Old Republic Ins. v. Stratford Ins. 12-cv-256-LM 1/27/14 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Old Republic Insurance Company

v. Civil No. 12-CV-256-LM Opinion No. 2 014 DNH 016 Stratford Insurance Company

O R D E R

In a case that has been removed from the New Hampshire

Superior Court, Old Republic Insurance Company ("Old Republic")

petitions for a declaratory judgment concerning: (1) its

coverage obligations with respect to a motor-vehicle accident

involving its insureds; and (2) the scope of its duty to defend

its insureds in an underlying action that resulted from the

accident. In the alternative. Old Republic seeks various forms

of equitable relief. Stratford Insurance Company ("Stratford"),

which also provides coverage for some of Old Republic's

insureds, has filed a counterclaim for declaratory judgment.

Before the court are cross motions for summary judgment. For

the reasons that follow, each motion is granted in part and

denied in part.

Summary Judgment Standard

"Summary judgment is warranted where ^there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.'" McGair v. Am. Bankers Ins. Co.

of Fla.,

(1st Cir. 2012) (quoting Fed. R. Civ.

P. 56(a); citing Rosciti v. Ins. Co. of Penn.,

(1st Cir. 2011)). "The object of summary judgment is to ^pierce

the boilerplate of the pleadings and assay the parties' proof in

order to determine whether trial is actually required.'" Davila

v. Corp. de P.R. para la Diffusion Pub.,

(1st

Cir. 2007) (quoting Acosta v. Ames Dep't Stores, Inc.,

(1st Cir. 2004)).

Background

This action arises out of litigation stemming from a motor-

vehicle accident. Specifically, in the United States District

Court for the District of Connecticut, Daniel and Karla Bendor

filed a complaint alleging that Antoine Girginoff jackknifed the

tractor-trailer he was operating, struck their vehicle, and

injured them. The tractor Girginoff was driving was owned by

Ryder Transportation Services ("Ryder") , and leased by Ryder to

Gary Merrill d/b/a DAM Express Delivery Service ("DAM"). DAM,

in turn, employed Girginoff. The trailer he was hauling was

owned by Coca-Cola Bottling Company of Northern New England,

Inc. ("Coca-Cola NE"). The Bendors are suing Girginoff (for

negligence, loss of consortium, and bystander emotional

distress), DAM (for negligent entrustment, hiring, training,

2 supervision, and retention), Ryder (for negligent entrustment,

hiring, training, supervision, and retention), and Coca-Cola NE

(for negligence, loss of consortium, bystander emotional

distress, and negligent hiring, training, supervision, and

retention). Old Republic is currently providing a defense to

Girginoff, DAM, and Coca-Cola NE in the underlying action.

The lease agreement between DAM and Ryder contains a set of

provisions regarding liability insurance, including the

following:

The party designated on Schedule A (the "Insuring Party") [i.e., Ryder] agrees to furnish and maintain, at its sole cost, a policy of automobile liability insurance . . . covering both you [i.e., DAM] and Ryder as insureds for the ownership, maintenance, use, and operation of each Vehicle ("Liability Insurance"). If you [i.e., DAM] are the Insuring Party, the terms of the policy and the insurer must be acceptable to Ryder. The Liability Insurance must provide that its coverage is primary and not additional or excess coverage over insurance otherwise available to either party . . . . The Insuring Party [i.e., Ryder] agrees to designate the other party [i.e., DAM] as an additional insured on the Liability Insurance . . . .

Pet'r's Mem. of Law, Ex. L. (doc. no. 26-14), at 3. The lease

agreement further provides:

Party Responsible for Liability Insurance: Ryder. Combined Single Limits $1,000,000 per occurrence. Customer Deductable: $1,500 per occurrence. You [i.e., DAM] agree that Ryder shall have the sole right to conduct accident investigations and administer claims handling and settlements and you shall adhere to and accept Ryder's conclusions and decisions.

.

3 To satisfy its obligation as the Insuring Party under the

lease agreement, Ryder relied upon a Commercial Package Policy

issued to it by Old Republic. With regard to liability

coverage, that policy obligates Old Republic to: (1) "pay all

sums an ^insured' legally must pay as damages because of ^bodily

injury' or ^property damage' to which this insurance applies,

caused by an ^accident' and resulting from the ownership,

maintenance or use of a covered ^auto'," Pet'r's Mem. of Law,

Ex. I (doc. no. 26-11), at 23; and (2) "defend any ^insured'

against a ^suit' asking for such damages,"

In a section headed "Other Insurance," the policy Old

Republic issued to Ryder provides, in pertinent part:

When this Coverage Form and any other Coverage Form or policy covers on the same basis, either excess or primary, we will pay only our share. Our share is the proportion that the Limit of Insurance of our Coverage Form bears to the total of the limits of all the Coverage Forms and policies covering on the same basis.

Pet'r's Mem. of Law, Ex. I (doc. no. 26-11), at 29. The parties

agree that with respect to the tractor DAM leased from Ryder,

Old Republic's coverage is primary. Their dispute concerns

whether a policy Stratford issued to DAM, described below, also

covers any potential losses on a primary basis, which would

trigger Old Republic's right to pay only its proportional share

of any losses suffered by any insureds covered by both the

4 policy it issued and the policy Stratford issued (hereinafter

"mutual insureds").

At the time of the Bendor accident, DAM was covered by a

Commercial Lines Policy it had obtained from Stratford. That

policy provided liability coverage for three categories of motor

vehicles: (1) specifically described autos; (2) hired autos; and

(3) non-owned autos. The policy describes "hired autos" as

"[o]nly those ^autos' you lease, hire, rent, or borrow."

Pet'r's Mem. of Law, Ex. J. (doc. no. 26-12), at 9. For its

hired-auto coverage, DAM paid a premium of $400. See

.

That premium was based upon DAM's report to Stratford that it

spent approximately $5,000 per year on hired autos. Stratford

has produced undisputed evidence that the figure DAM gave for

its estimated cost of hire was based upon its projected rental

of vans to augment the two-vehicle fleet of vans it owned and

used for local deliveries. It is also undisputed that: (1) when

Stratford issued the policy at issue, it did not know that DAM

leased tractors from Ryder; and (2) DAM spent approximately

$20,000 per month to lease those tractors.

With regard to liability coverage, DAM's Stratford policy

obligates Stratford to: (1) "pay all sums an ^insured' legally

must pay as damages because of ^bodily injury' or ^property

damage' to which this insurance applies, caused by an ^accident'

5 and resulting from the ownership, maintenance or use of a

covered ^auto'," Pet'r's Mem. of Law, Ex. J (doc. no. 26-12), at

10; and (2) "defend any ^insured' against a ^suit' asking for

such damages,"

. In addition, the Stratford policy

includes a provision pertaining to "other insurance" that

states, in pertinent part:

This Coverage Form's Liability Coverage is primary for any covered "auto" while hired or borrowed by you and used exclusively in your business as a "trucker" and pursuant to operating rights granted to you by a public authority. . . . However, while a covered "auto" which is a "trailer" is connected to a power unit, this Coverage Form's Liability Coverage is:

(1) On the same basis, primary or excess, as for the power unit if the power unit is a covered "auto".

.

The accident giving rise to the underlying personal-injury

action occurred on April 7, 2010. The Bendors filed suit

against Girginoff, DAM, and Ryder on December 8, 2010,1 and Old

Republic began providing a defense. In March of 2011, an

employee in Ryder's National Liability Claims Office contacted

Stratford to ascertain Stratford's position regarding coverage

for the Bendor accident. After learning of that loss, Stratford

Coca-Cola NE became a defendant later on, but the circumstances under which it did so have no bearing on the resolution of the issues before the court.

6 drafted, and DAM agreed to, the following retroactive

endorsement to DAM's Stratford policy:

CHANGES IN LIABILITY COVERAGE

This endorsement changes the policy effective on the inception date of the policy.

For a covered "auto" leased or rented to you by Ryder Truck Rental, Inc. DBA Ryder Transportation Services or any related entity, LIABILITY COVERAGE is excess over any other collectible insurance.

Pet'r's Mem. of Law, Ex. K (doc. no. 26-13), at 3. By letter

dated December 1, 2011, a senior litigation specialist for

Stratford informed Ryder that, under the endorsement quoted

above, "[a]ny coverage provided to either DAM or Mr. Girginoff

by Stratford is excess to the coverage provided by Ryder and/or

Old Republic," Pet'r's Mem. of Law, Ex. N (doc. no. 26-16), at

3. On that basis, Stratford stated that it was "not . . .

obligated to, and [would] not share in the cost of defending or

indemnifying [the] mutual insureds at this time," id. at 4.

In Count I of its petition. Old Republic seek a declaration

that

[it] and Stratford have a co-primary obligation to defend Coca Cola, DAM and Girginoff and that [it] and Stratford will be obligated to share any indemnity obligation of Coca Cola, DAM and Girginoff on a pro- rata basis.

Am. Pet. for Dec. J. (doc. no. 15) 1 39. In Count II, Old

Republic seeks "equitable . . . reformation of [DAM's Stratford]

7 policy in order to prevent unjust enrichment to Stratford based

on its post-accident attempt to reduce its coverage obligations

by retroactively amending its policy." Id. 1 45. Count III is

a claim for unjust enrichment, and in Count IV, captioned

"Waiver/Estoppel," Old Republic asks the court to rule that

Stratford: (1) is "estopped from asserting any claims or

defenses relating to insurance coverage that were not

affirmatively asserted in its December 1, 2011 correspondence

and should not be permitted to challenge coverage on any other

basis," id. 1 56; and (2) "should not be permitted to

retroactively amend its policy after learning of its insured's

accident in order to manipulate the respective obligations of

other insurers providing coverage and should be estopped from

asserting the position that the Change Endorsement is valid

thereby making its coverage excess," id.

In its one-count counterclaim, Stratford asks the court to

declare that: (1) "Old Republic provides primary coverage for

the liability, if any, of DAM, Girginoff, Ryder and/or Coca-Cola

in the Underlying Action," Def.'s Answer & Am. Countercl. (doc.

no. 16) 1 41; and (2) "Stratford provides excess coverage, if

any, for the liability, if any, of DAM, Girginoff, and/or Coca-

Cola in the Underlying Action," id. 1 42. Stratford also asks

8 the court to declare that Old Republic's duty to defend is

primary to any such duty it may have.

Discussion

Count I

Both Old Republic's Count I and Stratford's counterclaim

arise under New Hampshire's declaratory judgment statute, which

provides that "[a]ny person claiming a present legal or

equitable right or title may maintain a petition against any

person claiming adversely to such right or title to determine

the question as between the parties, and the court's judgment or

decree thereon shall be conclusive." N.H. Rev. Stat. Ann.

("RSA") § 491:22, I. The rights in dispute in this case are:

(1) Old Republic's purported rights to pay only a proportional

share of any losses suffered by the mutual insureds as a result

the underlying action and to have Stratford assume a

proportional share of the costs of defending that action; and

(2) Stratford's purported rights not to provide coverage and a

defense on a co-primary basis.

The facts underlying the parties' competing requests for

declaratory judgment are complicated by a number of factors, not

the least of which is the fact that at the time of the Bendor

accident, Girginoff was driving a tractor-trailer composed of:

(1) a tractor that Ryder owned and leased to DAM; and (2) a

9 trailer owned by Coca-Cola NE. In an effort to clarify things,

the court begins with a proposition on which both parties agree,

namely, that with respect to insurance coverage, a tractor-

trailer should be treated as a single unit. See Am. Pet. (doc.

no. 15) 5 26; Resp't's Mem. of Law (doc. no. 30-1) 19. That

issue has been thoughtfully addressed in an order from the

Superior Court of Maine, in which Judge Pierson explained:

In analyzing carrier liability arising out of the operation of a tractor-trailer rig, it is impossible to distinguish between that part of the liability that "arises out of" the use of the tractor unit and that part of the liability that "arises out of" the use of the trailer unit. The liability "arises out of" both equally, and the tractor-trailer rig is treated as an indivisible unit. See, e.g., Ryder Truck Rental v. United States Fidelity and Guaranty Co., 52

, 669-70 (E.D. Mo. 1981). Where different insurers provide primary coverage to a particular insured with respect to his use of components of the tractor- trailer rig, the primary coverages are in conflict and the insurers generally share the loss. Where different insurers provide excess coverage to a particular insured with respect to his use of components of the tractor-trailer rig and no insurer provides primary coverage, the conflicting excess insurance clause provisions are disregarded as mutually repugnant and each policy is considered primary. Cf. Carriers Insurance Company v. American Policyholders' Insurance Co.,

(Me. 1979). However, when only one carrier provides primary coverage on either component of the tractor- trailer rig, this carrier is considered primary with respect to the entire tractor-trailer unit. See Contrans, Inc. v. Ryder Truck Rental, Inc.,

, 171 (3rd Cir. 1987) .

U.S. Fid. & Guar. Co. v. Ledger, No. CV-91-049,

, at *6-7 (Me. Super. Ct. Jan. 6, 1993) . To resolve

10 the coverage dispute in this case under the principles described

in Ledger, it is necessary to determine the nature of the

coverage, i.e., primary or excess, that is provided by each of

the two policies to each of the two components of the tractor-

trailer that Girginoff was operating at the time of the Bendor

accident.

A. Coverage for the Tractor

According to Old Republic: (1) the policy Stratford issued

to DAM requires Stratford to provide primary coverage for the

Ryder tractor; (2) the endorsement describing Stratford's

coverage as excess to Old Republic's coverage is ineffective;

and (3) the "Other Insurance" provision in the Old Republic

policy makes the primary coverage provided by that policy co-

primary with the coverage provided by the Stratford policy. Old

Republic's argument on this point follows from a faulty premise;

the Stratford policy, as initially issued, did not require

Stratford to provide primary coverage for any losses that may

ensue in the underlying action. Thus, notwithstanding the

amount of attention the parties have paid to the validity of the

endorsement, there is no need for the court to reach that issue.

Under the common law of New Hampshire, it is well

established that "[t]he fundamental goal of interpreting an

insurance policy . . . is to carry out the intent of the

11 contracting parties." Great Am. Dining, Inc. v. Phila. Indem.

Ins. Co.,

(2013) (quoting Bates v. Phenix Mut.

Fire Ins. Co.,

(2008)). The starting point

for determining the intent of the parties is the language of the

policy. See Great Am. Dining,

(citing Pro Con

Constr., Inc. v. Acadia Ins. Co.,

(2002)).

Here, the Stratford policy provided primary coverage for hired

autos and defined the term "hired autos" to include autos that

DAM leased. And, it is undisputed that DAM leased the tractor

that Girginoff was driving at the time of the Bendor accident.

Thus, read in isolation, the policy's coverage provision and its

definition of "hired auto" would appear to provide primary

coverage for the tractor that Girginoff was driving.

But, those two parts of the policy, on their own, do not

fully express the intent of Stratford and DAM. Rather, it is

necessary to examine "the policy as a whole." Great Am. Dining,

(quoting Deyette v. Liberty Mut. Ins. Co.,

(1997)). The rest of the policy reveals that it

was the intent of the contracting parties to provide coverage

for autos that cost $5,000 per year to hire. It is undisputed

that DAM spent approximately $5,000 per week to rent tractors

from Ryder. Thus, there is no basis, in the language of the

policy, for a determination that DAM intended to seek coverage

12 for the Ryder tractors from Stratford, or that Stratford

intended to provide coverage, much less primary coverage, for

those tractors. Such an interpretation of the policy is

entirely consistent with provisions in Ryder's lease agreement

with DAM that: (1) made Ryder, and Ryder alone, the party

responsible for liability insurance; and (2) gave Ryder "the

sole right to conduct accident investigations and administer

claims handling and settlements," Pet'r's Mem. of Law, Ex. L

(doc. no. 26-14), at 7.

Based upon the undisputed evidence, it is clear that the

Stratford policy includes language that could be construed as

providing coverage for the tractors DAM leased from Ryder

precisely because neither DAM nor Stratford gave any thought at

all to those tractors when they came to terms on the policy.

When providing information on the scope of the coverage it

needed for hired autos, DAM knew that Ryder was responsible for

liability insurance on the tractors it leased to DAM, and DAM

said nothing to Stratford about those tractors. Stratford, in

turn, knew nothing about those tractors when it issued the

policy to DAM. In sum, it cannot have been the intent of the

parties for Stratford to provide primary coverage on a risk that

DAM never sought to insure and that, by Old Republic's own

admission, Stratford knew nothing about when it issued DAM its

13 policy and set the premium for it. Thus, Old Republic stands

alone in providing primary coverage for the tractor Girginoff

was driving at the time of the Bendor accident. Having made

that determination, the court turns to the question of coverage

for the trailer Girginoff was hauling. See Ledger,

, at *6-7.

B. Coverage for the Trailer

Old Republic argues that "[c]overage for the trailer is

primary under the Stratford policy and excess under the [Old

Republic] policy." Pet'r's Mem. of Law (doc. no. 26-1) 24.

Stratford contends that its policy "provides no coverage at all

for the trailer." Resp't's Mem. of Law (doc. no. 30-1) 18. If

Old Republic is correct, then its primary coverage for the

tractor and Stratford's primary coverage for the trailer would

be in conflict, with the result that both insurers would be

obligated to share the loss. See Ledger,

, at *7. But, if Stratford does not provide primary coverage

for the trailer, then Old Republic's primary coverage for the

tractor is primary for the entire rig. See

According to Old Republic, the Stratford policy provides

primary coverage for the trailer because that policy: (1)

provides primary coverage for the tractor; and (2) covers any

trailer on the same basis that it covers the power unit to which

14 that trailer is attached. But, as explained above, the

Stratford policy does not provide primary coverage for the

tractor. Thus, Old Republic's argument fails. As there appears

to be no other basis for ruling that the Stratford policy

provides primary coverage for the trailer, the court concludes

that it does not.

C. Coverage for the Tractor-Trailer Rig

Because the Old Republic policy provides primary coverage

for the tractor, and the Stratford policy does not provide

primary coverage for the trailer. Old Republic's primary

coverage for the tractor applies to the entire tractor-trailer

unit. See Ledger,

, at *6-7.

Accordingly, Old Republic is not entitled to a declaratory

judgment that Stratford must share the mutual insureds' losses

in the underlying action on a pro rata basis, and Stratford is

entitled to a declaratory judgment that Old Republic's coverage

for those losses is primary, as opposed to co-primary.

D. Stratford's Duty to Defend

Old Republic asks the court to declare that Stratford is

obligated to share equally in the costs of defending the

underlying action, while Stratford asks the court to declare

that Old Republic's duty to defend is primary to any such duty

15 it may have. On this point. Old Republic has the law on its

side. In Universal Underwriters Insurance Co. v. Allstate

Insurance Co., the New Hampshire Supreme Court explained that

"the duty of an insurer to defend is the same whether its

potential liability is either as a primary or as an excess

carrier,"

(1991) (citing Zurich Ins. Co. v.

New Amsterdam Cas. Co.,

(Ga. App. 1868); 14

Couch on Insurance 2d § 51:148 (rev. ed. 1982); Liberty Mut.

Ins. Co. v. Home Ins. Indem. Co.,

(1976)).

Here, because Stratford concedes that its policy provides excess

coverage, it is obligated to share equally in the costs of

defending its insureds in the underlying action.

Count II

Count II is Old Republic's request that the court reform

the insurance policy that Stratford issued DAM to exclude the

endorsement that purports to make Stratford's coverage for the

Ryder trucks excess. Because the court's determination of

coverage does not rely upon that endorsement. Count II is

dismissed as moot.

Count III

Count III is a claim for unjust enrichment in which Old

Republic asserts that

16 Stratford wrongly secured a benefit or passively received one which it would be unconscionable for it to retain by retroactively amending its policy after learning of the occurrence of the underlying accident in order to include an endorsement purporting to make its coverage excess over coverage afforded under the policy issued by [Old Republic] to Ryder.

Am. Pet. (doc. no. 15) 1 50. As with Count II, the problem with

Count III is that it presumes a determination on coverage that

is based upon the endorsement to the Stratford policy. Because

the court does not rely upon that endorsement. Count III is also

dismissed as moot.

Count IV

Count IV is titled "Waiver/Estoppel." However, that Count

does not appear to identify a cause of action or assert a claim

based thereon. Old Republic seems to acknowledge as much, as it

does not treat Count IV as asserting a claim in its motion for

summary judgment. Accordingly, to the extent that Count IV

requires judicial resolution at all, it is dismissed.

Conclusion

For the reasons detailed above. Old Republic's motion for

summary judgment, document no. 26, is granted, to the extent

that the court declares that Stratford is obligated to share

equally in the cost of defending DAM, Girginoff, and Coca-Cola

NE, but is otherwise denied. Similarly, Stratford's motion for

17 summary judgment, document no. 30, is granted, to the extent

that the court declares that Stratford's obligation to cover any

losses incurred by the mutual insureds is not co-primary with

Old Republic's obligation to provide coverage, but is otherwise

denied. The clerk of the court shall enter judgment in

accordance with this order and close the case.

SO ORDERED.

January 27, 2014

cc: Philip A. Bramson, Esq. Naomi L. Getman, Esq. Richard C. Nelson, Esq. Laurence J. Rabinovich, Esq.

18