. See Progressive N. Ins. Co. v. Argonaut Ins. Co.,

(2011); Weeks v. Co-Operative Ins. Cos.,

(1995); see also N. Sec. Ins. Co. v. Connors,

(2011) (if an insurance policy "is reasonably

susceptible to more than one interpretation and one

interpretation favors coverage, the policy will be construed in

favor of the insured and against the insurer"). Therefore,

Anderson was an insured for purposes of the New Hampshire

Endorsement.5

5Because Anderson meets the definition of an insured under section B.2.a of the New Hampshire Endorsement, Cadell is also considered an insured under the Endorsement. Section B.2.b defines an insured as "[a]nyone for damages he or she is entitled to recover because of 'bodily injury' sustained by another 'insured.'" Therefore, Cadell is considered an insured both in her capacity as the adminstratrix of Anderson's estate and individually.

11 3. Workers' compensation exclusion

XL argues that because Cadell received workers' compensation

benefits for the accident, the exclusion for those benefits in

the Policy bars or reduces coverage for Cadell. Cadell concedes

that she has received workers' compensation benefits but argues

that under New Hampshire law, workers' compensation set-off

provisions in insurance contracts are invalid. Section C.2 of

the New Hampshire Endorsement provides that its coverage does not

apply to "[t]he direct or indirect benefit of any insurer or self-insurer under any workers' compensation disability benefits

or similar law."

In Merch. Mut. Ins. Grp, v. Orthopedic Prof'l Ass'n,

(1984), the New Hampshire Supreme Court noted that

"worker's compensation set-off clauses . . . [are] repugnant to

. . . uninsured motorist statutes."

. The court

therefore held that "any policy provision which requires an

uninsured motorist to suffer a reduction in the coverage paid

for, by the amounts of workmen's compensation received by the

insured, is an invalid restriction of the statutory scope of

coverage."

. The court "supported this holding by

analogy to the collateral source rule, which prohibits

subtracting collateral benefits from a plaintiff's recovery from a tortfeasor." Anderson v. Fidelity & Cas. Co. of N.Y.,

(1991) (discussing holding in Merchants).

XL argues that Merchants has been superseded by statute,

citing Rooney v. Fireman's Fund Ins. Co.,

(1994) .

12 Rooney, however, addresses a different issue. The court held

only that in light of RSA 281-A:13, which was enacted after the

decision in Merchants, Merchants "cannot be relied upon as authority for denying a workers' compensation carrier the

statutory right to assert a lien against an employee's uninsured

motorist benefits."

. Neither Rooney, nor any other

supreme court decision or New Hampshire statute has abrogated the

holding in Merchants that policy provisions which reduce UIM

coverage by the amount of workers' compensation received by the

insured are invalid. See Rivera,

, at *2

("Insurers are free to contractually limit the extent of their

liability through use of a policy exclusion provided it violates no statutory provision."). Therefore, XL cannot deny or reduce

coverage to Cadell based on workers' compensation benefits.

4. Bodily injury exclusion

XL argues that Cadell is not entitled to coverage because

other sections of the Policy exclude coverage to the family of an

employee who sustains bodily injury arising out of his employment

with UOR (the "injury-during-employment exclusion"). Cadell

concedes that the Policy contains the injury-during-employment

exclusion, but argues that it is included only in the "Business

Auto Coverage Form" as opposed to the New Hampshire Endorsement.

Cadell further argues that the New Hampshire Endorsement has a

separate list of exclusions which does not include the injury-

during-employment exclusion. XL counters that the exclusions in

13 the Business Auto Coverage Form are applicable to the New

Hampshire Endorsement unless specifically addressed and modified

by the Endorsement.

The New Hampshire Endorsement provides that "[t]his

endorsement modifies insurance provided under the following:

BUSINESS AUTO COVERAGE FORM." The Endorsement lists various

exclusions, including exclusions for bodily injuries sustained

under specific conditions. It does not, however, include the

injury-during-employment exclusion.

XL argues that the exclusion is applicable here because the

Endorsement does not provide otherwise. In support, XL notes the

following language in the New Hampshire Endorsement: " [w]ith

respect to coverage provided by this endorsement, the provisions

of the Coverage Form apply unless modified by the endorsement."

XL argues that because the New Hampshire Endorsement does not

specifically modify the injury-during-employment exclusion, it

remains in effect.

In essence, XL argues that the provisions in the New

Hampshire Endorsement supplement, but do not modify, the

provisions found elsewhere in the Policy. This argument is belied, however, by certain exclusions, including those for

workers' compensation benefits and damage from war, in the New

Hampshire Endorsement which are also included in the Business

Auto Coverage Form. If XL's interpretation were correct, the New

Hampshire Endorsement would duplicate exclusions provided in the

Coverage Form, making those exclusions mere surplusage. Such an

14 interpretation is unreasonable. See Int'l Surplus Lines Ins. Co.

v. Mfrs. & Merchants Mut. Ins. Co.,

(1995) ("We

will not presume language in a policy to be mere surplus."); see

also Argonaut,

.

A reasonable reading of the Policy is that the provisions in

the "Exclusions" section of the New Hampshire Endorsement are the

only exclusions applicable under the Endorsement. Therefore, XL

cannot deny coverage based on the bodily injury exception in the

Business Auto Coverage Form.

Accordingly, Cadell is entitled to coverage under the New

Hampshire Endorsement of the Policy.6

C. Amount of Coverage

XL argues that if the court determines that Cadell is

covered under the Policy, her coverage is limited to the $50,000

cap provided in the New Hampshire Endorsement.7 XL further

argues that it is entitled to reduce Cadell's coverage by

$10,000, the amount Cadell received in her settlement with

McKenzie's insurance company. Cadell concedes that XL is

entitled to a set-off for what she received from McKenzie's

6The parties also dispute whether XL's payment of $5,000 in funeral expenses to Cadell acted as a waiver of any defenses to coverage. Because Cadell is entitled to coverage under the Policy, it is not necessary to address the arguments concerning whether XL waived the defenses it asserts in this action.

7XL initially argues that Cadell is limited to the $40,000 cap in the Connecticut Endorsement. As discussed above, the New Hampshire Endorsement, and not the Connecticut Endorsement, governs coverage in this case.

15 insurance company but argues that her coverage is not limited by

the $50,000 cap in the New Hampshire Endorsement. Cadell

contends instead that New Hampshire law entitles her to

$1,000,000 of coverage, the Policy's limit of liability. She

further argues that the court should stack the coverage by the

number of vehicles covered under the Policy, two hundred, and

therefore she is entitled to $200,000,000 in coverage.

1. Policy Limit

RSA 264:15 provides in part:

No policy shall be issued under the provisions of RSA 264:14, with respect to a vehicle registered or principally garaged in this state, unless coverage is provided therein or supplemental thereto at least in amounts or limits prescribed for bodily injury or death for a liability policy under this chapter, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or drivers of uninsured motor vehicles, and hit-and-run vehicles because of bodily injury, sickness, or disease, including death resulting therefrom.

Under the statute, "when an insurer provides general liability

coverage, it additionally must provide uninsured motorist

coverage in the same amounts and limits." Swain v. Emp'rs Mut.

Cas. Co.,

(2004). "The statute 'is intended to

allow policy holders to protect themselves against injury from an

uninsured motorist to the extent they protect themselves against

liability.'"

(quoting Wegner v. Prudential Prop. & Cas. Ins.

Co..

(2002)); see also Rivera.

, at *4 .

16 The New Hampshire Endorsement provides a $50,000 limit for

bodily injury. Under RSA 264:15, however, XL is required to

provide UIM coverage in an amount equal to its general liability

limit. The Policy has a general liability limit of $1,000,000.

XL argues that RSA 264:15 applies only to liability policies

that were issued and delivered in New Hampshire and it is

undisputed that the Policy was issued and delivered in

Connecticut. XL cites Ellis in support of its argument.

In Ellis, the plaintiff sought to increase UIM coverage to

the limits of the policy under RSA 264:15. See 129 N.H. at 334.

The supreme court held that the policy "was neither issued nor

delivered in [New Hampshire], and therefore [RSA 264:15] is

inapplicable . . . ." Id. Ellis, however, was decided before

the 1988 amendment to RSA 264:15 which removed the requirement

that the insurance policy be issued and delivered in New

Hampshire. Instead, RSA 264:15 now applies to an insurance

policy covering "a vehicle registered or principally garaged in"

New Hampshire.

XL does not dispute that the truck was registered and

garaged in New Hampshire and does not provide any other basis for

its argument that RSA 264:15 should not apply. Therefore, the

limit on the New Hampshire Endorsement is equal to the $1,000,000

liability limit of the Policy. See Wegner,

("the

parties to an insurance contract may not by agreement limit the

required coverage in contravention of the Financial Responsibility Law [RSA chapter 264].") (internal quotation marks

and citation omitted).

17 2. Stacking

Cadell argues that neither the Policy nor the New Hampshire

Endorsement precludes stacking of UIM coverage. Cadell contends

that, therefore, the available coverage should be multiplied by

two hundred, the number of vehicles insured under the Policy.

Section D.l of the New Hampshire Endorsement provides the

following limit of insurance:

Regardless of the number of "insured motor vehicles," "insureds," premiums paid, claims made or vehicles involved in the "accident," the most we will pay for all damages resulting from bodily injury sustained in any one "accident" is the Limit of Insurance for Uninsured Motorists Coverage shown in the Schedule or Declarations.

It is clear that the New Hampshire Endorsement specifically and

unambiguously precludes stacking.

Therefore, Cadell is entitled to a limit of $1,000,000 in

coverage under the New Hampshire Endorsement, less the $10,000

Cadell received from McKenzie's insurance company.

D. Award of Fees and Costs

Cadell argues that she is entitled to an award of the fees

and costs that she has incurred in bringing this lawsuit. RSA

491:22-b provides "[i]n any action to determine coverage of an

insurance policy pursuant to RSA 491:22, if the insured prevails

in such action, he shall receive court costs and reasonable

attorneys' fees from the insurer." "The insured becomes entitled

to the fees and costs once it obtains rulings that demonstrate

that there is coverage under the . . . insurance policy."

18 EnergyNorth Natural Gas, Inc. v. Certain Underwriters at Lloyd's,

(2007) .

XL does not address Cadell's request for costs and fees. As

Cadell is entitled to coverage under the Policy, she can recover

her costs and reasonable attorneys' fees incurred in bringing

this suit.

Conclusion

For the foregoing reasons, the plaintiff's motion for leave

to file a surreply (document no. 30) is granted. The plaintiff's

motion for summary judgment (document no. 14) is granted except

as to the claims for stacking coverage, which is denied. The

defendant's motion for summary judgment (document no. 23) is

denied except as to the claims for stacking coverage and the

offset for the plaintiff's settlement with McKenzie's insurance company, which is granted.

The deputy clerk will schedule a telephonic conference with

the parties to discuss the status of the case. SO ORDERED.

^— Ijoseph A. DiClerico, Jr. United States District Judge June 20, 2012 cc: John C. Barker, Esq. John E. Durkin, Esq. Paul Michienzie, Esq.

19