UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Karen M. Weinhold, et al. Case No. 18-cv-383-PB v. Opinion No. 2018 DNH 206
The Phoenix Insurance Company, et al.
MEMORANDUM AND ORDER
This declaratory judgment action stems from a refusal by
The Phoenix Insurance Company, Travelers Property Casualty
Company of America, and The Travelers Indemnity Company
(collectively, “Travelers”) to indemnify the State of New
Hampshire (“State”) under two commercial liability insurance
policies. Travelers removed the case to federal court but now
argues in a motion to dismiss that this court lacks subject
matter jurisdiction because the plaintiffs’ claim for coverage
is not ripe. For the reasons set forth below, I deny the
motion.
I. BACKGROUND
A. Underlying Action
In October 2014, Karen and Charles Weinhold filed a lawsuit
in New Hampshire Superior Court against the State, Audley
Construction, Inc. (“Audley”), and Remi Gross-Santos for the
injuries they suffered when Gross-Santos struck Mrs. Weinhold
with his car. At the time of the accident, Mrs. Weinhold was
walking on an unprotected shoulder on the west side of Ocean Boulevard in Hampton, New Hampshire. Audley, a contractor hired
by the State to repair the seawall that runs along Ocean
Boulevard, had closed the protected sidewalk on the east side of
the boulevard, diverting Mrs. Weinhold and other pedestrians to
the unprotected shoulder on the west side.
The case was tried before a jury in January 2018. The
Weinholds offered evidence at trial showing both that Audley was
negligent in choosing to divert the public onto the unprotected
west-side shoulder where Mrs. Weinhold was injured and that the
State had approved Audley’s plan. The jury awarded the
Weinholds $9 million in damages and apportioned liability among
the three defendants, finding the State 40% at fault and Audley
and Gross-Santos each 30% at fault. The State’s share of the
verdict thus totaled $3.6 million, exclusive of interest.
After the trial court denied the State’s post-trial motions
challenging the validity of the verdict and the State decided
not to appeal, it sought a ruling that the verdict against it is
subject to a statutory cap that limits the State’s tort
liability to the greater of $475,000 or the amount of available
insurance coverage. See N.H. Rev. Stat. Ann. § 541-B:14, I.
The Weinholds did not dispute the applicability of the statutory
cap. Instead, they argued that the cap did not limit their
right to recover against the State because the State was covered
as an additional insured on several insurance policies purchased
from Travelers by Audley. Because Travelers denied that the
2 State was covered under two of the three policies, the Weinholds
informed the state court that they intended to file a
declaratory judgment action to resolve the coverage dispute and
asked the court to stay any action on the State’s motion. The
court agreed that “a declaratory judgment action is the best
means of resolving this issue” and granted the request for a
stay. Doc. No. 20-6 at 2 n.2.
The Weinholds and the State jointly filed this declaratory
judgment action in New Hampshire Superior Court, seeking a
determination that Travelers is obliged to indemnify the State
for its portion of the jury verdict. Travelers responded by
removing the action to federal court based on diversity of
citizenship. 1
Following removal, the court in the underlying action was
asked to decide the Weinholds’ motion for prejudgment interest.
By order dated June 15, 2018, the state court determined that
the dispute concerning the extent of insurance coverage
available to the State precluded a calculation of prejudgment
interest. The court reasoned that Section 541-B of the New
Hampshire Revised Statutes limits the State’s liability for
prejudgment interest to “any award authorized under this
1 I have asked the parties to brief the issue as to whether the court has diversity of citizenship jurisdiction over the case given the fact that the State is a party to the case, and I will address that issue in a separate order after the briefing is complete.
3 chapter.” Doc. No. 16-3 at 4 (quoting N.H. Rev. Stat. Ann.
§ 541-B:14, III). Because the amount “authorized under” the
statute is dependent on the amount of available insurance
coverage, the court concluded that it could not calculate the
prejudgment interest award. Id. (citing N.H. Rev. Stat. Ann.
§ 541-B:14, I). Accordingly, the court stayed the Weinholds’
request for prejudgment interest on the 40% of damages
attributable to the State “pending resolution of the relevant
declaratory judgment action.” Id. at 5.
B. Insurance Policies
Audley’s contract with the State for the seawall repair
project required Audley to secure various types of insurance
coverage, including owner’s protective liability coverage for
the benefit of the State, a commercial general liability policy
that names the State as an additional insured, and a commercial
umbrella policy. Audley procured three different policies from
Travelers: an owner’s protective liability policy with $2
million in coverage per occurrence and $3 million in aggregate
(“Owner’s Policy”), a commercial general liability policy with
$1 million in coverage per occurrence and $2 million in
aggregate (“CGL Policy”), and a commercial excess liability
policy with $10 million in coverage (“Umbrella Policy”). A
certificate of liability insurance that Audley submitted to the
State recorded the three policies and noted that the State “is
included as an additional insured under general liability
4 coverage for ongoing operations when required by written
contract.”
After the jury verdict in the underlying action, Travelers
took the position that the CGL Policy and the Umbrella Policy do
not cover the State’s liability. 2 Travelers pointed to an
endorsement to the CGL Policy that it claims limits the State’s
coverage to vicarious liability arising out of Audley’s actions. 3
According to Travelers, the State’s liability is not vicarious
but is instead based on the State’s independent breach of a duty
to the Weinholds that is unrelated to Audley’s actions. Because
coverage under the Umbrella Policy is subject to the limitations
2 Travelers agreed that the State is covered under the Owner’s Policy. Travelers previously paid $150,000 from that policy to settle claims against the State brought by another individual injured at the same time as Mrs. Weinhold, leaving $1,850,000 of the policy limit available to satisfy the State’s liability to the Weinholds. 3 The endorsement, titled “BLANKET ADDITIONAL INSURED (CONTRACTORS)” states:
WHO IS AN INSURED – (Section II) is amended to include any person or organization that you agree in a “written contract requiring insurance” to include as an additional insured on this Coverage Part . . . [i]f, and only to the extent that, the injury or damage is caused by acts or omissions of you or your subcontractor in the performance of “your work” to which the “written contract requiring insurance” applies. The person or organization does not qualify as an additional insured with respect to the independent acts or omissions of such person or organization.
Doc. No. 2-4 at 16.
5 contained in the underlying CGL Policy, Travelers determined
that no coverage is available to the State under either policy.
In this lawsuit, the Weinholds and the State seek a
determination that the CGL Policy and the Umbrella Policy cover
the State’s liability. They maintain that the policy
endorsement at issue is not applicable to the State, and even if
it were, that the endorsement’s conditions have been satisfied
because the State’s liability arises from Audley’s acts or
omissions.
II. STANDARD OF REVIEW
When subject matter jurisdiction is challenged under Rule
12(b)(1), “the party invoking the jurisdiction of a federal
court carries the burden of proving its existence.” Murphy v.
United States, 45 F.3d 520, 522 (1st Cir. 1995) (internal
quotation marks omitted). Thus, if a plaintiff sues in federal
court, the burden to establish jurisdiction is on the plaintiff.
See id. When the plaintiff instead files suit in state court
and the defendant removes the action to federal court, the onus
shifts to the defendant to demonstrate that federal jurisdiction
exists. Danca v. Private Health Care Sys., Inc., 185 F.3d 1, 4
(1st Cir. 1999). If federal jurisdiction is challenged after
removal is accomplished, however, the burden is assigned to the
party asserting jurisdiction at that time. See DaimlerChrysler
Corp. v. Cuno, 547 U.S. 332, 342 n.3 (2006) (holding that
6 plaintiffs had to establish Article III standing that was
challenged after removal was effected because “the party
asserting federal jurisdiction when it is challenged has the
burden of establishing it” irrespective of the parties’ prior
positions on federal jurisdiction); Culhane v. Aurora Loan
Servs. of Neb., 708 F.3d 282, 289 (1st Cir. 2013) (“Once removal
has been affected, the burden of going forward with the claim in
federal court (including the burden of establishing standing)
still rests with the plaintiff.”).
When Travelers removed this case to federal court, the
Weinholds and the State did not challenge the propriety of
removal. Travelers is now challenging subject matter
jurisdiction, and the plaintiffs assert that it exists.
Accordingly, it is incumbent on the Weinholds and the State to
demonstrate that the court has jurisdiction over their claims.
In determining whether the plaintiffs have met their
burden, I must “take as true all well-pleaded facts in the
plaintiffs’ complaint[], scrutinize them in the light most
hospitable to the plaintiffs’ theory of liability, and draw all
reasonable inferences therefrom in the plaintiffs’ favor.”
Fothergill v. United States, 566 F.3d 248, 251 (1st Cir. 2009).
I may also consider extrinsic evidence, such as exhibits and
affidavits, without converting the motion to dismiss into one
for summary judgment. See, e.g., Carroll v. United States, 661
7 F.3d 87, 94 (1st Cir. 2011); Pitroff v. United States, No. 16–
CV–522–PB, 2017 WL 3614436, at *3 (D.N.H. Aug. 22, 2017).
III. ANALYSIS
Travelers argues that the case should be dismissed for lack
of subject matter jurisdiction because the plaintiffs’ claim for
insurance coverage is not ripe for review. I disagree.
The ripeness doctrine serves “to prevent the courts,
through avoidance of premature adjudication, from entangling
themselves in abstract disagreements” in violation of Article
III’s “case or controversy” requirement. Roman Catholic Bishop
of Springfield v. City of Springfield, 724 F.3d 78, 89 (1st Cir.
2013) (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 148
(1967)). The core question is “whether the facts alleged, under
all the circumstances, show that there is a substantial
controversy, between parties having adverse legal interests, of
sufficient immediacy and reality to warrant the issuance of a
declaratory judgment.” Labor Relations Div. of Constr. Indus.
of Mass., Inc. v. Healey, 844 F.3d 318, 326 (1st Cir. 2016)
(quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127
(2007)). In accordance with these principles, the plaintiffs
must allege facts sufficient to show that the issues raised are
(1) “fit” for judicial review and (2) that they will suffer
hardship if review is denied. Reddy v. Foster, 845 F.3d 493,
501 (1st Cir. 2017).
8 The fitness element concerns “whether the claim involves
uncertain and contingent events that may not occur as
anticipated or may not occur at all.” Ernst & Young v.
Depositors Econ. Prot. Corp., 45 F.3d 530, 536 (1st Cir.
1995)(internal quotation marks omitted). This analysis
typically entails consideration of “finality, definiteness, and
the extent to which resolution of the challenge depends upon
facts that may not yet be sufficiently developed.” Id. at 535.
The hardship element looks at “whether the challenged action
creates a direct and immediate dilemma for the parties.”
Sindicato Puertorriqueño de Trabajadores v. Fortuno, 699 F.3d 1,
9 (1st Cir. 2012) (internal quotation marks omitted). “In
general, the greater the hardship, the more apt a court will be
to find ripeness.” Ernst & Young, 45 F.3d at 536. I conclude
that both elements are established here.
This case easily satisfies the first component of the
ripeness test because there are no uncertain or contingent
events that may impact a determination of the State’s available
insurance coverage. The State’s liability in the underlying
action has been established with finality. The jury returned a
verdict finding the State 40% at fault for the Weinholds’
injuries, and the State has foresworn any intention to challenge
that verdict on appeal. With the issue of liability resolved
and the total amount of recoverable damages determined, the
coverage dispute is not contingent on any facts that remain to
9 be developed in the underlying action. Cf. Pustell v. Lynn Pub.
Sch., 18 F.3d 50, 52 (1st Cir. 1994) (finding claim “fit” for
review where “[n]o further factual development is necessary for
[the court] to resolve” it). Simply put, whether Travelers must
indemnify the State on the verdict that has been rendered is a
real and concrete issue.
The fact that judgment has not been entered (and as
discussed below, cannot be entered until the coverage dispute is
resolved) does not make this lawsuit premature. The cases cited
by Travelers for the proposition that judgment must be entered
in the underlying case before its duty to indemnify the State
becomes ripe for review are inapposite. They stand only for the
proposition that an indemnification claim may be unripe before
the insured’s liability has been established in the underlying
case. 4 Unlike in those cases, where the insured may avoid
4 See Travelers Inc. Co. v. Waltham Indus. Labs. Corp., 883 F.2d 1092, 1099 (1st Cir. 1989) (noting that “the duty to indemnify is determined by the facts, which are usually established at trial”); Am. Safety Indemnity Co. v. T.H. Taylor, Inc., 513 F. App’x 807, 810 & n.4 (11th Cir. 2013) (holding indemnity claim premature when raised after complaint was filed in arbitration action, before any adjudication of insured’s claims); Lear Corp. v. Johnson Elec. Holdings Ltd., 353 F.3d 580, 583 (11th Cir. 2003) (declining to rule on indemnity obligation when liability in underlying trial was not yet established); Scottsdale Ins. Co. v. United Rentals (N. Am.), Inc., 152 F. Supp. 3d 15, 19-20 (D. Mass. 2015) (dismissing claims seeking determination of insurer’s duty to indemnify where “the underlying action has not determined liability or adjudicated factual disputes”); Am. Cas. Co. of Reading, Pa. v. Allen, No. 2:12–cv–2414–TMP, 2014 WL 10450887, at *2 (N.D. Ala. Dec. 29, 2014) (declining to determine insurer’s indemnity obligation where liability had not yet been established in
10 liability altogether and thus no duty to indemnify would arise,
here there is no question that liability has already been
determined. The State is liable, and a court must determine the
extent of the State’s insurance coverage in order to determine
the damages that may be recovered from the State based on that
liability.
Travelers’ argument that the State’s liability remains
uncertain because the Weinholds have reserved the right to file
an appeal in the underlying action is also unavailing. The
question in that appeal would be whether a retrial is necessary
underlying case), R. & R. adopted as modified, No. 2:12-CV-2414- SLB, 2015 WL 5693598 (N.D. Ala. Sept. 29, 2015); Cincinnati Ins. Co. v. Jianas Bros. Packaging Co., No. 10–00218–CV–W–GAF, 2010 WL 2710732, at *2 (W.D. Mo. July 7, 2010) (finding declaratory judgment action not ripe because potential liability resulting from product recall was “highly speculative” where no underlying suit was filed and no monies were paid to third parties); Selective Ins. Co. of S.C. v. City of Paris, 07–CV–2224, 2010 WL 11553255, at *2 (C.D. Ill. May 27, 2010) (“As no liability has yet been assigned to Defendants, it is premature to say that Western World has a duty to indemnify Defendants.”); Country Mut. Ins. Co. v. Larson, No. 08–6154–TC, 2010 WL 1039790, at *5 (D. Or. Feb. 26, 2010) (declining to determine insurer’s indemnity obligation where complaint in underlying action failed to set forth facts that would invoke coverage and trial was imminent); Nat’l Union Fire Ins. Co. of Pittsburg, Pa. v. MI Windows & Doors, Inc., No. SA–06–CA–78–FB, 2008 WL 11417130, at *5 (W.D. Tex. May 16, 2008) (finding case not justiciable where underlying products liability cases were pending and insured made judicial admission that insurer had no duty to indemnify), R. & R. adopted, No. SA-06-CA-0078-FB, 2008 WL 11417131 (W.D. Tex. June 12, 2008); Shapiro Sales Co. v. Alcoa Inc., No. 4:06CV638 CDP, 2006 WL 2228987, at *3 (E.D. Mo. Aug. 3, 2006) (finding indemnification claim premature where underlying litigation was pending); Newell-Blais Post No. 443, Veterans of Foreign Wars of U.S., Inc. v. Shelby Mut. Ins. Co., 487 N.E.2d 1371, 1374 (Mass. 1986) (“The issue of indemnification must await the completion of trial.”).
11 on the narrow question of whether the State can be held jointly
liable with Audley for their collective share of negligence
assigned by the jury. The Weinholds maintain that the state
court erred in rejecting their argument that Audley and the
State could be jointly liable either under the common-law
doctrine of vicarious liability as joint venturers or because
they knowingly engaged in “a common plan or design resulting in
the harm.” See N.H. Rev. Stat. Ann. § 507:7-e, I(c). The
Weinholds first raised the issue in a motion to amend their
complaint to include a joint liability claim. The state court
denied the motion in a pretrial order on the basis that the
proposed amendment would be futile because it failed to state a
claim for which relief may be granted. 5 At trial, the court also
refused to instruct the jury that it could find Audley and the
State jointly liable based on the same two theories. Because
the jury found Audley and the State each less than 50 percent at
fault, their liability became several, meaning that the
Weinholds may recover from each defendant only that defendant’s
5 The court reasoned that the allegations that Audley and the State were involved in the creation of the same dangerous pedestrian detour fell short of stating “a common plan or design” because there was no allegation “that Audley and the State agreed to take concerted actions to accomplish an unlawful purpose, or to accomplish some [lawful] purpose . . . by unlawful means.” Doc. No. 27 at 10-11 (internal quotation marks omitted). In rejecting the theory of vicarious liability, the court concluded that there were insufficient allegations of a special relationship between Audley and the State to overcome the general rule that the State is not liable for actions of its independent contractors such as Audley. Id. at 13.
12 allocated share of damages. See N.H. Rev. Stat. Ann. § 507:7-e,
I(b).
A potential appeal on the issue of joint liability would
have no impact on the three issues that the jury already
determined: (1) the existence of liability, (2) the amount of
damages, and (3) the apportionment of fault among the
defendants. The only question would be whether Audley’s and the
State’s several liability should become joint. 6 The answer to
that question would not change the fact that the State has been
found 40% at fault for the Weinholds’ injuries in the underlying
action. Nor would it provide Travelers with any additional
argument to avoid any coverage obligations it might owe to the
State. Instead, at most, a finding of joint liability would
allow the plaintiffs to present additional arguments to support
their indemnification claims.
The prospect of this alternative avenue for obtaining
coverage does not render this court’s resolution of the instant
6 Travelers cites no authority for its position that the appeal could lead to a new trial on all issues. On the contrary, it is well settled under New Hampshire law that “a retrial for the correction of errors should be limited to the part of the case which might have been affected if the issues as to which no error occurred can be separated therefrom.” Lampesis v. Comolli, 102 N.H. 306, 308 (1959); see also Wallace v. Lakes Region Constr. Co., 124 N.H. 712, 718-19 (1984) (remanding for a new trial on the issue of damages only); Coos Lumber Co. v. Builders Lumber & Supply Corp., 104 N.H. 404, 408 (1963) (same). Whether Audley and the State should be jointly liable is plainly severable from the issues the jury already decided. Thus, it would make little sense to waste the parties’ and judicial resources to retry the whole case.
13 dispute advisory. The fact that the Weinholds may have some
other means to recover the State’s share of their damages from
the policies does not mean that Travelers’ current indemnity
obligations to the State cannot be determined with finality at
this time. Whether the State is entitled to coverage as an
additional insured when its liability is several and not joint
is a concrete question that does not depend on the outcome of
the Weinholds’ appeal.
In effect, Travelers argues that this case is not ripe
because the Weinholds might be able to obtain coverage under an
alternate theory if, at some unspecified point in the future,
they are able to obtain a verdict holding that the State is
jointly liable with Audley for their collective percentage of
negligence. In other words, Travelers asserts this case is not
ripe because the current controversy could become moot. But the
mere prospect of such an event is not enough to render this case
unfit for review. See KG Urban Enters., LLC v. Patrick, 693
F.3d 1, 16 (1st Cir. 2012) (“The fact that the case could be
rendered moot . . . does not render the case unripe.”). Because
the State’s liability has been decided with finality in the
underlying action, the extent of the State’s insurance coverage
is fit for judicial review.
Hardship, the second component of the ripeness analysis, is
also readily satisfied in this case because the underlying
action cannot be resolved until the State’s right to
14 indemnification is determined. The Weinholds cannot recover
anything from the State until a judgment is entered in the
underlying case specifying the damages that the State is
obligated to pay. Because the State’s liability is capped by
Section 541-B:14 at the greater of $475,000 or the amount of the
State’s available insurance coverage, the damages the Weinholds
can recover from the State cannot be fixed and judgment cannot
be entered until the current declaratory judgment action is
resolved. See N.H. Superior Ct. R. Civ. 46(d) (resolution of
all post-trial motions is a prerequisite to the entry of
judgment); 5 G. MacDonald, Wiebusch on New Hampshire Civil
Practice and Procedure § 54.13[2] (2014) (describing a motion to
reduce damages to conform to statutory limits as a post-trial
motion).
Requiring the plaintiffs to obtain a judgment in the
underlying case before proceeding with an insurance coverage
action when that judgment requires a determination of the
available coverage before it can be entered plainly would
present “a direct and immediate dilemma for the parties” that is
sufficient to satisfy the hardship component of the ripeness
test. See Fortuno, 699 F.3d at 9 (internal quotation marks
omitted); cf. Roman Catholic Bishop of Springfield, 724 F.3d at
92 (citing “delay, uncertainty, and expense” as a basis for
hardship sufficient to render claim ripe). Accordingly, this
insurance coverage dispute is ripe for judicial review.
15 IV. CONCLUSION
By removing this case to federal court, Travelers created a
“Catch 22” situation. Travelers argues that I have no
jurisdiction to decide the insurance dispute until there is a
judgment and the appeals period has run in the underlying
action, but the judgment below cannot be entered until the
amount of insurance is determined. For the foregoing reasons, I
disagree that the case is not ripe for review and deny the
motion to dismiss (Doc. No. 16).
SO ORDERED.
/s/ Paul Barbadoro Paul Barbadoro United States District Judge October 18, 2018
cc: John P. Graceffa, Esq. Brian A. Suslak, Esq. Scott H. Harris, Esq. Ashley B. Campbell, Esq. Mary Elizabeth Tenn, Esq. Vincent A. Wenners, Jr., Esq. Dianne H. Martin, Esq.