EnergyNorth v. AEGIS CV-97-064-M 01/31/01
UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
EnergyNorth Natural Gas, Inc.,
Plaintiff
v. Civil No. 97-64-M
Opinion No. 2001 DNH 021
Associated Electric & Gas
Insurance Services Limited, et al..
Defendants
O R D E R
Having carefully considered plaintiff's motion to reconsider
(document no. 280), and having again considered applicable New
Hampshire law in light of the points made, as well as others not
specifically raised, I am persuaded that, because New Hampshire's
law is unclear, substantially identical insurance policy coverage
language has been construed differently by judges of this court.
Upon further reflection, I am not confident that the New
Hampshire Supreme Court adopted a "wrongful act" trigger-of-
coverage theory in Johnson Shoes1, notwithstanding the late Chief
Judge Devine's holding in Town of Peterborough v. Hartford Fire
1 U.S. Fidelity & Guar. Co., Inc. v. Johnson Shoes, Inc.,
123 N.H. 148 (1983).
Ins. C o .,
824 F.Supp. 1102, 1111-12 (D.N.H. 1993) ("in cases
involving the delayed manifestation of environmental
contamination. New Hampshire follows the rule that the time of
the occurrence is the time of the wrongful act which caused the
ultimate damage.").
The insurer in Johnson Shoes denied coverage in an
environmental contamination case on grounds that the policy only
covered "occurrences" taking place during the policy period.
"Occurrence" was defined as "an accident, including injurious
exposure to conditions, which results, during the policy period,
in bodily injury or property damage neither expected nor intended
from the standpoint of the insured." Johnson Shoes, 123 N.H. at
153. Oil "had apparently escaped from an underground storage
tank on premises leased by Johnson Shoes, and, after a period of
heavy rain [in 1973], spilled over onto neighboring property up
to one-half mile away." Johnson Shoes,
123 N.H. at 151. By that
time - the time of "manifestation" - the policy had terminated.
But, earlier in 1971 [while the policy was in effect], a company
maintenance man had reported to his superiors at Johnson Shoes
that he believed the underground oil tank was leaking. The trial
2
court found that the "occurrence" (presumably, discovery of the
leak) was within the policy period. On appeal, the New Hampshire
Supreme Court affirmed the trial court's determination. It did
so, however, without adopting a specific trigger-of-coverage
legal theory, and without much explanation beyond noting that
"there was sufficient evidence before the trial court to support
its finding that the occurrence took place during the coverage
period, and [the insurer] failed to meet its burden of
establishing noncoverage with regard to the timing of the
occurrence." Johnson Shoes, 123 N.H. at 153.
In Town of Peterborough, Judge Devine noted that a year
earlier he had ruled that New Hampshire followed the
"manifestation" trigger-of-coverage theory (i.e., that the time
of the "occurrence," as that term relates to insurance coverage
for environmental damage claims, is the time when the property
damage first becomes known to the claimant). See Suburban
Construction Co. v. Hartford Fire Ins., Civil Action No. 90-379-
SD (D.N.H. July 28, 1992). But, Judge Devine concluded in
Peterborough that the Johnson Shoes result was inconsistent with
a manifestation trigger-of-coverage legal theory, and was more
3
consistent with a "wrongful act" trigger theory. In my Order of
September 30, 2000, I followed Judge Devine's lead, agreeing that
Johnson Shoes necessarily adopted a wrongful act trigger theory.
Chief Judge Barbadoro has, however, read Johnson Shoes
another way. In EnergyNorth Natural Gas, Inc. v. AEGIS, et al..
Civil Action No. 95-591-B (September 30, 1998), Chief Judge
Barbadoro held that "at most [Johnson Shoes) stands for the
proposition that coverage can be triggered under an occurrence-
based policy by the occurrence of property damage while the
policy is in effect." That is, Johnson Shoes does not decisively
adopt any recognized trigger-of-coverage rule, but it is not
inconsistent with an "injury in fact" theory - i.e., the
occurrence causing property damage took place when the oil leaked
into the environment (as opposed to, for example, when the leak
was actually discovered). But, Johnson Shoes is arguably
consistent as well with a "wrongful act" theory, a "first
discovery" theory, a "knew or should have known" theory (i.e.,
the occurrence took place when the insured knew or should have
known of the property damage); and a "continuous trigger" theory
(i.e., the occurrence took place when the property was exposed to
4
the contaminant, and as the contaminant migrated, and at the time
of manifestation).
There is also another possibility. New Hampshire might
follow all rational trigger-of-coverage legal theories in
environmental contamination cases. As plaintiffs note. New
Hampshire's general rule relative to construction of insurance
policy language is set out in Trombly v. Blue Cross/Blue Shield
of New Hampshire-Vermont, 120 N.H. 764 (1980), and reguires that
courts "honor the reasonable expectations of the policy holder."
Id., at 771 (guoting Maqulas v. Travelers Ins. Co.,
114 N.H. 704,
706 (1974)). In Trombly the court held that when terms of an
insurance contract are susceptible of two (or more) reasonable
interpretations, and one (or more) would provide coverage, the
interpretation that affords coverage must be adopted. While it
might be unusual, still, the New Hampshire rule might be that
insurance policy language must be construed consistently with any
rational and reasonable trigger-of-coverage legal theory under
which the disputed terms would afford coverage, on grounds that
the critical terms ("occurrence" and "accident") are necessarily
ambiguous since they can be reasonably construed under one
5
recognized trigger theory in a way that affords coverage and
under another theory in a way that precludes coverage. Thus,
under Trombly, the facts peculiar to each case could dictate
which legal theory of coverage the court would adopt, in order to
provide coverage in the face of contextually ambiguous terms.
Which legal trigger theory to apply is critical to proper
construction of the coverage language in both the accident-based
and occurrence-based policies at issue here. In nearly identical
circumstances, the Court of Appeals for the First Circuit made it
clear that "[t]he district court was obligated to determine which
of these trigger-of-coverage theories the [State] Supreme Court
would apply" in the case. CPC International, Inc. v. Northbrook
Excess & Surplus Ins. Co., 46 F.3d 1211 (1st Cir. 1995). In CPC
International, like this case, Rhode Island law was found to be
unclear, and pertinent state decisions were found to "raise more
guestions than they answer."
Id. at 1221. Recognizing that
different jurisdictions have adopted at least seven different
legal theories governing when an occurrence policy provision is
triggered in the context of environmental damage claims, and
finding Rhode Island law on this point was "unclear" with respect
6
to the trigger-of-coverage issue, and concluding that the issue
was determinative of the case, the court of appeals certified the
trigger guestion to the Rhode Island Supreme Court. See CPC
International, 46 F.3d at 1219-1220.
In this case, too. New Hampshire's applicable precedent
raises more guestions than it answers; the trigger-of-coverage
theory New Hampshire follows will resolve the coverage issue in
this case; this court is obligated to apply New Hampshire law as
the New Hampshire Supreme Court determines it to be; this court
is obligated to determine which legal trigger theory New
Hampshire would apply, but cannot reliably predict New
Hampshire's view based on existing precedent; and, important
principles of federalism counsel in favor of certifying the
trigger-of-coverage issue to the Supreme Court.
One final clarifying point with regard to plaintiff's motion
to reconsider is, perhaps, worth making. With regard to the
"occurrence-based" policies, the coverage provisions do not
strike me as ambiguous with regard to whether the "event" giving
rise to an "occurrence" must take place within the policy period,
when those provisions are read in context, for the reasons given
7
in the court's Order dated September 29, 2000, (document no.
276) . In the end, on that issue plaintiff has not offered a
reasonable or plausible interpretation of policy language, when
the language of the policy is considered as a whole. See Trombly
v. Blue Cross/Blue Shield of New Hampshire - Vermont, 120 N.H.
764, 768(1980). Any potential ambiguity regarding whether
coverage extends to occurrences in which the reguisite "event"
took place before commencement of the policy term is, in my view,
resolved by the interplay between the coverage language of
paragraphs 1 and 4, and the provision that, "This policy . . .
shall apply to occurrences happening during the currency hereof."
See Order, September 29, 2000, at 9-10.
The additional point is this. Paragraph 4 describes what
the policy covers, making clear that the general coverage
includes not only liability for property damage imposed by law,
but also, on an egual footing, liability assumed by contract
(including both contracts "now in effect [when the policy term
began]" and those that "become effective while this Policy is in
force"). That is, the insured's potential property damage
liability for "occurrences" (which must happen during the policy
period) is covered, whether contractually assumed or imposed by
law, "provided always" that the coverage extended by the policy
does not apply to "any event which occurred prior" to the
commencement of the policy term, whether such event gives rise to
contractual or legally imposed liability.
The court is persuaded that the policy as a whole is clear,
and paragraph 4 actually underscores the parties' intent that
coverage for contractually assumed liability and legally imposed
liability be coextensive. Nevertheless, plaintiff argues that
the language of paragraph 4 (i.e., "provided always, however,
that no liability shall attach to the underwriter by virtue of
this paragraph, in respect of any event which occurred prior to
the attaching date of this policy") (emphasis added) should not
be construed as a reiteration, and specific application of the
general reguirement of coverage under the policy - that the
"occurrence" ("event" giving rise to "happening") must happen
during the policy period - to contractually assumed liability.
Instead, plaintiff urges a reading of paragraph 4 that would
create two distinct and substantively different species of
coverage in the policy. One species would cover legally imposed
liability for property damage, extending coverage to "one
happening or a series of happenings arising out of one event,"
where the event can occur before the policy period begins. A
distinct second species would cover contractually assumed
liability for property damage, extending coverage to "one
happening or series of happenings arising out of one event," but
where the event must occur during the policy period.
Importantly, however, plaintiff's proffered construction is
not reasonable, reading the policy as a whole, as it must be if
the Trombly presumption of coverage arising from ambiguity is to
be effectively invoked. In other words, beyond merely asserting
that its interpretation of the policy language is "possible,"
plaintiff has not shown that the necessary result of its reading
- creation of two distinct species of coverage - would lead to
anything other than illogical, unintended, or even absurd
results. See, e.g., Curtis v. Guaranty Trust Life Ins. Co., 132
N.H. 337, 341-42 (1989) (noting that the insured's proposed
construction of the policy language must be "reasonable," and
observing that the court "will not create an ambiguity simply to
resolve it against the insurer," and rejecting plaintiff's
10
proposed construction of the policy because it would lead to
"absurd" and "illogical" results). See also City of Manchester
v. General Reinsurance Corp., 127 N.H. 806, 809-10 (1986).
Contrary to plaintiff's assertions, the policy language,
taken as a whole, reveals two things. First, it evinces an
intent by the parties to obtain and extend uniform coverage for
property damage liability, whether imposed by operation of law or
assumed by contract. Second, that language also reveals the
parties' unmistakable intent that coverage extend only to
"occurrences" that are precipitated by "events" that transpire
within the policy period. Read in context then, the policy
provisions are not ambiguous, and the "event" giving rise to a
happening or series of happenings (i.e., an "occurrence") must
take place within the policy period for coverage to obtain.
Unfortunately, however, the court's construction does not
resolve the bottom line coverage issue with regard to either the
accident-based or the occurrence-based policies at issue here
because, depending on which trigger-of-coverage legal theory New
Hampshire follows, the "event" could be found to have taken place
either during or outside the policy period.
11
The short of it is, I am no longer persuaded that the New
Hampshire Supreme Court resolved the trigger-of-coverage issue in
Johnson Shoes and, while each theory employed in prior cases in
this court could be correct, each is just as arguably incorrect.
And, other possible theories could be correct. See e.g..
Peerless Ins. Co. v. Clough, 105 N.H. 76 (1963) ("the time of the
occurrence resulting in the loss or damage . . . determines
whether there is coverage under the policy," suggesting that in
environmental damage cases, the time of the spill might control) .
Conclusion
The motion for reconsideration (document no. 280) is granted
in part. The court has reconsidered the issues presented.
However, in light of the circuit court's opinion in CPC
International, Inc. v. Northbrook Excess & Surpluss Ins. Co.,
supra, I believe that certification to the New Hampshire Supreme
Court of the legal trigger-of-coverage issue presented in this
case is appropriate, and even mandated. Conseguently, the court
proposes to certify to the New Hampshire Supreme Court a guestion
or guestions designed to determine the trigger-of-coverage legal
12
theory the State of New Hampshire would follow in resolving this
coverage dispute.
Accordingly, on or before March 2, 2001, each party shall
show cause why the court should not certify the trigger-of-
coverage issue to the New Hampshire Supreme Court, if that is
their position, and, notwithstanding any opposition to
certification, each party shall also propose guestion(s) of law
for certification, and shall file a statement of relevant facts
(preferably stipulated) meeting the reguirements of New Hampshire
Supreme Court Rule 34, for consideration by the court (i.e., the
parties should assume the issue will be certified) .
SO ORDERED.
Steven J. McAuliffe
United States District Judge
January 31, 2001
cc: Bruce W. Felmly, Esg.
Doreen F. Connor, Esg.
John A. Guarascio, Esg.
Michael F. Aylward, Esg.
Kimball A. Lane, Esg.
13
