EnergyNorth v. AEGIS et al

• Court: District Court, D. New Hampshire
• Decided: September 30, 1998
• Docket: CV-95-591-B
• Status: Published

Opinion

EnergyNorth v. AEGIS et al CV-95-591-B 9/30/98 P UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

EnergyNorth Natural Gas, Inc.

v. C-95-591-B

Associated Electric & Gas Insurance Services, Ltd., et a l .

MEMORANDUM AND ORDER

EnergyNorth Natural Gas, Inc., is the successor-in-interest

to companies that manufactured coal gas in Concord, New

Hampshire, from 1852 to 1952. EnergyNorth brought this

declaratory judgment action, pursuant to 28 U.S.C.A. § 2201 (West

1994) and N.H. Rev. Stat. Ann. § 491:22 (1997), against its

predecessors' liability insurers. Plaintiff seeks to recover

costs incurred in responding to directives from the New Hampshire

Department of Environmental Services (NHDES) to investigate and

restore a site in Concord that became contaminated with by­

products from its predecessor's coal-gasification operations. In

this order, I address EnergyNorth's contention that its coverage

claims should be evaluated using the burden of proof specified by

N.H. Rev. Stat. Ann. § 491:22-a (1997).

I. DISCUSSION

New Hampshire common law places the burden of proof on the

party seeking coverage under an insurance policy to establish the "existence and validity of the policy." Town of Peterborough v.

Hartford Fire Ins. Co., 824 F. Supp. 1102, 1110 (D.N.H. 1993);

Merchants Mut. Ins. Co. v. Transformer Serv., Inc., 112 N.H. 360,

364 (1972). Insurance coverage suits brought pursuant to New

Hampshire's declaratory judgment act, N.H. Rev. Stat. Ann. §

491:22, however, are governed by N.H. Rev. Stat. Ann. § 491:22-a,

which provides that "the burden of proof concerning coverage

shall be upon the insurer whether he institutes the petition or

whether the claimant asserting the coverage institutes the

petition." Accordingly, if EnergyNorth has properly based its

action for declaratory relief on section 491:22, the burden of

proof will lie with the defendant insurers to disprove

EnergyNorth's coverage claims.

The principal obstacle to EnergyNorth's contention that its

claims are subject to section 491:22-a is N.H. Rev. Stat. Ann. §

491:22(111), which provides in pertinent part that: "[n]o

petition shall be maintained under this section to determine

coverage of an insurance policy unless it is filed within 6

months after the filing of the writ, complaint, or other pleading

initiating the action which gives rise to the [coverage]

guestion." Dictum in a recent First Circuit Court of Appeals

opinion suggests that this section should be interpreted

expansively to prevent an insured from basing a coverage claim on

section 491:22 unless the claim arises from an underlying lawsuit

in which the insured is named as a defendant. See New Hampshire

Ball Bearings v. Aetna Cas. and Sur. Co., 43 F.3d 749, 752 (1st

2 Cir. 1995). If this dictum correctly interprets section

491:22(111), EnergyNorth could not base its coverage claim on

section 491:22 as NHDES has not brought suit against it.

Defendants do not invoke the Ball Bearings court's dictum in

challenging EnergyNorth's right to base its claim on section

491:22. Instead, they argue that the current action does not

comply with section 491:22(111) because it was commenced well

more than 6 months after NHDES issued a letter to EnergyNorth

directing it to begin an investigation of possible contamination

at the Concord site. In other words, defendants concede that an

insured may base a declaratory judgment claim on section 491:22

even though it has not been named as a defendant in an underlying

lawsuit, but argue that NHDES's directive to EnergyNorth

gualifies as a "writ, complaint, or other pleading" triggering

section 491:22's 6-month limitations period.

I begin by examining the First Circuit's dictum and then

consider the merits of defendants' argument that the NHDES

directive is a "writ, complaint, or other pleading" as that

phrase is used in section 491:22(111).

A. Does Section 491:22(111) recruire an underlying lawsuit against the policyholder in order to base an insurance coverage claim on section 491:22?

The First Circuit appeared to endorse the most expansive

possible reading of section 491:22(111) in its recent Ball

Bearings decision. See 43 F.3d at 752. There, the court

determined that a policyholder, knowing that its disposal of

hazardous wastes was certain to result in injury to property,

3 could not successfully claim a right to coverage under the

defendant's liability insurance policies. See Id. In reaching

this conclusion, the court observed in dictum that: "We note that

the district court properly found that, because there is no

underlying state court lawsuit in this case, the burden shifting

framework of New Hampshire's declaratory judgment act . . . does

not apply . . . ." Id. at 752. The court did not explain its

reasoning, but instead appeared to adopt the trial court's

conclusion that this result was compelled by the New Hampshire

Supreme Court's decisions in Jackson v. Federal Ins. Co., 127

N.H. 230 (1985), and Scully's Auto-Marine Upholstery, Inc. v.

Peerless Ins. Co., Inc., 136 N.H. 65 (1992) ("Scully's"). See

New Hampshire Ball Bearings v. Aetna Cas., 848 F. Supp. 1082,

1089-90 (D.N.H. 1994). If, as the First Circuit's dictum

suggests, the New Hampshire Supreme Court has determined that a

policyholder may not base a claim on section 491:22 unless the

insured has been named as a defendant in an underlying lawsuit,

the matter is no longer open for debate and I cannot allow

EnergyNorth to base its coverage claim on section 491:22. See

Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). However, I am

free to reach a contrary conclusion if the New Hampshire Supreme

Court has not resolved the guestion and the relevant precedents

suggest that the court would arrive at a different result. See

Dedham Water Co., Inc. v. Cumberland Farms Dairy, Inc., 972 F.2d

453, 458-59 (1st Cir. 1992) (court not obligated to follow

unconsidered dictum). Thus, I first examine Jackson and Scullv's

4 to determine whether either decision is controlling.

1. Significance of Jackson and Scully's.

In both Jackson and Scullv's, the New Hampshire Supreme

Court examined the issue of whether a party may base an insurance

coverage claim on section 491:22 when the lawsuit giving rise to

the coverage dispute is brought in a foreign court. In Jackson,

the court observed that the plain language of the statute as then

amended spoke only in terms of underlying actions commenced by

the filing of a "writ."1 127 N.H. at 232. The court concluded

that because a federal action is commenced by filing a

"complaint" and not a "writ," an action commenced in federal

court did not constitute an underlying action for the purpose of

satisfying section 491:22(111). Id. at 232.

Relying on its decision in Jackson, the Scullv's court

concluded that an action commenced in a foreign state court also

does not constitute an underlying action for the purpose of

satisfying section 491:22(111). See 136 N.H. at 67. In so

holding, the court reasoned that section 491:22(111) had

originated as a "court cleaning bill." Id. (guoting Jackson, 127

N.H. at 233 (guoting, in turn, N.H. Senate Journal, at 627 (May

24, 1967) (stating that section 491:22(111) will "do away with

the procedure of a few days before the trial [of an underlying

1 The language of the statute as then amended read: "No petition shall be maintained under this section to determine coverage of an insurance policy unless it is filed within 6 months after the filing of the writ which gives rise to the guestion." N.H. Rev. Stat. Ann. § 491:22 (1993) (codified as amended at N.H. Rev. Stat. Ann. § 4 91:22(111)).

5 dispute], a person filing a declaration petition," thereby

delaying resolution of the original matter and clogging courts'

dockets)). Thus, because the New Hampshire legislature lacked

the power to clean the dockets of a foreign state's courts, only

actions brought in New Hampshire state courts could satisfy the

legislative intent expressed in section 491:22(111). See id.

Neither Jackson nor Scullv's expressly considered whether

section 491:22(111) applies in cases where the insured has not

yet been sued in an underlying action. See Robert J. Lynn,

Declaratory Judgments in Insurance Cases: Recent Amendment Solves

the "Where to Sue" Problem but Leaves the "When to Sue" Question

Unresolved, 36 N.H.B.J. 58, 64 (1995) (concluding that the Ball

Bearings court's reading of Jackson and Skullv's is broader than

is compelled by either decision). Although the New Hampshire

Supreme Court conceivably could decide to extend its reasoning in

both decisions to cases in which an underlying lawsuit has not

yet been commenced against the insured, I am unwilling to assume

this result without first examining the legislative history of

section 491:22(111) and other Supreme Court decisions bearing on

the subject.2

2 When confined to their facts, Jackson and Scullv's have been superseded by legislative amendment to section 491:22(111). Specifically, the New Hampshire legislature has amended section 491:22(111) to allow New Hampshire state and federal courts to take jurisdiction over a declaratory judgment action to determine insurance coverage brought pursuant to section 491:22(111), even where the action giving rise to the insurance dispute was brought in federal court or the court of another state. See 1994 N.H. Laws 37:1 ("A petition for declaratory judgment to determine coverage of insurance policy may be instituted as long as the court has personal jurisdiction over the parties to the matter.

6 2. The legislative history of Section 491:22(III).

Section 491:22(111) was added to the declaratory judgment

statute by a 1967 amendment. Proposed by the New Hampshire

Superior Court, the amendment was designed "to curtail the

practice, apparently wide-spread at the time, of litigants

waiting until the eve of trial of an underlying lawsuit to file a

declaratory judgment action to determine the availability of

insurance coverage." Lynn, supra, at 59. Such a practice

resulted in "last-minute reguests for continuances of the trial

of the underlying suit until the coverage issues were resolved,"

clogging court dockets. Lynn, supra, at 59, 65. As Senator

Leonard, spokesperson for the Senate Judiciary Committee which

recommended passage of the measure, explained: "This [bill] will

do away with the procedure of a few days before the trial, a

person filing a declaration petition. ... It is really a court

cleaning bill." N.H. Senate Journal, at 627 (May 24, 1967) .

Thus, the purpose of the amendment was to increase the efficiency

of the judicial process by encouraging declaratory judgment

actions to be brought -- and resolved -- well before trial in the

underlying action.

even though the action giving rise to the coverage guestion is brought in federal court or another state court.") (codified at N.H. Rev. Stat. Ann. § 491:22(111) (1997)); 1987 N.H. Laws 150:1 (granting New Hampshire federal district courts jurisdiction to hear N.H. Rev. Stat. Ann. § 491:22 actions to determine insurance coverage) (codified at N.H. Rev. Stat. Ann. § 491:22-c (1997)); see generally Lynn, supra, at 59-60, 62-64 (1995) (discussing history of amendments to section 491:22).

7 During the Senate Judiciary Committee hearings on whether to

recommend passage of the 1967 amendment. Senator Leonard

specifically rejected the suggestion that the amendment's purpose

was to limit the availability of declaratory relief to instances

in which an underlying suit was actually pending. At one

hearing, a critic of the amendment expressed concern that the

amendment was motivated by a desire to prohibit the filing of

declaratory judgment actions unless there was a pending

underlying lawsuit. See Hearing on SB 66, Senate Comm, on

Judiciary (Mar. 9, 1967) (statement by Irving Soden, spokesperson

for the American Insurance Association). In response. Senator

Leonard stated that such a worry was unfounded. He explained

that the amendment was not intended to "change the basic

[declaratory judgment] law. It adds [only] one thing [to the

law]. It says that when there is . . . an accident case in the

courts and either party wants to test . . . coverage under a

policy, it must do so within six months. This will not concern

any other rights." See Hearing on SB 66, Senate Comm, on

Judiciary (Mar. 28, 1967) (statement by Senator Leonard)

(emphasis added).

Section 491:22(111) represents the rare case in which

legislative history provides incontrovertible evidence of a

statute's intended meaning. This history demonstrates that the

amendment that gave rise to the section was intended simply to

increase the efficiency of the judicial process by reguiring

litigants to file their declaratory judgment actions no later than 6 months after the underlying action was commenced.

Moreover, when confronted with the suggestion that the amendment

might bar the use of section 491:22 in instances where there was

no pending underlying lawsuit, the amendment's sponsor explicitly

denied that it would have this effect. Since the legislative

history of section 491:22(111) is devoid of any indication that a

more expansive reading was intended, it is highly unlikely that

the New Hampshire Supreme Court would adopt the expansive reading

suggested by the Ball Bearings court's dictum. See Claremont

School Dist. v. Governor, 712 A.2d 612, 613 (N.H. 1998) ("in

interpreting the law, we are bound to be mindful of its apparent

purpose as disclosed by its language in light of its legislative

history")(guoting Chagnon v. Union-Leader Corp., 104 N.H. 472,

47 6 (1963)); Appeal of Coastal Materials Corp, 130 N.H. 98, 103

(1987) .

3. Other New Hampshire Supreme Court decisions applying Section 491:22(111).

A number of New Hampshire Supreme Court decisions support

the construction of section 491:22(111) suggested by its

legislative history. In Andrews v. Nationwide Mut. Ins. Co., 124

N.H. 148, 151-52 (1983), the court rejected a claim that section

491:22(111) prevented a policyholder from basing a first-party

insurance coverage claim on section 491:22. In reaching this

conclusion, the court necessarily rejected the argument that

there must always be an underlying action pending against the

policyholder in order for the insured to base a claim for

coverage on section 491:22. The court has also entertained declaratory judgment actions based upon section 491:22 to resolve

coverage guestions concerning liability policies even though an

underlying action was not pending against the insured when the

action was commenced. See e.g., Portsmouth Hospital v. Indemnity

Ins. Co. of North America, 109 N.H. 53, 55-57 (1968) (hospital

permitted to maintain declaratory judgment action to determine

whether removal of mentally incompetent patient to another

facility violated policy's cooperation clause); Auclair v.

Allstate Ins. Co., 118 N.H. 626, 627-28 (1978) (declaratory

judgment action entertained despite absence of underlying suit).

Finally, in Coaklev v. Maine Bonding & Cas. Co., 136 N.H. 402,

405-08 (1992), the court reached the merits of a declaratory

judgment action based on section 491:22 in an environmental

insurance coverage case where the insured had not been sued. In

Coaklev, the insured sought a declaration that its insurers were

obligated to reimburse it for its costs incurred in responding to

the directives of an administrative agency. Even though the

insured had not been named as a defendant in an underlying

lawsuit, the court reached the merits of the case. See Coaklev,

136 N.H. at 419. As the guestion of whether an insured may base

a coverage claim on section 491:22(111) bears on the court's

jurisdiction to consider the claim, it is unlikely that the

Coaklev court would have reached the merits of the case if

section 491:22(111) reguired a pending underlying action against

the insured.

10 In summary, the legislative history of section 491:22(111)

and a number of New Hampshire Supreme Court decisions decided

before and after Jackson and Skullv's strongly suggest that the

New Hampshire Supreme Court would not interpret the law in the

manner suggested by the Ball Bearings court's dictum.

Accordingly, I decline to follow the dictum in this case.

B. Does Section 491:22(III)'s 6-month limitation period apply to declaratory judgment actions in which an underlying lawsuit has not vet been commenced?

Defendants do not base their argument on the Ball Bearings

court's dictum. Instead, they argue that EnergyNorth cannot base

its claim on 491:22 because NHDES's 1992 site-investigation

letter to EnergyNorth gualifies as a "writ, complaint, or other

pleading" triggering the commencement of section 491:22 (111)'s 6-

month limitations period. I reject defendants' construction of

section 491:22(111) because it is supported by neither the plain

language of the statute nor its legislative history.

A New Hampshire court begins an exercise in statutory

construction with an examination of the language of the provision

at issue. See Cheever v. Southern New Hampshire Regional Medical

Center, 141 N.H. 589, 591 (1997). The court will not add words

to the statute that the legislature has not seen fit to add. See

Lorette v. Peter-Sam Inv. Properties, 140 N.H. 208, 211 (1995).

Here, the disputed portion of section 491:22(111) is unambiguous:

the phrase "writ, complaint, or other pleading initiating the

action" clearly refers to documents that initiate judicial

proceedings. Black's Law Dictionary, for example, defines "writ"

11 as a "written iudicial order to perform a specified act . . . as

in an 'original writ' for instituting an action at common law."

Black's Law Dictionary 1608 (6th ed. 1990). It also defines

"complaint" as the "original or initial pleading by which an

action is commenced under the codes or Rules of Civil Procedure."

Id. at 285; see also Fed. R. Civ. P. 3 ("A civil action is

commenced by filing a complaint with the court."). Moreover,

because the plain meaning of "writ" and "complaint" refers only

to documents that actually initiate judicial proceedings, Imust

construe the term "other pleading initiating the action" as

similarly referring only to documents that actually initiate

judicial proceedings. See State v. Wilson, 140 N.H. 44, 45

(1995) ("General words in a statute that follow specific words .

. . are construed to include only items of a similar character to

the specific ones mentioned.").

The legislative history of section 491:22(111) further

supports the conclusion that the phrase "writ, complaint, or

other pleading initiating the action" refers to documents that

initiate judicial proceedings and not to documents that stop

short of doing so. As noted above, in 1967, the legislature

amended section 491:22 to reguire that declaratory judgment

actions be filed within 6 months of the "writ which gives rise to

the [coverage] guestion." See 1967 N.H. Laws 432:1 (codified as

amended at N.H. Rev. Stat. Ann. § 491:22(111) (1997)), Lynn,

supra, at 59. The amendment was passed with the intent of

clearing court dockets by encouraging declaratory judgment

12 actions to be brought and resolved at the same time as any

pending underlying suits. See N.H. Senate Journal, at 627 (May

24, 1967) (statement by Senator Leonard); Lynn, supra, at 59, 65.

Accordingly, the term "writ" clearly refers only to actual

lawsuits that could clog court dockets if the filing of a

declaratory judgment petition were unreasonably delayed.

The New Hampshire legislature again amended section 491:22

in 1994, this time to explicitly allow declaratory judgment

actions even where such actions were brought in response to

underlying lawsuits filed in a federal or foreign state court.

See 1994 N.H. Laws 37:1 (codified at N.H. Rev. Stat. Ann. §

491:22(111) (1997)). Because federal suits are initiated by

complaint, the New Hampshire legislature inserted the term

"complaint, or other pleading" after the word "writ" to emphasize

that a section 491:22 action could be maintained no matter where

the underlying lawsuit was filed. Lynn, supra, at 63; Hearing on

SB 722, Senate Comm, on Insurance (Jan. 27, 1994) (statement by

Leslie Nixon, spokesperson for the New Hampshire Trial Lawyers'

Association) ("[W]e're just asking you to change the statute to

make it clear that it doesn't matter whether the underlying case

. . . is brought by a writ or a complaint."). Thus, because the

term "complaint, or other pleading" was added to emphasize that

section 491:22 actions could be maintained regardless of where

the underlying lawsuit was filed, I view the term as referring to

documents that actually initiate a lawsuit rather than to

communications that stop short of doing so.

13 Because the ordinary meaning of the provision at issue and

the legislative history of the provision reveal that it refers to

documents that actually initiate a lawsuit, I hold that the 1992

NHDES letter to EnergyNorth (a type of document that does not

initiate a lawsuit) is not a "writ, complaint, or other pleading"

for the purpose of triggering the section 491:22(111) period of

limitations.3

II. CONCLUSION

After reviewing the legislative history of section

491:22(111) and the relevant New Hampshire Supreme Court

precedents, I am convinced that the section's 6-month limitation

period does not apply in cases such as this where the insured has

3 Defendants' argument to the contrary borders on the frivolous. Defendants predict that based on its decision in Coaklev, 136 N.H. at 417-18, the New Hampshire Supreme Court would find, in the instant case, that the type of letter NHDES sent to EnergyNorth is the constructive eguivalent of a "writ, complaint, or other pleading" for the purpose of triggering the section 491:22(111) period of limitations. In Coaklev, the court examined whether the type of letter NHDES sent to EnergyNorth constituted a constructive "suit" for the purposes of triggering an insurer's contractual duty to indemnify an insured. 136 N.H. at 405. The court ruled that such a letter could constitute the commencement of a suit where the meaning of the term "suit" as used in the insurance policy was ambiguous and where the insured's asserted interpretation comes within any one of the possible meanings of the term. Id. at 417. Because the court found that the insured's interpretation of the contractual term "suit" as "an attempt to gain an end by legal process," id. (internal guotations omitted), was a possible meaning of the term, the court held that it was bound by its rules of policy interpretation to adopt that meaning, id. at 418. Therefore, Coaklev is clearly limited to instances in which a court finds the meaning of the term "suit" as used in an insurance contract to be ambiguous and, therefore, is bound by the applicable rule of decision reguiring that such policy terms be construed in favor of coverage.

14 not been named in an underlying lawsuit. Accordingly, I hold

both that EnergyNorth is entitled to base its declaratory

judgment action on section 491:22 and that its claims are to be

judged using the burden of proof specified by section 491:22-a.

SO ORDERED.

Paul Barbadoro Chief Judge

September 30, 1998

cc: Bruce Felmly, Esg. Robert Gallo, Esg. Vincent Ziccolella, Esg. Donald Uttrich, Esg. Emily Rice, Esg. Paul Leodori, Esg. John Putnam, Esg. Jeffrey Osburn, Esg. John Guarascio, Esg. Michael Aylward, Esg.